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March 10, 2014 #45

March 10, 2014, Issue 45

Be informed, do business

georgia Parliament Adopts Resolution on Ukraine, Fails to Show Unanimity

arliament adopted on March 6 GD-proposed resolution on Ukraine calling on the west to take “political, economic and diplomatic measures” to help Ukraine amid Russian “aggression”. Pg. 2

Petrocas Energy Group: Agreement with Rosneft means transportation of the oil products to Armenia through Georgia

etrocas Energy Group states that Rosneft is their commercial partner and cooperates only for freight shipments. The company released the statement on Thursday. Pg. 5

Turkish Airlines Remains Air Market Leader in January

n January 2014 passenger flow on flights has increased by 28% in comparison with the same period last year. Pg. 5

FT - Growth helps narrow gender gap in fast-growing economies

Georgian Macroeconomic Review

eorgian GDP growth rebounded sharply in December, bringing the 4Q13 growth to a healthy 6.9% yoy and full 2013 growth to 3.2% yoy.

Pg. 9

Khudoni HPP - the First Serious Challenge for the New Government

nergy independence acquires even higher importance in the light of the Ukrainian events. Russia already made a decision to raise gas price for the country. Pg. 10

Azerbaijan Azerbaijan to ‘effectively regulate’ monetary policy in 2014

zerbaijan will effectively regulate its midterm monetary policy in 2014, head of the Central Bank of Azerbaijan (CBA) said on March 4. Pg. 11

cis Who will threatened sanctions hit most? US-EURussia trade in numbers

S lawmakers are already threatening Russia with economic sanctions over the crisis in Ukraine. Pg. 12

WORLD NEWS The cost of living around the world

caucasian1

AYONARA, Tokyo. Singapore is now the world’s most expensive city, according to the bi-annual cost of living index from the Economist Intelligence Unit, our corporate sibling. Pg. 13

Bidzina Ivanishvili Loses 100 mln USD and 41st Position in the Forbes Rating

115 Persons Poisoned by Gas Odorant

Azerbaijan’s First Lady named most influential woman of 2014

SOCAR to Explore Reasons

ast night a total of 115 persons were poisoned by natural gas odorant in one of the districts of Baku, Azerbaijan. Excessive dose of odorant in natural gas has poisoned the people. The substance is usually used to detect gas leakage. According to the Trend news agency, Some 70 people were provided with medical assistance. Some 45 people were taken to the Poison Centre of the Ministry of Health, 43 of them were hospi-

Pg. 6

talized but later they were sent home. The assumption that one of the Lokbatan residents (Natalia Mammadova) died as a result of this incident has not been confirmed, the spokesman for the Ministry of Health Anar Gadirli said. Azerigaz supplies natural gas to Baku and Georgia. At this stage, SOCAR is examining reasons for the accident. At the same time, criminal case has been instituted at the Baku City prosecutor’s office. Natural gas supply has been temporarily ceased to local residents.

Gas Filling Stations to Jointly Act against SOCAR

Pg. 6

Crimean Unrest Devaluates VTB Bank Shares

Fitch Lowers VTB Bank’s Rating

he price of Russian VTB Bank shares started falling as a result of political unrest in Crimea, Ukraine. At the same time, Fitch has lowered a rating to the company. The Rus-

sian policy against Ukraine has already damaged the Russian economy. Besides the devaluation of the Ruble, shares of Russian companies have gone also down and Russian businessmen’s losses have recorded millions of USD. VTB, Lukoil, Rosneft are among the companies that are bearing losses because of Putin’s policy. The Russian companies have lost confidence of investors. The price of a VTB Bank shares made up 0.042 Rubles at the February 28 Moscow exchange session, while on March 3 the price fell by nearly 12% to 0.034 Rubles. Pg. 6

Vimpelcom Loses 2.66 billion USD in Ukraine

osses of Vimpelcom telecommunications holding made up 2.66 billion USD in the 4th quarter of 2013, the report of International Financial Reporting Standards (IFRC) reads. The 2013 total losses marked 1.4 billion USD. Reuter’s analysts expected Vimpelcom profits would be 437 billion USD in the fourth quarter of 2013, as the company earned 195 million USD in

Pg. 5

the 4th quarter of 2012. Losses arose after writing off assets of 2.9 billion USD in Ukraine and Canada. Devaluation came from economic downturn. The company’s earnings in Ukraine dropped by 9% in the fourth quarter of 2013 to 331 million USD. Therefore, the EBITDA fell by 18% to 1.5 billion Hryvnia. In Ukraine Vimpelcom operates as the brand of KyivStar. The political unrest deteriorated economic situation in Ukraine for several months. Ukraine’s GDP fell for the first time after 2008, gold reserves recorded the lowest indicator since 2006 and the national currency considerably went down in value.

Pg. 11

George Kadagidze: 5% economic growth is realistic Pg. 5

Finance Ministry: In total 188.8 Million GEL were Mobilized into the Budget during Two Months ofPg.2014 6 Georgian Co-Investment Fund CEO Talks about investing in Georgia Pg. 4

Business Association: There is a Political Will to Free Business from Restrictions Pg. 4

Earnings Derived from Export of Wine Exceed the Previous Year’s Results by 68 Million USD

Pg. 6

main events caucasian business week

March 10, 2014 #45

Parliament Adopts Resolution on Ukraine, Fails to Show Unanimity

arliament adopted on March 6 GD-proposed resolution on Ukraine calling on the west to take “political, economic and diplomatic measures” to help Ukraine amid Russian “aggression”. The resolution was passed by a vote of 74-0, but lawmakers from UNM parliamentary minority group did not vote for it citing GD majority’s refusal to include in the text direct calls for international sanctions against Russia. Despite two days of negotiations between GD and UNM lawmakers in an attempt to come up with a bipartisan text, the parties failed to agree and each group put on vote its own separate resolution. UNM’s draft was rejected by a vote of 27-6. Main cause of disagreement was related to UNM’s insistence to include in the text a point that would have called on the Georgian government to “carry out active diplomatic campaign for the purpose of diplomatic isolation of and imposing sanctions against” Russia. UNM lawmakers said this point was of “principle” importance. Discussions on two separate drafts grew into heated debates during which UNM parliamentary minority group was accusing some GD lawmakers of being, as one MP put it, “loyal” to Russia because of their reluctance to include sanctions clause in the resolution and GD MPs were blaming opposition of trying to “impose”, as one GD MP put it, “scandalist” and “provocative” policies pursued by UNM when it was in power. Parliament speaker, Davit Usupashvili, who was the last speaker in debates, said that instead of staying on-topic and focusing on developments in Ukraine, lawmakers spent most of their time in mutual accusations. “This is one of the hardest days for me in this Parliament and today I am not proud that I am the member of Parliament,” Usupashvili said in his speech and said that the GD-proposed text and its wording is “absolutely right”; he also accused UNM of trying to derail attempts to draft a joint text even before talks were over on March 5. Text of Resolution Below is unofficial translation of text of resolution on “Supporting Sovereignty and Territorial Integrity of Ukraine”, which was proposed by the Georgian Dream and adopted by the Parliament: “The recent aggressive acts carried out by the Russian Federation against the sovereignty and territorial integrity of Ukraine, including use of military units on the territory of Ukraine in violation of provisions of the bilateral agreements and threat of large scale military aggression, pose a serious threat not only to our friendly Ukraine, but to Georgia and entire Europe as well. Georgia experienced firsthand Russia’s armed aggression in 2008 and other similar processes (distribution of Russian passports, setting up of illegal armed formations, military exercises near the state border, military intervention under the pretext to protect its own citizens, etc.) that resulted in occupation of Georgia’s two regions and ethnic cleansing. Ukraine faces the same threat today. Therefore, the Parliament of Georgia: Expresses full support towards the European choice of the freedom-loving Ukrainian people, as well as sovereignty and territorial integrity of Ukraine; Condemns resolutely forceful actions against sovereign Ukraine by the Russian Federation as well as all the other actions carried out in violation of basic principles of international law and bilateral agreements; Appeals the Government of Georgia to continue consultations with representatives of the Ukrainian authorities and, if need be, to render meaningful humanitarian aid to brotherly Ukrainian people; Appeals the Government of Georgia to participate actively in peacekeeping, monitoring and humanitarian missions planned in Ukraine under the aegis of UN, OSCE, EU, Council of Europe and other international organizations; Calls on the Russian Federation to immediately withdraw all those military units from the territory of Ukraine, which are present in there in violation of international agreements, and to cease actions directed against Ukraine’s statehood; Calls on the international community, primarily the European Union and the United States, to take efficient

political, economic and diplomatic measures to assist Ukrainian people, to protect Ukraine from Russian Federation’s aggression, to avoid armed conflict and to achieve Georgia’s de-occupation; Supports the spirit of the Address of the Verkhovna Rada of Ukraine to the Guarantor States’ [pursuant to the Budapest 1994 Memorandum] parliaments and international organizations, including on creation of special group to conduct negotiations for de-escalation of the situation; Calls on the European Union and NATO to accelerate the process of integration into these organizations of all those countries, including of Georgia, who are ready for it and whose free choice faces increasing threat.” Text of UNM-Proposed Draft Draft of resolution proposed by the UNM, which was rejected, was calling on the Georgian government to “carry out active diplomatic campaign for the purpose of diplomatic isolation” of Russia. It said that Russia’s “political aggression” against Ukraine, which aimed at forcing Kiev to change its foreign policy course, now grew into “military aggression.” It also said that Russia’s actions pose “existential threat” not only to Ukraine, but to Georgia as well. According to the text Russia’s actions against Ukraine follow patterns similar to those applied by Moscow against Georgia in the lead up to aggression in August, 2008, including distribution of Russian passports, followed by military intervention under the pretext of protecting its citizens; use of local “puppet leaders” for the purpose of legitimizing aggression; use of illegal armed groups and deployment of Russian troops. The text then continues by saying that the Georgian Parliament: “Expresses full support towards freedom, sovereignty and territorial integrity of Ukraine; Condemns resolutely political and military aggression carried out by the Russian Federation; military intervention ongoing on the territory of Ukraine and occupation of its region; notion of ‘spheres of influence’ and any attempt by the Russian Federation to bring its neighbors in these ‘spheres of influence’; Calls on the Georgian government to voice clear and unambiguous position in support of Ukraine; to condemn Russia’s brazen military aggression against Ukraine and occupation of the Ukrainian territory; to carry out active diplomatic campaign for the purpose of diplomatic isolation of and imposing sanctions against the Russian Federation; Calls on the Georgian government to promptly carry out consultations with the government of democratic Ukraine over providing meaningful assistance by Georgia; Calls on the Russian Federation to immediately withdraw from the Ukrainian territory all the military units and to stop all the actions directed against the Ukrainian state; Calls on the international community, first and foremost the European Union and the United States, to take efficient economic, political and diplomatic sanctions against the Russian Federation for the purpose of its international isolation until the Russian Federation ceases

