Caucasian Business Week #48 by Caucasian Business Week

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BUSINESS WEEK March 31, 2014 #48

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March 31, 2014, Issue 48

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GEORGIA FAST PAYMENT COMPANY “NOVA TECHNOLOGY “ WAS BOUGHT BY “ENERGY - PRO GEORGIA’S” CZECH FOUNDERS

ommersant.ge has exclusively learned that prompt payment company “Nova Technology” has a new owner - “Energo - Pro Georgia’s” founder, a unit of Czech Republic-based Energo-Pro AS. Pg. 5

FIRST “HILTON “ HOTEL TO BE OPENED IN BATUMI

ilton” first hotel will be opened in Batumi. The hotel will receive the first guests in September. The hotel will be 23 - storey and meant for 248 rooms. Pg. 5

TOURISM, ENERGY, AGRICULTURE – 5 PROJECTS OF CO-INVESTMENT FUND

BANK SECTOR’S JANUARY TO FEBRUARY PROFITS MARKED 78.096 MILLION GEL

anking sector completed January-February 2014 with 78,096 million GEL profit (01/02/14 -37 million GEL). Profit of the 2 months of last year equaled to 42,3 million GEL. Pg. 9

AZERBAIJAN PASHA BANK HAS AZN 3.576 MILLION OF ASSETS PER EMPLOYEE

GEORGIAN RAILWAY MANAGEMENT FAILS TO PROVIDE EFFICIENT WORK TRANSIT CARGO RAILAGE FELL BY 11% IN 2013

eorgian Railway transported 18.2million tons of cargo in 2013, down 9.4% (1.9 million tons) compared to 2012. Cargo transportation volume has shrunk in all directions. Only exports have grown by 1.7% to 1.7 million tons. At the same time, the transit cargo transportation shrank by 7.7% to 11.2 million tons and makes up 61% in total volume. As to the cargo categories, 9.1 million tons of oil

and oil products were transported in 2013, down 4% year on year (by 384 000 tons). 952 000 tons of grains was transported in 2013, down 33% (by 471 000 tons). Sugar of 610 000 tons was transported in 2013, down 11.5% year on year. Iron and manganese transportation fell by 13.7% to 720 000 tons. Transportation of nonferrous metals decreased by 5% to 743 000 tons and transportation of nitric fertilizers dropped to 481 000 tons.

CARREFOUR AGAINST GEORGIAN FARMERS

Pg. 5

Goodwill Named as Active Promoter of Georgian Products, Carrefour and Smart Show Less Support

abor productivity in one of the largest private credit institutions of Azerbaijan - PASHA Bank, remains at a high level. Pg. 11

CIS IMF UNLOCKS UP TO $18 BN FOR UKRAINE’S SHATTERED ECONOMY

he International Monetary Fund has agreed to grant Ukraine between $14 billion and $18 billion to help the country avoid a default. Pg. 12

WORLD NEWS VISA, MASTERCARD RESUME SERVICES WITH 2 RUSSIAN BANKS BLOCKED AFTER US SANCTIONS

nternational payment systems Visa and MasterCard have resumed services for transactions for clients at Russia’s SMP Bank and Investcapitalbank, blocked. Pg. 13

KHUDONI INVESTOR: “WE’VE SUCCESSFULLY IMPLEMENTED MUCH LARGER PROJECTS” Pg. 10

DIRSI CONSTRUCTION COMPANY CHEATING CITIZENS Pg. 5

Georgia ready to become member of Europeann neighbourhood

Pg. 2

Barroso twitted that Association Agreement with Georgia will be signed no later than June Pg. 2

Mamuka Khazaradze against Financial Monitoring Service’s Separation from NBG Pg. 9

Temur Chkonia: Goods Suitable for the European Market have not been Produced in Georgia for 20 Years Archil Tsabutashvili: Customers in All Regions will Have 24-hour Water Supply in about 10 to 15 Years

Pg. 4

NATAKHTARI FUND FUNDRAISING COMPLETED

Take Care of Future – the Third Wave of Natakhtari Fund’s Charity Project Broke Pg. 6 the Record

MAIN EVENTS caucasian business week

March 31, 2014 #48

BARROSO TWITTED THAT ASSOCIATION AGREEMENT WITH GEORGIA WILL BE SIGNED NO LATER THAN JUNE

GEORGIA READY TO BECOME MEMBER OF EUROPEAN NEIGHBOURHOOD

e believe the time has come for the European Union to recognize Georgia’s European prospects”, said Georgian Prime Minister Irakli Garibsahvili in his opening address at an international conference discussing Georgia’s EU integration. Garibashvili is taking part in the Economic Integration with EU – Prospects and Opportunities conference in Tbilisi, which is being attended by delegations representing EU member states and Eastern Partnership countries, as well as non-EU member states. Georgia’s Prime Minister began his speech stating Georgia was determined to continue striving towards EU integration. “We, the Government and the people, realize very well that Georgia belongs in Europe and nothing can force us to stray from the path to European integration.” Garibashvili believed the time had come for the EU to recognize Georgia’s European prospects and if this happened, it would pave the way for Georgia’s accession to the EU. “It has become clear today that should the European Union fail to make a definite promise of membership to successful Eastern Partnership countries, crises similar to that in Ukraine will surface again. Moreover, these crises may get out of control and encompass the whole region,” the PM said. He assured conference participants that Georgia was ready to complete the development of the Association Agenda and not only become a neighbour of Europe but a member of the European neighbourhood. “We welcome the new possibilities that opened up for us at the Vilnius Summit. However, we also realize the challenges that accompany this process and we are ready to overcome these difficulties,” he said.

“To this end, we initiated a number of reforms and planned activities that are reflected in the economic section of the Georgian Government’s policy. All this reiterates willingness to implement consistent reforms within the framework of the Deep and Comprehensive Free Trade Area, with a view to ensuring that the country makes full use of the benefits offered.” Garibashvili then spoke about the benefits brought by signing the Deep and Comprehensive Free Trade Agreement. “Access to the European market, one of the largest and richest markets in the world, will ensure a powerful impetus for the diversification and development of Georgian business, local production, and export. I believe that Georgia’s attractiveness will grow in terms of foreign direct investments, which, in turn will promote the inflow of new technology and know-how into the country, stimulate the emergence of competitive local production and creation of new workplaces,” he said. Garibashvili explained the signing of this agreement enabled Georgia to cooperate with European countries in such fields as sustainable development, transparency and trade-related energy issues. He also expressed hope that Georgian and international business communities will take advantage of this new reality. More importantly, Garibashvili said the agreement would benefit every Georgian citizen and business. “The main objective of Georgia is to ensure the timely signing of the Association Agreement. As our European partners have promised us, very soon, in a matter of months, we will witness the long-awaited moment in the life of the Georgian people, as Georgia will sign one of the most important agreements in its history, an agreement that will define the future of our country. For our part, we will make an all-out effort to this end,” the PM said.

GEORGIA, EU MULL CO-OP PROSPECTS

eorgian President Giorgi Margvelashvili met with the EU- Georgia Parliamentary Cooperation Committee members on March 27. The talks focused on cooperation between Georgia and the EU, in particular the importance of accelerating the signing of an Association Agreement, the presidential administration reported. Georgia initialed association agreement with the EU at the Vilnius summit dedicated to the Eu-

ropean Union’s ‘Eastern Partnership’ countries - ex-Soviet states on November 29, 2013. The signing of the Association Agreement is scheduled for August 2014. Margvelashvili and co-Chairman Milan Cabrnoch paid particular attention to the issues of stability in Georgia and regional security in the light of recent developments in Ukraine. They also discussed the EU’s role in conflict resolution, as well as intensification of the EU Monitoring Mission. The meeting also focused on the rule of law, development of democracy, protection of human rights, as well as prospects of cooperation between Georgia and the EU in these areas after the signing of the Association Agreement. Attendants in the meeting included National Security Council Secretary Irina Imerlishvili, co-chairman of the EU-Georgia Parliamentary Cooperation Committee Tina Khidasheli and the president’s foreign policy adviser, Vano Machavariani.

resident of European Commission José Manuel Barroso twitted that Association Agreements with Georgia and Moldova will be signed no later than June. Before that it was known that Association Agreement between Georgia and EU would have signed in August. Barroso wrote that he is very happy for this decision made on EU leaders meeting yesterday.

EC PRAISES GEORGIA’S REFORM EFFORTS IN 2013

he European Commission (EC) positively evaluated Georgia’s implementation of the plan on the European Neighbourhood Programme in 2013 for a variety of priorities. The commission’s annual report indicated that there was an intensive dialogue between Georgia and the European Union in 2013. Senior officials of both sides paid mutual visits, the document reads. “Last year Georgia fulfilled most of the EU recommendations. The presidential elections were carried out transparently in the country and fully complied with international standards,” the report further reads. The document noted that the Georgian government successfully completed a comprehensive phase of the transfer of power last year and in early 2014. It did not hinder the processes of reforms and rapprochement with the EU, the document reads. The European Neighbourhood Policy (ENP) was

developed in 2004 and aims at bringing Europe and its neighbours closer to their mutual benefit and interest. This ENP framework is proposed to the 16 of EU’s closest neighbours - Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, Palestine, Syria, Tunisia and Ukraine.

GEORGIA TO ENSURE MORE EFFECTIVE PUBLIC SAFETY

new programme aimed at ensuring public security will be applied in Georgia which will contribute to the normal operation of enterprises, institutions and organizations in the country. The program focuses on the functioning of mobile fire departments in Georgia to eliminate fires and other emergency situations with a view to minimize their consequences to the country’s economy. In this regard, the Georgian government submitted to the parliament a bill on amendments to the law ‘On public safety’, which has already been considered at the legal issues committee meeting. The law on fire safety and on the protection of the population and territories from emergency situations of natural and man-made disasters will be merged into a single legal act in order to conduct

large-scale reforms in the sphere of public safety. In accordance with the draft law, subdivisions of the emergency and fire rescue services of the Emergency Situation Agency of the Interior Ministry, Adjara government and local authorities will be cancelled. The property of these units will be transferred to the Emergency Management Department of the Georgian Interior Ministry. The Head of the Legal and Human Resources Department of the Georgian Interior Ministry, Zviad Okropiridze said that the draft law envisages the implementation of the action plan consisting of two stages. The plan covers 2014-2015, and provides for the formation of structural and territorial divisions of the Emergency Management Agency, its powers, operating rules and number of employees, as well as construction of buildings for fire departments, purchase of fire, rescue and other equipment.

COMPETITION AGENCY TO BE ESTABLISHED BY APRIL 15

ompetition Agency will be officially established by April 15, during the remaining time government will work on its charter and selection of personnel. In general, work on methodology and the legislative acts, without which the Agency is not able to work, will be completed by October 1, 2014. Prior to approval of the document, it will be considered by the parliamentary majority and the opposition, as well as the Parliamentary Committee on Sector Economy. According to the Deputy Minister of Economy

Natia Mikeladze, identification of monopolists on the Georgian market by the Agency should take place by market research and positions of certain companies on it Tentatively, the degree of effectiveness of the new Anti-Monopoly Service will be determined by the end of 2014. Under the recently enacted antitrust legislation, the Competition Agency will be independent authority, which itself will determine priorities. The Agency will annually report to the Prime Minister of Georgia.

