Caucasian Business Week #42 by Caucasian Business Week

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BUSINESS WEEK February 17, 2014 #42

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February 17, 2014, Issue 42

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GEORGIA GOVERNMENT TO INCREASE GDP PER CAPITAL 2.2 TIMES BY 2020

Margvelashvili Comments on Putin’s Readiness for Meeting Pg. 2

“ANADOLU GROUP” TO CONTINUE INVESTING IN ENERGY SECTOR OF GEORGIA

urkish company “Anadolu Group”, which is currently building “ParavanHPP”, intends to continue investing in the energy sector of Georgia. Pg. 5

NEW LAW: GENETICALLY MODIFIED SEEDS BANNED FROM ENTERING GEORGIA

ork on a new Bill to prohibit importing live genetically modified organisms into Georgia has begun. Pg. 6

PASSENGERS SWINDLED BY ATLASJET AND PEGASUS OR GASA

eorgian passengers presume Turkish airlines may have concluded collusion. Commersant newspaper published passenger pretences several days ago. Pg. 7

THE RATING OF PROFITABLE BANKS

he Georgian bank sector registers 21 commercial banks as of January 1, 2014. Total profits of 16 commercial banks marked 400 million GEL as of January 1. Pg. 7

NBG STATED THAT WITHDRAWAL FROM SMOOTH MONETARY POLICY STARTED

n February 12 Monetary Policy Committee of National Bank of Georgia made a decision to increase refinancing rate by 25 basic points. Monetary policy rate equals to 4%. Pg. 9

AZERBAIJAN QATAR HOLDING SEEKS TO INVEST IN AZERBAIJAN

ruitful investment environment in Azerbaijan was highlighted at the meeting of Azerbaijan`s Agriculture Minister Heydar Asadov and representatives of Qatar Holding in Baku on February 5. Pg. 11

CIS WORSE THAN GREECE: FITCH SAYS UKRAINE’S DEFAULT RISK HIGH

he worsening political and economic circumstances in Ukraine has prompted the Fitch Ratings agency to downgrade Ukrainian debt from B to a pre–default level CCC. Pg. 12

WORLD NEWS US HOUSE RAISES $17.2 TRILLION DEBT CEILING, NO STRINGS ATTACHED

he US House of Representatives has agreed to raise the government’s borrowing cap until March 2015, without specifying the exact limit. Pg. 13

RESEARCH BANK OF GEORGIA, LIBERTY BANK AND VTB BANK AS CONSUMER RIGHTS MAJOR VIOLATORS

Pg. 5

ccording to the current legislation, every bank operating in Georgia is obliged not to issue any kind of information about a client without his consent. In contrast with abovementioned, often banks hand information about the client to various institutions which on one had represents a bank secret and on the other hand personal information. Organization the “Young Barristers” are actively asked for legal help by citizens whose rights are violated by banks operating in Georgia. In precise: • Banks often issue data about their clients without their consent to JSC “Kreditinfo Georgia”;

• In order to extract unpaid bills, banks often address various legal persons and without client’s consent hand them private information. • Banks do not write off requests of remoteness. Organization instructs, that according to “protection of personal data” of civil code and “about commercial banks” of Georgian statute, a bank institution has no right to issue information it possesses about a client without his consent. In addition to this, according to the 22nd article of Georgian statute about “protection of personal data”, bank is obliged to correct, update, add, block, delete or destroy information about the client if it is incomplete, wrong or has not been updated.

SENTA ARGUES FOR 60 REFUELING STATIONS WITH SUN PETROLEUM GEORGIA

Pg. 7

ACCUSED OF TAX EVASION

criminal investigation was initiated in respect of a mobile operator “Geocell “ on the fact of tax evasion on a large scale - Investigation Service of the Ministry of Finance of Georgia states. Checks in the central office of the company began on February 13. According to the company’s management, “Geocell” is an international company that operates transparently and responsibly , complies with all ethical standards and in any case does not avoid paying taxes or performing other financial obligations. “Geocell “ is one of the largest taxpayers in the country and all the company’s operations are monitored and documented by leading auditors of Georgia. We will take all legal measures in order to protect our interests as much as possible. We will also strongly contribute the investigation passed transparently and objectively,” - the company says. “ Geocell “ is a subsidiary of the Swedish telecommunications company “Telia Sonera”.

Natia Mikeladze: Competition Agency will Start Working in April Pg. 4

Archil Mestvirishvili: Variable rate loan in GEL is much cheaper than its analogic loan in the foreign currency

Pg. 4

David Mirtskhulava: “5% of the company’s profit will be permanently transferred to Svaneti Development Fund”

Pg. 10

Georgian Experts against Non-core Assets of Banks An interview with an expert Levan Kalandadze Pg. 4

Business Association: Georgia can Become a Regional Center in Various Sectors Pg. 6

Irakli Iashvili: MoF Slows Terminals Industry Pg. 4

MAIN EVENTS caucasian business week

MARGVELASHVILI COMMENTS ON PUTIN’S READINESS FOR MEETING

resident Giorgi Margvelashvili said that his Russian counterpart Vladimir Putin’s remarks about readiness for a meeting will be “thoroughly” considered by Tbilisi, including with its Western partners. Asked on February 10 in Sochi if he would meet the Georgian President, Vladimir Putin responded: “Yes, if he wants; why not.” “We will make a very serious and thorough analysis of these remarks; we will hold consultations and elaborate our position,” President Margvelashvili told journalists in Tbilisi. “If there is a possibility for this kind of meeting to give positive impulse to Georgian-Russian relations, if there is a serious readiness to discuss very problematic issues, then naturally there is a reason to discuss it, hold consultations within the country, as well as with our Western colleagues and to think about such meeting,” Margvelashvili said that ongoing bilateral dialogue between Georgian PM’s special envoy for relations with Russia, Zurab Abashidze, and Russia’s Deputy Foreign Minister, Grigory Karasin, on trade, economic and people-to-people contacts serves for defusing tensions and for laying ground for “rational discussion” of issues related to “occupation” of Georgia’s territories by Russia.

“Occupation of Georgian territories will bring nothing positive to Russia; none of the side can benefit from it. Our compatriots, living beyond these barbed wires [referring to residents of breakaway Abkhazia and South Ossetia], are not benefiting either from this [situation],” Margvelashvili said. Last time when presidents of the two countries met was in early July, 2008 – a month before the war broke out between Georgia and Russia. Then Georgian President Mikheil Saakashvili and then Russian President Dmitry Medvedev met briefly on July 5, 2008 in Kazakh capital Astana. Russian President, Vladimir Putin, also said on February 10 that he’s “very glad” that Georgian athletes are participating in the Sochi Winter Olympic Games, which, he said, helps to build ties with Tbilisi. “I think that it’s a very good sign and that’s exactly the case when the Olympic Games contribute to building relations even where it seemed impossible or very difficult,” he told journalists while touring Olympic Games media center in Sochi. He said that direct flights between Tbilisi and Sochi started just ahead of the Olympics. “We have decided to keep this practice after the Olympics as well,” Putin said. “That’s already a plus of the Olympic Games.” “The Olympic Games help to build ties with Georgia and I am very glad about it and we wish success to the Georgian athletes,” Putin said. His remarks were made in response to a question from a Georgian journalist, who asked about “clouded” parts of Abkhazia on Georgian map during the opening ceremony of the Sochi Olympic Games. The satellite zoom in on Georgia’s map, projected on arena floor while Georgian athletes were parading, showed parts of Abkhazia covered by what appeared to be clouds; some in Georgia complained it was done deliberately to portray Georgian map without its breakaway region. “That’s nonsense,” Putin responded. “There is no need of stirring up something out of nothing.”

February 17, 2014 #42

FINANCE MINISTRY EXPECTS NO RISE ON LOANS INTEREST RATES

rowth in refinancing rate will not increase interest rates on loans, even to a small extent - Minister of Finance of Georgia Nodar Khaduri states. The National Bank responsible for monetary policy in the country analyzed the situation and decided to increase the refinancing rate by

only 0.25 %. “This will not lead to any, even a small increase in interest rates on loans , or any other processes,” - said the Minister. According to the National Bank, in late 2013 there were signs of growth in economic activity in Georgia , the economy grew by 3.1 % and an increase in bank lending was registered.

GEORGIAN WINE MUSEUM TO OPEN IN TBILISI

museum of Georgian Wine will be opened in Tbilisi upon the Georgian Prime Minister’s initiative . In addition, Irakli Gharibashvili proposes to establish a day of Georgian wine, which will be celebrated annually on the last Sunday of October. He says that the country with such a huge tradition should have a place where history of Georgian wine will be presented. In his words, a mu-

seum of wine should be created in Tbilisi and it’s going to become something of a center, which the entire history of Georgian wine will be collected. Premier believes that the museum will be visited by both Georgian and foreign visitors. Gharibashvili asks the National Wine Agency as soon as possible to begin work on the museum project. PM says thatthese new initiatives will help further popularize Georgian wines and Georgian wine will occupy a worthy place.

MONETARY FUND EXECUTIVE DIRECTOR - ECONOMIC GROWTH FORECAST IS OPTIMISTIC

he economic growth forecast for the recent period is optimistic, the Monetary Fund Executive Director Meno Schnell stated after a meeting with the President of National Bank of Georgia Giorgi Kadagidze. He said the meeting was interesting and constructive. He said

that they positively assess the monetary policy of National Bank. Mr. Schnell stated that one of the major problems Georgia faces is unemployment, which is still high. As the Monetary Fund Executive Director said, compatibility is very important and investment should be carried out for this.

GEOCELL PRESIDENT RELEASES STATEMENT ON INVESTIGATION ACTIVITIES IN THE COMPANY

he President and Executive Director of Geocell Pasi Koistinen released a statement regarding the investigation of the company. The company confirms that the Investigative service of Ministry of Finance entered the company. “We unfortunately don’t know the factual circumstances that were cause to launch the criminal case. We represent an international company that practices ethical business full of transparency and responsibility. There is no reason to evade taxes or other commitments. Geocell is

one of the largest tax payers in Georgia. During its entire existence all the activities/operations of the company have been registered and documented by world leading audit companies. Geocell will take all legal steps to have its legal interests protected. We’ll take care to see that the full investigation continues in transparent manner, with final goal to find the actual foundation for launching the criminal case”, the statement says. Investigative service of the Ministry of Finance entered Geocell yesterday.

GOVERNMENT TO INCREASE GDP PER CAPITAL 2.2 TIMES BY 2020

overnment of Georgia aims to increased GDP per capita by 2,2 times by 2020. It’s considered by the social-economic development project of the country - “Georgia 2020”, prepared by Ministry of Finance. As it’s mentioned in the document, by 2020 GDP per capita should increased to 13 000 GEL, currently this data equals to 5811,7 GEL. Inflation data should be 4%, unemployment lev-

el, which is currently 15%, should be less than 12%. The government also aims to reduce Gini coefficient from 0,41 points to 0,35 points. This data is currently the most adequate means for distribution inequality measuring. 0 stands for the most equal, 100 - the most unequal. The formula is mainly used for measuring of money distribution in the countries. Share of taxes in GDP should increase from 24% to 25%, export share - from 35% to 50%.