military and political aggression against Ukraine; Calls on the European Union and the United States to provide meaningful economic assistance to the Ukrainian authorities; Calls on the Government of Georgia to carry out active work to ensure that the international community maintains set international sanctions until the Russian Federation, along with complete de-occupation of Ukraine, carries out full withdrawal of its occupational military forces from the territory of Georgia and eradicates the consequences of ethnic cleansing. Calls on the European Union and NATO to take meaningful steps to speed up Euro-Atlantic integration of Ukraine, Georgia and Moldova; Calls on the Georgian government to intensify all the possible measures and to carry out broad campaign for receiving NATO Membership Action Plan at the 2014 NATO summit.” Debates Debates were held over the two separate drafts before they were put on vote. “Reference to sanctions in the text turned out to be a red line for the parliamentary majority, which it failed to cross and we believe that it is the major difference,” UNM MP Zurab Japaridze said, adding that UNM’s insistence to include sanctions clause in the resolution “is not something out of the ordinary” as western leaders have also been speaking about it. MP Japaridze said that while some GD members were inclined to agree on UNM-proposed text, most of them were against which made it impossible to reach an agreement. “There is a majority [within GD], who is more loyal towards Russia rather than towards Georgia’s interests,” he added. “What the Georgian Dream calls constructivism towards Russia is in fact nothing else but fear before this so called ‘great neighbor’; what the Georgian Dream calls pragmatism [in relation with Russia] is simply infantilism, which may cost a lot to our country. It is high time for the GD to revise its foreign policy approach [in respect of Russia],” he added. GD MP Victor Dolidze, who was involved in drafting of the text, said that “measures” mentioned in the GDproposed resolution also imply sanctions. He said that UNM was insisting on use of term “sanctions” because it wanted to “make headlines out of it.” “Our work is not based on making headlines; we are result-oriented and we will bring that result,” he added. “This [GDproposed] resolution is result-oriented and concrete.” UNM lawmaker, Givi Targamadze, responded: “Yes it should be in headlines that Georgia, which has suffered [from Russia] like Ukraine, demanded isolation of and sanctions against Russia.” MP Targamadze also said that he has a “firm impression” that GD is “agreeing text” of resolution with Russian officials. “We [UNM] will never vote for any document, which is being agreed with Russia and which is being adopted as a result of giving up Georgia’s interests,” he added. GD lawmaker, Gia Zhorzholiani, said that GD-proposed resolution makes a reference to sanctions by calling on the EU and the U.S. “to take efficient political, econom-

ic and diplomatic measures” to protect Ukraine from Russia’s aggression and for achieving Georgia’s de-occupation. He said that with these debates UNM only aimed at “justifying” its wrong policies pursued by the party when it was in power and trying to create its “political platform” out of developments in Ukraine. He also mentioned former president Mikheil Saakashvili, who has been in Kiev for past several days to, as Saakashvili himself said, help the Ukrainian authorities with “advice”. “Saakashvili, who cannot walk in the streets of Tbilisi, is searching for places from where he can carry out a political campaign and his team is trying here to impose his political campaign on us,” MP Zhorzholiani said. “We should not be diverted from the policy that we pursue… and we should not become dragged into squabbles. There is no rational answer to these absurd and irrational analysis and discourse that we hear today from [UNM]. We should realize well that this is just a political campaign aimed at putting us on the path of scandalistic and provocative policy, which was pursued by the UNM, which now wants us to continue their legacy. No, we will not do that.” GD MP Eka Beselia accused UNM of “pseudo-patriotism” and using developments in Ukraine for scoring political points. UNM MP Giorgi Gabashvili said that debates show fundamental difference between two opposing principles and compared this difference to the one that existed in Europe between those who followed a policy of appeasement of Hitler and those how opposed it in the 1930s. “Your conceptual mistake is that you can’t even mention word ‘sanctions’,” MP Gabashvili said and added that Georgia should be in forefront of supporting Ukraine. He told GD lawmakers that they remain fixated on slamming Saakashvili, who, he said, speaks to western television channels, commenting on developments in Ukraine and defending Georgia’s interests, “unlike your silent, hidden, frightened Prime Minister” Irakli Garibashvili. “Should not the Georgian Parliament say that we support sanctions against those people who are cancer for the free world? Should not we dare to say it?” MP Gabashvili said and added that GD did not want to make reference to sanction in the resolution because of trying to avoid “upsetting” Russia. “But that’s not what may upset [Russia]. Whether they will be upset or not… depends on whether you [the Georgian government] will really go towards NATO and EU or not… I really want to believe that you will really go towards NATO and EU and in that case you can’t avoid confrontation [with Russia] and in this confrontation you should be standing next to the international community.” He said. Parliament speaker, Davit Usupashvili, whose speech concluded debates, said that he and his colleagues from the GD ruling majority spared no effort during consultations on draft resolution with the UNM lawmakers for past two days to avoid the kind of the debate on the issue that had taken place in the Parliament. Usupashvili said that instead of speaking about “how to help Ukraine” lawmakers wasted “98% of time and energy” on mutual accusations. Usupashvili also said that when on March 5, while consultations were not yet over and attempts were still ongoing to come up with bipartisan text of resolution, UNM lawmakers started speaking publicly about points of disagreements between the parties, it made reaching of agreement even more difficult. He said that when in the middle of negotiations one starts speaking about the details of talks before TV cameras, trying to score political points, “it means that you are aiming at thwarting” the process. “The good news is that while we are arguing here, the executive government is in touch with Kiev, Brussels and Washington on daily basis; relevant documents calling for sanctions have been sent to the Council of Europe. Yes we are working and we’ll keep on working and that’s the good news. But I think we all have to apologize on behalf of the parliament before ordinary Ukrainian citizens because of what happened here in this chamber today and because of our failure to make Ukraine, instead of something else, a priority in this chamber today,” Usupashvili said. Civil.ge

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March 10, 2014 #45

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March 10, 2014 #45

Georgian Co-Investment Fund CEO Talks about investing in Georgia

he Georgian Co-Investment Fund has witnessed major interest from international investors. Agenda.ge’s exclusive interview with the Fund’s CEO, George Bachiashvili. Seeing the first investments “going public” is something George Bachiashvili, the Chief Executive Officer of Georgian Co-Investment Fund (“GCF”), a USD $6 billion private equity fund equal to 40% of Georgia’s GDP - is looking forward to after the fund established five months ago. While keeping the details of the investments confidential, the 28 year old, who was named on the Forbes 2014 ‘30 Under 30’ list, revealed that over ten projects totalling USD $1.1 billion across a range of sectors were being considered for investment. In a bid to explore Georgia’s investment potential and uncover the realities of Georgia’s private equity market at its infancy, Agenda.ge exclusively interviewed George Bachiashvili the CEO of the largest private equity fund in Georgia. Q: It has been a few months since the establishment of the Georgian Co-investment Fund. Does it justify the hopes and plans you had before? A: It certainly does, as since the establishment of the Fund, we have received numerous project proposals across a range of investment sectors and have witnessed major interest from international investors. We are looking forward to our first investments going public. Q: How many projects have already started or are being discussed? Which type of projects are mostly promoted and in which sector? Could you name a project that you consider one of the best and why? A: Currently, over ten projects across the range of sectors totaling USD $1.1 billion are being considered for investment. We are working closely with

our partners and potential co-investors to go through the necessary due diligence and progress to the investment stage. Our main investment sectors are energy and infrastructure, agriculture and logistics, hospitality and real estate and manufacturing. Due to confidentiality agreements, we cannot disclose specific information about the projects we are working on. At the same time, I would not necessarily point out one of them as the best since all the projects that get an approval from the Fund’s investment committee meet predefined and complex investment criteria which makes them best fit for our investors. Q: The Georgian Co-Investment Fund has attracted heavy weight investors including the UAE’s Abu Dhabi Group, RAKIA and Turkey’s Calik Holdings, plus a commitment of $1 billion from Bidzina Ivanishvili’s personal funds. Do you expect other investors from other countries, including the USA and EU, to invest in the fund? A: At this point, it is our priority to source investment opportunities and deploy existing capital but it is something we could also consider. The Fund is in ongoing negotiations with numerous co-investors/ partners for the specific projects. The Fund was not marketed to US investors because our regulation only covers non-US investors. Although, we look forward to partnering with US and international companies and investors to co-invest on projects in Georgia, as relevant to both parties. Q: The fund aims to finance projects in energy, tourism, manufacturing, agriculture, and infrastructure. If there will be some other projects in other sectors, will you finance them? George Bachiashvili: As you said, we are considering projects across energy and infrastructure (up to USD $3bn), hospitality and real estate (up to USD $1bn), agriculture and logistics (up to USD $0.5bn) and manufacturing (USD $1.5bn). But at the same time, despite the fact that we predefined our main investment sectors, we have also set aside around USD $500 million for the opportunities which may not necessarily fall into these categories but still can provide a compelling case for investment. Q: Since the launch of the Fund, there is much talk about whether Georgia’s relatively modest economy will be able to absorb such amount of capital. How would you respond to this argument? A: Georgia is a fast growing and dynamic economy which still lacks significant foreign direct investments. This is where we come in – international investors have become much more savvy and are no longer restricted to just investing in mature economies; they are driven by returns and opportunity. We have been able to create a vehicle which enables them to profitably invest in an economy they are eager to support.