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PUBLICITY March 31, 2014 #48

caucasian business week

INTERVIEW caucasian business week

March 31, 2014 #48

“COCA-COLA BOTTLERS GEORGIA”: GOODS SUITABLE FOR THE EUROPEAN MARKET HAVE NOT BEEN PRODUCED IN GEORGIA FOR 20 YEARS An interview with the founder of “Coca-Cola Bottlers Georgia” Temur Chkonia

- Infrastructure Minister Davit Narmania stated that trafficking should be free in the country, but it is necessary to adopt a number of regulation. What could you say about this? - In trade, the most important is to have a competitive product the other side is interested to purchaseno matter whether it is Europe or Africa. From this we should start talking about regulation. In reality, the situation is that in the past 20 years

Georgia has not produced any products that would be consistent with the European quality standards. The reason for this is the lack of knowledge of the business and those projects that are performed by businessmen. In most cases we are talking about fast projects meant only for personal well-being, rather than development. This is the main reason. When a State introduces regulations not only European, but also local realities should be considered in order the product to be cheap. There is a wonderful formula - price plus quality. It must always be respected. Regulations and quality are not the only criteria. For example, wine and mineral water are very cheap in Europe, and often it is surprising how they manage to save such low prices. If Turkey starts to sell mineral water in Georgia on the prices at which it sells it in Europe, then production of mineral waters in Georgia will stop. How do they do it, I do not know, it should be studies by the state.

- The Minister also noted that regulatory institutions should be formed, and some experts say that extra regulations are undesirable for business. How right is it to create different regulatory structures? - The only right way: we need to know where the finish line, by what means, by what methods and what results we want to achieve. We must begin with the result - what price we want to enter the European market. If the government wants the country to be exporter of goods, it must itself take part in this process as only business cannot cope with this task. Tax breaks are needed as well as tariff preferences and so on. If we can get low prices with high quality, then Georgia will be able to take a certain niche in the European market. Only invitation to Europe is not enough, we must assess actually and critically - we must ask ourselves - are we ready to offer Europe high quality goods at low price? - Can an Association Agreement with the EU as-

sist in investment flows? European investors may well be interested in Georgia, this is realistic, but on the other hand, the investment has no nationality. We are investors. We have invested so much money in the economy that no foreigner can be compared with this. I do not think I bring less benefit than foreign investors. It is possible to stimulate Georgian business – to make cheap money more available, to create laws that promote exports. The problem is that tomorrow Europe may be interested in Georgian tomatoes, and then it turns out that we have only two boxes. In 2014 I’m going to invest 12 million euros in the production of soft drinks and beer, in order to export products to Armenia, Azerbaijan, Central Asia, and so on. Am I worse than foreign investors? They have different preferences, and I have nothing. All somehow believe that we should especially attract foreign investors and turn a blind eye on local businessmen such as they are obliged to invest.

CUSTOMERS IN ALL REGIONS WILL HAVE 24-HOUR WATER SUPPLY IN ABOUT 10 TO 15 YEARS Interview with Archil Tsabutadze, a director general for the United Water Supply Company

-The mission of the Georgian United Water Supply Company is to ensure 24-hour water supply to the population. When do you expect to fulfill this mission and what are your plans in this direction? - We suppose it will take about 10 to 15 years to ensure 24-hour water supply to the population in regions. The water supply networks have been either disordered or outdated in a number of regions and many years and many millions are required to restore this infrastructure. Our company has elaborated a concrete plan to rehabilitate the infrastructure stage by stage in many cities and districts. - The water supply network is genuinely outdated and the company losses are grown, while the quality falls. What is the formula to determine priorities for replacing the infrastructure? Do

you make accent on only removal of breakdowns? Answer: Our company removes breakdowns in everyday regime. As to our priorities, we make focus on the population that lacks for drinking water. Therefore, our company carries out full or partly rehabilitation of outdated networks or pumping stations in cities of all regions within our coverage zones. We also prioritize to organize ultramodern water quality laboratories. All these measures ensure required quality of drinking water. The Asian Development Bank (ADB) has approved the third tranche as part of the water supply improvement project. The tranche accounts for 98 million USD. We plan to purchase ultramodern water quality laboratories thanks to this tranche. Today we have quality laboratories in almost all regions and we plan to increase their quantity in the future too. - What are the projects the company is working on now. What time is required to implement these projects? Will the company carry out the project under the schedule and what is the value of these projects? - At this stage the company is implementing several projects. The projects financed by ADB and the European Investment Bank are the most important ones. ADB-financed projects are being implemented in Mestia, Anaklia, Kutaisi and Poti. The projects call for construction and rehabilitation of water supply systems and they are valued at 102 million GEL. Part of them will be completed in 2014,

ISRAELI AIR COMPANY EL AL ISRAEL AIRLINES STARTS OPERATING IN GEORGIA

AV Georgia informs that Israeli air company will perform charter flights from Tbilisi International Airport to Tel-Aviv, Ben Gurion airport. The fights are scheduled on Tuesdays, at

21:35. El Al Israel Airlines performs regular civil flights since 1948. Its air fleet contains 40 Boeings of various modifications, which perform regular and charter flights to Europe, South America and Middle and Far East. Civil Aviation Agency informs that local Air

Caucasus already applied for 3 frequencies to Tel-Aviv direction. The agency also expects application of Georgian Airways (Airzena) and Israeli air companies (Arkia, Israir), which are already represented on Georgian market. The agency considers that the activity is determined by cancellation of visa regime between two countries and they expect considerable increase of passenger flow. Visa-free regime was established on March 13 between Georgia and Israel.

while some of them will be completed in 2016. Despite the projects are large-scale, their implementation will end within the schedule. As to EIB-financed ongoing projects, the bank has allocated a 40 million EUR loan for 31 cities in Georgia for the water supply systems rehabilitation. Projects have been completed in 21 cities, while the works will end by the end of 2014 in the remaining 10 cities. The projects are being implemented by the municipal development fund of Georgia. The loan is supported by a 4 million EUR grant of the neighborhood investments facility (NIF) that will be spent to improve the company operation. The ongoing projects have considerably improved the water supply systems in Georgia in various regions. Consequently, the population receives high-quality drinking water. We have improved the supply schedule in many cities, as well as achieved 24-hour water supply in many places. -Would you provide some information on the planned projects? How much finances the donors have allocated and what is the ratio of donors in these funds and what is the ratio of the state budget? - Besides the ongoing projects, the company also plans to implement new large-scale projects. Namely, we plan to implement new projects in Ureki and the second phase of the project in Kutaisi. These projects will be financed as part of the ADB-provided third long-term tranche of 98 million USD. The Ureki project calls for constructing water supply and sewage systems, while the Kutaisi project is to rehabilitate the water supply system. In 2014 we will also implement the projects fi-

nanced under the first and second tranches of ADB: the sewage system cleaning works in Anaklia and the construction of a sewage system cleaning asset in Mestia. ADB-financed projects are of crucial importance to provide high-quality services to Georgian customers in regions. This year we will launch construction and rehabilitation of water supply systems in 28 cities as part of the ADB second loan of 40 million EUR. The loan is enhanced by an 8 million EUR grant of NIF and the sum will be spent on implementing infrastructural projects in 28 cities. The second loan is to considerably improve the company services. The donors-provided funds are replenished by the state budget funds and ithe state ratio is about 18%. - Water standard issues represent real problems in regions. How do you plan to resolve the problem? - The problem mainly arises amid the weather conditions deterioration in the places from where we take water, when the river water tiered up and so on. In similar situations the company has to cease water supply to prevent the population from receiving low-quality water. As soon as the water meets the standards, the company restores the water supply. We provide the drinking water control by technology chemical and microbiology devices. Analysis contains many components and stands close to the Healthcare Organization standards. The company also has 8 central regional laboratories to supervise service center laboratories, where drinking water quality control is carried out on everyday basis.

PARTNERSHIP FUND HIRED IFC AS CONSULTANT FOR NENSKRAHESI

nternational Financial Corporation (IFC) will evaluate proposals of the potential investors of Nenskrahesi. Partnership Fund signed contract with IFC on Friday. According to the agreement, International Financial Organization will consult in elaboration of project structure, preparation of contract and financial documentations, also negotiations with investors. “We want all the large infrastructural projects implemented by us along with private investors according to international standards. That’s why we hired IFC as consultant, which will evaluate investor’s proposal, also will prepare legal, com-

mercial and financial structure of the deal”, - executive director of Partnership Fund Irakli Kovzanadze stated. Reminding that Nenskra hydro power station of 210 MW should be built in Svaneti, on the river Nenskra. Its potential capacity will be 1.3 billion KW/hour. Overall investment budget of the project is $570 million, construction term - 5 years. IFC, which is a member of World Bank group, is the largest international institute oriented for private sector development. It also provides consultations in the infrastructural projects in cooperation issues of state and private sectors.

BUSINESS March 31, 2014 #48

caucasian business week

ARDI GROUP OBTAINED LIFE INSURANCE LICENSE

he company obtained life insurance license from Insurance Supervision Service on March 14. Respectively, the regulator included data about license awarding to Ardi Group in the institution’s license registry.

Ardi Group operates on the insurance market since 2010. According to Q3 2013, the company has attracted bonuses of 16,59 million GEL. 50% share of Ardi Group belongs to Armaz Tavadze, 20% - Zaza NIshnianidze, 30% - Zurab Khizanishvili.

CARREFOUR AGAINST GEORGIAN FARMERS

DIRSI CONSTRUCTION COMPANY CHEATING CITIZENS

iorgi Burjanadze, a head for the antitrust union, says DIRSI construction company cannot provide high-quality works and the company customers face many problems. “DIRSI, an Azerbaijani construction company, launched operation in Georgia several years ago. We have received information that the company provides low-quality construction works. Therefore, our citizens face many problems in this respect. Namely, a month

ago a worker, who fell from the height, died here, as the company ignores security norms. I see that similar companies have been admitted from corresponding structures to act arbitrarily and to do everything they want. And similar approaches make negative influence on the work quality. All of us knows that uniforms must be used during the work. Workers must not be drunken. This is obvious requirement in all normal countries”, Giorgi Burjanadze told the Qronika newspaper.