TOP 5 TRADING PARTNER COUNTRIES BY EXPORT AND IMPORT IN 2013

n 2013, top five trading partner countries by export were: Azerbaijan (24%), Armenia (11%), Ukraine (7%), Russia (7%) and Turkey (6%). The contribution of EU countries in total export is 21%, which is significantly higher (6.1 percentage point) compared to the corresponding indicators in 2012 (14.8%). In the mentioned period, the volume of export to EU countries increased dramatically (72.2%, 255 mln.USD). In 2013, five major exported commodities were: motor cars (24%), ferro-alloys (8%), nuts (6%), copper ores (4%), fertilizers (4%). Based on the fact that cars are not locally produced and are just re-exported through Georgia, Ferro-Alloys can be considered as the major exported commodity in 2013. In 2013, the volume of the following exported products increased considerably : copper ores (202%, 108 mln.USD), motor cars (20%, 116

mln. USD), nuts (99%, 83 mln.USD), wines (97%, 63 mln.USD) and mineral waters (80%, 47 mln.USD). In 2013, the top five trading partner countries by import were: Turkey (17%), China (8%), Azerbaijan (8%), Ukraine (8%), Russia (7%) and China (7%). The major commodities imported from Turkey were: medicaments (52 mln.USD), Structures and parts of structures of iron or steel (36 mln.USD) and sanitary and hygienic products (33 mln.USD). The major commodities imported from Azerbaijan were: petrol and petroleum (276 mln. USD) and gases (247 mln.USD). The major commodities imported from Ukraine were : cigarettes (74 mln.USD) and fittings (44 mln.USD). Five major imported commodities were: petroleum (14%), motor cars (10%), gases (4%), medicaments (4%) and wheat (3%). The contribution of imported product from EU countries in total import is 29%.

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PUBLICITY February 17, 2014 #42

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INTERVIEW caucasian business week

COMPETITION AGENCY WILL START WORKING IN APRIL An interview with Deputy Economy Minister Natia Mikeladze

- It is known that the project of the antimonopoly legislation will be considered by Parliament in the near future. What will be in the new law and how the agency will work? - The current legislation adopted in 2012 provides for the existence of the Department of Competition in Competition and State Procurement Agency. The new bill provides for the establishment of an independent structure, which will be accountable to the Prime Minister and Parliament, the head of which will be elected for a term of 5 years. The draft guarantees the independence of the Agency, as the government has the political will to ensure that such an Agency existed independently and maximally contributed to the development of competition in the country. - How often will researches in various sectors of the economy be conducted? And will the Agency have the right to start checking on its own initiative and not on the basis of the complaint, as it is today? - Under the current law , the Agency cannot independently investigate these or other sectors of the economy where there is suspicion of a monopoly or cartel deals. To do this, request or complaint is needed. We intend to change this practice. If we want to see a healthy competition in the country, the Agency should have the possibility of permanent and independent research on the market. The Agency should have a realistic picture of what is happening, know about the existing problems to solve these problems. - When work on the project just started, some businesspeople had a claim to the market share, according to which a company was regarded as a monopoly. What is the current situation in this matter? - The current law envisages a figure of 40 %, and it will remain unchanged. However, this

does not mean that every company that owns 40 % of the market will be immediately declared a monopoly. A company can control 80% of the market but if this control is achieved without the support of government officials, and the company does not abuse its position , there will be no claim to it. - Do you plan the introduction of any sanctions? - We believe that the penalties for violating the law cannot exceed 10 % of the turnover for the year although the final decision depends on the nature of the violations. In addition, the Agency’s decision will not be final and may be appealed in court. - When will the Agency be launched and whether you decided who would lead it? - We plan to form the Agency by April. The remaining time will be maximally used in order the Agency to be able to carry out its duties without interference. As for the l head of the agency, I do not take part in the discussion of this issue, as by law it is within the competence of Prime Minister. - Was business associations’ and experts’ opinion taken into account when drafting the bill? Whether were there comments on their part which differed significantly from the government’s position? - We had to consult with so many people. We have used a part of the advice and comments, while a part of them was not taken into account. In addition, there was not unanimity among businessmen – they had different views on various issues, so it was very difficult to take into account all opinions. Although despite all this, we were able to achieve a certain balance. If there are some unresolved issues, we are ready to rediscuss them with the business. Our doors are always open. - What will be the first task of the Agency, after it is created? Do you plan to conduct a study of all sectors of the economy? - This is a very specific question and the answer can be given only by specialists. Probably, the market research will be conducted, and then specific areas of the economy, where the probability of the presence of monopolies and cartel deals will be higher, will be examined.

“EAST GATE GROUP”: MOF SLOWS TERMINALS INDUSTRY

ccording to the Head of the Supervisory Board of a large Georgian carrier company “East Gate Group” Irakli Iashvili, instead of preserving and developing a successful business of “customs clearance zones “, Ministry of Finance in reality hampers

terminals business. “Previous government limited companies’ range of action and ordered them in which terminals to store goods, but the new government has much worsened the situation , and requires to implement offloading only in the customs clearance zones. Soon, the situation will get out of control, and the terminals left without functions will have to lay off employees. And this is despite the fact that up to 500 people work in each terminal. Ministry of Finance deprives them of their work,” says the businessman. According to the Revenue Service of the Ministry of Finance of Georgia, under the previous government unloading in terminals was artificially limited, now the restrictions are lifted. All carriers can unload where they see fit. “As for the clearance zones, the information on the revision of the project is untrue. No change in this system is planned to make. Currently customs clearance zones are functioning in Tbilisi, Rustavi, Batumi, Poti , Telavi , Kutaisi and Akhaltsikhe . In addition, up to 20 customs terminals are operating across Georgia,” - the Ministry of Finance states.

February 17, 2014 #42

MESTVIRISHVILI: VARIABLE RATE LOAN IN GEL IS MUCH CHEAPER THAN ITS ANALOGIC LOAN IN THE FOREIGN CURRENCY

ational Bank considers that increase of refinancing rate by 0,25% keeps banking loans attached to this rate in preference of those, which are denominated in the foreign currency. As vice-president of National Bank Archil Mestvirishvili stated, variable rate loan (offered by banks, denominated in GEL, attached to NBG refinancing rate) means that interest rate will change, raise or drop considering how market conditions and monetary policy rate changes. “Although I want to mention that the change, which occurred on February 12 is very little, increase of rate by 0,25% points, variable rate loan, considering even growth is cheaper than analogous loans in the foreign currency. As for variable rate loan, it’s the loan popular in the world and introduction of such instrument, which happened in previous year, let us to significantly reduce interest rates in the country during recent year”, - Archil Mestvirishvili stated. National Bank increased refinancing rate from 3.75% to 4% on February 12 and stated that they mentioned signs of economic revival and there is no need to keep considerably smooth monetary policy. After the increase of refinancing rate by 0,25%, part of the economists expressed concern that in-

crease of monetary policy rate would cause increase of the loans in GEL, attached to this rate. According to official statistic, by the end of December average weighted interest rate for mortgage loans denominated in GEL was 8,4%, for the same loan denominated in USD - 10.4%. It’s noteworthy that it’s an average rate, calculated by considering of mortgage loans in all 21 commercial banks and also includes the loans, which are not attached to refinancing rate. Besides, only several Georgian banks offer customers mortgage loan of such variable rate.

GEORGIAN EXPERTS AGAINST NON-CORE ASSETS OF BANKS An interview with an expert Levan Kalandadze

- You were among the experts demanded that the government ban the ownership of non-core assets by banks. Why have you decided to update this problem? - This problem didn’t appear yesterday or today, it has been brewing for some time , and today took a shape of a trend. My colleagues and I think that ownership of non-core assets by banks creates a considerable danger, and the government should put the right emphasis on this issue. The problem is that banks should engage in lending and take care that business entity , who has taken a loan, to be able to successfully implement the project , and not to create subsidiaries in various business fields. Now banks are engaged in the bankruptcy of the borrower, a transfer of the case to the rehabilitation phase , and then cheaply buy the entire business . This is especially apparent in such areas as construction, insurance, healthcare, large retail chains , etc. Banks create companies, manage them , and accordingly, put them in a privileged position , as a result , suffers business deprived of such financial opportunities as companies associated with the banks. In the future it is possible that banks will be engaged in lobbying for the benefit of their companies. They will restrict free competition that will have extremely negative consequences for the economy. Based on this, we found it necessary to develop specific recommendations that were given to the Prime Minister, President and Speaker of Parlia-

ment . We pose the question of the need to introduce a number of regulations that exist in the world. Under the conditions of the previous government, banks were allowed to own non-core assets without any restrictions, while the world practice is completely different - banks and business companies are always very clearly differentiated. In Georgia, we should go in this direction as well. We see that the uncontrolled right of banks to establish subsidiaries leads to a very dangerous trend . Unfortunately, the business is very dependent on financial institutions - many loans , including problematic . In this situation, they cannot speak loudly about their position in this matter. Some experts criticize the current government for the fact that it too often intervenes in the economy contrary to the principles of the free market. Our initiative is just aimed at the development of the market and competition. Current legislation allows banks to easily provide a unique position in the market and crush competitors, be monopolists, restrict companies’ access to the market. Our initiative, by contrast, aims to support the liberation of the business climate and growth of competition . We support a civilized approach. We have no intention to push banks and the government should not act so. Our initiative is designed for about 3-5 years , during which banks will be able to quietly, slowly get rid of non-core assets .

BUSINESS February 17, 2014 #42

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RESEARCH NAMES BANK OF GEORGIA, LIBERTY BANK AND VTB BANK AS CONSUMER RIGHTS MAJOR VIOLATORS

rganization the “Young Barristers” address private banks operating in Georgia and asks to protect one of the fundamental human rights and freedoms – Confidentiality of personal information. What is more, the organization advises clients to attentively read contracts signed with banks. The organization addresses Association of Banks of Georgia and asks to effectively react on violation of rights between citizens and the bank institutions. Because of the facts of negligence and encroachment of “legalized” personal data by banks operating in Georgia we have a current situation, where 110470 citizens have been registered in the Debtor Registry by February 3rd, 2014. Since statistical data about productions implemented in favor of commercial banks is not protected in national bureau of enforcement, the organization

agrees with experts’ opinion, according to which, out of 110470 citizens registered in Debtor Registry, most of them have been harmed during relations with banks. According to 2014 year data of organization’s advocacy group of citizens, number of people who claim against banks has increased. The organization will pay attention to the fact that citizens most often issue claims against “Liberty Bank”, “VTB Bank” and “Bank of Georgia”. The organization has cases against these banks. The “Young Barristers” will set up monitoring on topic “Quality of protecting bank and personal data by banks in Georgia”. Recommendations will be sent to Georgian government and inspector of protecting personal data. It is possible to prepare a legislative proposal, which will create more solid guarantees for the protection of personal information.

‘’AIRZENA” ACCUSES CIVIL AVIATION AGENCY OF OBSTRUCTING THE COMPANY’S WORK

irzena” airline accuses the Civil Aviation Agency of Georgia of obstructing the work of the company. The airline’s Director General states ‘’Commersant” that the Tbilisi airport operator “TAV Georgia ‘’ will violate the company’s flight schedules during the runway rehabilitation in summer and will prevent the company’s activity. Iase Zautashvili notes that the Civil Aviation Agency that is the regulatory body doesn’t require “TAV” to work at night and doesn’t consider “Airzena” interests. Head of the Civil Aviation Agency claims in response to “ Airzena “ that the letter has been received from the company. According

to Guram Jalghonia, ‘’Airzena” knew about the repair works in December where it was stated that the work will not coincide with their flight schedules . However, Jalaghonia notes that the company demands to carry out works from 1 till 8 pm, whereas , TAV doesn’t guarantee the high quality of nighttime activities. Jalaghonia says that “TAV’’ will carry out the runway repair works from April 1 through October. In his words, “Airzena” does not make concessions, and the other companies did not complain . “TAV Georgia” states that they carry out the runway repair on an annual basis and this process hasnever created any problems to air companies.

TURKISH COMPANY “ANADOLU GROUP” TO CONTINUE INVESTING IN ENERGY SECTOR OF GEORGIA

urkish company “Anadolu Group”, which is currently building “ParavanHPP”, intends to continue investing in the energy sector of Georgia after the implementation of this project, - Nodar Kurtanidze, the company’s representative, says. It is assumed that in June HPP will be completed, after which the company intends to begin imple-

mentation of other energy projects. “At this stage I cannot say where and in what regions new hydropower plants will be built, but they will be more powerful than ParavanHPP. It is about three projects that have been suspended,”- Kurtanidze notes. The cost of the construction of ParavanHPP amounts to 177 million USD, capacity of the hydroelectric power will be 87 megawatts.