There is a number of sector-focused teams in the Fund, which are ring-fenced for industry-specific opportunities. We believe that by being an anchor and a solid local partner we will be able to attract investments into projects which would otherwise be impossible to finance. The scope and the nature of projects we are considering make us confident that the Georgian economy will be able to absorb such volumes. We should also note that the bigger projects will depend not only on Georgian but the region’s economy. Q: Moreover, analysts have concerns that if there are available funds, why won’t investors invest directly in Georgia’s economy and what is the advantage of directing investments through the Fund in this aspect? In particular, analysts are interested about whether the Fund will give any specific privilege to its investors? A: It made sense to create the private equity structure to bring familiarity to global investors, while giving them the upside of the confidence that a major regional Fund will be investing alongside them, working towards a common objective – to grow businesses and deliver real value and return, which would in turn bring significant economic benefit for Georgia. We looked at various possible co-investment vehicles and structures and we believe that a private equity structure best aligns the interests of investors, project promoters and potential partners, and the very positive feedback from potential investors we’ve had show that we made the right choice. Talking about the privileges, GCF is a completely private entity, transparent and independent. We have set up a limited-partnership structure, in accordance with British law, to purposefully avoid any issues of conflict of interest. Its structure replicates other long-established PE businesses in the West. This was one of the major attractions for our Limited Partners. Q: What could be main obstacles for foreign investors investing in Georgia? And what is the advantage of partnering with the Fund for the investors? A: Having seen significant improvements in the investment climate in Georgia, in my answer, I will focus more on the advantages as I don’t see major obstacles for international investors willing to invest in our country. Moreover, their eagerness to contribute to the GCF reinforces that the country and its economy are perceived as stable and attractive. The Government of Georgia has undertaken great strides to stabilize its political and economic systems; this is boosting investor confidence, increasingly making Georgia an attractive investment. Additionally, the recent peaceful transfer of power, as well as the World Bank’s projected growth figures for 2014

(5-6%), further reinforce investor confidence. As for the advantages of the Fund, we provide investors with unique access to investment opportunities in the region’s fastest growing industries and sectors through a private equity structure. Also, having prominent members of the international and domestic investment communities, including sovereign wealth funds, major global corporations and private family offices as our investors make us an attractive and reliable partner to potential investors; at the same time, one of the Fund’s main objectives is to provide investors with high returns. Last but not least, the Fund is run by a management team comprised of some of the most experienced and talented professionals committed to deliver superior performance. Q: What will be your recommendations to businessmen who plan to submit projects to the Fund? A: I would recommend them to promote the projects, taking into account the local and global trends as well as to get aquatinted with our investment criteria comprehensively and tailor their proposals to meet the Fund’s investment criteria. Q: One of the investor of the fund, the Estate of Badri Patarkatsishvili stated that if the dispute over Rustavi Steel LCC were not ruled justly, they will think about withdrawing their investment from Georgia? Does this negatively affect the development of the Fund? A: The Estate of Badri Patarkatsishvili is one of our investors. So far, we have been cooperating successfully and see no reason for impeding our partnership. In addition, any Limited Partner participating in the Fund has the right to discontinue cooperation; and this is not something that will hinder the development of the Fund as we can attract alternative ones. Q: The fund’s horizon is 7-9 years, after which it will exit from all of its investments by selling its shares to co-owners, third parties or through initial public offerings. Is there serous risk that the Fund will leave the businesses unprofitable? A: In order to generate solid returns for investors, underlying investments should be realized at the highest possible prices. This can only be achieved if these investments are able to generate sustainable profits. Hence, our success is only possible by creating healthy and sustainable businesses. Q: Earlier this year you were named on the Forbes ‘30 Under 30’ list. Does this mean you face additional responsibility? A: It is a great honor and privilege for me to be listed along with the most successful and creative representatives of my generation around the world who started from a scratch and achieved substantial results. It is another good reminder to my team and me that we are moving in the right direction. agenda.ge

Business Association: There is a Political Will to Free Business from Restrictions An interview with the Head of Business Association’s Group Working on Securities Market Development Program Efrem Urumashvili

- Recently Business Association has stepped up , particularly in the work on the program of strategic development. What is a reason for this? - Business Association has never been passive , although certainly intensification has become more noticeable in recent months. This is primarily due to the authorities’ willingness to have an open, transparent relationship with the business and solve existing problems together with businessmen. And there are still too many problems, their solving depends on cooperation of government, business associations, non-governmental organizations and civil society .

One can only welcome the desire of the government to establish partnerships with business class that will contribute to a joint solution of issues. - Business has a lot of problems in almost all fields. Which of them apply to everyone, regardless of the field of activity? - There are problems that lie on the surface and there are fundamental problems and their solution is of great importance for business. For example, today the most important for Georgian business is a possibility to operate freely. Liberal climate is needed, not actions of “punitive brigades” that interfere with business work differently. Based on this, we have identified four main priorities - the decriminalization of tax offenses, reforming of the Investigation Service of the Ministry of Finance , a more efficient mechanism considering lawsuits , and improvement of the mechanism of tax audits. - As can be seen, all initiatives relate to the problems of relationship between business and the state .. - Absolutely. These problems have been accumulating over the years and they can be solved only through dialogue between business and government. Entrepreneurs themselves know better than anyone that stands in their way, what should be changed in the law , etc. If the government considers the recommendations of business, the problems will be at least

minimized , the business will be able to develop, and this in turn will boost the economy and create new jobs. - How the problems you mentioned really interfere with business development? - Well, for example, the issue of decriminalization of tax violations. This question has long been on the agenda - we all remember the numerous cases of arrests of businessmen that eventually led to the fact that the business was closed and people lost their jobs. Of course, no one calls for the business to be unpunished and inviolable. However, a priority should be a punishment for tax violations which would create minimal disruption to business. Today the tax laws are rather vague , and it leaves room for interpretation of certain points. There is a saying - “ Pay taxes - an obligation, to pay little tax - art.” Often businessmen’s actions are motivated not by tax evasion and legitimate tax code but by the desire to reduce the tax burden . And as our legislation does not distinguish these two concepts , the interpretation of the law often leads to criminal liability. This is a serious problem , and its solution is of great importance for business. - You also said about the reformation of various structures of the Ministry of Finance. What do you mean? - This need exists. In particular, if we talk about the

investigative service of the Ministry of Finance, which, has a negative impact on the business climate today, and on the image of the Ministry of Finance. This service is sowing panic in society. Whereas, in fact the finance ministry should implement optimal fiscal policy , and not kill companies with its investigative functions. Therefore, it is necessary to revise the above functions and leave only investigation of tax violations in the process of administration in the responsibility of the financial police. As for the establishment of an effective mechanism for dealing with tax litigation, timely, prompt , impartial and expert examination of litigation is in direct communication with the normal functioning of the business. Therefore, it is very important to staff the council so that there were well-known and respected professionals in the business . This will help to increase the independence of the service and, accordingly, the level of credibility on the part of business. And finally - in order the business to be able to operate in more predictable and transparent conditions, it is necessary to improve the procedure of tax audits and introduce certain terms - this is very important because today tax audits may continue indefinitely, accompanied by sealing business or company accounts, which again interferes with the normal functioning of the companies.

March 10, 2014 #45

business & economy caucasian business week

Ivanishvili Loses 100 mln USD and 41st Position in the Forbes Rating

uring last year property of the former prime minister of Georgia and the richest Georgians reduced by $100 million. In the rating of the journal Forbes Bidzina Ivanishvili’s position worsened by 41 points, which was his political election number in the parliamentary elections 2012. Former prime minister ranks 270 in the list of the world’s riches people, Forbes has evaluated his property by $5,2 million. By March of last year Georgian billionaire ranked 220 with the property of $5,3 billion. Forbes list includes two other billionaires of Georgian origin - Alexander Japaridze from Russia and David Iakobashvili, which is one of the new faces in the rating. Alexander Japaridze owns property of $2,1 billion and ranks 828. As for David Iakobashvili, Forbes has evaluated his property for $1,2 billion. He ranks 1372.

Partnership Fund Receives Afghan Businessmen

epresentative business delegation of Afghanistan, headed by former US ambassador in UN and existing president of the company Grpyhon Partners - Zalmay Khalilzad met with the heads of Partnership Fund. Partnership Fund informs that the aim of delegation’s visit to Georgia is study of the local business environment and establishment of tradeinvestment relations with Georgia. Executive director of the fund Irakli Kovzanadze introduced to the guests fund’s structure and priority directions: energy, real estate/infrastructure,

industry and agriculture. “We are interested to study the market and its opportunities locally”, - Zalmay Khalilzad mentioned and added that their interest spheres include: telecommunications, energy, extraction of minerals and mining industry, banking and insurance sectors, import and distribution of the consumer products. Afghan businessmen represent various companies, such as Grpyhon Partners, Afghan Wireless Communications Company, Habib Gulzar International, SMN Investments, TSI Global and Afghanistan Chamber of Commerce and Industry.

Ushba Expects no Exports Suspension amid Ukraine Crisis

ike Georgian wine companies, one of the largest producers of vodka “Ushba” also doesn’t expect problems due to the Ukrainian crisis. The company’s CEO states “Com-

mersant ‘’ that despite the crisis, there is still a demand for Georgian alcoholic beverages in Ukraine and the interest has not decreased . Dmitry Abesadze says they are in talks with several Ukrainian distribution companies and consider risky not Ukrainian but the Russian market where the company’s products have been registered. Note: The Minister of Finance of Georgia is confident that the Georgian entrepreneurs will not lose the Ukrainian market, because if there are some interruptions, this niche will be uptaken by other businessmen.

Turkish Airlines Remains Air Market Leader in January

n January 2014 passenger flow on flights has increased by 28% in comparison with the same period last year. Tbilisi, Batumi, Kutaisi and Mestia airports served to 123 507 passengers in the reporting period (01/12/12 - 1 300 518). Turkish Airlines remains market leader with 14,3% market share. Their share has increased by 0.1% in comparison with the same period of last year. Data of Georgian Airways reduced by 2,3%, of the Ukrainian Airlines - increased by 1,1%, of the Pegasus Airways - reduced by 2,3%. Top-6 list of the leading air companies:

Currently 27 air companies operate on Georgian air market. 37 ones used domestic flights from Mestia Airport (01/13 - 28).

George Kadagidze: 5% economic growth is realistic

ccording to Opinion of NBG president. 5% economic growth is realistic. “Of course there are risks mainly related to geopolitical situation. Affairs in Ukraine will have some kind of impact on Georgian economy”, - George Kadagidze mentioned.