FAST PAYMENT COMPANY “NOVA TECHNOLOGY “ WAS BOUGHT BY “ENERGY - PRO GEORGIA’S” CZECH FOUNDERS

ommersant.ge has exclusively learned that prompt payment company “Nova Technology” has a new owner - “Energo - Pro Georgia’s” founder, a unit of Czech Republic-based Energo-Pro AS. In addition, “Commersant “reports that “Nova Technology” had a debt to “Energy Pro”. “Commersant “ was told at “Energo- Pro Georgia “ that “ Energo-Pro AS “ is interested in the purchase of various businesses around the world and focuses on all those business sectors which are profitable. However, how profitable is the business run by

“Nova Technology” in Georgia is unknown, especially in the light when “ Bank of Georgia “ offers 0% commission fee to pay box users. Recall that mobile operators stopped subsidizing of the prompt payment companies and customers have to pay a 4% - fee. The exception is “Bank of Georgia “ pay boxes. How is the Czech company going to compete with “Bank of Georgia” pay boxes? How much does it invest in the company and what are its plans in terms of development of this segment of the Georgian market? Commersant.ge is trying to get answers to these questions from “Energo Pro” head office.

SES: ASTRA 5B SATELLITE LAUNCH SUCCESS ON ARIANE 5 ASTRA 5B will offer state-of-the-art capacity for CEE, including Georgia and CIS from 31.5 degrees East Satellite also carries SES’s second EGNOS hosted payload for the European Commission

orld-leading satellite operator SES announces that the ASTRA 5B satellite was successfully orbited by an Ariane 5 rocket from the European spaceport in Kourou. ASTRA 5B was built by Airbus Defence and Space Systems in Toulouse, France, based on the highly reliable Eurostar E3000 platform. The satellite will be located at the orbital position of 31.5 degrees East and is equipped with 40 Ku-band transponders (36 MHz equivalent) as well as 6

Ka-band transponders. ASTRA 5B will extend SES’s transponder capacity and geographical reach over Central and Eastern Europe, including Georgia and the Commonwealth of Independent States for DTH, directto-cable and contribution feeds to digital terrestrial television networks. The spacecraft also carries the second SES hosted L-band payload for the European Commission’s European Geostationary Navigation Overlay Service (EGNOS). EGNOS helps to verify, improve and report on the reliability and accuracy of positioning signals in Europe. Romain Bausch, President and CEO of SES, said: “Today’s successful launch of ASTRA 5B is particularly satisfying to me personally, less than two weeks away from my official retirement from the position of President and CEO of SES on April 3, 2014. The launch success means that SES will have grown its satellite fleet under my tenure from 4 satellites at a single orbital position over Europe back in 1995, to 56 satellites at 37 orbital slots around the world today. At the same time, the number of active transponders will have grown from 64 to 1.508, once ASTRA 5B becomes operational. In line with our well-defined strategy, ASTRA 5B will greatly increase SES’s capacities over CEE, including Georgia and the CIS.”

seasonal character of the agrarian sector makes a major problem in Georgia, Jean Marc Stavrulakis, a financial manager for Carrefour noted at the ISET economic school in Tbilisi. The seasonal character of the domestic production is the result of undeveloped greenhouse complexes, he added. The lack of transportation and packing technologies is also relevant, as well as low knowledge of legal issues. “You can see many domestic products in the Carrefour network, but the current situation is far from the ideal one in the agrarian sector. The Carrefour strategy for 2014 is to deepen relations with Georgian farmers and develop efficient production chain so as the consumer receive high-quality products at comparatively low prices”, he noted. At this stage the company cooperates with about 100 domestic suppliers. The company also plans

to unveil branches in various regions of Georgia. Meanwhile Georgia farmers and small entrepreneurs talk about the problems they meet with Carrefour. A major part of them cannot cover the expenditures raised during the cooperation with Carrefour. Moreover, contract agreements are so complicated and losing. Only major companies are able to follow them thanks to their resources. Part of small companies and farmers refused to cooperate with Carrefour from the very beginning to avoid the expected problems. Carrefour records a good dynamics of sales, but the contract-provided financial regulations and cooperation systems considerably grow expenditures. Therefore, we had to refuse the cooperation in advance, because all small companies that had agreed on cooperation failed to fulfill the contract agreement and they have withdrawn their products back, they noted.

GOODWILL NAMED AS ACTIVE PROMOTER OF GEORGIAN PRODUCTS, CARREFOUR AND SMART SHOW LESS SUPPORT

PI and the trademark of Choose Georgian publishe the rating of trade networks that promote Georgian products. The inquiry included the list of 12 exclusive networks of stores: Goodwill, Carrefour, Smart, Nikora, Two Steps, XL, Vejini, Fresco, Furshet, BIG Ben, Nugeshi, Foodmart. According to the questioned businessmen, Goodwill ensures the most active promotion of Georgian products in its network, while Carrefour and Smart show the least activity in this direction. Businessmen noted Carrefour and Smart make most barriers to Georgian products to penetrate into their networks by high-level bureaucracy and unfavorable conditions for businessmen. The rating of the most active promoters of Georgian products is as follows:

1. Goodwill. 2. NIiora 3. Foodmart. 4. Fresco 5. Two Steps 6. Vejini 7. XL 8. Furschet 9. Nugeshi 10. Big Ben 11. Smart 12. Carrefour The rating is based on inquiry of small and medium entrepreneurs. The inquiry was carried out from March 1- to March 20 and total of 38 businessmen from food, alcoholic and nonalcoholic products manufacturers have taken part in it.

FIRST “HILTON “ HOTEL TO BE OPENED IN BATUMI 100 thousand euros to be invested in the project performed by “Tour Invest” company

ilton” first hotel will be opened in Batumi. The hotel will receive the first guests in September. The hotel will be 23 - storey and meant for 248 rooms. According to “Tour Invest “, along with the hotel, a complex includes 90 apartments, which will be sold after the complex is put into operation. However, the pricing policy has not been determine yet. According to the company, a 5 - star hotel will be managed by the brand . “Hilton” hotel budget amounts to 100 thousand euros.

Another “Hilton” hotel will be opened in Tbilisi in 2016. The project, carried out by “REDIX” company, will be 14-storey and meant for 165 rooms.

WINE EXPORTS GREW BY 320 % IN ONE YEAR

s per trade statistics for January February, wine is among the three products for export. According to “Sakstat” official data, during one year wine exports increased by 320 % and amounted to 32,044 million USD in January – February. Wine made 7.3 % of total exports in January -

February , while in the first two months of last year - 2.1 % . Such radical changes in wine export sales were caused by the opening of the Russian market last summer. In 2 months of this year, 70% of all wine exported from Georgia fall on Russia. Georgian natural wines worth 22.52 million USD were exported to Russia in January - February.

BUSINESS 6 NATAKHTARI FUND FUNDRAISING COMPLETED caucasian business week

March 31, 2014 #48

Take Care of Future – the Third Wave of Natakhtari Fund’s Charity Project Broke the Record

ompany Natakhtari presented the results of the Charity Project Take Care of Future to the public. It has been the third year that a charity program of Natakhtari Lemonade is being implemented for supporting the children deprived of care. The collected amount is increasing along with growing popularity of the project. At the press conference held in Tiflis Palace Hotel, Natakhtari Fund introduced the success achieved within the project framework, the amount collected during the third wave and future plans to the public. As Tornike Nikolaishvili, the Marketing Director of the Company explained, GEL 183,742 got collected throughout the third phase of the project, which broke the record. Overall, the amount collected during 3 years exceeded GEL 420,000. Factuality of the amount was attested by international audit firm PricewaterhouseCoopers. Tornike Nikolaishvili, the Marketing Director of the Company and Manana Omarashvili, Head of the Psychology Service addressed journalists and answered posed questions. The Fund aims to support integration of children deprived of care into the society. Special advantage of Natakhtari Fund is that each adolescent is a separate case and approach towards each of them is individual. This is the only project in our reality, which does not cease the service when adolescents become 18. The fund supports them until they are ready to face independent life. Main aspect of the Fund’s activities is public con-

solidation and increasing awareness about this problem. I am proud that the record amount was collected – GEL 183, 742. In total during 3 years more than GEL 420,000 got collected. There is a new approach towards mobilization of funds. An auction was held where the works of Georgian artists created on social topics got sold. Also visitors of Natakhtari Fund’s facebook page had the opportunity to help the fund in fundraising. Additional GEL 12,500 got collected through such activities. Public concentration was achieved, which produced good results. According to Manana Omarashvili, Head of the Psychology Service (Association Our Home

Georgia), during the last two years 45 cases got closed. As she said the project helped adolescents in successful integration with the society which they needed most. As the psychologist noted, various charity projects were functioning to help adolescents, however these efforts were not sufficient to settle the major problems. “The main problem arises when these children become 18 and have to start independent life, they are not ready for this. We considered that 45 beneficiaries no longer needed our assistance, since they were already independent and working. There are cases when they get married and

do not require assistance. Also there are cases of sending adolescents to host families by social workers and as a result children do not require our support. It is undoubtedly good outcome that 13 adolescents out of 117 current cases are working, 5 are students and 11 are getting ready for national exams”, - said Ms. Omarashvili and mentioned several success criteria developed by the association psychologists especially for these adolescents. “In our opinion, it is a success when a young person, as a result of the psychologist’s work, gets more adapted and becomes a full member of the society. It is significant to improve the health condition as well. Therefore, psychologists in addition to psychological assistance are trying to find supporting organizations for overcoming various problems. Achievements in the educational sector are also very important. I do not mean that somebody just got a student or acquired an occupation, we are helping them in their academic performance.”- explained Manana Omarashvili. According to her, raising selfesteem and personal development represent one of the main assistances for an adolescent. “Revival of contacts with families contribute to strengthening of adolescents. We are working very actively in this direction as well and involve various experts. Acquiring occupation and employment are important. However, the result would be zero with having these and being unable to start independent life. This is a success criterion, which indicates that we can close a case”- added Manana Omarashvili. Representatives of Natakhtari Fund say that the project will continue and assist actively the children in resolution of their problems.

NATAKHTARI FUND EXPRESSES ITS GRATITUDE TO EVERYONE WHO HAS CONTRIBUTED TO THE SUCCESS OF THE PROJECT – TAKE CARE OF FUTURE

atakhtari Fund operates since 2012 and in the meantime it has succeeded to support 162 children deprived of parental care in Georgia. The goal of the fund is to prepare teenagers for independent life. With two year budges of 240 000 GEL Fund managed to provide psychology service for each beneficiary along with helping them to advance in school subjects, get college degree, higher education and acquire profession. Fund supports specialized probation and scholarship programs as well. Peculiarity of the fund is individuality, as each teenage is a separate case with his/her abilities, needs and corresponding program. Interestingly, the program is finished only after the adult is able to live independently even if he/she is above 18. During two years 16 adults have left the fund, which means that they already are able to earn living with their professions. Natakhtari Fund expresses its gratitude to everyone who has contributed to the success of the project – Take Care of Future.

Fund is thankful of Catholicos-Patriarch of All Georgia His Holiness and Beatitude Ilia II for blessing. Great thanks to the association Our Home – Georgia and its team of psychologists, who have tremendously contributed to the success of the fund. Their everyday work have definitely changed children’s future in a positive way. Also, we want to thank PricewaterHouse Cooper for guaranteeing financial transparency of the fund. However without support of our consumers it would have been impossible to realize the project. That is why we want to thank our consumers for being loyal and supportive. Purchasing each bottle of Natakhtari Lemonade (during November-February) means that one is helping children. Involvement of the society in money collection process was record-breaking, we all together collected 183,742 GEL, and thus during three years more than 420 000 GEL have been collected. This is a big victory for all participants of the fund – each of us. We can be optimistic as we are improving life of orphan children together.