KAZAKHSTAN INVESTMENT COMPANY SUES STATE OF GEORGIA “The state is not interested in promoting investments in the country”

n October 9, 2013 the company “Aksai - BMC Ltd.” filed a lawsuit against the state in the name of the Ministry of Energy and Natural Resources and Oil and Gas Agency of Georgia due to a license unilaterally revoked by the state. “Aksai - BMC Ltd. “ is a subsidiary of the Kazakh JSC “Mangistaugeologiya” which has more than 50 years of successful experience in well drilling and maintenance work on the Kazakh market. According to the company, “ Aksai - BMC “ has invested 5 million USD and employed the local population in the western Georgia . The company has successfully completed the first and second stages of the work program.

According to them, based on the agreement with the State of Georgia, in 2007 the company received a license for hydrocarbon prospecting and extraction. It is interested in continuing to work in Georgia and plans to invest more than 10 million USD. “The company wants a peaceful resolution of the dispute , but the defendant - Energy and Natural Resources Ministry and the Oil and Gas Agency have not agreed to a peaceful solution. In this case, the company will be forced to apply to London Court of International Arbitration which was specified in the production sharing contract signed between the company and the state. This will adversely affect the country’s reputation, in what the company is not interested, ““Aksai - BMC “ representatives say.

RUSSIAN AGRICO AND ISRAELI TERRA 1 GROUP WILL BE INTRODUCED TO GEORGIAN INVESTMENT ENVIRONMENT

ompany CEOs have a business visit in Georgia and they had a meeting with the heads of Partnership Fund. Partnership Fund informs that executive director of the fund Irakli Kovzanadze introduced the directions for the fund’s projects to the guests. These are energy, real estate/infrastructure, industry and agriculture. Irakli Kovzanadze talked about implemented projects of the fund and mentioned that agriculture is one of the

priorities. The fund successfully implemented on project in this direction - pig farm. It’s noteworthy that Russia AGRICO, Agrarian Investment Company is a dynamically growing large organization on the Russian market, which owns agricultural land in the South Russia and produces high quality agricultural products. Director of AGRICO Vladimer Bovin mentioned on the meeting that his company is interested in Georgian market and he arrived to Georgia to study business environment.

PKF WAS APPOINTED AS GOODWILL REHABILITATION MANAGER

uthorities between administrator and management will be distributed by balloting and will be determined by February 17. PKF is a candidate supported by Goodwill and non-secure creditors. Goodwill has about 40 million GEL debt to 490 creditors and among them 18 million is to TBC, out of which major debt does not exceed 15,5 million. Remaining is bank securities. Founder of several creditor companies Temur Chkonia states that now right and meaningful management of Goodwill are necessary so that

neither company nor creditors are harmed. For some of them paying debt is vital, because it’s source for turnover capital. Chkonia mentions that working of the existing management should be regulated; they should not be occupied with black PR against creditors. “Neither “poor me” positions is beneficial. Along with the company, all creditors are interested in its rehabilitation. If the management does not change the course, it will appear in the deadlock again”, - Chkonia considers.” Insolvency case against Goodwill started on September 24, 2013.

AUTO IMPORTERS: AFTER ARMENIA JOINS CU, CUSTOMS CLEARANCE FOR AUTOMOBILES FROM GEORGIA WILL GROW FOURFOLD

fter Armenia’s accession to the Customs Union customs clearance for cars from Georgia will rise fourfold. Chairman of the Union of Car Importers of Armenia Tigran Hovhannisyan told reporters on February 12. According to him, the reason lies in the high customs duties in the Customs Union on vehicles from third countries. “We have acquainted with rates on imports of cars, in Russia it is 5 - 6 Euro per cubic centimeter of engine. Thus , customs clearance for cars with large engine - for example to 1.8 thousand cubic meters can reach 9 000 Euro, that is 4 - 5 times more than now , “- said Hovhannisian . This figure, he adds, is especially in contrast to the current value of the used European cars ( 4 – 5 000 USD), which are now purchased in Georgia. The price of these cars can go up to 15 000 USD. According to NGO representative, Armenia should have a transitional period for the implementation of these duties tin order the importers to be able to adapt to new conditions. “In Russia, those duties we are talking about took effect from 2014 , although the decision was taken in 2006 . Eight years of transition. And in our country everything can be implemented in a few months: we decided to join the Customs Union, the Parliament will ratify it quickly , and we will find ourselves face to face with the problems ,”- said Hovhannisyan . In his words, the problem is compounded by social

orientation ofbusiness: in Armenia 5 - 10 thousand people earn their living by trading cars and therefore families. With all this, car imports from Georgian to Armenia in any way are more convenient than Russian - Tigran Hovhannisyan notes. He adds, new foreign cars assembled in Russia, are much more expensive than used from Europe imported to Armenia via Georgia . In response to the comment that there are a lot of used cars in Russia (according to a study conducted by «Price Waterhouse Coopers», the average life of car ownership in Russia is only 3 - 4 years , and in Japan and Germany - 6.5 - 7 years) Hovhannisian says that to buy them in Tbilisi is more convenient than even in Vladikavkaz. “ Anyway, there is a difference in the distance. In addition, Georgia, without being a member of the Customs Union, can create barriers to their transit of vehicles.Here we do not know for sure, “- said Hovhannisian . Therefore, he adds, although imports of vehicles from Russia will be duty-free but it will not solve all problems.

ECONOMY caucasian business week

February 17, 2014 #42

GEORGIA SIMPLIFIES REGULATIONS BUSINESS ASSOCIATION : GEORGIA FOR CLOSING BUSINESS COMPANIES CAN BECOME A REGIONAL CENTER s well as making it easier to start a from less to more efficient fields of business. business, Georgia has also simpli- Therefore, it promotes the growth and comIN VARIOUS SECTORS

fied the process to make it easier to close one. Georgia’s Finance and Economy Ministries have published the country’s SocialEconomic Development Strategy Project, entitled Georgia 2020, which will foresee the implementation of the new initiative. “Closure of a business is very important for increasing the production capacity of the private sector because it facilitates companies to shift

petitiveness of companies,” the strategy project stated. The documents also read that in order to simplify the administrative procedures related to business activities, the Government must ensure the improved legislation surrounding the closure of businessis enforced. In addition, in the case of insolvency, in order to satisfy the creditors’ requirements the legislation and enforcement mechanisms will also be improved.

MARRIOTT’S MOXY HOTEL BRAND TO ENTER GEORGIA’S HOSPITALITY SECTOR

eorgia is set to become the first Eastern European country to welcome a new affordable but chic hotel brand to the region. Moxy is the newest hotel by world hotel chain Marriott International and focused on the rapidly growing 3-star-tier market by offering a combination of top service, smart design and affordable prices. Today, Marriott representatives introduced the concept to Giorgi Kvirikashvili from the Ministry of Economy and the Sustainable Development of Georgia. Markus Lenert, Vice President of International Development at Marriott Hotel said Georgia had “the greatest tourist opportunity”. “We welcome the willingness of the Ministry of Economy to support our project. There is a good basis for starting the expansion of the Moxy brand from Georgia throughout the Eastern European countries,” he said. In the next few months, Moxy will undertake a feasibility study of the Georgian market. Investors have expressed their initial interest in developing the hotel in Batumi, the Black Sea tourist city, and Likani, a mountain spa resort in South-Eastern Georgia. In the Black sea coastal Adjara region, global brands like Kempinski, Hyatt, Hilton and Ritz-

Carlton are expected to begin operating in the next five years. Adjara’s first internationallyrecognised 5-star hotel, Sheraton, opened in June 2010. One year later the ribbon was cut to open luxury hotel Radisson Blu Hotel. Presently there are more than 120 hotels in the region. “Investors are mostly interested in Batumi and we discussed the plan to broaden the city,” Minister Kvirikashvili said. “In saying this, they also don’t want to exclude the possibility of building the hotel in the Eastern part of Georgia.” Marriott is represented in the Georgian market by two hotels - Tbilisi Marriot Hotel and Courtyard Marriott. Both are located in Tbilisi, Georgia’s capital city. Last year, Tbilisi Marriott Hotel, a luxury five-star hotel, celebrated its 11th anniversary. The Marriott brand was brought to Georgia by GMT Group. During its 11-year existence, the Hotel has welcomed many of Tbilisi’s VIP guests and international delegations, including Former American President George Bush, high official Hilary Clinton, English actor Malcolm McDowell, singers Bryan Adams, Andy Garcia and Shakira, to name a few. Currently, the full-service international hotels operating in Georgia include Tbilisi Marriott, Courtyard Marriott, Sheraton Metekhi Palace, Radisson Blu Iveria and Holiday Inn. The latest survey by Georgian National Investment Agency, responsible for attracting investment to the country, revealed that from 106 hotels across Georgia, 60-65 % of the total revenue generated in the hospitality sector was generated by international hotel chains while the remaining 35-40% was held by the local market. The survey also revealed high-quality hotels were concentrated in the capital city, while mid-range hotels, guest houses and family houses were more common in the regions. In 2013, there were five hotel franchises operating in Georgia.

GIORGI KADAGIDZE: NBG HAS FULL SUPPORT OF IMF

ational Bank of Georgia (NBG) has full support of International Monetary Fund (IMF) and it will continue in the future. NBG president George Kadagidze mentioned after the Friday meeting with executive director of IMF Menno Snel that the fund supports reforms implemented in the bank. It’s also important that cooperation of Georgia to IMF is on the new stage.

“For many years Fund and World Bank have been our strategic partners. Our relationship is like in the developed democratic country. For a long time we have not been in the phase when any kind of demands were imposed to use, because Georgia meets all target data during last years”, - NBG president mentioned. Delegation of IMD and World Bank arrived to Georgia on February 13.

LIVING WAGE IN JANUARY SHRANK TO 154.2 GEL

n January living wage slightly reduced. Geostat informs that in January living wage for a man, capable for working equaled to 154,2 GEL, which is 90 Tetri less than December data. According to official statistics, living wage of January is 3,5 GEL more than the data of analogic period last year. It’s noteworthy that in January, living wage of average consumer equaled to 136,6 GEL (137,4 GEL in December), average family - 258,7 GEL

(260,2 in December). According to statistics, living wage of 1-person family equals to 136,6 GEL, 2-person family - 218,5 GEL, 3-person families - 245,8 GEL, 4-person families - 273,2 GEL, 5-person families - 307,3 GEL, families with 6 and more members - 363,3 GEL. Reminding that from September 1, 2013the government made a decision to equal the pension with a living wage and determined pension at 150 GEL.