He specified that its quite possible to reach 5% economic growth in terms of purely economic forecast, if we exclude foreign factors having influence over us. World Bank has more optimistic prognosis, expects 6,3% economic growth in 2014. According to Geostat data, in January 2014 real GDP increased by 7,8%

National Bank against Separation of Financial Monitoring Service

resident of the National Bank of Georgia Giorgi Kadagidze opposes the idea of the separation of the Financial Monitoring Service from the National Bank and its transfer to the jurisdiction of the Ministry of Finance. The bill was prepared by the Finance and Budget Committee of the Parliament of Georgia. “I will try to convince the deputies not to do this. I think the subordination of the Finan-

cial Monitoring Service to the Ministry of Finance is a wrong decision and oppose it. It will not bring the expected results and will not contribute to economic development, in particular the banking sector. At this stage, I will refrain from public argumentation, I just will try to explain my opinion to the draftsmen and convince them that this decision will harm the economy,” - said the President of the National Bank.

Containers coming from China will be shipped to Europe through Kazakhstan, Azerbaijan and Georgia

rans Caucasus Terminal signed cooperation memorandum with operator companies of Romania and Kazakhstan. On Wednesday director of Trans Caucasus Terminal Levan Jgarkava signed a trilateral cooperation memorandum with administration of riverine port Galatz and operator companies of the same port. According to the memorandum, containers coming from the West China will be distributed to all over the Europe through Kazakhstan, Azerbaijan and Georgia, though Romanian ports. The line

will work from west to east and vice versa. The cargo will pass destinations and reach central Europe through the container line. Poti and Galatz cities will connect each other with regular container naval line. Freight turnover on this section will be made by the containers of Georgian Railway. Besides, on March 1 of the current year in the capital city of Kazakhstan LTD Trans Caucasus terminal and subsidiary of Kazakh Railway - KTD Express signed a contract on transport service, which provides freight shipment from Aktau port to Kazakhstan and china directions.

Petrocas Energy Group: Agreement with Rosneft means transportation of the oil products to Armenia through Georgia

etrocas Energy Group states that Rosneft is their commercial partner and cooperates only for freight shipments. The company released the statement on Thursday. “Recently several articles have been published in Georgian information agencies about the interest of Russian oil company Rosneft - to use Georgian transit corridor for transportation of the oil products in our region. Rosneft is one of the commercial partners of Petrocas Energy Group along with other companies, such as BP, Total, Mobanaft and others. Our group cooperates with these companies for freight shipments. It’s not surprising that agreement of Petrocas Energy Group and Rosneft considers transportation of the oil products in the neighboring Armenia Through the territory of Georgia. Aim of Petrocas Energy Group has always been effective utilization of Georgian transit potential, which totally coincides to the policy declared by Georgian government to maximally increase freight turnover by the railway owned by the state. We want to add

that cooperation of Petrocas Energy Group with Rosneft will enhance import of the world class oil products on Georgian market, which will increase competition on the local market and bring benefits to Georgian society”, - says the statement of the company. Leadership of Petrocas Energy Group states that they always supported and still continues to support open cooperation with all interested companies and potential partners, which ultimately promotes creation of favorable business climate in Georgia.

business & economy caucasian business week

Crimean Unrest Devaluates VTB Bank Shares

Fitch Lowers VTB Bank’s Rating

hares went down after the Russian Federation took a decision on deployment of Russian troops to Ukraine. On Thursday the price of all Russian assets increased, the price of VTB shares rose to 0.037 Rubles, but on Wednesday prices fell down again by 2.5% to 0.036 Rubles. It should be also noted Fitch has decreased the rating of VTB Bank and its subsidiary companies from BBB to BBB-. As a result, VTB refused to take part in the rating process. In February 2014 Fitch ceased publishing the ratings of the bank. It should be noted, after Sberbank, VTB Bank is second in terms of assets in Russia. The stakeholders meeting of VTB Bank will be held on June 19, 2014. VTB Bank is an international finance group founded in the Russian Federation. The bank operates in over 20 countries in Europe, Asia and Africa. VTB Bank has got long tradition and experience of financial activity. The bank offers retail and corporate bank products to the markets

of operation. VTB Group has got about 1000 service centers. Standard & Poor’s and Fitch rating companies have conferred a BBB credit rating to VTB Bank, while Moody’s has conferred a Baa1 rating. VTB Bank actively operates in Georgia as VTB Bank Georgia. VTB Bank plans to issue new shares. VTB Bank Georgia director general Archil Kontselidze says, according to the 11th part of the 54 clause of the Georgian law on entrepreneurs, VTB Bank that owns a 96.589374% stake in VTB Bank Georgia took a decision on February 28, 2014 to issue 11000000 additional shares of VTB Bank Georgia. The issuance will be carried out on the ground of the prospect approved by the National Bank of Georgia (NBG). The price of a share is 1 GEL. JSC VTB Bank Georgia was founded in 1995 by merger of three state commercial banks. In 2005 VTB Bank Georgia joined VTB international finance group. VTB owns a 96.31% stake in VTB Bank Georgia.

March 10, 2014 #45

Finance Ministry: In total 188.8 Million GEL were Mobilized into the Budget during Two Months of 2014

s Finance Minister Nodar Khaduri announced at the Government’s session today, the financial resources of our state budget runs up to 188, 8 million GEL; allegedly, this figure is 233 million GEL more than that of the last year’s. “If compared to 2013, in the present year the situation has been improved – the revenue income the government has received this year has exceeded that of the last year’s by a considerable rate, precisely, by 100 million GEL. In the first two months, our revenue income hit 954 million GEL which amounts 14 per cent of our annual plan,” - Khaduri said. In addition, the Finance Minsiter underscored that in January 2014, the government’s income has exceeded by 65 million GEL if compared to that of the January 2013. “In February, our revenue income proved to be 35 million GEL more than that of February last year. As an added plus, we have already launched a cheap credit program for banks. As the minister maintains, the situation in this direction has also substantially improved; allegedly, the Government does not spare efforts to improve the

Georgian people’s social conditions; they have introduced a new program aiming to grant 5000 GEL in aid to the deceased soldiers’ families; as the Minister says, pensions have also increased recently. According to Mr. Khaduri, today only capital expenditures are going through a relatively bad patch in Georgia; however, allegedly, the situation in this direction has also been improved.

Earnings Derived from Export of Wine Exceed the Previous Year’s Results by 68 Million USD

Gas Filling Stations to Jointly Act against SOCAR

wners of Georgia based gas filling stations have decided to set up an association that was introduced at Sheraton Metechi Palace several days ago. Members of the Association of Natural Gas Consumers say the goal is to develop a joint strategy for resolving problems in the field. At this stage, the monopolistic state of the State Oil Company of Azerbaijan (SOCAR) is the most relevant issue, the association representatives noted. SOCAR is a sole company that carries out natural gas imports to Georgia, the association says. “There is no antitrust service in Georgia yet. Therefore, SOCAR has increased gas tariffs stage by stage. At the first stage, the price per 1000 cubic meters increased to 315 USD from 265 USD, while the tariff rose to 345 USD in 2014. At the same time, the company supplies natural gas to its own filling stations at 275 USD and we have to work in uncompetitive conditions”, the association says. The issue is of about 80 filling stations. Companies have invested 700 000 USD to 1.2 million USD and a major part of these investments were taken from commercial banks as loans.

Besides interest rates, businessmen has to cover the difference between the GEL exchange rates and the profits margin fell to 0.12GEL -0.10 GEL. In this situation, SOCAR lowered natural gas tariffs in its own filling stations by 0.05 GEL and 0.07 GEL. Moreover, several discount cards are available in the network with 0.05 GEL preferences. The difference in prices, finally, made up 0.17 GEL. We are unable to compete with SOCAR. The profits margin has been zeroed in practice”, the association members note. The association members are afraid in the near future commercial banks may start seizing mortgaged assets and invested properties. “To reach absolute monopolistic state on the market, SOCAR has set the goal to lead gas filling stations to bankruptcy and then to take over them. The law on free trade and competition restricts similar activities, but regulations do not concern electricity and natural gas fields. Nor the Georgian Energy and Water Supply Regulatory Commission regulates the sector”, the association says. Owners of gas filling stations ask the government to fill this gap in the legislation and protect the interest of entrepreneurs.

Sector Economic Committee Studying an Issue of Banning Non-core Assets Owned by Banks

arliamentary Committee on Sector Economy is studying the issue of banning non-core assets for banks. Recall that last month four experts Levan Kalandadze , Irakli Lekvinadze, Levan Alapishvili and Giorgi Abashishvili sent a letter to Prime Minister , Speaker of Parliament and President of the National Bank requesting to ban non- core assets for banks.

Chairman of the Committee on Sector Economy states “Commersant ‘’ that an issue of banning non-core assets owned by banks is under study , but in the near future the Committee will prepare a final conclusion. Zurab Tkemaladze is ready to cooperate with everyone who is interested in this subject , including economic experts proposed to ban the non-core assets for banks.

hairman of the Agricultural Committee, one of the leaders of the Republican Party Gigla Agulashvili releases the export growth data in 2012-2014 and adds that in 2013 revenues received only from export of Georgian wine amounted to 232 million. He explains that the earnings derived from wine exports exceed a figure of the previous year’s same period by 68 million USD. As Agulashvili notes, last year turned out to be successful in terms of markets diversification. “Export of laurel, spices , dried fruit and other products of low phytosanitary risk started in June. In October high-risk products were also allowed: nuts , citrus , grapes, apples, pears, quince . Along with the promotion of Georgian wine export growth on the Russian market, especially great attention is paid to new export markets. Compared to 2012 , exports to Ukraine increased by 7%, Kazakhstan – by 1 % up, Belarus - 2

%, Poland - 12 % , England - 61 %, Lithuania - 3 %, Hong Kong - 16% , the Netherlands - 17 % , Finland, Armenia, France and so on. etc. “ – says the Chairman of the Agricultural Committee.

Currency reserves increased in February

y March 1, 2014 international foreign actives equals to $2,62 billion (01/02/14 - $2,566 billion). Reserves increased in February. They reduced by 297 million, in January, in December - by 207 million, in November - by 80 million. According to statistic of National Bank of Georgia (NBG), the growth is negative n the annual expres-

sion as well and equals to -11,3% (01/02/14 _-12%, 01/01/14 _ -1,7%). NBG purchased $60 million in February, in January sold 180 million, in December -160 million. By March 1 foreign currency reserves equals to $2,403 billion (01/02/14 - $2,342 billion). Reserve actives, in addition to the foreign currency reserves, include Special Drawing Rights (SDR) and data about the reserve position in IMF.