INVESTING March 31, 2014 #48

caucasian business week

TOURISM, ENERGY, AGRICULTURE – 5 PROJECTS OF CO-INVESTMENT FUND

ardabani Greenhouse Farm will replace 30% of imported potato on the first stage. In the framework of Panorama Tbilisi, 30 000 trees will be planed in Tbilisi and in total 1800 underground parking will be added to the city. Projects of Co-investment Fund of %6 million, the society was waiting announcement of which during 6 moths, are already known. Grandiose hotel complex, diary processing enterprise and greenhouse farm, Mtkvarhesi and Tskhenistskali power plants cascade – are the projects presented by executive director of the fund George Bachiashvili to the representatives of media, business and government. Total investment amount of the funds equals to $1.3 billion and each of them is initiated by Co-investment Fund. Although the fund has already found foo some funds, for others it is still looking for. Contribution of the fund in the projects is 40-60^. TOURISM – PANORAMA TBILISI Construction of the complex with 4 hotels starts in the near future in Old Tbilisi. The hotels of Panorama Tbilisi will be Freedom Square, Erekle II Square, Sololaki Hill and Sololaki Gardens. Documents of the Sololaki part of the complex will be sent to the city hall for approval in the current week and the fund expresses readiness to start construction in Sololaki part as soon as they are approved. Hotel with 5+ stars of the complex will be located on Freedom Square, with 4+ stars – in Old Tbilisi, 4-star hotels will be in Sololaki. George Bachiashvili says that construction of the hotels was decided on the basis of market study. ”THERE IS STATISTIC FROM DEPARTMENT OF TOURISM, HOW NUMBER OF TOURISTS INCREASED AND THERE ARE ALSO CUMULATIVE DATA HOW HOTELS ARE LOADED. WE ALSO MAKE OUR INTERNAL RESEARCHES. O THE BASIS OF ALL THESE WE MADE A DECISION THAT INDEED, GEORGIA AND IN PARTICULAR TBILISI NEEDS ADDITIONAL HOTELS», - EXECUTIVE DIRECTOR OF COINVESTMENT FIND STATED. The fund has not yet found a partner In the case of Panorama Tbilisi and currently their contribution in the project is 100%, although Bachiashvili says that negotiations are going with various brands, among them with Hilton. «Negotiations with several brands are going. There will be 4 hotels, therefore there may be 4 different brands, or may be one brand with various sub brands», - Bachiashvili stated. He said that the fund already owns necessary plots for Sololaki projects, among them the lands that had belonged to Bidzina Ivanishvili, although as director general of the fund mentioned, the plots have not been gifted or given for free – the fund purchased them. «Part of the purchased plots belong to Mr. Bidzina, part of them we bought from the private owners», - Bachiashvili added. He said that complex Panorama Tbilisi is distinguished and unique not only because all 4 parts of it will connect each other by cableway and the guest will be able to relocate from one part to another, but also because 30 000 new trees will be planted. «It’s the first case when trees of this amount will be planted in Tbilisi and additionally, 1800 underground parking will be added to the city», - Bachiashvili mentioned. He said that on this stage the fun cooperates only with architectural firms in Georgia, although it’s not excluded to cooperate with the local construction companies in the future as well. ”REQUEST FOR ARCHITECTURES IS TO TAKE INTO ACCOUNT HISTORICAL VALUES OF TBILISI.

ALSO, AFTER RESPECTIVE SERVICES OF THE CITY HALL REVIEW THESE PROJECTS, IT’S POSSIBLE TO MAKE SOME ADJUSTMENTS», - ADDED EXECUTIVE DIRECTOR OF THE FUND. Chairman of TBC Bank’s supervision board Mamuka Khazaradze stated in the interview with BPN that the investment of the scale, which Coinvestment Fund is going to invest in Georgian business, neither single company nor many investment companies together have made during years. The businessman expressed satisfaction because investment is diversified and one of the priorities is development of tourism and city development. «Such grandiose constructions will cause completely innovative vision of the city arrangement and hotel system», - Khazaradze stated. As Bachiashvili mentioned, fund’s management plans to implement 3-stars hotel projects as well, which are on the preparation stage now and will be presented to society in the future. Energy – power plants cascade on the river Tskhenistskali and Mtkvarhesi «We have already got supposed partner in Mtkvari-hesi project – our and their share will be equal 50%-50%», - Bachiashvili stated. Installed capacity of Mtkvari-hesi will be 53 MW/hour and its completion is planned in 2,5 years. Construction of the power plant starts next month. As for power plants cascade on the river Tskhenistskali, its construction is planned after 1,5 year as technical-economic research of the power plant is going now. Co-investment plant is negotiation with American Direct Investment Fund about the partnership in power plants cascade project and Bachiashvili says that American partner will enter with 60% share in the project. Respectively, share of Coinvestment Fund in the project will be 40%. Installed capacity of the power plants cascade on the river Tskhenistkali will be 250 MW/hour in total. AGRICULTURE – DIARY PROCESSING ENTERPRISE AND TOMATO GREENHOUSE Co-investment Fund has already found partner in both agricultural projects. Contribution of the various companies in each project will be 40$. ”WE ARE TALKING WITH DUTCH REGARDING FARM. WE HAD NEGOTIATIONS WITH UKRAINIAN COMPANIES, ALTHOUGH UNFORTUNATELY DUE TO AFFAIRS DEVELOPED IN UKRAINE THIS COMPANY FACED TO DOMESTIC PROBLEMS AND CURRENTLY CAN’T CONTINUE COOPERATION. OTHERWISE WE SHOULD HAVE STARTED IMPLEMENTATION OF THIS PROJECT EARLIER», BACHIASHVILI MENTIONED. The project, which includes farm and diary processing plant, will cost $45 million. Field farms will be located in Samtredia and Abasha and both of them will employ 400 persons in total. As Bachiashvili stated, selection of the plots is over and construction of the farm will start on the fall. As for tomato greenhouse in Gardabani, Coinvestment Fund will cultivate it at first on 10 hectares. The fund assumes that by 2014 about 4500 tons of tomatoes will be harvested, which will replace import by 30% o the first stage. After the farm transfers to the second stage and expand, the fund does not consider that Georgian tomato will fully replace imported one. Mamuka Khazaradze also positive evaluated greenhouse system project and emphasized amount of the investment made in agriculture. ”GEORGIA IS A COUNTRY, WHICH SHOULD EXIST WITH THE PRODUCTS HARVESTED

THERE AND EVEN EXPORT THEM. IT’S UNACCEPTABLE THAT WE CONSUME TURKISH TOMATO BOT BECAUSE WE HAVE SOMETHING AGAINST TURKEY, BUT BECAUSE WE CAN PRODUCE OUR PRODUCT. SUCH KINDS OF INVESTMENTS WILL FOSTER THAT GEORGIANS PRODUCE OUR FOOD ON LOCALLY AND MOREOVER, EXPORT THEM ABROAD», - HEAD OF TBC BAN’S SUPERVISION COUNCIL STATED. Co-investment fund will cooperated with the foreign company with 50 years of experience in the greenhouse-farming project. Total investment of the project is 14,3 million. FUTURE PLANS OF THE PROJECT As George Bachiashvili explained, al investors can enter to the projects implemented by fund respectively to their contribution share in the fund. «If they refuse, respectively they will not enter, but we have this obligation according to out regulation of our projects», - Bachiashvili stated. He said that the fund plans to leave the projects step by step and thus liberate the investment made in them in order to invest it in other projects. For this purpose respective companies should be found, which will replace the fund’s share in the projects. Bachiashvili considers that they «will be great strategic investors». Although, director general of coinvestments did not exclude either placement of the shares in the listing of stock exchanges. «IF BY THEN IN GEORGIA WILL BE DEVELOPED STOCK EXCHANGE IN THE PROPER WAY, COMPARATIVELY LESS SIZED PROJECTS, WITH UP TO 100 MILLION VALUE MAY BE LISTED HERE IN ORDER TO

INVEST IN GEORGIAN INVESTMENT CAPITAL. AS FOR LARGER PROJECTS, ESPECIALLY ENERGY PROJECTS, THEY MAY APPEAR ON THE LONDON STOCK EXCHANGE. IT WILL OCCUR ONLY AFTER THESE PROJECTS ARE LAUNCHED AND SHOWS PROFITABILITY – IN ABOUT 2 YEARS TERM», - BACHIASHVILI STATED. The fund plans to start construction of all projects except power plants cascade on the river Tskhenistskali in autumn. Construction projects will be over in 3-4 ears, energetic – in 2-2,5 years, all others – in one-year term. Currently still $6 billion is mobilized in the fund – so far new investor’s amount has not been added to the fund’s capital. Current investors of Co-investment Fund are Dhabi Group, RAK Investment Authority, State Oil Fund of the Republic of Azerbaijan, Representative company of the company Kaztransoil - Batumi Industrial Holding Limited, Calik Holding A.S, Milestone International Holdings Group Limited, Bidzina Ivanishvili, Alexander Mashkevich, Badri Patarkatsishvili family and others. Fund’s management hopes that by investing existing money profitably, they will gradually attract other investors as well.