Head of the group working on the economic development strategy at Business Association of Georgia Archil Gachechiladze - Business Association” completed its work on the concept of economic development of Georgia. What is written in it, how long did it take to develop it and who worked on the document? - The work on the strategy began in the summer of 2013. By September the document was ready and we were going to submit it to the Government which is also developing a development strategy. “Business Association “ brings together 60 major Georgian companies and they all received an offer to participate in the work on the document . - What is the main emphasis in the document? - During our work on the strategy, we interviewed representatives of the government and the National Bank, met with the President and two Vice Presidents of the National Bank, the heads of the Ministries of Finance and Economy. In addition, we asked the opinion of international organizations. This document reflects their opinion as well. Our main aim is to develop a strategy that will allow Georgia to achieve economic growth, which would exceed the world average (about 3 %) - it is about 6-8 % per year. This is not an easy task, and for its implementation a proper strategy is needed. Major emphasis is placed in the very beginning of the document. In particular, Georgia is a small country with a population of 4.5 million, respectively, no strategy designed for the domestic market will bring any tangible benefits , and the only way is export and turning the country into a regional center in certain industries. For example, as it is already happening with tourism. We have much more tourists than Armenia, Azerbaijan , Eastern Turkey , and North Caucasus. In this sense, Georgia is a tourism center. The second is the logistics center. We have access to the Black Sea , which is lacking in other countries in the regio . This natural advantage must be strengthened by tax policy. Third - this is the car market, which is a very good example of what we believe is right. The

same situation can be created in everything else, and become a regional services center. Then economic growth will be much more noticeable. - Whether the different models of development were taken into account during the work on the concept, and parallels with which country can be drawn? - We have studied the strategies of different countries. Some of them do not have strategies at all, others have more detailed than ours. However, we did not adopt any of them. When an investor will think of investing capital in the region, he should remember about Georgia in the first place. We should have a much better investment climate than in neighboring countries. This is not easy to achieve , but it is possible . Sometimes we are talking about unexpected things, for example, the clinic “New Hospital”, owned by the insurance company “PSP”, managed to attract 3 145 foreign customers in 2013. This shows that Georgia may well become a regional medical center. The same can be done in the education system. - Have you sent your strategy to the government, and what was the reaction? - We had a meeting with representatives of the government at the end of the year and gave them our strategy. They assured us they would look into it and take into consideration.

NEW LAW: GENETICALLY MODIFIED SEEDS BANNED FROM ENTERING GEORGIA

ork on a new Bill to prohibit importing live genetically modified organisms into Georgia has begun. The Bill prepared by the Ministry of Environment and Natural Resource aimed to place restrictions on genetically modified organisms being imported to Georgia. The Genetically Modified Organisms Bill stated it would be illegal to bring seeds of live genetically modified organisms (GMO) into Georgia. However it was permissible if someone brought such seeds into the country only if the seeds were planted in a quarantined enclosed area. The new Bill does not include issues related to genetically modified products stored in market networks therefore it did not set any regulation on this. “A distinction must be made between genetically modified seeds and genetically modified

seed production. This latter is permitted to be imported to Georgia,” George Tsagareishvili, of the Environment and Natural Resources Committee of Parliament, said. “But Georgia has been declared as a closed zone … [which] means genetically modified raw seeds must not come into Georgian territory.” “We do not have huge rural - agricultural lands but Georgia within Europe is the ‘Last Island’ which provides ecologically pure products. This is why we are attractive to the rest of the world. Ecologically clear products are what we should promote to the European food market,” Tsagareishvili believed. A detailed Government study into GMO’s revealed there appeared to be two companies which imported GMO products into Georgia. Under the new law, activities relating to live GMO’s will be subject to administrative and criminal responsibility.

BUSINESS February 17, 2014 #42

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SENTA ARGUES FOR 60 REFUELING PASSENGERS SWINDLED BY STATIONS WITH SUN PETROLEUM ATLASJET AND PEGASUS OR GASA Cheated Passengers Point to Available Collusion GEORGIA

total of 60 refueling stations of Gulf company has been sealed up, Senta company reports. The company argues for 60 refueling stations with two companies that own GULF, SENTA Group defense lawyer David Asatiani and the company founder David Miminoshvili and Zaal Iakobidze told a news conference on February 14. They urge all interested bodies to abstain from concluding any deals over the property. Senta applied to the court in October 2012 and brought action against SUN Petroleum Georgia, owner of GULF company, to Tbilisi City Court, David Asatiani noted. “Today I would like to inform you that the court has sealed up about 60 assets of Gulf. Namely, owners are banned to sell the assets. We urge and warn all bodies interested in Gulf to abstain from making deals”, Asatiani noted. In 2010 to 2011 the former Defense Minister David Kezerashvili staged pressure on Senta and reregistered a 80 million USD property to SUN Petroleum Georgia at 22 million USD. In the end, Senta owners received only 6 million USD, while the remaining part was spent to serve the existing obligations, the defense lawyer said.

“The main content of Kezerashvili’s ultimatum was the following: you must cede your company and the issue has been agreed with Saakashvili, Merabishvili and Adeishvili. Thus, the issue has been resolved and it will no be discussed. Kezerashvili also added that in other case we would have to go to prison”, Zaal Iakobidze noted. The Prosecutor’s Office investigates the case on charge of business persecution, Asatiani said. Sun Petroleum Georgia representatives reacted to the SENTA owners’ statement on the same day. Nino Jibladze, a vice president for the company PR and marketing department noted the court has banned Gulf to sell only 33 filling stations. “The decision concerns the stations we have bought from Senta at 40 million GEL that is 23.8 million USD according to the exchange rate of that time. The deal was performed in time”, Nino Jibladze said. The filling stations continue operation in usual regime and there is no problem in this respect, she noted. ”We expect the court to pass just decision and we hope for justice that will put an end to any manipulation for once for all”, SUN Petroleum Georgia representatives said.

IMF CONSIDERS RECENT ECONOMIC PROGNOSIS OF GEORGIA OPTIMISTIC AND INDICATES TO HIGH UNEMPLOYMENT

nternational Monetary Fund considers recent economic prognosis of Georgia optimistic, they are satisfied with monetary and monetary-credit policy, but names high level of unemployment as a major problem and sees necessity of creation of the credible macroeconomic frames for attraction of the foreign investments. Executive director of IMF - Menno Snel stat-

ed about it after the Friday meeting with the president of National Bank of Georgia, George Kadagidze. “We had a very interesting meeting with the president of National Bank of Georgia and we talked about economic situation and monetary policy. We discussed inflation and economic growth prognosis... Resent economic growth prognosis are optimistic... we positively evaluate monetary and monetary-credit policy”, - Menno Snel stated. He considers that one of the main problems of Georgia is unemployment, which remains high. “Competitiveness is very important and that’s why investments should be made and created credible macroeconomic frames, which will be attractive for the foreign investors?” - executive director of IMF stated.

between Turkish Companies

eorgian passengers presume Turkish airlines may have concluded collusion. Commersant newspaper published passenger pretences several days ago. Part of the passengers show discontent with the fact the airline sells tickets of competitor airlines, while another part points to errors in the Atlasjet and Pegasus systems. “I have bought a ticket at Gasa company. The company operator told me they officially represent Atlasjet and, compared to travel companies, they offere lower prices, but I had to buy another ticket because of the system error. I put forward my pretences to Gasa and they readdressed me to the Georgian office of Atlasjet. I phoned to the Georgian office of Atlasjet and they told me the ticket seller was responsible for the error and I had to address to Gasa again. I cannot understand who is responsible for that error? I have bought the ticket at an official representation of the airline to receive the primary price and be protected from problems, while I have faced full chaos and unclearness”, one of the passengers says. Is Gasa company an official representative of Atlasjet and Pegasus and do their operators cheat consumers? To explore the information, the Commersant has phoned to Gasa company The company operator named herself as a representative of both Atlasjet and Pegasus. As reported, Gasa company became a general trade agent of Pegasus Airlines in Georgia in 2010, but there are questions concerning Atlasjet, because Atlasjet opened an official representation in Georgia in December 2012 and the Turkish side has not named the company Gasa as an official representative. The Commersant will cast light on the issue is several days. Before, it is unclear whether two Turkish airlines have genuinely concluded collusion or not. After Atlasjet appeared on the Georgian market, competitor airlines concluded collusion and start-

ed cheating consumers, the Commersant readers say. Namely, the airlines sell tickets through the Gasa company network and avoid resolving booking problems in time, while passengers have to buy another ticket in the same or alternative way. “I cannot understand anything: if Atlasjet and Pegasus compete with each other, why do they sell their tickets via the network of the same airline (Gasa)? It does not matter where I buy a ticket, but no one should cheat me and make problems at the airport”, the readers noted. For information: Atlasjet and Pegasus name each other as competitors. Namely, Levan Elizbarashvili, a head of the Pegasus representation, has noted the airline would offer lower prices compared to Atlasjet and the company would not lose passengers. “We pledge to offer always lower prices compared to Atlasjet”, Elizbrashvili has said. On the other hand, Atlasjet was also promising competitive tariffs for passengers. “You can see the prices of other companies and you will make sure we have genuinely competitive prices. We respect our competitor airlines, but the business is business and Georgia follows free business principles. Therefore, the strong will survive”, Samir Halilov, a director general for the airline’s Georgian office noted. However, it is still unclear who is responsible for tickets bought in the Gasa network and whether Atlasjet and Pegasus are genuinely in collusion and whether they have agreed price policy. The Commersant continues working on the issue.

THE RATING OF PROFITABLE BANKS

he Georgian bank sector registers 21 commercial banks as of January 1, 2014. Total profits of 16 commercial banks marked 400 million GEL as of January 1, 2014, while the year before total profits of 13 commercial banks made up 232 million GEL.

Total profits of 15 commercial banks in 2011 made up 343.6 million GEL. The year of 2010 recorded 231.7 million GEL profits for 13 commercial banks. The bank sector’s net profits marked 389.1 million GEL in 2013 (134 million GEL in 2012). The rating of bank in terms of net profits (millions of GEL):

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RECOGNIZED UNICITY AND FLEXIBILITY OF NATAKHTARI FUND A conference devoted to Social Responsibility for Child Care Development was held within the Take Care of Future Project implemented by Natakhtari Fund and Association Our Home Georgia

he purpose of the conference was facilitating integration of children and the adolescents deprived of care into the society and their preparation for independent life. Representatives of public institutions, international and non-governmental organizations working in the childcare field as well as of large companies and media took part in the conference held at Radisson Hotel. Opinions on specific topics were presented by the Ministry of Labor, Health and Social Welfare, the Ministry of Education and Science and the Ministry of Sports and Youth Affairs. The Conference consisted of three major components: in the first part representatives of Natakhtari Fund and Association Our Home Georgia reviewed the situation in the field and also addressed the problems and challenges. The second component of the Conference was devoted to speeches made by various agencies and organizations on projects and initiatives for overcoming problems faced by children and adolescents deprived of care. The major objective of the Conference was exchanging information among various sectors. The final part was devoted to media coverage followed by the interesting discussion. The conference participants noted that the similar meetings in the field represented a precondition for problem identification and resolution. TORNIKE NIKOLAISHVILI, Marketing Director of Natakhtari Company: “The Conference was held under the initiative of Natakhtari Fund and I’m very happy. Those people participated in this event who are working on the issue of children deprived of care. The main goal of the Conference was to unite our efforts and views. Also we decided to share the experience in this field with each other, so that we overcome the problems together and set a better action plan for the future. After the meeting a narrow target group

will be created to be focused on specific projects. Taking care of adolescents, in my opinion, is very important topic for the business sector and any company should be interested in it. MANANA OMARASHVILI, Head of the Psychology Service, Association Our Home Georgia: “The Conference was devoted to the social responsibility issue in the childcare field. Therefore, we invited the non-governmental organizations and three public agencies – representatives of the Ministries of Health, Education and Science and Sports and Youth Affairs. These are those institutions, which are directly working in the childcare sector and on problems faced by adolescents on the way towards independent life. Also, we invited the NGOs engaged in the reform. Everyone has to assume its own responsibility to take care of children’s welfare. Involvement of the Natakhtari Fund and the Association Our Home Georgia aims to show an example to others. During the last two years we achieved quite good results we were working with children placed in a small family-type homes and providing them with psychology service and assistance in acquiring the profession, so that when they become 18 and have to leave the home they are ready for an independent life. They need to have an occupation, job and if they do not have an apartment we’ll help in renting one…” NINO SUBELIANI, Communications Manager, HeidelbergCement: “Caring for the future I think is an important issue for a business sector, any company is to be interested in it. Need for implementing the social projects is very acute in the country. Assistance projects for children deprived of care are very interesting for HeidelbergCement and participation in Natakhtari Fund’s Conference is very important. Implementation of joint projects is also possible, which would be beneficial for the future generation.”