“Shah Deniz 2 “ to Bring Georgia 2 Billion USD in Foreign Investment

n order to expand the South Caucasus Pipeline, the oil giant “BP” launches “Shah Deniz 2” project, which will bring the country 2 billion USD in foreign investment. BP Regional President for Azerbaijan, Georgia and Turkey Gordon Birrell says that the project includes both the second phase of Shah Deniz gas deposit development as well as the expansion of the SCP in the territory of Georgia and the creation of the Southern Gas Corridor. In his words, it’s a huge -scale project, which will connect the Caspian sea resources with the European consumers via Georgia, Azerbaijan

and Turkey for the first time in the history. According to the Minister of Energy of Georgia, as a result of the project, it will be able to transport additional 16 billion cubic meters of natural gas from Azerbaijan to Europe via Georgia. Kakha Kaladze states that Georgia will receive an additional benefit such as 2 billion USD in foreign direct investment, more jobs, increased transportation revenues and most importantly – an increase in the country’s energy security. Recall that the investment value of one of the largest energy projects in the world reaches 28 billion USD.

March 10, 2014 #45

gender

caucasian business week

FT - Growth helps narrow gender gap in fastgrowing economies

7 Chanda Kochhar, chief executive, ICICI Bank ‘Change will be driven as much from an economic as from a social perspective. An economy cannot reach its full potential if it limits the progress of 50 per cent of the workforce.’

Changhua Wu, greater China director, the Climate Group ‘Chinese women do not feel inferior to men. You might put this down to communism – and that may be right to an extent – but far more important is the fact that women have always worked because they had to. It was difficult for women to stay at home, because it was impossible to support a family on a single income.’

Kumud Srinivasan, president, Intel India ‘Technology has great potential as an equaliser. It does dramatic things: removes barriers; makes geographic distances irrelevant; increases transparency and reduces corruption. It has potential, but we have to watch out for ‘digital divide’. There is a chance women could be left behind.’

omen cheered, some men booed, but everyone took notice when Christine Lagardequipped in 2010 that had Lehman Brothers been Lehman Sisters, the global financial crisis might have looked different. It was only half a joke. As Ms Lagarde, France’s finance minister at the time and now head of the International Monetary Fund, later wrote: “When women are called to action in times of turbulence, it is often on account of their composure, sense of responsibility and great pragmatism in delicate situations.” Perhaps surprisingly, it is an argument that emerging markets have recognised better than the developed world. Amid a growing international debate on bridging the gender gap, the rapid economic growth of emerging markets in recent years has greatly increased opportunities for women in business, giving them a boost over their counterparts in developed countries. This would seem to contradict perceptions dominant in the west of women in developing nations. The more prevalent image is that tradition and social mores in many of these countries, as well as educational and economic disadvantages, limit women’s empowerment in business. To some extent the perceptions reflect reality: although women lead Argentina, Brazil and Chile, 70 per cent of executives in Latin America say family pressures cause women to leave their jobs, according toa survey by McKinsey, the consultancy. In China, women are still expected to put their families first, an attitude reinforced by the onechild policy. Chinese women are also expected to take care of the elderly in the family. “Observers in the west tend to see third-world women as victims,” write Sylvia Ann Hewlett and

Trang Nguyen Ngoc, general director, VietinBank-Aviva ‘Vietnam remains quite a traditional country with strong family values, so people tend to have different expectations and doubt our capabilities. If we do well, we are treated equally, but if something goes wrong, we receive greater criticism.’ Ripa Rashid in their 2011 book Winning The War for Talent in Emerging Markets: Why Women are the Solution. “In a similar vein, business leaders tend not to have women on their radar screen. “The fact is that no company can afford to ignore highly qualified female talent if it wants to compete in these fast-expanding economies – and win,” the authors say. According to Grant Thornton’s 2014 Women in Business report, which surveyed about 6,600 privately owned companies in 45 countries, the proportion of senior roles filled by women across the Brics countries (Brazil, Russia, India, China and South Africa) exceeds 30 per cent, compared with about 20 per cent in the G7 group of industrialised nations, and higher than the 24 per cent global average. Some statistics are striking: in China more than 60 per cent of chief financial officers are women. Across the Brics, the percentage of companies that have no women in senior roles has fallen from 39 per cent last year to 18 per cent this year. In the boardroom too, women in emerging markets score better than the global average. This special report sheds further light on that progress, with data showing that in China about 30 per cent of entrepreneurs are women. Six out of 24 self-made female billionaires worldwide on the Forbes 2013 list are from China (including Hong Kong), more than any other country outside the US. In Turkey, meanwhile, 12 per cent of chief executives are women, according to the World Bank, higher than the EU average. “Emerging markets do seem really to value some of the things that women bring to boards and senior roles,” says Francesca Lagerberg, global head of tax at Grant Thornton. With large, fast-growing companies you go from [recruiting for] 50 to 500 posts. The need for tal-

ent overcomes barriers - Saadia Zahidi, World Economic Forum “The approach to business is different and there’s a real recognition that innovation and creativity are sometimes more closely linked to female leaders.” What lies behind the numbers? One factor is education: as the authors of Winning the War For Talent point out, women in emerging markets are graduating from universities and graduate schools at rates that match and often outstrip those of men. Family and tradition can work to women’s advantage. In China, and in countries of the former Soviet Union, women’s participation in the labour force has been encouraged; in conservative societies close-knit extended families and affordable help can make it easier for women to work. The need for women to contribute to the household income has been a driver of ambition – but more jobs also have been available. Saadia Zahidi, head of gender parity and human capital at the World Economic Forum, says: “If you have large, fast-growing companies – say you go from 50 to 500 posts [in a company] – the need for talent overcomes barriers that may exist.” Institutional backing for working women has also helped, with growing support for remote working arrangements, flexible hours and paid maternity leave. Imposing quotas can be less controversial than in Europe. Ms Lagerberg says more and more business leaders in emerging markets say they back board quotas for women. “It’s telling that people engaged in this are beginning to see where it should go. It might be that quotas come in several years’ time, but business leaders are becoming more conscious about process,” she says. There is still a long way to go. And the risk is that

the progress achieved so far will not be accelerated as growth in emerging economies begins to slow. Far too many women still face social pressures to leave their jobs after having children; their entrepreneurial drive is also stifled by constrained access to credit. The wage gap should also narrow. Even if they might receive equal pay to men when they join the labour force, women find the disparity widens as they move up the organisation. Ms Lagerberg cites the need for more role models and mentoring to push women up the corporate ladder. “The more you see senior women in role modelling positions, the more you inspire others to come through. You need [mentoring] programmes with a specific diversity element.” Other experts warn that improvements at the top do not necessarily mean pro¬gress at the bottom. The picture for senior women in emerging markets may be brighter than in the west, but women’s participation in the labour force is lower than in Europe or the US. Ms Zahidi says that in rapidly growing economies such as Brazil, China and Indonesia, women are joining the labour force at relatively faster rates than men. But in India, women’s participation in the workforce has risen only 4 per cent, to 34 per cent, in the past eight years. “In India, a policy was just passed [which means] all publicly listed companies have to have one female director on board ... and there’s a trend to get more women in leadership positions. “But this is also the country where a lot of the poverty and illiteracy is concentrated among females,” Ms Zahidi says. “Because of cultural implications you see a divergence between low- and high-income women.”

publicity

caucasian business week

March 10, 2014 #45

Banking & Statistic caucasian business week

VTB Bank completed January with 892 000 GEL profit

SC VTB Bank completed January with 892 000 GEL profit (01/02/13 - 362 000 GEL). The bank reports that by February 1, 2014 deposit portfolio equals to 538 million GEL (01/02/13 -298,5 million GEL), loans - 527 million GEL (01/02/13 -371,4 million GEL). Annual growth of the deposits is 80%, loans - 42%. Overall obligations are 749 million GEL. Bank’s actives are 826,6 million

GEL, market share - 4,8% (01/02/13 -539,2 million GEL, 3,8%). VTB Bank Georgia (former United Georgian Bank) operates since 1995. Owner of Authorized capital of the bank is Russian VTB, besides 2,08% belongs to Lakarpa Enterprises Limited affiliated to it. Owner beneficiary of 72,71% stocks is Russian Federation. Bank’s capital is 77,9 million GEL (01/02/13 60,7 million GEL).

Procredit Bank completed January with 0,9 million GEL profit

SC ProCredit Bank (Georgia) completed January with 0,9 million GEL profit (01/02/13 -0,5 million). BY February 1, 2014 clients’ deposit portfolio equals to 559 million GEL (01/02/13 -527,6 million), loans - 717,2 million GEL (01/02/13 - 719 million). Overall obligations are 904,3 million GEL (01/02/13-880 million GEL). Bank’s actives equal to 1,04 billion GEL (01/02/13

-1,014 billion), market share - 6% (01/02/13 7,1%). JSC Procredit Bank is a member of international banking group, operates in Georgia since 1999. It’s mainly oriented on the crediting of small and medium-size businesses. 100% of the bank stocks belong to Procredit Holding (ProCredit Holding AG &Co. KGaA). Beneficiaries include IPC, KFW, DOEN Foundation (13,44%).

NBG: Events in Ukraine may Have Some Impact on Economic Growth of Georgia

ccording to the President of the National Bank of Georgia Giorgi Kadagidze, events in Ukraine may have some influence on the factors of economic growth in

the country. “We think that a 5% economic growth in 2014 is a quite realistic outlook, but there are risks associated with the geopolitical situation , in particular with the events in the region , and especially in Ukraine. This may have some impact on the parameters of economic growth in Georgia, “- said the President of the National Bank Giorgi Kadagidze. As it is known, the Georgian government does not intend to revise the forecast of 5% growth in 2014 - Finance Minister Nodar Khaduri said earlier. According to him, it’s a realistic prognosis and it is not necessary to review it. Finance Minister Nodar Khaduri also believes that Georgian entrepreneurs do not lose the Ukrainian market.

“I believe that the Georgian entrepreneurs will remain in the Ukrainian market . Despite local opposition, the Georgian products will remain on the Ukrainian market, “- said Nodar Khaduri.