HPP 8 KHUDONI INVESTOR COMPANY WAITING FOR PERMIT AND READY TO START CONSTRUCTION caucasian business week

hudoni Project investors met with Georgian media representatives for the first time and answered the questions that opponents and stakeholders had. In particular: what was the experience of the investor company, whether it implemented the projects bigger than Khudoni and how it was going to communicate with locals, why it decided to get engaged in the project, what were negotiations with the government, why one of the company’s shareholders was registered in an off-shore and who were the people behind the project and what were their backgrounds. Mohinder Verma and Bhupendra Kansagra, representatives of the investor company Trans Electrica Georgia, during one hour were answering questions of Georgian journalists. According to investors, when they got interested in the Khudoni Project, they were well aware of the project they were going to implement: “When we made a decision about implementing the Khudoni Project we knew what we were going to tackle. I would like to assure you that this project will be implemented with observance of all standards. Moreover, Khudoni Project will be

realized in accordance with the rules set by the World Bank, that is why many international and well-known organizations took part in the conducted surveys”- said Mohinder Verma. According to Bhupendra Kansagra, one of the investors, upon issuance of the construction permit, Khudoni Construction will be implemented by European companies. “As soon as we have a construction permit, we’ll attract well-known and serious companies, we have sufficient financial as well as technical resources. In addition, we have implemented much bigger projects and very successfully.” They named Natfa Jahri HPP with 1500 Megawatt capacity constructed by the Company Continental Constructions. As investors said, this company implemented 30 projects within 50 years. Mohinder Verma in response to the question what Trans Electrica Georgia and Continental Constructions had in common said: “Trans Electrica Georgia is intending to construct HPP in Svaneti with the installed capacity of 702 Megawatt. 100% of this company is held by Trans Electrica LTD, which is a partner organization of Continental Constructions. The latter represents one of the parties of the Consortium, which is going to fund and implement Khudoni Project.” Bhupendra Kansagra answered the following question: “Why is the company registered in offshore? This question is most frequently asked by your opponents. They say that this fact causes certain suspicion.” Bhupendra Kansagra: “Trans Electrica Georgia implementing the Khudoni Project is registered in Georgia and will pay all due taxes in accordance with the Georgian legislation. One of its owner companies, because of taxation reasons, is registered in off-shore. All transactions will be funded by the Georgian party, we stand behind these off-shores and we are founders, this was done for mitigation of risks. In case of risks we will take the responsibility, investors have to bear the project and implementation risk. A lot of big and good reputation companies are registered in off-shore zones and it does not mean at all that something is suspicious behind that. This is a common practice around the globe, which, I

March 31, 2014 #48

President Obama Visiting India in November 2010; Bhupendra Cansagra Meeting with the US President will reiterate once again, is related with taxation factors. As regards Khudoni HPP, all tax operations will be implemented in accordance with the Georgian legislation.” David Mirtskhulava, Technical Director of Trans Electrica Georgia answered the question – “What will be a specific benefit for the country and for Khaishi population from this project?” David Mirtskhulava: “Power generated by Khudoni HPP will increase Georgian generation by 15%. This will be energy of the Georgian Energy System, therefore 15% growth in any business and in energy as well is a significant increase. In addition, construction of Khudoni HPP will make it possible to generate additional 470 million KWH by the largest energy objects Enguri HPP and Vardnili HPP. Monetization of this additional energy for 20-year period will be USD 1,350 billion. The project will have a separate social and fiscal effect for Mestia Region; its budget will get filled with taxes paid by Trans Electrica Georgia and social guarantees will be introduced for locals. 4 thousand new jobs will be created in the course of Khudoni construction and the Georgian Energy System will collect USD 19 million from electricity transportation and dispatching.

People residing at the construction site will receive significant compensations. God granted oil to Azerbaijan and Hydro resources to Georgia, therefore it will be irrational not to use them. Our future depends on use of hydro resources. If we want to reduce poverty we have to use these resources, which the God gave us. You will not find a country in Europe, which has hydro resources and the utilization level thereof is not 95%. For example, Norway that has not less gas and oil than Azerbaijan constructed 3,600 hydro dams. Reservoir hydro dams are also actively being constructed in Europe”- said David Mirtskhulava. Founder of Continental Construction also addressed problems of Khaishi residents. According to him, he had the respective information about problem of Khaishi people and the company would continue dialogue with population in the future. “Discussions with the village population are very important for us, the form needs to be found that would be acceptable for all parties”- said Mohinder Verma. If the governmental permit is received, the Khudoni HPP construction will commence in the third quarter of this year.

KHUDONI INVESTOR: “WE’VE SUCCESSFULLY IMPLEMENTED MUCH LARGER PROJECTS”

ohinder Verma and Bhupendra Kansagra, investors for “Trans Electrica Georgia” the company responsible for the implementation the Khudoni HPP – held a press conference in the Tbilisi Marriott hotel and discussed the aforementioned

hydro energy project. Mohinder Verma, who is the founder and leader of Continental Construction Corporation, as well as a professional engineer, said that his company knew what it was taking on when they decided to helm the project. “I own a company with a 60-year experience. In

these 60 years we’ve build more than 30 constructions. When we decided to implement the Khudoni project, we knew what we were signing up for. I want to assure you that we’ll be able to implement this project while adhering to all standards,” stated Verma. Continental Construction Corporation is a company that works in in hydro energy,

irrigation and naval construction businesses, and has built large hydro power stations and water irrigation systems in numerous countries. “And I’ll add right here that the Khudoni project is being carried out by rules set in place by the World Bank, which is why a number of international and well-known organizations have taken part in conducted assessments.” Bhupendra Kansagra, who is a member on the Board of Directors for several international companies including AGM Chemicals, Royal Holdings Services (SpiceJet), “Bishopwood” real estate and a number of oil fields in Kenya, thanked the Georgian government for the support and partnership throughout the project processes. “As soon as we gain a permit for construction, we’ll attract serious and famous investors, for which we have ample financial and technical resources. I’ll add that we’ve already implemented projects which were much larger than the Khudoni HPP, and quite successfully so. During the rest of the meet, Mohinder Verma and Bhupendra Kansagra talked about their various experiences and interests in executing the Khudoni Project. Hydro Energy was deemed as the ideal renewable fuel due to it being a clean, efficient and ecologically safe energy source. “The Khudoni 702 megawatt HPP construction in Georgia is the first project the company is carrying out in the Caucasus. To this day the Khudoni Project is the largest planned private capital expenditure in Georgia’s energy sector, with a combined investment amount of $1.2 Billion,” – stated Mohinder Verma.

BANKING NEWS March 31, 2014 #48

caucasian business week

ASSOCIATION OF BANKS OF GEORGIA APPRAISES FINANCIAL MONITORING SYSTEM REORGANIZATION

resident of the Association of Banks of Georgia Zurab Gvasalia says if confidentiality of financial information is assured as a result of the reorganization and the level of secrecy is upgraded , the service will become more efficient. In this case, there will not be any claims to the reorganization. According to him, further reforms of the system should be the starting point of any institutional changes in this area which means primarily the growth of its autonomy. “In 2002, when the current system was created, we actually acted in force majeure mode. We had no experience in either legislative or institutional sense. Then there were two alternatives - to establish a system of financial monitoring under any of the ministries, or to create an independent structure. Preference was given to the intermediate option – a legal entity within the National Bank. This option was supported by international financial institutions, as it allowed the service independently gather and sort information. The National Bank is a guarantor of the independence of this institution, which excludes the possibility of inappropriate dissemination of information about transactions. In addition, there were other factors - the banking system was not completely ready for the creation of such an independent body - either technologically or methodologically,”- says Gvasalia. According to him, the banking sector certainly is interested that the reorganization does not cause

harm, as the Financial Supervisory Service collects a very large amount of confidential information. “Furthermore, this structure is very actively engaged in the fight against organized crime, as it is its direct responsibility. For all these reasons, the banking system is interested that changes do not hurt the principle of confidentiality of financial transactions. If reorganization ensures this, if the service is more flexible and efficient, we have no objection to the reorganization,”- says Gvasalia. At the same time, President of the National Bank of Georgia Giorgi Kadagidze openly opposed the planned reorganization of the monitoring service and believes that neither law enforcement nor the financial police , and anyone else should have access to information - the only exception is the National Bank. “On average 100 million transactions are carried out per year, 0, 01 % of them, the largest, are subject to monitoring which are produced in suspicious areas requiring a special attention. Information on the transactions which have signs of crime, we transfer to the Ministry of Interior. I want to recall that government officials stated that all laws pertaining to the economy would be very carefully analyzed and consistent with businessmen, “- Kadagidze notes. Under current legislation, the Financial Monitoring Service is an independent body that is not subject to any other body or official. Currently, a project of reorganizing the service is being considered and should become a part of the Ministry of Finance of Georgia .

BANK SECTOR’S INCOMES GROW

n January-February revenue of the banking sector increased by 25% and expenditures increased by 10,6% in comparison with the same period of last year. In February sector’s revenues equaled to 192,3 million GEL (01/14-226,8 million GEL), expenditures - 147,7 million GEL (01/14 -184,4 million GEL). Incomes of 2 months equal to 419,04 million GEL (01/03/13 -347,5 million), expenditures - 332,07 million GEL

(01/03/13 -301,5 million).According to statistic of National Bank of Georgia, 58,3% of the revenues (244,2 million GEL) is received from the loans for individuals and legal entities. 23% of the expenditures - 77,2 million GEL is made on the deposits. In January-February banking sector spent 69,3 million GEL on the maintenance of the staff, in the same period 2013 - 57 million GEL. Banking sector is represented by 21 commercial banks.

BANK SECTOR’S ASSETS FELL TO 17.2 MILLION GEL IN FEBRUARY

y March 1, 2014 overall actives of the banks equals to 17,2 billion GEL (01/02/14 -17,4 billion GEL). Own capital f the banking sector is 3 billion GEL, which is 17,3% of the total actives of commercial banks. Net profit of February is 39,2 million GEL. Contribution of the

foreign capital in the paid-in authorized capital is 77,1%. Share of 5 largest banks according actives in the total actives of the banking sector is 76,8%. The sector is represented by 21 banks, among them - with contribution of the foreign capital in the authorized capital and 2 branches of the foreign banks.

IN FEBRUARY NON-BANKING DEPOSITS INCREASED BY 113,2 MILLION GEL

mount of he non-banking deposits placed in the banking sector exceeded to 9,5 billion GEL by March 1, 2014. It is 113.2 million GEL or 1.2% more than on February 1 of the current year. National Bank of Georgia (NBG) informs that in February, compared to previous month deposits on demand increased by 65,3 million GEL or 1.6^. Fixed-term deposits increased by 47,9 mil-

lion GEL or 0.9%. By March 1 of the current year Dollarization coefficient of the deposits equaled to 61.9% - 1,22 percent point less than on February 1. Share of USD in the deposits in foreign currency equaled to 80.5%, share of EURO - 17.0%. Average weighted annual interest rate on the fixed-term deposits equaled to 6.2%, among them deposits in the national currency - 8.1%, deposits in the foreign currency - 5.3%.

BANK SECTOR’S JANUARY TO FEBRUARY PROFITS MARKED 78.096 MILLION GEL

anking sector completed January-February 2014 with 78,096 million GEL profit (01/02/14 -37 million GEL). Profit of the 2 months of last year equaled to 42,3 million GEL. For the reporting period own capital of the banking sector (stock capital) is 2,967 billion GEL (01/03/13-2,498

billion GEL). Supervision capital equals to 3,079 billion GEL (01/03/13- 2,603 billion GEL), capital adequacy coefficient is 18% (01/03/13-17,7%). For the reporting period Return On Equity (ROE) is 15,9%, Return On Actives (ROA) - 2,7% (01/03/13 - respectively 10,2 %, 1,8%). Consolidated data includes results of 21 commercial banks.

MAMUKA KHAZARADZE AGAINST FINANCIAL MONITORING SERVICE’S SEPARATION FROM NBG Chairman of the Supervisory Board of “TBC Bank” thinks that the Financial Monitoring Service shouldremain subordinate to the National Bank

amuka Khazaradze, Chairman of the Supervisory Board of “TBC Bank”, is the first of the banking sector who makes public comments regarding reforms in the Financial Monitoring Service. Khazaradze thinks that the Financial Monitoring Service must remain subordinate to the National Bank. “I think this scheme is tested and works well, my personal position is that the financial monitoring service should remain where it is, “ - says Khazaradze . According to him, consultations have not been conducted with

“TBC bank” during the development of the new bill. Recall the initiative on the separation of the Financial Monitoring Service from the National Bank belongs to the MP David Onoprishvili. Experts have already expressed concern that the reform would jeopardize the security of financial information. President of the National Bank opposes to moving the Financial Monitoring Service under the subordination of Ministry of Finance. Giorgi Kadagidze says this change will cause undesirable results and will not help the economy and the banking sector in general.