122 714 TOURISTS ARRIVED TO GEORGIA IN JANUARY

n January 2014, 319 400 tourists crossed border of Gerogia. Growth is mentioned in comaprison with December (391 724 visitors) - 6% reduction was mentioned in December. Ministry of Internal Affairs indorms that in comparison with the same period of last year growth is 14,1% )280 023). Like in previous months, in the reporting period majority of the visitors - 96 434 persons crossed border from Turkey, although growth is negative. Out of the total number of the visitors 122 714 are tourists, 53 241 - transit passengers.

Source: Ministry of Internal Affairs 5 365 356 visits were registered in 2013 (4 428 in 2012). among them 2 080 808 were tourists (01/11/13 1 935 767), 1 167 570 - transit (1/11/13 -1 094 159), 2 116 978 - with other aims (1/11/13 - 1 943 706).

BANKING NEWS February 17, 2014 #42

caucasian business week

NBG STATED THAT WITHDRAWAL FROM SMOOTH MONETARY POLICY STARTED

n February 12 Monetary Policy Committee of National Bank of Georgia made a decision to increase refinancing rate by 25 basic points. Monetary policy rate equals to 4%. NBG explained the decision about tightening monetary policy by consideration of these circumstances: According to existing prognosis, it’s possible that inflation approaches to the target level in the second half 2014. In January overall inflation equaled to 2,9%. The prices in creased by 0,8% in comparison with previous month. At the end of the year economic activities revived. According to preliminary evaluation, economic activity growth exceeded to 8% in November-December. Considering this, predicted growth of the Q4 equals to 6,9%, total GDP

growth in 2013 will reach 3,1%. Along with foreign demand (which had been active in previous periods as well), intensified domestic demand also promoted economic growth in the Q4. High annual growth of import indicates intensification of domestic growth. Increase of investment import is especially noteworthy, which should promote revival of economic growth in the next periods. From the second half 2013 increase of banks’ credit activity has been observed, considerably increased during recent months. During 2013 credit portfolio of the commercial banks increased by 16%, excluding exchange rate effect. After August 2013 nominal effective exchange rate depreciated by 2,8%. According to evaluation of National Bank, impact of this depreciation on the consumer prices equals to about

1% points, which is already included in the current inflation prognosis. Recently economic growth revival can be mentioned and it’s expected that this trend will continue in the first half 2014. Preliminary indicators of January points to maintenance of this trend. Therefore, Monetary Policy Committee considered that there is no need to keep smooth policy and increased policy rate by 25 basic points. By this step National Bank started withdrawal process from the smooth policy assuming that above-mentioned trends will be maintained in the future. National Bank will observe current economic processes in the future and make a respective decision. Next session of monetary policy is scheduled on March 26, 2014”, - says the statement released by National Bank.

NBG:THE SANCTIONS AGAINST SOME IRANIAN COMPANIES REMAIN IN FORCE

anctions imposed by the National Bank of Georgia in respect of some Iranian companies are still in force and the country continues to cooperate with the UN and international organizations on this issue - said the President of NBG George Kadagidze. According to him, the National Bank

meets all regulatory requirements and at this point, no changes are expected. “This does not mean that the sanctions are imposed on all Iranian companies indiscriminately. Everything depends on a particular client and a particular bank,”- the National Bank President states. As reported, Iran’s Deputy Ambassador in Georgia told “Com-

mersant” that the Ministry of Foreign Affairs of the country were negotiating about the lifting of sanctions against Iranian companies . However, the Minister of Foreign Affairs of Georgia Maia Panjikidze denied this information saying that no negotiations on this issue are conducted.

BASIS BANK INCREASED RETAIL LOANS PORTFOLIO BY 62,5%

SC Basis Bank increased retail loans portfolio by 62,5%, to 81,1 million GEL. The bank informs that mortgage loans have increased with a record amount - by 95,8%, auto-loans - 41,3%, consumer credits - by 30,1%. Overall loan portfolio of the bank exceeds to 205 million GEL (01/01/13-

97,6 million GEL). The bank completed 2013 with 10,697 million GEL profit (2012 - 1,3 million GEL). Actives have increased by 108%, to 414,9 million GEL (01/01/13-199,9 million GEL). Market share is 2,4% (01/01/13 -1,4%). Basisbank operates since 1993. European Bank for Reconstruction and De-

velopment (EBRD) is its stockholder since May 2008 (15%). Large Chinese company Xinjiang Hualing Industry & Trade (Group) Co ltd became owner of Basis Bank in 2012. 95,6% of the stocks belongs to it. Stock capital of the bank equals to 116,528 million GEL (01/01/13- 51,6 million GEL).

BANK OF GEORGIA COMPLETED 2013 WITH 123,397 MILLION GEL PROFIT

SC Bank of Georgia completed 2013 with 123,397 million GEL profit (2012 - 134,349 million; 2011 - 152,8 million GEL). Its share among the profitable banks equals to 31% (2012 - 58%). By January 1, 2014 according to ac-

tives, market share of Bank of Georgia is 33,8% (01/01/13 -37%), according to loan portfolio (3,09 billion GEL) 33,4% (01/01/13 -36%). The bank is the market leader according to almost all data; the only exception is individuals’ deposit portfolio.

INVESTBANK’S NEW MAJORITARIAN STOCKHOLDER WILL BE KNOWN SOON

ew owner of JSC Investbank’s control package will be known in several days. President of National Bank (NBG) stated that new owner of 70% share will be known soon. The case deals to Georgians, although George Kadagidze does not specify whether it’s bank, micro-finance orga-

nization, financial group or individuals. New stockholders will replace Dimitri Gabrielasvhili and Lado Alexidze. Alexidze refrains from comments. Gabrielashvil assures that changes in the stockholders’ structure are not expected. Investbank has been managed by the temporary administration of Na-

tional Bank for 4 months. Failure to fulfill the supervision capital requirement became basis for entrance of the regulator at the end of October 2013. Coefficient was 11,826% and respectively was slightly behind to 12% norm. Possible changes in the stockholder structure will be known till the end of this month.

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February 17, 2014 #42

DAVID MIRTSKHULAVA: “5% OF THE COMPANY’S PROFIT WILL BE PERMANENTLY TRANSFERRED TO SVANETI DEVELOPMENT FUND” full. After the road renewal, it will be possible to land in Ushguli in 40 minutes from Kopitnari Airport. This will be a significant advantage for the region’s development. I’ll bring the example of Italian Valle d’Aosta. In this region there used to be a hard demographic situation, but now, after implementing several such large projects, I mean hydro power plants, it is the only region in Italy’s highland where the population is increasing. Therefore, once again, we are not opponents or enemies, nobody should say that anyone does not care for Georgia on this or that side. Both supporters and opponents love their country, though they have different opinions. Reservoir construction and rehabilitation issues have not been resolved easily in any country.”

f we look at the financial model of Khudoni construction, the cost of construction equals $ 700 million. Given the banking services and all other expenses, the overall cost will constitute $1.2 billion. I would like to note that suspension of Khudoni construction was not a single event and we should not blame Greens’ Movement and the national movement for everything. In the Soviet Union at that time much bigger constructions got stopped. However, it needs to be added that later almost all projects were completed” – said David Mirtskhulava, Technical Director of Trans Electrica (Khudoni’s investor company) at the meeting organized by the Georgian Infrastructure Projects Initiative.” David Mirtskhulava, at the Meeting – discussion between energy experts, economists and nongovernmental organizations, dedicated to Khudoni Project made announcement about another important initiative: “Under the investor’s decision, 5% of the company’s profit will be permanently transferred to the Regional Development Fund. This equals several million Lari annually. In addition, an initiative emerged that investor takes care of construction of Lentekhi –Mestia road. Along with the state, the investor will take part in construction of this tunnel. Svaneti is a winter resort, with a good skiing tracks. New cableways are being constructed in Tetnuldi while guesthouses are empty. During January only few guesthouses were

‘THIS IS THE BEST OPTION AMONG ALL REVIEWED PROJECTS” As regards the state’s participation in the project, David Mirtskhulava made a comment on this matter: “based on the Canadian and the other countries’ examples I would like to note that some are in the state ownership some in private. But in a country like ours, which is at the verge of poverty, involvement of the private sector is much more effective. Economists would agree that the model chosen by Georgia implying construction, operation and ownership is more attractive for investors. We are not the country like Russia, to construct everything ourselves like GasProm and have everything owned by the state, we do not have resources for this. The most attractive sectors for investors in our country are energy and hydro energy fields. I used to attend meetings where discussions addressed the model of construction-operation-transfer, but the banks which significantly fund such projects, advised to refrain since it would reduce the number of investors. As regards the work performed, the huge experience should be noted. Enguri HPP or Lajanuri HPP was not constructed accidentally. Unfortunately, everything got destroyed in Georgia all archives got lost. It is a disaster that brilliant projects of the Institute of Energy as well as libraries turned into a waste in some cases. In 2010 the World bank invited the experts’ council with participation of the greatest geologists, hydrologists and experts of these types of con-

SWISS COMPANY STUCKY: THE SELECTED LOCATION FOR KHUDONI HPP CONSTRUCTION IS THE BEST ONE “The statement made by Simon Bakhturidze is not genuine. On the contrary, we insist that the current location is the best one for Khudoni HPP construction and there is not alternative in this respect”, Giorgi Macharadze, a director for Georgian representation of Stucky company, made the statement to answer Simon Bakhturidze.

-Mr. Giorgi, Simon Bakhturidze has noted Stucky company finds the selected location inappropriate for Khudoni HPP construction. He says the company offers the upper part of the river Enguri to the investor for the HPP construction. Would you name any other better

places for Khudoni HPP construction? -The statement made by Bakhturidze is not genuine, because our company has performed research works over the issue. We have submitted the report to the Energy Ministry. The information Bakhturidze has given has not been indicated in the report. We have received entirely different results and entirely different decision has been taken. In practice, the report proves efficiency of the existing project. -Mr. Giorgi, do you confirm the place for HPP construction has no alternative? -We have discussed many alternative places and the research has showed the current location is the best one. Stucky company conducted the research for developing Khudoni HPP feasibility studies in 2008 to 2013. “The research includes geological, topography, hydrology, social, environment and other research works that are required for feasibility studies. Briefly, we have a full picture of issues in line with international standards. These research works have showed the current location is the best one”, Giorgi Macharadze noted.

structions and they stated that this option was the best one compared with all reviewed ones. ‘This was the best studied project from the seismic point of view.” A question was raised at the meeting how well was the Khudoni project studied from the seismic and environmental point of view. David Mirtskhulava: “They often speak about geology and I would go farther, asking the question how well the project is studied is absurd. We do not have a better studied structure in Georgia. Ms. Nino Tsereteli conducted recently research about seismic side of the project. We all know that when you are constructing something it should be complying with respective seismic regional map, which the country has. Our regional seismic map made especially for Khudini, is of higher level than the regional map provided for in the normative act. I would say that this project is the best studied from the seismic and environmental point of view in Georgia. French – Italian organizations in 2008 conducted a survey and prepared an opinion that environmental impact was of minimum level. As regards the erosion issue, I do not know the best expert in the field of erosions than Mr. Emil Tsereteli. He unilaterally noted that the disaster would happen only if Khudoni were not constructed. If we do not trust Emil Tsereteli in the field of erosions than I don’t know who to trust…” “INVESTOR WILL CREATE ALL CONDITIONS FOR SETTLING THE EMPLOYMENT ISSUE IN SVANETI” David Mirtskhulava, as a Representative of an Investor Company made a comment about resettlement process: “one more thing I am an investor’s representative and let me say a few words on behalf of our company. I would like to address resettlement issue, which is a very sensitive one. We do not regard this process as a short-term one, this is a long-term process. Our goal is that every person living here, his/her children live much better than they do today. This is our goal and we want it. Also I’ll make two statements about investor’s plans: investor will create all conditions that would contribute to improvement of demographic situation in Svaneti. The employment was addressed and I would mention that