Georgian Macroeconomic Review

Hpp

caucasian business week

March 10, 2014 #45

One for All and All for One?! Khudoni HPP - the First Serious Challenge for the New Government

nergy independence acquires even higher importance in the light of the Ukrainian events. Russia already made a decision to raise gas price for the country. However, these are only “flowers” and the Ukrainian developments will show how far Putin intends to go. All agree that energy security should be a priority for any country, especially as the country’s unused natural resources allow it and Russia is an unfriendly neighbor. Khudoni HPP project, being a potential guarantee for the country’s energy independence according to majority of experts, represents the first serious challenge for the new government. Naturally the project that can bring many benefits in terms of investment, financial and economic perspectives requires painless resolution of the other problems having no less importance. Among them are issues related with environment protection, human rights, property and cultural heritage. This is the time when the executive government has to have one vision

and agreed and consistent policy for settling the issues having importance for the government. Unfortunately, currently we know the position only of separate members of the government, while the others do not like to talk about such controversial topics. If we admit that the road to strong and independent state lies through energy independence, the policy of silence is equal to a crime. And this is when different statements made about Khudoni HPP confused the public and divided it into two parts – supporters and opponents. Is Khudoni HPP to be constructed or not? – only a part of the government has a clear position about this matter. Another part prefers to play the role of an observer, which even more strengthens the suspicion about uncoordinated work of the government. This finally gets reflected in a small number of their achievements allowing the political opponents to criticize the government because of its failure to act. Confused society is always interested to know opinions of those charged with the country’s fate and decision-

making. Irakli Gharibashvili, the Prime Minister of Georgia made several comments about Khudoni HPP recently. Irakli Gharibashvili: “I visited Mestia and met with the local population. The state has to play such role that none of the parties is negatively influenced including the investor, who is very important and valuable for us. But our nature and our citizens are also very important. We have to find out such mechanisms that none of the parties has any question. According to our information, there are issues and the investor company is working seriously on their resolution. Our goal is that none of our citizens living in Svaneti has any doubt and we’ll achieve this. I am sure that the investor company will do everything that this process is transparent at maximum extent and explain to population what is implied under construction of Khudoni HPP Project… The government and the Ministry of Energy on their side will provide detailed information to population on importance of this project and its perspectives what will be its benefits for the country and for the people. As far as I am concerned, this project is going to ensure the country’s energy independence. That is why it is so significant, but the population should not be left with the feeling that something was done wrong…” Minister of Energy also addresses necessity to have negotiations with the locals, for which he offered the Khaishi residents to set a group of 10-15 people. Like the Prime Minister, Kakha Kaladze, the Minsiter of Energy gives the guarantee that dialogue with the Khaishi population will continue and the Khudoni Project will be implemented only with consideration of people’s interests. “I personally will be a guarantee, as well as the government. We are constructive and ready for a dialogue. Under the government’s decision such project as a Khudoni HPP will necessarily be implemented. We will convince Khaishi residents that this project is vital for the country and it will bring GEL 12 million to the budget annually. Today Georgia is 75% dependent on neighboring coun-

tries in terms of energy. However, the country really has the capacity to become an energy independent by means of its resources. You would agree that the energy independence is equal to country’s independence and therefore we have to use those resources that country has” – said Kakha Kaladze. According to Giorgi Kvirikashvili, the Minister of Economy and Sustainable Development of Georgia without energy independence development of local production would be impossible. Giorgi Kvirikashvili: “Energy independence is of course significant for development of our production capacity. Local production cannot be developed without ensuring energy competitiveness. Therefore, in my opinion, this is the most significant factor and it will be so in the future. In our opinion, large HPPs will be necessary for Georgia, otherwise it will be hard and even impossible to develop our industrial potential. There are several large investment projects that are not being implemented due to insufficient energy. However, social problems and factors are very important and we shall not be taking the forceful approach. There should be a dialogue and each problem accompanying large projects need to be resolved through this process. Development of Georgian economy will be impossible without large HPPs and the fact that energy generation would take place in Georgia means that such energy will be for local market and then in case of surplus it will get exported. Overall it will be profitable. There are certain aspects, which we are going to address with the investor company, i.e. details in the agreement that need to be elaborated, however the project in general is needed for the country.” At the time when the issue of country’s energy independence is being resolved, at least the opinions of the government’s economic team or economic council members under the Prime Minister should be known to the public. We shall not forget either that Khudoni topic goes beyond energy, economy and financial issues and therefore the observer’s position taken by some of the government members is at least non-state approach.

Discussions about Khudoni construction shall become more productive

mbudsman’s Office organized public debates about Khudoni construction at the National Library a few days ago. Ucha Nanuashvili, a moderator of the meeting explained from the very beginning that both parties would have the opportunity to express their opinions; however it did not happen so. Speeches of HPP construction supporters were met by noise and insulting exclamations of Green Alternative and the other NGO representatives. Ministry of Energy was represented by Ilya Eloshvili, the Deputy Minister. He failed to convince the attendees that the Ministry never had the problem of communication with local population. “When I came for the first time I offered to set a group of 10 people as well as a vehicle to come to Tbilisi and discuss these issues together. You remember well my second visit. My offer is valid, set a group and let’s meet and plan. Having discussions will only be possible within such format and not in the one where emotions prevail.” - No one is interested in your travel history, you are talking too long and waste our time – Eloshvili was not allowed to complete his speech. The same happened to a student of Energy Faculty, one of the Khaishi residents grabbed his shoulder and started shaking. What was the purpose of this meeting, to identify whether the right of self-expression of the parties was equally protected? Why the issues such as Khudoni economic benefits, the fate of cultural heritage monuments, environmental impact and etc. were addressed in addition to human rights announced in advance? Is discussion of Khudoni issue in the light of human rights an instrument, which contributes to formation of negative public attitude against the project?

These questions were asked to Maia Liparteliani, an employee of the Ombudsman’s Office who presented an opinion on lawfulness of Khudoni construction and protection of human rights. According to Liparteliani, the purpose of the meeting was engagement of interested parties and participation in the review. “The purpose of these public debates was to allow all stakeholders to take part in discussion and express their opinions. At the meeting, all stakeholders were present and it can be concluded that the objective was achieved. If you mean that any agreement could have been reached at public debates we did not have much expectations on this. This is the process and during one meeting, of course, similar agreement cannot be achieved.” – said Liparteliani. - Khudoni supporters did not have an opportunity to express their views, respectively it is difficult to state that parties’ involvement was equal. Did you, as a human rights defender, ensure their right of self-expression? - The freedom of expressing an opinion is recognized by the constitution, but within that format we did our best to give the opportunity to all participants. If you attended the meeting you probably saw that all persons who raised their hands were given the opportunity to speak. Surely one meeting will not be sufficient regarding such painful issue as Khudoni HPP, in order to hear all opinions. You saw attendance and eagerness of participants. Therefore such meetings will continue. - In your speech, along with human rights you addressed economic and financial aspects of the project, as well as resettlement and cultural heritage monuments. Do not these go beyond your competence? - In my speech I of course addressed human rights. This is the primary right of people to live in a safe and

healthy environment. Therefore, our opinion was focused on these aspects that Georgian and international laws are to be observed so that the public is informed at every stage of decision-making and their involvement is ensured. The next right is the right of property. In this regard we noted that the resettlement plan was not yet approved and the Ombudsman made respective recommendations that the right of property should be protected. Yes, I also addressed economic analysis in my speech, since the project has to be beneficial for the country and the population is to be convinced in such need. Also we discussed protection of cultural heritage, since development and preservation of cultural heritage is one of the fundamental rights. Also we addressed country’s security, this project needs to be studied in the light of country’s security, which pertains to human rights and therefore we shall continue observance over these processes. - GYLA’s statement says that review of the project’s implementation issue and its necessity and decision making go beyond the Ombudsman’s authority and competence. Do you agree with this opinion? - GYLA’s recommendation was the opposite if you got acquainted with it. The opinion and statement indicate that the Ombudsman is obliged to monitor protection of human rights and study this process. Public Defender cannot evaluate technical parameters of the project, but he is in charge of defense of human rights during the process. - What caused such a proactive involvement of Ombudsman in Khudoni issues? Have human rights violation cases increased in Khaishi? Are there any specific facts? - Since specific decisions have not been made regarding project implementation at this stage we may not have specific facts of human rights violation, however the Ombudsman is obliged to apply to the respective institutions in order to prevent such facts. I noted it and I think that information publicity requirement, as regards the right to live in a safe and healthy environment, is

violated, since from the initial stage of decision making the public did not have sufficient information. - So there are already specific facts of human rights violation? - Due to the fact that project implementation has not started yet, cases of human rights violation have not been identified. However, we have to apply to the government regarding potential violations as well. A meeting which was attended by representatives of the Ministries of Energy and Environment Protection along with the Ombudsman did last for approximately three hours. The agreement was not reached, Khaishi residents, prior to leaving, said once again that they would not allow HPP construction and would not meet Kakhi Kaladze. They noted that they had hopes for the Prime Minister who was distinguished “by wise talking”. According to Maia Liparteliani, an employee of the Ombudsman’s Office, similar meetings on various important issues will be held on a monthly basis and it is not excluded that the subject of one of them is Khudoni again. Experts Levan Kalandadze, Irakli Leqvinadze, Levan Alafishvili and Giorgi Abashishvili deem that Khudoni HPP topic requires professional review and are applying to the Prime Minister with the initiative to establish a special governmental commission. According to experts, the major function of this commission should be conducting the communication campaign with the local population and effective resolution of all issues that emerge in relation with the Khudoni project development. “Khudoni Project is the first serious challenge for the government in terms of investment, financial and economic aspects as well as rule of law, equality before the law and guaranteed human rights. In our opinion, one of the major issues currently is a professional review of Khudoni Construction and launching an outreach campaign for the Svaneti population within this commission format”- reads the letter of experts addressed to the Prime Minister.