TBC BANK PROFITS RECORDED 16.3 MILLION GEL IN BY MARCH

y March 1 profit of TBC is 16,3 million GEL (01/03/13 -14,025 million GEL). Credit portfolio of the bank is 2,585 billion GEL (01/03/13 - 2,236 billion GEL), deposits - - 2,6 billion GEL (01/03/132,278 billion GEL), overall obligations - 3,4 billion GEL (01/03/13 -2,901 billion GEL). Annual growth of the loans is 15,6%; deposits of clients (non-banking) have increased by 13,6%. Actives equal to 3,982 billion GEL, market share - 23,2%.

The bank operates on the market for 21 years. Main stockholders are TBC HOLDING, EBRD, IFC, DEG, FMO. Bank’s capital equals to 611,4 million GEL (01/03/13 - 559 million GEL). Recently TBC stockholders approved changes in the statute, related to increase of allowed capital and possible IPO. Sources of Bloomberg inform that global deposit receipts of TBC will enter to London Stock Exchange in the first half of the current year and $200 million is assumed to be attracted.

22% OF RETAIL LENDING COMES ON TBC

hare of TBC Bank on the retail lending market is 22,2% by March 1, 2014 (01/02/14 -22,5% 01/03/13 - 24%). Amount of the loans for individuals is 1.065 billion GEL (01/03/13 - 867,3 billion GEL).

Overall loan portfolio of the bank is 2,585 billion GEL (01/03/13 - 2,236 million GEL). For the reporting period amount of the credit investment of the commercial banks (including loans for non-residents) equals to 10,4 billion GEL.

FEBRUARY RECORDS GROWTH IN GEL-DENOMINATED LOAN PORTOFLIO, DECLINE IN FOREIGN CURRENCY DENOMINATED LOANS

n February Loan portfolio of the banks increased in GEL, reduced in the foreign currency. According to NBG statistic, loans of 1,1 billion GEL is issued (21,7 million GEL more in comparison with previous month), 4.2 million GEL by foreign currency (74.2 million less).

In February 2014 amount of the lending for resident individuals increased by 0.6% (28.5 million GEL) and by March 1 of the current year reached to 4.8 billion GEL. In February 2014 amount of the lending investment of commercial banks (including loans for non-residents) reduced by 0.3%, (27.6 million GEL) to 10,4 billion GEL.

BANK SECTOR’S CREDIT PORTFOLIO MADE UP 10.5 MLN GEL BY MARCH

hare of problem loans has reduced by 2%, by March 1 equals to 7,4%. In the same period 2013 it was 9,4%. According to statistic of National Bank of Georgia (NBG), amount of problem loans (non-standard, dubious, hopeless) equals to 781,7 million GEL (01/03/13-818,7

million GEL). During last year slowdown of inactive loans amount was mentioned, at the end of the year it started to reduce. By March 1, 2014 total credit portfolio of 21 commercial banks equals to 10,5 billion GEL (01/03/13 -8,7 billion).

LIBERTY BANK PROFITS MARKED 2.492 MILLION GEL IN JANUARY TO FEBRUARY PERIOD

SC Liberty Bank completed JanuaryFebruary with 2,492 million GEL profit (01/03/13 - 0,4 million GEL). By March 1, 2014 clients’ deposit portfolio (non-banking) equals to 1,177 billion GEL (01/03/13 - 772 million GEL), credit portfolio - 693,4 million GEL (01/03/13 - 411 million GEL), overall obligations - 1,221 billion GEL (01/03/13 - 855 million GEL). Deposit portfolio as increased twice (01/03/13

- 10,3%), annual growth of the loans is 69% (01/03/13 - 14,2%), actives - 42% and by March 1 amount is 1,376 billion GEL (01/02/13 - 970 million GEL), market share - 7,9% (01/03/13 6,8%). Direct and indirect owner beneficiaries of Liberty Bank’s stocks are: Dan Cortache Patriciu (73,1%), Lado Gurgenidze (8%) and BNY (NOMINEES) LIMITED (11,3%). Stock capital of the bank is 154,9 million GEL.

PUBLICITY caucasian business week

March 31, 2014 #48

AZERBAIJAN March 31, 2014 #48

caucasian business week

PASHA BANK HAS AZN 3.576 MILLION OF ASSETS PER EMPLOYEE

abor productivity in one of the largest private credit institutions of Azerbaijan - PASHA Bank, remains at a high level. The Bank reports that as of 1 March 2014 PASHA Bank’s assets per employee totaled AZN 3.576 million against AZN 3.278 million and AZN 2.858 million by early 2014. This index reached maximum by 1 February 2013 – AZN 4.08 million. By early 2013 the indicator made up AZN 3.44 million. The Bank’s income per employee by the end of February totaled AZN 25,504 versus AZN 8,824 by the end of January and AZN 116,193 by the end of 2013, AZN 144,098 for 2012, while expenditures – AZN 14,061 against AZN 7.156 million, AZN 87,274 and AZN 86,076 respectively. In February 2014 the number of employees in the Bank grew from 253 up to 263 people. By 1 March 2014 PASHA Bank had assets of AZN 940.55 million and capital of AZN 235.2 million. Profit before taxation amounted to AZN 6.707 million and net income - AZN 8.8 million.

EBRD GRANTED US$6 MILLION EQUIVALENT LOCAL CURRENCY LOAN TO FINCA AZERBAIJAN

he European Bank for Reconstruction and Development (EBRD) is lending US$6 million equivalent in local currency to non-banking credit organization FINCA Azerbaijan. According to the EBRD, the funds will help FINCA Azerbaijan to further expand its lending operations, contributing to the development of MSMEs in the country. It will also allow the clients of FINCA Azerbaijan to take medium-term loans in local currencies, thus avoiding currency exchange risks. FINCA Azerbaijan with its 65 branches has been an EBRD client since 2006 and has received US$24 million worth of financing, with its current outstanding exposure from the EBRD at US$18.5 million, all in local currency.

KYRGYZSTAN

PASHA BANK’S ASSETS REACHED THE RECORD LEVEL INVITES EXCEEDING AZN 940 MILLION FOR THE FIRST TIME AZERBAIJANI

ne of the largest private credit institutions of Azerbaijan, PASHA Bank OJSC, reached the record level of its assets which exceeded AZN 900 million for the first time

in its history. The Bank reports that return on equity (RoE) of PASHA Bank made 15% in February 2014 against 12% in January 2014 and 15% by the end of 2013. By the end of 2012 Roe was 18%. Return on assets (RoA) increased up to 5% in February against 3% in January and 4% by the end of 2013 and 2012.

The Bank’s assets in February increased from AZN 829.345 million up to 940.552 AZN million. By the end of 2013 the figure was AZN 697.393 million and by the end of 2012 - AZN 742.142 million. The Bank’s capital in February increased from AZN 229.815 million to AZN 235.2 million with keeping the share capital at AZN 228 million. By the end of 2013 the capital reached AZN 227.945 million with the share capital at the level of 228 million. PASHA Bank’s profit before taxation as of 1 March 2014 reached AZN 6.707 million against

AZN 28.351 million in 2013, AZN 26.658 million in 2012 and AZN 19.329 million in 2011. In December 2013 the index was AZN 1.795 million and the best monthly index for 2013 was recorded in June: AZN 4.76 million. Net income by the reported date was AZN 8.801 million against AZN 14.991 million in 2013, AZN 11.720 million in 2012 and AZN 11.732 million in 2011. In February net income made up AZN 5.978 million against AZN 2.822 in January. In December 2013 the Bank had net profit of AZN 5.135 million and the best monthly index was recorded in July: AZN 7.243 million.

SOCAR OPENS MORE FILLING STATIONS IN GEORGIA, ROMANIA

zerbaijan’s state energy company SOCAR opened its 108th petrol station and the 15th combined type of a station in Tbilisi, Georgia, last week. The opening ceremony was attended by SOCAR President Rovnag Abdullayev, SOCAR Vice President Suleyman Gasimov, Head of the Investment Department of SOCAR Vagif Aliyev, Azerbaijani ambassador to Georgia Azer Husseyn and Director of SOCAR Georgia Mahir Mammedov. The station, where car owners will be able to buy fuel, oil products and natural gas as well as accumulate gift bonus points on UNICARD and ENEGRY CARDs, is equipped with fuel-distribution columns of the Japanese brand “Tatsuno” which is distinguished with most precise petrol filling and registering. The gas petrol station is equipped with the most recent generation gas-compressing appliance of the Argentinean brand “Galileo” which provides fast filling of gas into the car with maximum pressure above the acceptable level and, what’s most important, safe filling of gas into the user’s

automobile. The station will also offer consumers the service of the 24-hour cafe-market. Besides, car owners will be able to use a special service block at the petrol station by means of which it is possible to regulate the pressure in tires, add water, and car salon cleaner. Twenty five persons will serve the site. The company plans to increase the number of petrol stations in Georgia to 120 by late 2014. STATIONS IN ROMANIA SOCAR also opened its 27th filling station in Romania on March 21. The first gas station in the city of Cluj, located on Traian Vuia Street costs $1 million and occupies an area of 3,500 square meters. The gas station is equipped with four fuel pumps and uses the latest technology. Heavy vehicles also can fuel from the new station. The new station promotes the services from whole network SOCAR such as multi- product store, the Nar Cafe - the place of traditional products such as coffee in the sand and fresh pomegranate and the fast food area. In addition, consumers have

tablets available for web browsing and a digital kiosk to guide traffic. CEO SOCAR Romania Hamza Karimov and representatives of the local government of ClujNapoca and representatives of management structure of the company attended the inaugural ceremony. “The opening of Cluj station is the signal of our network extending in Transylvania region also where we work with other stations, which we estimate that we will complete all this year. Since the beginning of 2014 we opened eight new stations in Romania and expansion plans will continue in the same dynamic. Our team size has almost doubled in the last year, today our national team numbering more than 400 employees,” Karimov said. The company entered the Romanian market by buying local filling stations from Romtranspetrol and re-branding them in 2011. Becoming one of the most important players on the fuel distribution in the northeast of Romania, SOCAR plans to bring the number of its gas stations in Romania to 100.