250 people will be employed during the exploitation period. In the course of construction during 6 months up to 4,000 people will get employed. We perfectly remember how many people used to work at Enguri HPP at that time. Currently only locals work there. I am sure that in this region many talented people would appear who would work hard. Why people leave Svaneti? Because there are no jobs there. Timbering acquired really catastrophic scale, since people have no other work and it is the only source of income. The social situation is also dramatic in that village and in the region at large. In case of implementing the project, it will be possible to employ those people and create normal living conditions. “WE ARE READY TO BUILD A UNIQUE VILLAGE IN SVANETI” “We make a statement that we are ready to build a village, which will be unique in Georgia. There are representatives of new technologies here. Believe me the state-of-the-art technologies will be used for heating and energy efficiency in all premises. Close to the place where locals live a new village will be constructed. I am not supporting Khudoni Project only today. In 80s of the last century when I was young I was supporting the project then and I’m supporting it now, since I think that this is the future of my country. There is no other way for development and economic growth in Georgia. Any neighboring country possessing the natural gas wants us that we construct thermal power stations. Currently, we are 73-75% energy dependent on our neighbors. We do not have any other chance we have to use our own resources. Here comes Enguri HPP issue. If a reservoir is constructed in Svaneti, there is a chance to resolve Enguri regulation issue. The Military experts attending this meeting would agree that Svaneti needs reservoir for regulation of the biggest river. Moreover, if anyone starts talking about one more reservoir construction, I’ll be an opponent, since no more reservoirs are to be constructed. One reservoir meets the objective that is necessary for our country. More reservoir HPPs shall not be constructed in Svaneti” – added David Mirtskhulava.

KAKHA KALADZE: KHUDONI HPP ISSUE CONCERNS THE WHOLE GOVERNMENT INCLUDING THE MINISTRY OF ECONOMY

akha Kaladze, the Minister of Energy and Vice Prime Minister, met journalists within the framework of the Project Georgian Government for Open Governance. Majority of raised issues pertained to implementation of Khudoni HPP. One of them was the land ownership. Who is the owner of the land, the registration of which has been suspended under the decision of the Ministry of Energy? Is the Ministry of Economy a successor of paid compensations received by 130 Khaishi families in 1988 and is the Ministry to answer these questions? Kakha Kaladze addressed these issues: “As regards the Ministry of Economy, of course, it needs to be included in the discussion. I would like to reiterate that negotiations are in progress with the investor, the Ministry of Energy is trying to achieve agreement on details, however it should not be a decision only of the Minister of Energy. This is the government’s decision and when we came to power we started to study all those agreements individually that were concluded before. When we reached the Khudoni Project, we established a working group with participation of those NGOs that now are opposing the project. They took part in reviewing the agreement. Presented comments were accepted by the investor. Afterwards the issue was reviewed at the Meeting of the Government, it approved the project and it was decided that prior to March 1, 2014 the

Investor had to direct its efforts towards obtaining the construction permit. We will do our best to assist the investor. Any investor that comes to the country, I mean not only the Khudoni Project it is about the energy sector as a whole (starting from 1 mega watt to the largest HPP), needs to be treated with a uniform approach. Investments will always be supported by the Government. Khudoni HPP issue needs to be addressed by the Government, including the Ministry of Economy. The Ministry of Economy issued a permit in the past so that the 1,500 hectares of land got transferred to the investor.”

AZERBAIJAN February 17, 2014 #42

caucasian business week

AZERBAIJAN’S BUSINESS OPPORTUNITIES PRESENTED IN ITALY

zerbaijan and Italy’s relations and expanding bilateral cooperation in economic, cultural, and humanitarian fields were discussed at an event about Azerbaijan held in Bergamo, Italy. Co-organized by Azerbaijan’s Embassy in Rome and Bergamo Chamber of Commerce and Industry, the event brought together Italian businessmen and local public figures. Azerbaijani Ambassador Vagif Sadigov met Mayor of Bergamo Franco Tentorio on the sidelines of the event. Speaking at the event, President of the Bergamo

Chamber of Commerce Giovanni Paolo Malvestiti emphasized the importance of the event in terms of studying Azerbaijan’s economic opportunities, adding that Azerbaijan was an important trade partner for Italy. Sadigov, in turn, highlighted Azerbaijan’s economic developments, saying that the international community has praised Azerbaijan’s progress in diversifying its economy. He also touched upon the TAP project, saying it would play a significant role in ensuring energy security of Europe. Italian businessmen are interested in investing in Azerbaijan’s non-oil sector, especially the infrastructure and food industries, Sadigov said, adding that there were great potentials for realizing projects in Azerbaijanis regions. Italy remains the largest importer of Azerbaijani goods, and almost a quarter of Azerbaijan’s exports went to Italy in the first 6 months of 2013, compared to 22 percent in the same period in 2012. Currently, 45 Italian companies operate in Azerbaijan in insurance, banking, trade, and other areas.

AZERBAIJANI-SPANISH BUSINESS FORUM TO BE HELD IN BAKU

zerbaijani-Spanish business forum is planned to be held in Baku. This was announced at a pressconference dedicated to the visit of a delegation of Spanish parliamentarians to Azerbaijan last week. “Azerbaijan is interested in development of relations with Spain,” head of the working group on Azerbaijan-Spanish inter-parliamentary relations, MP Fazail Agamali said. “We would also like to create a permanent group of friendship with Azerbaijan in the Spanish Parliament.” He added that the visit of the members of the parliamentary friendship group to Spain is soon expected. Head of the Spanish delegation Jose Maria Chikio, in turn said there are possibilities for comprehensive development of relations between Spain and Azerbaijan. “We have opportunities for cooperation in many areas. We are also interested in attracting entrepreneurs from Spain to Azerbaijan. During the

meetings, we proposed to hold a business forum in Baku in summer.” Earlier, the delegation of Spanish parliamentarians met with Azerbaijan’s Foreign Minister Elmar Mammadyarov and Deputy Chairman of the Azerbaijani Parliament Ziyafat Asgarov. The meetings discussed possible ways to boost bilateral relations between the two countries. Spain recognized Azerbaijan’s independence in December 1991. Diplomatic relations were established in February 1992. The trade turnover between the two countries amounted to about $158.4 million in 2012. Azerbaijan’s embassy in Spain has initiated the establishment of a joint chamber of commerce with aims to increase the trade turnover between the two countries, to attract Spanish companies to Azerbaijan, take Azerbaijani goods to the Spanish market, to organize mutual business forums, trade and investment missions, and to organize other events to promote bilateral cooperation.

AZERBAIJAN, SERBIA TO EXPAND TIES

meeting at high-level between officials of Azerbaijan and Serbia will take place next month in Belgrade. Serbian Ambassador to Azerbaijan Zoran Vajovic confirmed, adding that the two sides will discuss the opportunities to develop cooperation in the economic field. “We are right now working on the agenda of the intergovernmental commission meeting to be held on March 3-5,” the diplomat said. The intergovernmental commission is co-headed by Azerbaijani Economy and Industry Minister Shahin Mustafayev and Serbian Deputy Prime Minister and Minister of Foreign and Internal Trade and Telecommunications Rasim Lyaich. “We expect concrete negotiations among representatives of various ministries and departments of the two countries,” the ambassador said. “The Serbian side is primarily interested in investment projects.” Vajovic went on to note that the development of economic cooperation, promotion of joint infrastructural projects, investment projects, increase of turnover between the countries and the participation of Serbian companies in different projects in Azerbaijan are among the main topics to be discussed during the meeting. “As you know, a construction boom in Baku is expected before the European Olympic Games: Baku 2015. Marvelous projects are being implemented, stadiums and other sports complexes are being constructed,” Vajovic noted. The diplomat emphasized that his country attaches great importance for expansion of trade and

economic relations with Azerbaijan. “In 2010, the trade turnover between two countries amounted to several million euros, but in 2012 and 2013, it increased to 40 million euros, and then it reached 60 million euros including project-construction, engineering, transportation and installation of different equipment and materials, internal and external facilities, equipment for oil and gas industry, and also furniture and construction materials and so on,” he said. Currently, several Azerbaijani companies are working in Serbia. “Serbia and Azerbaijan are working on construction projects. The biggest project is the construction of the motorway in Serbia in which the Azerbaijani company AzVirt is the general contractor. The projects of the creation of free zones in the cities Chachak and Kraljevo have also been presented to Azerbaijani investors,” the ambassador noted. According to Vajovic, the Serbian side is interested in Azerbaijani investments and tries to attract Azerbaijani partners. Vajovic believes that the bilateral political relations between Serbia and Azerbaijan are at a very high level. “Serbia and Azerbaijan are strategic partners. Last year, during the visit of Serbian President Tomislav Nikolich to Azerbaijan, two countries signed a declaration about friendly relations and strategic partnership which creates the legal and political basis for further interactions in all spheres,” he said.

AZAL INCREASES FLIGHTS TO BEIJING

zerbaijani Airlines, AZAL, has started to implement Baku-Beijing-Baku flights under the new schedule, including Thursdays. The flight will be carried out on Tuesdays, Fridays and Sundays at 19.20 local time from Baku, and on Tuesdays, Thursdays and Sundays at 01.00 local time from Beijing. Being the biggest Azerbaijani airline and national flag carrier, and a regional and CIS leader in the number of new aircrafts, AZAL offers its passenger flights to European countries, the CIS, Middle East, and Asia. After purchasing new Boeing

aircrafts for long-haul flights in 2014, the airline plans to open regular flights to several destinations in North America and Southeast Asia. The company cooperates with about 60 airlines to provide its passengers with an opportunity to travel freely around the world.

BP AZERBAIJAN MAKES PUBLIC 2013 RESULTS

ritish BP, which operates a number of major oil and gas projects on behalf of its co-ventures in Azerbaijan, Georgia, and Turkey, made public the results of 2013. The company’s February 13 report said the giant Azeri-Chirag-Gunashli (AGC) block of oil and gas fields in the Azerbaijani sector of the Caspian Sea produced over 239 million barrels (32.2 million tons) of oil. The daily production in the ACG fields was an average of 655,370 barrels per day (bpd), BP said. In 2013, the volume of operational expenditures and capital expenditures within the project reached $772 million and $2,833 million, respectively. The company is expected to spend $1,052 million in operating expenditures, and $2,068 million in capital expenditures for ACG activities in 2014. At the end of the year, a total of 81 oil wells were producing, while 37 wells were used for injection in the ACG field, the report said. The report also said in 2013, BP, as operator of the ACG field, continued to deliver associated gas to the Sangachal terminal and from there into Azerigas’ national grid system for domestic use. BP also said ACG associated gas flaring was 2.6 percent by the end of 2013, which showed a 45 percent decrease from 2012. As a result of the measures taken for further improvement, the rate of ACG associated gas utilization has reached 97.4 percent, which is in line with the best European standards. “BP as operator of ACG will continue its efforts to minimize associated gas flaring while maintaining safe operations,” the report said. In 2013, BP delivered around 6 million cubic meters of ACG associated gas to SOCAR on a daily basis, which made a total of 2.19 billion cubic meters. ACG delivered 12 oil production wells, one gas

injector, and three water injector wells. In addition, one data acquisition well was successfully delivered. Furthermore, in 2013, the giant Shah Deniz gas condensate field in the Caspian Sea produced about 9.8 billion cubic meters of gas and 2.48 million tons (19.6 million barrels) of condensate. The daily production at the field amounted to about 26.8 million cubic meters of gas and 53,740 barrels of condensate. “Since the start of Shah Deniz production in late 2006 till the end of 2013, about 47.3 billion standard cubic meters of Shah Deniz gas, and about 99.5 million barrels (12.6 million tons) of Shah Deniz condensate has been produced,” BP said. According to the report, the volume of operating expenditures and capital expenditures in 2013 amounted to $200 and $1,700 million respectively. In 2014, the company plans to spend around $200 million on operating expenditure and about $4,000 million on capital expenditure for Shah Deniz activities. Also, in 2013, the Baku-Tbilisi-Ceyhan pipeline (BTC) exported about 247.2 million barrels (33 million tons) of crude oil. In 2013, BTC spent over $75 million in capital expenditures. In 2014, BTC capital expenditures are expected to be about $119 million. The BTC pipeline currently carries mainly ACG oil and Shah Deniz condensate from Azerbaijan. In addition, crude oil from Turkmenistan continues to be transported via BTC. In 2013, the South Caucasus Pipeline’s (SCP) daily average throughput was about 13.4 million cubic meters of gas or 81,600 barrels of oil equivalent per day. SCP spent around $50 million in operating expenditure and $250 million in capital expenditure. In 2014, operating expenditure is expected to be $50 million.