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BP extends support for project management school

P and its co-ventures in the AzeriChirag-Gunashli, Baku-TbilisiCeyhan, Shah Deniz, and South Caucasus Pipeline projects have extended their support for the School of Project Management (SPM) until November 2015. A Memorandum of Understanding (MOU) on extension of the initiative was signed on March 5 by BP’s Regional President for Azerbaijan, Georgia and Turkey Gordon Birrell at Azerbaijan’s Khazar University. Addressing the event, Birrell said the decision to extend the cooperation is based on the success that BP and its business partners have seen over the past three years of the School’s existence. “We are pleased that the globally-recognized, comprehensive project management training curriculum and international project management standards offered by the SPM have been fully translated and are available in the Azerbaijani language along with English. This means that now non-English speaking national managers also have

direct access to the trainings and this is very important in the local environment,” he said. SPM was established by BP and its co-ventures in 2011. The objective of the initiative is to help improve the local project management performance and establish a long term project management capability in the country. The curriculum of the school leads to two globally-recognized certifications, in particular the Masters Certificate in Project Management, awarded by the George Washington University (GWU), and the PM Professional certificate, awarded by the Project Management Institute (PMI). Since its start in 2011, SPM has trained over 300 specialists representing 98 private and public sector organizations. Of the graduates, 129 have been qualified for Masters and 192 for Associates Certificates by the George Washington University. The project is implemented by ESI International - a leading project management training and solutions company, in collaboration with the Khazar University.

Azerbaijan to use electric cars soon

lectric cars will be available for rent and hire in Azerbaijan in the near future. Azerbaijani company Aznur, engaged in renting cars in countries such as Germany, Austria, Australia and Belarus, is to deliver 250-300 electric vehicles from the European manufacturers to Azerbaijan. The news was announced by Nargiz Isgandarzade, the company’s Managing Director, on March 3. The main advantage of such cars is their environmental friendliness. It is the first project of its kind in Azerbaijan, she said. Negotiations are currently underway with the largest manufacturers of electric vehicles, and once a contract is signed in the near future, the brand name of the electric vehicles that will be

delivered to Azerbaijan will be announced. The vehicles will be used for rent and hire, but there is also a possibility of their use as taxis in the future. In addition to using electric vehicles, the company also intends to create an infrastructure for their maintenance, particularly their charging. The dynamic development of Azerbaijan, especially Baku, requires the use of modern technology prevailing in other countries, and the extensive use of electric vehicles is in that direction, the company believes. Today, ecological issues are among the most important issues in the country, and the use of such vehicles will contribute to improving the city’s atmosphere. Furthermore, electric vehicles are much more economical than those working with gasoline.

Azerbaijan’s two regional airports gain int’l status

ankaran and Zagatala Azerbaijan’s two regional airports gained international status. The decision was made by the Cabinet of Ministers on the amendments to the charter and structure of the Azerbaijan Airlines (AZAL) Close Joint-Stock Company. The decision said the Gabala international airport and the Azerbaijan Airlines passenger airline were included in the structure of AZAL, and Aircraft Maintenance Administration and Production and Economic Administration, which are parts of the company, were eliminated. Being the biggest Azerbaijani airline and national flag carrier and a regional and CIS leader in its number of new aircrafts, AZAL offers flights to European countries, the CIS, Middle

East, and Asia to its passenger. 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. AZAL includes Azerbaijan Airlines cargo airline, Azalhelikopter Baku airline, Azalagro Yevlakh airline, National Aviation Academy, Heydar Aliyev, Ganja and Nakhchivan international airports, Azerairnavigation air traffic Administration, aviation security Administration, AzalOil fuel and lubricants Administration, international commerce Administration, as well as branches and representative offices.

SOCAR resumes motor gasoline export

zerbaijan’s state energy company SOCAR resumed the export of motor gasoline last month and this figure amounted to 383 tons in February 2014. SOCAR said it exported 86,168 tons of diesel fuel in February 2014, which is 4.6 percent more compared to the same period of 2013. In February SOCAR exported 13,088 tons of jet fuel, which is 4.3 percent more compared to the same period of the last year. SOCAR also exported 34,448 tons of vacuum gas-oil. Also, the export of diesel fuel in January-February 2014 decreased by 2.7 percents compared to the same period of 2013 and amounted to 164,275 tons while the export of jet fuel in the reported period increased by 10 percent and reached 23,245 tons. In 2013, SOCAR exported around 1.04 million tons of oil goods produced in its own oil refineries, in particular, 14,250 tons of petrol, 899,905 tons of diesel fuel, 131,322 tons of aircraft gasoline, and 657 tons of furnace oil. Azerbaijan’s oil products are produced on the

base of two oil refineries in Baku with total capacity of 16 million tons of oil per year. Both refineries are part of SOCAR, which processes about seven million tons of oil a year. The oil production is carried out at ground and sea wells at the expense of its own funds. SOCAR, which includes production associations Azerneft (companies involved in production of oil and gas onshore and offshore), Azerkimya (chemical industry enterprises), and Azeriqaz (gas distribution), is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in the domestic and international markets, and supplying natural gas to industry and the public in Azerbaijan. SOCAR owns gas stations in Azerbaijan, Switzerland, Georgia and Ukraine. It has representative offices in Georgia, Turkey, Romania, Austria, Switzerland, Kazakhstan, Britain, Iran, Germany and Ukraine, and trading companies in Switzerland, Singapore, Vietnam, Nigeria, and other countries.

Azerbaijan’s First Lady named most influential woman of 2014

zerbaijan’s First Lady, and Goodwill Ambassador of UNESCO and ISESCO, Mehriban Aliyeva was awarded the title of the most influential woman of 2014. This was the result of a survey conducted jointly by the French Center for Arabic Cultural Heritage and Egyptian “Nefertiti Media Production” company, the Azerbaijani embassy in France reported on March 6. The survey was conducted in France and in the Arab world among students, journalists and internet users between March 8, 2013 and January 10, 2014. The list also included

the names of women heading states, large enterprises and charity organizations. Mehriban Aliyeva won the survey given her special merits in her activity as the UNESCO Goodwill Ambassador, as well as thanks to contribution to promoting culture and international cultural exchange, development of science, health, sports, education, technology and ecology. The establishment of International Mugham Center in Baku, aid to orphans and numerous other charity events organized upon Mehriban Aliyeva’s initiative were noted among her merits, the embassy reports.

Azerbaijan to ‘effectively regulate’ monetary policy in 2014

zerbaijan will effectively regulate its mid-term monetary policy in 2014, head of the Central Bank of Azerbaijan (CBA) said on March 4. Elman Rustamov made the statement in a meeting in Baku with a delegation from the International Monetary Fund (IMF) headed by head of the IMF mission to Azerbaijan Raja Almarzoqi. Rustamov said finding the optimal balance between the objectives of growth of bank assets and stability, synchronization of monetary and macro-prudential policy, formation of a framework for counter-cyclical banking supervision, and regulation of the financial sector to prevent it from overheating are particularly important. The CBA head also informed the guests about the economic growth of Azerbaijan, macroeconomic stability, development of the non-oil sector, diversification of the economy, the monetary policy of the CBA, the development of the country’s banking sector, and other issues. The head of the IMF mission, in turn, assessed the developments as well as the financial and macroeconomic stability in Azerbaijan as posi-

tive. Emphasizing the short-term and the midterm tasks of the country, the parties exchanged views on joint work between Azerbaijan and the IMF in this field. The sides also discussed the prospects for development of the ongoing cooperation. The visit of the IMF mission to Baku began on March 4 and will last until March 17. The purpose of the visit is to hold consultations with the government of Azerbaijan on Article 4 of the agreement on the establishment of the IMF. Azerbaijan has cooperated with the IMF since September 18, 1992. IMF loans were allocated to Azerbaijan within six programs, but cooperation with the IMF has been at the level of consultation since 2005, as the Azerbaijani government has refused to receive loans from the fund. The IMF office was opened in Baku in 1992. Despite its staff having been reduced since 2009, it has remained an important partner of the Azerbaijani government. It is noteworthy that the cooperation between Azerbaijan and the IMF played an important role in the period of global economic and financial crisis.

CIS 12 Who will threatened sanctions hit most? US-EU-Russia trade in numbers caucasian business week

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S lawmakers are already threatening Russia with economic sanctions over the crisis in Ukraine. Trade, business, investment, and G8 membership closely link the Russian, American and European economies. While the West is considering going down the ‘sanction road’, here’s a look at what’s at stake for the markets.

Trade In terms of billions of dollars, trade is higher between Russia and the EU, but the US remains Europe’s biggest export market. Net trade between Russia and the US was $38.1 billion in 2013, according to US Chamber of Commerce data. The US exported $11.26 billion to Russia, and imported $26.96 billion worth of goods.

Russia exports more than $19 billion of oil and petroleum products to the United States, as well as $1 billion in fertilizer products, according to Chamber of Commerce data. “Is Russia going to be cut off from the world? That is very unlikely given what Russia provides to the world, which are oil, gas, raw materials,” Alexis Rodzianko, president of the American Chamber of Commerce in Russia told Reuters. Russia is very dependent on trade with the EU, as member states account for about 50 percent of total Russian imports and exports. In 2012, trade between the two neighbors reached €123 billion.

One of Russia’s most valuable exports to Europe is something factories and households run on every day: natural gas. Europe imports one-third of its natural gas from Russia, with Germany being the biggest client importing nearly 30 billion euro annually. In 2012, 75 percent of all European imports from Russia were energy. Many countries in Europe have strategic partnerships with Russia’s state-owned gas giants, Rosneft and Gazprom. According to Eurostat data, Russia accounts for 7 percent of total imports and 12 percent of total exports in the 28 European Union bloc, making it the regions third most important trading partner, behind the USA and China. US companies with big Russia presence Several of America’ biggest companies- Boeing, Cargill, Ford, General Motors, ExxonMobil, to name a few- all have a huge presence in the Russian market. Boeing’s investment in Russia is deep, as the aerospace carrier sources a considerable amount of steel, titanium, and aircraft parts from Russian companies. Boeing receives about 35 percent of its titanium from state-owned, Rostec. In 2013, Boeing’s deliveries to Russian carriers were valued at $2.1 billion, and the company plans to spend $27 billion in Russia, Bloomberg reports.

“We are watching developments closely to determine what impact, if any, there may be to our ongoing business and partnerships in the region,” Doug Alder, a spokesman for Chicago-based Boeing, told Bloomberg by email. Last year, Russia was a $11.2 billion market for the US, with heavy trade in automobiles and aircrafts, according to Commerce Department data. US automakers have a high exposure to Russian markets, so are closely watching US economic actions against Russia. Ford has sold over 1 million automobiles in Russia, and in 2013, sold 105,000 cars. GM, which has a 9 percent market share, sold 258,000. Both companies have shifted production plants from Europe to Russia, which is set to become Europe’s biggest car market by 2016. ExxonMobil has partnered with Rosneft in exploring the Bazhenov oil field in Western Siberia, a deal that could be worth up to $500 billion. ExxonMobil is planning to build a $15 billion LNG terminal project in the Bazhenov field, and also has joint venture projects set up to explore Black Sea reserves. Senator Chris Murphy, chairman of the Senate’s subcommittee on Europe, said the sanctions could be extended to Russia’s banks. Russia’s two largest state banks are Sberbank, Europe’s third largest, and VTB. Both banks have a strong industry presence in London, which has indicated it isn’t moving towards the sanctions. A leaked document from Downing Street shows that the UK government doesn’t plan to follow America-led asset freezes or trade restrictions, but are mulling over visa restrictions and travel bans on key Russian politicians.