ENTREPRENEURS TO INVEST IN MINERAL DEPOSITS

yrgyz Embassy in Baku invited Azerbaijani entrepreneurs to take part at a tender for the implementation of three licenses for search, exploration, and development of mineral deposits in Kyrgyzstan. The news was announced by Trend Agency which quoted the Azerbaijani Economy and Industry Ministry on March 26. The tender will be held by Kyrgyz State Agency for Geology and Mineral Resources on March 31 in the city of Toktogul. A license for geological exploration on the Kyzylkel area with reserves of vein gold in the Toktogul region is offered for bidding. The starting price of the license is $3,000. A license for conducting geological exploration on the Tegermen area with reserves of vein gold is offered for bidding in the same region. The starting price of the license is $3,000. Diplomatic relations between Azerbaijan and Kyrgyzstan was established on January 19, 1993. Azerbaijan and Kyrgyzstan are working together to strengthen their partnership in industry, trade, communications, and transport. The two countries also intend to develop cooperation between their justice authorities. Azerbaijan and Kyrgyzstan signed an agreement on a new air service which envisaged regular passenger and cargo flights between the two countries.

AZERBAIJAN UPS PRODUCTION OF MOTOR CARS

zerbaijan produced 147 motor cars in January-February 2014, the Azerbaijani State Statistics Committee has reported. This index is 4.6 times more than the index for 2013, when the country produced 424 motor cars. The committee’s report says Azerbaijan manufactured 91 trucks in JanuaryFebruary 2014, which is 3.1 times more than in the same period of the last year. The number of produced trucks was 246 in 2013. The country produced 217 tractors in JanuaryFebruary 2014 and this index is 72.3 times more than the same period of 2013. Azerbaijan manufactured 739 tractors in 2013, which is 19.6 percent more than in 2012.

12 AZERBAIJAN, KAZAKHSTAN, KYRGYZSTAN, TURKEY TO REALIZE JOINT TOURIST PROJECT

CIS caucasian business week

IMF UNLOCKS UP TO $18 BN FOR UKRAINE’S SHATTERED ECONOMY

zerbaijan, Kazakhstan, Kyrgyzstan, and Turkey will realize a joint tourist project, the Ministry of Culture and Tourism of Azerbaijan announced on March 12. The four countries are members of the Standing Committee for Economic and Commercial Cooperation of the Organization of the Islamic Cooperation (COMCEC). Submitted by the ministry, the “Cities of Common Cultural Heritage” project was chosen as the winner among more than 30 projects submitted at the COMCEC’s initiative. The competition was announced on September 2, 2013. The project will be implemented through a grant presented by the Development Bank of Turkey and with the financial support of the Ministry of Culture and Tourism. The project, which will cover April-September 2014, includes studying the potential of cultural tourism, determining the regions possessing similar patterns of heritage in Azerbaijan, Kazakhstan, Kyrgyzstan, and Turkey, and creating a joint tourist product that connects these countries as a result of these studies. The purpose of the project is to achieve competitive and sustainable tourism development in the COMCEC region, and raise awareness about the cultural tourism resources of these countries in key tourist markets.

TAJIKISTAN TO CHANGE POLICY ON SMALL HPPS CONSTRUCTION

ajikistan’s specialized government agencies are reviewing a policy on the construction of small hydropower plants (HPP). The news was announced by local Tajik media which quoted a source in the energy as saying on March 26. The source said Tajikistan will apply the changes when designing the construction of small HPPs. While the existence of water in summer was taken into account when designing the HPPs before, they will now be constructed in places where rivers have sufficient volume of water to generate electricity during the winter. Experts believe that water freezes or disappears in winter, which causes power shortages in Tajikistan when demand for power increases due to the cold weather. “Such work is conducted for the efficient year-round operation of HPPs. Also, special attention will be paid to ordering energy equipment for these HPPs,” the source noted. The number of constructed small HPPs currently exceeds 305 units with a total capacity of 25.5 MW.

‘CHOCOLATE WAR’: UKRAINE’S ROSHEN CONFECTIONER FINED $70 MN IN COUNTERFEIT PROBE

rosecutors have accused Ukrainian confectioner Roshen of producing counterfeit products, and it has suspended production at its Lipetsk factory in southwest Russia. Imports of Roshen chocolate were banned by Russia last summer. Russia’s Uniconf has filed a lawsuit against the Ukrainian sweet manufacturer claiming $70 million in compensation. On March 14, 2014 the Tverskoi Court in Moscow seized the accounts of Roshen enterprises in Russia, after the Russian law enforcement agencies carried out an inspection of the Lipetsk confectionery plant. “If we continued working we’ll have to take commodity credits and have debts to pay to suppliers. No one will lend us money in the present situation,” as Interfax quotes CEO of Roshen, Viacheslav Moskalevsky. In July 2013 Rospotrebnadzor, the Federal Service for Supervision of Consumer Rights Protection and Human Well-Being, banned the import of the Ukrainian confectionery. As Russia is the main market for Roshen sales fell by 6 thousand tons a month. This forced the company to close its factory in Mariupol, Ukraine. A month later in August 2013, Belarus decided to join Russia and ban the transit of confectionary, causing an approximate $200 million loss in revenue. During the last 6 months Roshen has been only selling in Russia production from the Lipetsk factory, amounting to 10 thousand tons a month. Now the confectioner plans to dispute the Tverskoi Court of Moscow decision. “We plan to file a counter-claim against the ruling. Now all our efforts are aimed at overturning the court ruling or at least reducing the blocked sum so that the enterprise is able to function. A total of around 1.7 billion rubles has been seized,” Moskalevsky said. Roshen is one of the largest producers of confectionery in Ukraine. The company makes up to 200 different types of confectionery: chocolate and jelly candies, caramel, cookies, wafers, swiss rolls and pies. Total production is about 450,000 tons a year.

March 31, 2014 #48

he International Monetary Fund has agreed to grant Ukraine between $14 billion and $18 billion to help the country avoid a default. The package includes a 50 percent rise in the cost of energy to Ukrainian

homes. The IMF promised to grant Kiev the lifeline over the next two years, after finishing its mission in Ukraine on Wednesday. Overall support from the broader international community will stand at $27 billion over the period, the IMF statement said. “The agreement reached with the authorities is subject to approval by IMF Management and the Executive Board. Consideration by the Executive Board is expected in April, following the authorities’ adoption of a strong and comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth,” the document specified. The money will help to stabilize Ukraine’s economy and compensate for the damage incurred by four months of unrest across the country. However, the IMF funds come with stringent terms; it is asking for a number of economic reforms particularly in energy. “Energy sector reform will focus on reducing this sector’s fiscal drag, while attracting new investment and enhancing efficiency. A key step is the commitment to step by step energy reform to move retail gas and heat-

ing tariffs to full cost recovery, along with early action towards that goal,” the IMF said. The IMF promised the energy reform “will be accompanied by scaled up social protection to mitigate the impact on the most vulnerable. Over time, the program will focus also on improving the transparency of Naftogaz’s accounts and restructuring of the company to reduce its costs and raise efficiency,” the IMF said. On Wednesday Ukraine’s coup-appointed leaders agreed to unpopular IMF conditions to increase domestic gas prices 50 percent from May 1. For a long time the IMF has been asking Kiev to cut its energy subsidies which, it says, cost 7.5 percent of Ukraine’s GDP in 2012. From April 1 Ukraine could start paying as much as $500 per 1,000 cubic metres for Russian gas, which compares to the discounted $268.5 it pays now. Earlier in the month President Putin said Gazprom willstop providing Ukraine with a 33 percent gas discount, as the country’s Naftogaz was about $2 billion in debt. Prime Minister Medvedev said the price of Russian gas would go up another $100 should Russia break the Kharkov agreement, which gave Kiev a gas discount in exchange for allowing the Russian Black Sea fleet to use the base in Sevastopol. The IMF conditions could turn out tough for Ukraine, and “the government needs to pay special attention to compensation mechanisms,” as Olena Bilan, an economist at Dragon Capital, warned earlier in an interview with Bloomberg. “A sharp drop in purchasing power may fuel the ongoing instability in eastern Ukrainian regions.” MONEY AND UKRAINE The European Commission proposed a 11 billion euro ($15 billion) package for Ukraine three weeks ago, saying it’ll unlock the funds once Ukraine signs a deal with the IMF.

“The International Monetary Fund has a central role leading the international effort to support Ukrainian reform, lessening Ukraine’s economic vulnerabilities, and better integrating the country as a market economy in the multilateral system,”said a G7 communiqué issued after a meeting of world leaders in The Hague. “IMF support will be critical in unlocking additional assistance from the World Bank, other international financial institutions, the EU, and bilateral sources,” the document said. The IMF has 188 countries as members, and promotes international economic cooperation. It collects contributions from each country, known as quotas, that are used for loans to nations facing difficulties. As the global financial crisis began to grow in 2010, the IMF proposed doubling quotas, which would provide a pot of $720 billion. The size of a quota equates to a country’s voting power in IMF decision making, as well as its borrowing capabilities. So far, the US, the IMF biggest and most powerful member, is blocking reform. On Tuesday Senate Democrats dropped IMF reforms from the Ukraine aid package, which is now expected to be passed on Thursday. The aid package includes sanctions against Russia, as well as $1 billion to Ukraine in loan guarantees and another $150 million in direct assistance. The IMF reform would have enlarged the loan package for Ukraine, but the US politicians insisted they needed to react quickly in a current dispute over Crimea. Japan’s Prime Minister Shinzo Abe also said Monday the country would give about $1.5 billion to Ukraine in a form of loans and grants. Japan specified the money will help economic reform, as well improve housing and sanitary conditions in Kiev. So far, Russia has been the only country that has effectively provided money to Ukraine. In the end of last year Moscow bought Ukrainian bonds worth $3 billion, which was part of a broader $15 billion deal signed in December. Ukraine’s economy is expected to slide 3 percent in 2014, according to the country’s Finance Minister Oleksandr Shlapak. The hryvnia has lost 24.7 percent against the dollar this year, which has made it the worst performing currency among more than 170 surveyed by Bloomberg. Ukraine’s public debt stands at 40.5 percent of GDP. This summer a debt repayment of $6 billion, or the equivalent to about a third of the economy, is due, the Central Bank says. In February estimates by Ukraine’s Finance Minister showed the country would need $35 billion in foreign assistance over the next two years.

‘CONFIDENCE CRISIS’: WORLD BANK WARNS RUSSIAN ECONOMY WILL SHRINK 1.8% IF CRIMEA CRISIS ESCALATES

he World Bank has dramatically cut Russia’s outlook from 2.5 percent GDP growth, saying in the worst case scenario the economy could shrink 1.8 percent in 2014, as the Crimea conflict is hitting confidence. Russia’s economy may contract up to 1.8 percent in 2014, as the dispute with Ukraine could lead to further worsening of the consumer and business climate, says the World Bank study. Since the political uncertainties around the Crimea crisis in early March 2014 led to an increase in market volatility, the World Bank developed two alternative scenarios for Russia’s 2014-2015 growth outlook. The projection is highly dependent on a recovery in business and consumer confidence and how the outcome of the geopolitical risks. The optimistic World Bank projection of 2.2 percent GDP growth in December has turned. “The lowrisk scenario assumes a limited and short-lived effect of the Crimea crisis and projects 1.1 percent growth for 2014 and 1.3 percent for 2015,” said Birgit Hansl, World Bank Lead Economist and Country Sector Coordinator for Economic Policy in Russia and the main author of the Report. “The high-risk scenario assumes a more severe shock to economic and investment activities if the geopolitical situation worsens, resulting in a contraction of 1.8 percent in 2014 and 2.1 percent growth in 2015. Also, global risks are expected to remain prominent with continuing higher overall market volatility,” she concluded. Both scenarios don’t assume any trade sanctions against Russia by the West. The Russian government expected the economy to grow 2.5 percent in 2014, but officials have already indicated the forecast may be revised in April. 2013 wasn’t a very successful year for the Russian economy. The GDP expanded at an estimated 1.3 percent in 2013, well below the projected rate of 3.6 percent. The ongoing deterioration of the current account and higher volatility in capital outflows has triggered the ruble to come under increasing pressure. Meanwhile frail domestic demand has dragged the Russian economy close to stagnation.