AZERBAIJAN-GEORGIA TRADE TURNOVER UPS

he trade turnover between Azerbaijan and Georgia amounted to $1.35 billion, or 12.5 percent of total foreign trade turnover of Georgia in 2013, Georgian National Statistics Office reported. The trade turnover between the two countries increased by 7.14 percent in 2013, while in 2012, the trade turnover between Azerbaijan and Georgia amounted to $1.26 billion. Azerbaijan is Georgia’s second largest trading partner after Turkey. Georgia’s trade turnover

with the latter amounted to $1.53 billion (14.2 percent). Ukraine ranks the third with $795.13 million share for the reporting period. Georgia’s total foreign trade turnover in 2013 amounted to $10.78 billion, increasing by 5.48 percent compared to 2012. Azerbaijan mainly exports to Georgia petroleum, petroleum oils and gases, gypsum, anhydrite, plaster and other products, while the motor cars, live bovine animals, bars and rods of iron, cement are the most imported goods from Georgia to Azerbaijan.

QATAR HOLDING SEEKS TO INVEST IN AZERBAIJAN

ruitful investment environment in Azerbaijan was highlighted at the meeting of Azerbaijan`s Agriculture Minister Heydar Asadov and representatives of Qatar Holding in Baku on February 5. At the meeting, the minister praised relations between Azerbaijan and Qatar. Asadov noted the importance of conducting joint researches in the agrarian sphere and exploring the export opportunities. Deputy Head of the Business Development Department of the Holding, Mohammad al Mosal-

lam said agriculture plays an important role in Azerbaijan`s economy. He noted that they are interested in investing in this field. The sides appointed coordinators with the aim of developing cooperative relations. Qatari Ambassador Sheikh Mubarak bin Fahad Jassem Al Thani was also present at the meeting. Qatar Holding is a global investment house established in 2006, founded by the Qatar Investment Authority (QIA). It invests internationally and locally in strategic private and public equity as well as in other direct investments.

12 FITCH DOWNGRADES UKRAINE’S CREDIT RATING TO PRE-DEFAULT LEVEL

itch has downgraded Ukraine’s credit rating from “B-” to “CCC”, or a predefault level. The agency cited the political instability and fears over Kiev’s debt repayment schedule. Fitch added that “political uncertainty has contributed to a weakening in confidence in the Ukrainian hryvna and in the exchange rate policy.” The country’s central bank last week limited private transfers abroad to around $5,700 a month. Russia has suspended a $15 billion bailout after President Viktor Yanukovich sacked the prime minister, Nikolay Azarov, following street protests.

GAZPROM TO MOVE HQ TO ST. PETERSBURG BY END OF 2015 – PAPER

azprom will move its headquarters to St. Petersburg by the end of 2015, Vedomosti daily writes, citing its sources. The Russian gas giant is looking for new offices to rent in the city and personnel as some are not going to leave Moscow. The company’s own 86-story building to house the headquarters, the Lakhta Center, is expected to be completed by the end of 2018. Currently, five departments of Gazprom are working in St. Petersburg.

RUSSIAN ECONOMY MINISTER TO VISIT IRAN – REPORTS

ussian minister of economic development, Aleksey Ulyukayev, plans to visit Iran on an official visit, Prime reported. The Russian Ambassador to Tehran, Levan Dzhagaryan, said on Saturday that Ulyukayev will visit Iran on March 21, according to the Fars news agency. It added that Moscow and Tehran may discuss “railway construction for Iran’s oil,” and expansion of ties in other economic areas.

CAR EXPORTS TO EXCEED ONE MILLION

xport of passenger vehicles from Russia will exceed 1 million units, auto industry experts predicted in a survey by KPMG. The research, in which 200 executives at various levels in major automobile manufacturers, their suppliers and dealers participated, revealed that 44 percent of respondents believe that number will be hit in three to five years, while 33 percent think it will take six to years. In 2013 Russia exported 142,000 cars, up 26 percent from 2012, according to ACM Holding. The majority — about 88,000 — went to Kazakhstan, which is the third-largest car market in the former Soviet Union, after Russia and Ukraine, and grew 80 percent last year. AvtoVAZ is the largest exporter, and increased its sales abroad by 11.4 percent in 2013 to hit 78,602 units. The lion’s share, at 72 percent, went to Kazakhstan. Europe took 4 percent of that volume. Exports are growing along with production capacity of the factories built in Russia by the international majors, said Ulrik Andersen, who runs the automobile practice at KPMG in Russia and CIS. Existing and planned capacity for light vehicle production in Russia totals more than 3 million units per year, he added. Domestic sales in 2013 were at 2.6 million units, ACM said. It is entirely possible to hit the 1 million unit export target in three to five years, said Deputy Industry Minister Alexei Rakhmanov. The CIS markets are developing and their volumes are growing, he added. Car manufacturers in Russia polled by Vedomosti said they do not intend to increase exports. VW and GM produce in Russia primarily for the local market, with only the Chevy Niva from GM-AvtoVAZ being exported, a company spokesman said. Toyota’s factory in St. Petersburg produced 35,685 cars in 2013, of which 3,042 went to Kazakhstan and 255 to Belarus, a factory spokesman said. A spokesman for Nissan said earlier that about 10 percent of their Russian production gets exported to the CIS.

CIS caucasian business week

February 17, 2014 #42

CHINA AND RUSSIA TO BUILD WORLD’S BIGGEST THERMAL POWER PLANT

hina and Russia are to build the world’s biggest thermal power plant with an 8 gigawatt capacity. The Erkovetskaya TPP project in Russia’s Amur region could cost up to $24 billion, and will export energy to China where domestic demand is high. The plant will be developed by Eastern Energy Company, a subsidiary of Inter RAO, the Russian state-run power utility, Vedomosti newspaper reported.

The plant will supply 30-50 kilowatts per year, which is about 5 percent of the Russian Federation’s total current production, General director of Eastern Energy Company, Mikhail Shashmurin told Vedomosti. It will cost between $7.5 and $12 billion, according to Natalia Porokhova, an energy analyst at Gazprombank. Talking to another Russian newspaper Kommersant, Sergey Beiden from Otkrytie Financial Corporation estimated the cost to be between $12.5 - $24 billion. At first a 5 gigawatt project was in the works, but at the request of the State Grid Corporation of China (SGCC), the joint venture will look at “additional exploration,” Shashmurin said. To deliver the energy to Beijing, where demand is strongest, an estimated 2,000 km of transmission lines will need to be installed. A framework agreement was signed in 2013 between the two state-owned companies which explored the possibility of building power plants in Russia’s Far East with the goal of exporting 4050 billion hours to China. The final decision will

come from China’ Committee of Development and Reform, and will include a 5-year draft economic plan. The Chinese want to be shareholders, and according to Shashmurin, could own up to 49 percent in the project. The first long-term power contract with China was inked in 2012, and stipulated 100 billion kilowatts of supply over 25 years to the Heilongjiang province. In 2013, Inter RAO delivered 3.39 billion kilowatts to China, Shashmurin said. Inter RAO halted exports to China in February 2007 after Russia increased duties on Chinese sales. Trade resumed in 2009. The Russian Far Eastern Amur region was devastated by floods last summer, with nearly 100,000 people were affected, and thousands of homes submerged. There was great concern that a heat power plant in Khabarovsk would be submerged by flood water. When floods hit in 2007, the reservoir of the Zeya hydroelectric plant nearly overflowed. Russia’s biggest natural gas producer, Gazprom is negotiating gas delivery with CNPC.

WORSE THAN GREECE: FITCH SAYS UKRAINE’S DEFAULT RISK HIGH

he worsening political and economic circumstances in Ukraine has prompted the Fitch Ratings agency to downgrade Ukrainian debt from B to a pre–default level CCC. This is lower than Greece, and Fitch warns of future financial instability. “Intensification of political and economic stress is such that default on government debt becomes probable,” Fitch said in an e-mail. On the brink of default, the Ukrainian economy has taken a further beating as protests drag on in the capital Kiev. Foreign debt is $140 billion, nearly 80 percent of the country’s gross domestic product. “There are emerging signs of stress in the banking system. Demand for foreign currency cash has risen, potentially leading to further steep exchange rate depreciation. These developments pose liquidity and asset quality risks, given the large amounts of foreign currency debt on private sector balance sheets,” the note said. The Ukrainian Central Bank is tapping into the country’s reserves to pay off the country’s fastaccumulating debt. Foreign reserves shrank 12.8 percent to $17.8 billion in January, the lowest since 2006, according data published by the central bank. Overall in 2013, international reserves dropped 16.8 percent, losing a total of $4.1 billion. The central bank is intervening on behalf of the

hryvnia, which has fallen significantly as President Viktor Yanukovich and the opposition fail to strike an agreement, and protesters continue to clash in Kiev after 3-months of unrest. Limits on foreign-currency purchases have been set in order to protect the hryvnia, which has spiraled into freefall, rising above 9.0 against the dollar for the first time since February 2009. At 16:30 MST Monday it was trading 8.4350 against the dollar. If the situation continues to unravel, more capital controls could be introduced to limit the amount of foreign currency bought, or even moved outside Ukraine. This is the action Cyprus took when it faced default in March 2013. RUSSIAN MONEY POSTPONED Ukraine’s $15 billion loan from Russia has been put on hold until a new government is formed. A transfer of $3 billion in Eurobonds has already been placed, but the uncertainty over when the next installment will come worries Fitch. “We no longer assume the Russian loan will be disbursed in full, while Ukraine has lost external market access,” Fitch said. “Fitch has previously warned that further Russian

support is likely conditional on President Yanukovich’s continued political survival,” the statement said. Mykola Azarov resigned as Prime Minister at the end of January along with many other top government officials. Standard & Poor’s and Moody’s Investor Services have both reduced Ukraine’s outlook. Violent protests have plagued the country since November, when President Yanukovich refused to sign a trade treaty with the EU, and instead in December turned to Russia for monetary aid. As the currency weakens and foreign currency reserves are depleted, Ukraine may become more dependent on Russian aid. Both the US and the EU have pledged monetary assistance to Ukraine, but no official offers have been inked.