EU freezes assets of EU proposes 11 billion euro in Yanukovich and 17 other financial aid to desperate Ukraine he European Commis- On Tuesday, Secretary of State John reforms, holding elections, fighting Ukranians sion has proposed an 11 Kerry said the Obama administration corruption, and protecting against

he European Union has frozen the assets of 18 Ukrainians held responsible for embezzling the country’s funds, and illegally sending them abroad. Ousted President Viktor Yanukovich tops the list. The foreign ministers of 28 EU member states agreed to impose sanctions from March 6, against leading Ukrainian officials responsible for the “misappropriation” of Ukrainian state funds, the officialstatement said. The list also includes the two sons of the former President - Oleksandr and Viktor Yanukovich, former Prime Minister Mykola Azarov and his son Oleksii, as well as a former Minister of Internal Affairs Vitalii Zakharchenko. All the 18 people listed are subject to “criminal proceedings in Ukraine in connection with the embezzlement of

Ukrainian State funds and their illegal transfer outside Ukraine,” according to the document. The European assets of the targeted Ukrainian officials will be frozen for the next 12 months, but they can be recovered if “certain conditions are met,” the document added. The document was published hours ahead of the EU emergency summit in response to the crisis in Crimea. “This is the first time in many years that we have the perception in Europe of a real threat to our stability and even to peace in this continent,” European Commission President Jose Manuel Barroso said ahead of the summit. On Wednesday, the EU offered Ukraine 11 billion euro ($15.1 billion) in loans, on a condition Kiev signs a deal with the International Monetary Fund (IMF). Accepting IMF money normally means many sacrifices for a country’s economy, which could result in high gas bills in Ukraine, frozen government salaries, and all around budget cuts. In late February the Swiss Financial regulator FINMA froze the assets of Yanukovich, his son Oleksander, and 18 other Ukrainians.

billion euro helping hand to cash-strapped Ukraine. European Commission President Jose Barroso said Kiev will get the money if it agrees a deal with the IMF, which normally includes drastic austerity measures. Jose Barroso announced the Commission’s plan on Wednesday, and the full statement is available on the institution’s website. Funding will be significantly sourced from the IMF and the World Bank. Accepting IMF money will mean many sacrifices for Ukraine’s economy, which are likely to include increased gas bills, frozen government salaries, and all around budget cuts. Up to 8 billion euros will come from the European Investment Bank and the European Bank of Reconstruction, and 3 billion euros will be sourced from the EU budget- about half in macro financial assistance loans and half in grants. Another 3 billion euro will be raised through the Neighborhood Investment Facility. The figure matches Russia’s earlier $15 billion proposal, but falls short of $35 billion Ukraine says it needs to survive through 2015.

will offer $1 billion in loan guarantees. Ukraine’s acting Finance Minister Yuriy Kolobov said that Ukraine’s economy need $35 billion by the end of 2015. The funds will help Ukraine pay off its outstanding debts, including those to Russia’s Gazprom, to which it owes $2 billion. Ukraine’s parliament has signed off on the terms of a earlier 610 million euro EU aid package - but that money won’t be paid until Ukraine seals a bailout deal with the IMF. A concrete figure may also have to wait until after a new president is elected on May 25, in order for the IMF to ensure they are issuing loans to a stable government. The IMF failed to come through with a loan of 10-15 billion euro last August, a reason why ousted-President Viktor Yanukovich turned to Russia in December, and signed a $15 billion loan deal. This deal is on hold until Kiev forms a legitimate government, Moscow says. US Secretary of State John Kerry, while in Kiev yesterday, announced $1 billion in energy aid to Ukraine, which will focus on meeting Ukraine’s “four most pressing needs” - economic

“politically motivated trade actions by Russia”, according to the statement released by the White House on Tuesday. The shift comes after Moscow announced it will no longer offer its neighbor discounted gas prices, which yesterday, in his first public appearance since President Yanukovich of Ukraine was ousted, Russian President Putin maintained that the measures were not political, but economic. Gazprom, Russia’s largest natural gas producer, is waiting for Naftogaz to pay a $1.5 billion debt, which Putin said, for a company, isn’t “commercially viable” as it has expenditures it must cover. Yesterday, Gazprom CEO Aleksey Miller said it was possible to give Ukraine a $2-3 billion loan to cover its unpaid bill. The $1 billion in aid from the US will help Ukraine “find new export markets and adjust to trade pressures” as well as help the country achieve its goal to become more energy independent. Ukraine faces massive debts, and, by its own admission, has a nearly empty treasury. The country is due to pay off more than $60 billion in debt this year, or about a third of the country’s GDP.

world news Federal Reserve likely to keep trimming asset purchases - Yellen

British Airways owner not worried about Scottish independence

ritish Airways-owner International Airlines Group became the first major company to publicly say that Scottish independence could be good for its business, Reuters reported. Chief Executive Willie Walsh said Friday he was not worried about British Airway’s prospects if Scotland voted on September 18 to split from the rest of the UK after 307 years. The company believes that an independent Scotland “will abolish air passenger duty,” Walsh told BBC television.

Switzerland banks to freeze Yanukovich’s assets

he Swiss government has said the banks will be ordered to freeze assets of Ukrainian ousted president, Viktor Yanukovich. The banks “have a due diligence requirement” regarding Ukrainian money held in the country, according to Swiss officials. There was no indication, however, whether Yanukovich has any money deposited in Switzerland.

Japan’s output grows most since 2011

apan’s industrial production grew the most since 2011, indicating the economy is strengthening, Bloomberg reported. Output rose 4 percent in January from the previous month. Consumer prices excluding fresh food climbed 1.3 percent from a year earlier, according to the statistics bureau. As inflation matched the highest level in more than five years, a looming sales-tax bump stimulates demand.

Further bank consolidation will be credit positive for Russia’s banking system - Moody’s

he gradual consolidation in the Russian banking sector seen in recent years will accelerate from 20142016, Moody’s Investors Service said. This would bring “credit-positive changes through the amalgamation of weaker banks into banks with greater creditworthiness today,” it said. Well-executed mergers will benefit some larger private banks because their acquisitions of smaller entities will increase their scale and geographical diversification, according to a report “Russian Banks: Consolidation will strengthen the banking sector.”

US economy grew more slowly in Q4

he US economy grew at a slower pace in the fourth quarter of 2013 than first thought, AP reported. The Commerce Department announced Friday it now estimates the economy grew by 2.4 percent in October, November and December, down from an initial estimate of 3.2 percent released Jan. 30. The economy was weighed down by disappointing retail sales, inventory adjustments and a less robust trade balance.

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he US central bank is likely to keep trimming asset purchases, even as data is being monitored to determine if recent weakness in the economy is temporary, Federal Reserve Chair Janet Yellen has said. “Unseasonably cold weather has played some role,” she told the Senate Banking Committee. Yellen rehashed some of her earlier statements that the Fed intends to reduce asset purchases at a measured pace, adding that that the bond-buying program was likely to end in the fall. Yellen hinted the Fed will continue to taper at $10 billion per month.

New Zealand puts free trade deal with Russia on hold over Ukraine crisis

ew Zealand has put a free trade deal with Russia on hold over its deployment of troops to Ukraine’s Crimea, and Prime Minister John Key has ordered Trade Minister Tim Groser to leave Moscow. The two states have been negotiating a Free Trade Agreement with the Customs Union comprising Russia, Belarus and Kazakhstan for the last three years. Groser has reported making good progress on it in Moscow over the last few days, local media say. Key was at one stage expected to go to Moscow to sign a FTA after his upcoming trip to China in two weeks.

Obama proposes raising $100bn through new taxes on US multinational firms

S President Barack Obama proposed raising about $100 billion in revenue over the next decade through new taxes on US multinational companies, Bloomberg reported. The changes are included in the president’s budget plan for fiscal 2015. They would affect digital goods, deductions for “excessive” interest. The hybrid arrangements that can lead to income that isn’t taxed in any country are also considered. Obama is also expected to make it tougher for US-based companies to relocate to other countries.

China sets year’s growth target of 7.5%

hina has set its growth target for the year at 7.5%, the BBC reported. Inflation goal was set at 3.5%, aimed at keeping prices in check. The targets were announced by Prime Minister Li Keqiang in his first appearance at China’s annual parliamentary session. The country grew at a pace of 7.7% in 2013, about the same as in 2012.

Apple to appoint first new financial chief in 10 years

pple is to appoint its first new financial chief in 10 years, the Financial Times reported. As newcomer Luca Maestri is promoted to replace Peter Oppenheimer, the appointment could spark hopes that Apple will further increase its share buybacks and dividends. The move is the latest change in Tim Cook’s executive team after the departures of software chief Scott Forstall and retail head John Browett in 2012. Also last year, Angela Ahrendts, former Burberry chief executive, was appointed to lead the Apple Store network.

The cost of living around the world

AYONARA, Tokyo. Singapore is now the world’s most expensive city, according to the bi-annual cost of living index from the Economist Intelligence Unit, our corporate sibling. The Singapore dollar’s appreciation and high transport costs have propelled it to top spot. Tokyo and Osaka, which ranked first and second last year, have seen the biggest falls in costs because of a cheaper yen. The index is a weighted average of the prices of 160 products and services, with New York’s figure set to 100 to provide a base for comparisons. Paris rose six places from last year, reflecting a recovery in European prices. Strikingly, Tehran experienced a steep rise in costs over the past five years as economic sanctions began to bite. Mumbai offers the best value for money. As for the seeming anomaly of why Caracas should be one of the priciest cities, it is because the Venezuelan bolívar is pegged to the dollar: if black market rates were applied, Caracas would comfortably become the world’s cheapest city in which to live.

publicity

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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

Tbilisi Guide

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

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caucasian business week

March 10, 2014 #45