KAZAKH PRESIDENT DEFENDS TENGE’S DEVALUATION

azakh President Nursultan Nazarbayev has defended the devaluation of national currency tenge saying the move will lead to further growth of the country’s

economy. Speaking at a meeting with Prime Minister Serik Akhmetov and National Bank’s Chairman Kairat Kelimbetov on February 12, the president said the measure is aimed at improving the economic state of Kazakhstan’s enterprises, each with 10,000-40,000 staff. “Our economy will receive additional income and in general, it will positively impact the economy’s further growth,” the president said. Nazarbayev also emphasized that the government’s decision to devaluate tenge should not adversely affect ordinary citizens, therefore it is necessary to prevent artificial raise in prices and curb speculations at the currency exchange points. “The officials at all levels should monitor the issue closely and the relevant government authorities should continuously conduct monitoring and take the tightest measures, including the withdrawal of the license of those who speculate on the current economic situation,” Nazarbayev said. “Currently it is necessary to take all necessary measures for the national currency corridor

to be at the declared level and to work for the benefit of our economy”. In his remarks the National Bank’s chairman said the potential opportunity created as a result of the devaluation in February 2009 has increased the competitiveness of Kazakh economy. “We achieved good results, but in 2012-2013 the opportunity gradually faded because the currencies of other developing countries weakened before the U.S. dollar. Today, many investors abandon the emerging markets,” Kelimbetov said. The bank’s head also said import in Kazakhstan grows faster than export. “To avoid such a fast pace of growth in import, we worked on the adjustment of the exchange rate, as the previous corridor at 145-155 tenges per dollar has exhausted itself. Today we believe that a 20 percent change in rates and achievement of targeted 185 tenges per dollar with three tenges more or less is that equilibrium and competitive exchange rate, which is needed in the Kazakh economy in the nearest medium term,” he said. Kazakh Prime Minister, in turn, said the expert community and the government are aware of a number of uncertainties in the economic situation in 2014, not only in Kazakhstan but also in other countries, including Russia, China and developing states. “We believe that, given the situation, which is

currently developing in the global economy, the devaluation which is conducted by the National Bank is a necessary measure. This will allow improving the macroeconomic indicators of our country’s economy in several areas,” Akhmetov said. Experts believe devaluation of tenge will lead to the increase of prices of many goods, including food products, increase of the prices of imported goods, which occupy a large share in the consumer basket of Kazakh citizens. There is also a risk that the public services in the country would become more expensive. The devaluation of the tenge by 20 percent will increase inflation by 3.3 percent as well. The devaluation has also some positive results. The devaluation of tenge is expected to support the trade balance and improve the foreign trade positions of the country, to have a positive effect on the revenues of the country’s state budget. Also, the nominal amount of the country’s GDP will increase by an additional 6.5 percentage. The devaluation of tenge may also give impetus to the development of the national economy. In particular, companies exporting products abroad may benefit from the fall of the Kazakh currency, and have a positive impact on the situation of large domestic manufacturing companies, the products of which are exported.

WORLD NEWS February 17, 2014 #42

HOUSE OF REPRESENTATIVES APPROVES ‘CLEAN’ DEBT LIMIT

he US House of Representatives has narrowly approved a one-year extension of federal borrowing authority. The decision on Tuesday came after Republicans caved in to President Barack Obama’s demands to allow a debt limit increase without any conditions, Reuters reported. The 221-201 vote, carried mainly by Democrats, marked a dramatic shift from the confrontational fiscal tactics House Republicans have used over the past three years. That culminated in last October’s 16-day government shutdown.

CHINA COMMODITIES IMPORTS HIT RECORD HIGHS IN JANUARY

hina’s imports of crude oil, iron ore and copper hit record highs in January, Reuters reported. Some of the unexpected strength was put down to stockpiling ahead of the Lunar New Year holidays. Data showed the value of China’s overall imports and exports climbed around 10 percent last month from a year ago and beat expectations. The figures raised optimism over the health of the world’s second-largest economy after recent weak data.

2 AGENCIES PROPOSED FOR DEVELOPMENT OF RUSSIAN FAR EAST

he Ministry for the Development of the Russian Far East has proposed creating two new agencies, one of which will work to attract investment and support exports, Vedomosti daily writes. The second agency will be responsible for the development of human capital and recruiting in the region. The investment agency is expected to boost image of the Russian Far East as a region attractive for investment projects.

CHINA’S ALIBABA TO LAUNCH ECOMMERCE SITE FOR US CONSUMERS

he Chinese ecommerce company Alibaba wants to help sell goods to American consumers and launch its first majority-owned ecommerce venture in the US, according to the Financial Times. The company, which has long connected US brands to Chinese suppliers, is poised for an initial public offering that could value it at more than $100 billion, analysts say. Two of Alibaba’s US subsidiaries, Vendio and Auctiva, will soon launch a business-to-consumer site, 11 Main. Alibaba described it as a boutique ecommerce platform selling “interesting quality products” from “handpicked shop owners.”

FEDERAL RESERVE TO CONTINUE TAPERING STIMULUS - YELLEN

ederal Reserve chief Janet Yellen has said the Fed will continue to cut its stimulus measures for the US economy, the BBC reported. If the US economy keeps improving, the bank would take “further measured steps” to reduce its support, the new Fed chair said in her first testimony on Tuesday. Yellen also signaled that interest rates would remain low. “I have always been in favor of a predictable monetary policy that responds in a systematic way to economic variables,” Yellen said in response to questions from Jeb Hensarling, the chair of the House Financial Services Committee.

caucasian business week

US HOUSE RAISES $17.2 TRILLION DEBT CEILING, NO STRINGS ATTACHED

he US House of Representatives has agreed to raise the government’s borrowing cap until March 2015, without specifying the exact limit. It’s a huge shift as the bill was approved for the first time in three years with no conditions from Republicans. The bill next goes to the Senate, where approval is expected from the Democratic majority. The 221-220 vote was a landmark victory for Democrats, and will put an end to Washington’s budget enmity, which led to a two week US government shutdown in January. Raising the debt ceiling, an action Republicans have fought against staunchly for three years, means the US will increase the $17.2 trillion borrowing limit and be able to meet promised financial obligations. Republican House Speaker John Boehner promised the February 27 technical default deadline, set by Treasury Secretary Jack Lew, would be met in good faith. The vote was “a positive step in moving away

from the political brinkmanship that’s a needless drag on our economy,” White House spokesman Jay Carney said in a statement after the vote. The bill is “clean” as there are no strings attached, no extra conditions President Obama and Democrats need to negotiate in order to raise the debt ceiling. John Boehner urged his party not to filibuster and prolong the process, and lamented the vote as a “disappointing moment” but would help the party better focus on 2014 elections. On Friday, the Treasury was forced to start “emergency measures” after spending its borrowed time and money. In December, Democrats and Republicans agreed to a $1.01 trillion budget that will increase budget spending by $63 billion in 2014 and 2015 and cut $23 billion off the budget deficit over 10 years without hiking taxes. The two-year budget agreement could usher in a new era of cooperation in Congress, which has been viciously divided over raising the debt ceiling to fund the budget.

EU LOOKS TO REDUCE RELIANCE ON BANK LENDING

he EU is examining ways to use the personal savings of its half a billion people to fill gaps the 2007 financial crisis created. Tougher regulations means there is less credit available from banks, and this money could bridge the divide. According to an unpublished EU document seen by Reuters the Commission plan is to ask the European watchdog “to mobilize more personal pension savings for long-term financing”. “The economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment,” says the document.

The liquidity rules for long- term investing and the “appropriateness” of EU capital will be revised within the next two years. The changes will need in depth inspection by world-wide regulators in order to exclude any unfair advantage the EU banks may get. The postcrisis economy is forcing lenders to hold much larger safety cushions of capital and liquidity. The European officials plan to explore the feasibility of introducing an EU savings account, open to individuals whose money could then be invested into small businesses. At the same time the EU Commission will also think about creating a liquid and transparent secondary market for trading corporate bonds in the EU. Another tool to boost the economy could focus on reviving the securitization market, as the Commission will “take into account possible future increases in the liquidity of a number of securitization products,” says the document. This is when banks pool loans like mortgages into bonds thus raising funds both for themselves and companies. After the financial crisis, the market was tarnished when the bonds related to US real estate loans started to default in 2007, causing global market turmoil in the following two years.

FOUR LATIN AMERICAN COUNTRIES AGREE $85 BN FREE-TRADE DEAL

hile, Colombia, Peru and Mexico have signed a treaty to eliminate tariffs on 92 percent of goods and services. The Pacific Alliance is free trade area of some 210 million people, accounting for more than a third of all Latin American and Caribbean GDP. The move is a big step towards strengthening the countries’ position alongside the strong neighboring trade pact – Mercosur - which includes Argentina, Brazil, Paraguay, Uruguay and Venezuela. “This translates into more investment, more competitiveness and as a consequence, more employment, and good quality employment. This is the fundamental purpose of this whole exercise,” the Wall Street Journal quotes Colombia’s President Juan Manuel Santos.

Morgan Stanley estimates an average 4.25 percent growth for the new alliance this year, or about $85 billion. At the same time many economists forecast a shrinking Venezuelan economy, weak 2 percent growth for Brazil, along with Argentina falling into recession. Besides establishing strong economic connections, the deal will also create a fund to finance infrastructure investment and a medicines price monitoring and leverage system. The Pacific Alliance, founded in June 2012, has set a vital goal to increase trade with fast-growing Asian nations. Accounting for 50 percent of the population of Latin America the union is ready for further expansion. Costa Rica applied for membership at the VIII Summit of the Pacific Alliance. Panama and Guatemala have also expressed interest in becoming members.

GOLD HITS 3-MONTH HIGH

old hit a three-month high and global shares rose Tuesday, Reuters said. As investors are waiting for Federal Reserve chief Janet Yellen to appear with her first testimony before Congress, gold lifted 0.7 percent to 1,283.70, just off its highest level since midNovember. US gold futures gained for a fifth day in a row, the longest winning streak since August 2012. The dollar fell to its lowest level in almost two weeks against the euro and a basket of major currencies. Oil prices rose, with Brent crude edging above $109 a barrel.

US HOUSE TO VOTE ON DEBT-LIMIT INCREASE ON FEB. 12

he House plans to vote February 12 to increase the US debt limit and restore cost-of-living raises for military retirees, Bloomberg quoted Representative Robert Pittenger of North Carolina as saying. The plan was announced in a closed-door meeting of House Republicans. The debt limit would be raised until March 2015, according to Republican Representative Joe Pitts of Pennsylvania. The military retirees’ cost-of-living adjustments had been reduced in a December budget deal, and Republicans would pay for the restored benefits by extending cuts in programs including Medicare for one year.

UBS TO PUT 2 HONG KONG BANKERS ON LEAVE AMID INTERNAL REVIEW OF HIRING PROCESS

BS placed two bankers in Hong Kong on leave as an internal review is continuing of the hiring of a banker linked to China’s Tianhe Chemicals Group, Bloomberg reported. Joseph Chee, the Hong Kong-based head of global capital markets for Asia, and Sharlyn Wu, a member of his team, were put on leave, according to sources. Reuters earlier said that UBS is among banks seeking a senior role in managing Tianhe’s $1 billion Hong Kong share sale. The Swiss bank is looking into whether the hiring process used to bring in Joyce Wei, whose father is chairman of Tianhe, violated internal procedures.

GOOGLE BECOMES 2ND MOST VALUABLE US COMPANY BY MARKET CAPITALIZATION

oogle has passed Exxon to become the second most valuable US company by market capitalization, AP reported. As of Friday’s market close, the internet giant sat at $395.42 billion compared with the oil company’s $392.66 billion, according to FactSet data. Shares of Google have gained 66 percent since the beginning of 2013. Google and Exxon trail Apple’s market capitalization of $463.55 billion.

US LAUNCHES SECOND CHALLENGE VIA WTO TO INDIA OVER SOLAR POWER

he US has intensified a trade row with India over its national solar program, the Financial Times reported. Washington is launching a second challenge via the World Trade Organization to Indian requirements that if solar power developers want to sell in India, they have to use Indian-made solar products, said Michael Froman, the US trade representative. The US launched a similar challenge a year ago to little effect.

PUBLICITY caucasian business week

February 17, 2014 #42

TBILISI GUIDE February 17, 2014 #42

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 17, 2014 #42