WORLD NEWS March 31, 2014 #48

caucasian business week

BANK OF AMERICA TO PAY $9.5 BN TO US HOUSING REGULATOR

ank of America has agreed to pay $9.5 billion to the Federal Housing Finance Agency (FHFA) to resolve all residential mortgage-backed securities (RMBS) issues. It’s the largest settlement to a single regulator over misleading mortgage sales.

Under the terms of the settlement, Bank of America will make cash payments of about $6.3 billion to Fannie Mae and Freddie Mac. In addition, the bank will repurchase soured RMBS at fair market value, which is approximately $3.2 billion, says a bank statement. The FHFA settlement resolves four lawsuits filed

in September 2011 against Bank of America and its subsidiaries Countrywide and Merrill Lynch. The suits revolved around the false representation of mortgage loans and the underlying standards. Approximately $57.5 billion of private-label RMBS purchased by Fannie Mae and Freddie Mac are covered by the settlement. The payout is expected to hurt the bank’s first quarter 2014 income by approximately $3.7 billion (pre-tax), or $0.21 per share. The report of first-quarter 2014 results bank is scheduled to be release on April 16. This is the largest settlement involving misleading mortgage sales practices in the run-up to the financial crisis. JP Morgan paid $5 billion for misleading mortgage sales last year as part of its broader $13 billion settlement with the Department of Justice (DoJ) and the state attorneysgeneral. The Bank of America is also in settlement talks with the DoJ and state authorities concerning paying at least $7.5 billion to resolve other faulty mortgage sales practices, according to the Financial Times. If it all goes ahead the bank’s total payout will amount to more than $17 billion.

VISA, MASTERCARD RESUME SERVICES WITH 2 RUSSIAN BANKS BLOCKED AFTER US SANCTIONS

nternational payment systems Visa and MasterCard have resumed services for transactions for clients at Russia’s SMP Bank and Investcapitalbank, blocked after the US imposed sanctions against top Russian officials following Crimea’s move to join Russia. On Thursday, Washington imposed sanctions singling out 20 top Russian political figures and businessman, as well Rossiya bank. Boris and Arkady Rotenberg who control the SMP Bank and Investcapitalbank were included in the sanctions list. Following Obama’s executive order to impose sanctions, on Friday Visa Inc and MasterCard Inc stopped serving clients of seven Russian lenders, according to Timur Batyrev, the head of the national payment system department at the Central Bank of Russia. The lenders included SMP Bank and Investcapitalbank.

Visa blocked four Russian banks including Rossiya bank and Sobinbank, belonging to Yury Kovalchuk, SMP and Investcapitalbank in control of the Rotenbergs, while MasterCard blocked the first three of them. There was no official warning, according to Rossiya bank’s statement. SMP Bank said the decision to stop providing services by the two international payment systems was unlawful because the sanctions were imposed on shareholders, not the bank, which said it has no assets in the United States. “We are glad that the two biggest international payment systems have heard our arguments and reversed their decision to block (SMP bank transactions on Sunday),” SMP bank CEO Dmitry Kalantyrsky said in a statement. “The decision was taken by MasterCard last night and Visa - in the morning. Currently MasterCard’s service is completely restored, Visa

transactions will be restored in a few hours as communication channels are being debugged and equipment settings updated,” SMP Bank said in a statement. Investcapitalbank has also said in a statement that the payment systems have resumed their services. According to Itar-tass, Visa has confirmed the system has lifted the embargo on the transactions with SMP Bank and Investcapitalbank. “The US government has informed the company Visa Inc to lift economic sanctions on SMP Bank, and Investcapitalbank due to the fact that these organizations do not meet the criteria on which sanctions are imposed,” said a spokesman for Visa. Visa officials could not clarify the future of the transactions with Rossiya bank and Sorbinbank. The officials of both banks told Itar-Tass that they do not know when Visa and Mastercard will return to a standard mode of operation with them.

BANKS PAID $100 BN IN US FINES FOR ‘PRE-CRISIS MISTAKES’

s supervisory bodies are tightening the screws on the financial institutions across the world seeking to punish those involved in the 2007 financial crisis, the Financial Times has calculated the banks have already paid a total of $100 billion in fines. So-called “pre-crisis mistakes” included selling bad loans, as well as manipulating some of the benchmark rates like Libor and Euribor. Most recently, Credit Suisse paid $885 million to the Federal Housing Finance Agency, bringing the total fines paid by global institutions to $99.5 billion, the Financial Times study found. 2013 brought in over half, or $52 billion to the

US treasury. In comparison the combined earnings of the 6 major US banks such as JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs accounted for $76 billion in the same year. The prosecutions were considered by the Commodity Futures Trading Commission and surrounded the mortgage repurchases from Fannie Mae and Freddie Mac. The penalty sum varied depending on the scale of bank activity, from the biggest JP Morgan paying a record sum of $13 billion, to fines as low as $1 million. However some critics say even huge fines paid by individual banks can hardly impact on insti-

tutions with the capacity to easily absorb such penalties. “The fines can be viewed as [a] ‘cost of doing business’,” the Financial Times quotes Anat Admati from Stanford University. “They don’t get at the heart of the problem, and aren’t effective to change behavior, because the strong incentives of individuals within the banks to keep engaging in the same practices remain in place.” Anyway, the large fines reflects a substantial shift in US political attitudes towards banks, signaling that those responsible for the financial crisis would not go unpunished. With a number of large banks still under investigation, the legal costs could rise further.

US, EU AND JAPAN CLAIM WTO VICTORY IN DISPUTE WITH CHINA OVER EXPORTS OF RARE EARTHS

he three countries have claimed victory in a major trade dispute with China over its curbs on exports of rare earths, the minerals used in mobile phones, hybrid cars, flatscreen TVs and other high-tech products, AP said. A World Trade Organization dispute settlement panel has agreed with the US argument in the 2012 case that China’s limits on its exports of rare earths, tungsten and molybdenum are in breach of trade rules, according to US Trade Rep. Michael Froman. Beijing discriminated against US companies, causing manufacturers to pay as much as three times more than their Chinese competitors for the same materials, Froman said Wednesday.

BUSINESSEUROPE FEDERATION WANTS ENERGY EXPORTS IN EU-US TRADE DEAL

uropean business federation BusinessEurope has called for energy to be included in any future transatlantic trade and investment partnership (TTIP), Argus reported. The agreement is being negotiated between the EU and US. EU leaders have called for any future EU-US trade deal to facilitate natural gas exports from North America to the EU to reduce dependence on gas imports from Russia.

US CONGRESS CUTS PAKISTAN AID BY $10MN TO HELP UKRAINE

congressional committee passed a legislation of new financial assistance to Ukraine, by reducing a small portion of US aid given to Pakistan under the Kerry-LugarBerman bill, PTI reported. The $10 million taken from the annual $1.5 billion to Pakistan would be used to carry out programming in the Ukrainian, Balkan, Russian, and Tatar language services of Radio Free Europe and Radio Liberty and Voice of America. “We’re actually taking money from the Pakistani aid budget and putting it into the Ukraine aid budget instead,” Congressman Alan Grayson was quoted as saying. Congressman Ed Royce explained that “it’s broadcasting in Pakistan that we’re taking the funds and applying it here.”

S&P DOWNGRADES BRAZIL LONGTERM DEBT RATING

tandard & Poor’s has cut Brazil’s sovereign debt rating closer to speculative territory on Monday, Reuters reported. Brazil had its long-term debt rating downgraded to BBB minus, the agency’s lowest investment-grade rating. The outlook was changed to stable from negative, meaning further downgrades are unlikely for now. President Dilma Rousseff’s efforts to stir the economy from a slump have eroded the country’s finances, analysts say.

PUBLICITY caucasian business week

March 31, 2014 #48

TBILISI GUIDE March 31, 2014 #48

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 16 Akhmeta Str., Avlabari, 0144 Tbilisi. E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: 75 21 11, Fax: 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 15 Gorgasali Exit, 0105 Tbilisi, Georgia Tel: +995 32 291 01 94; +995 32 291 01 95 Fax: +99 532 291 02 70 Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08; E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze Av., Tbilisi Tel: 225-20-72/73/74/76 E-mail: turkemb.tbilisi@mfa.gov.tr Address: 8, M. Abashidze str. Batumi, Georgia tel: (8-88-222) 7 47 90 Republic of Azerbaijan Embassy Kipshidze II-bl . N1., Tbilisi Tel: 225-26-39, 225-35-26/27/28 E-mail: tbilisi@mission.mfa.gov.az Address: Dumbadze str. 14, Batumi Tel: 222-7-67-00 Fax: 222-7-34-43 Republic of Armenia Embassy 4 Tetelashvili St. Tbilisi Tel: 95-94-43, 95-17-23, 95-44-08 E-mail: armemb@caucasus.net Web: www.armenianembassy.ge Consulate General, Batumi Address: Batumi, Gogebashvili str. 32, Apt. 16

caucasian business week Kingdom of Spain Embassy Rustaveli Ave. 24, I floor, Tbilisi Tel: 230-54-64 E-mail: emb.tiflis@maec.es Romania Embassy 7 Kushitashvili St., Tbilisi Tel: 38-53-10; 25-00-98/97 E-mail: ambasada@caucasus.net Republic of Poland Embassy 19 Brothers Zubalashvili St., Tbilisi Tel: 292-03-98 Email:tbilisi.amb.sekretariat@msz.gov.pl Web-site: www.tbilisi.polemb.net Republic of Iraq Embassy Kobuleti str. 16, Tbilisi Tel: 291 35 96; 229 07 93 E-mail: iraqiageoemb@yahoo.com Federative Republic of Brazil Embassy Chanturia street 6/2, Tbilisi Tel.: +995-32-293-2419 Fax.: +995-32-293-2416 Islamic Republic of Iran Embassy 80, I.Chavchavadze St. Tbilisi, Tel: 291-36-56, 291-36-58, 291-36-59, 291-36-60; Fax: 291-36-28 E-mail: iranemb@geo.net.ge United Nations Office Address: 9 Eristavi St. Tbilisi Tel: 225-11-26/28, 225-11-29/31 Fax: 225-02-71/72 E-mail: registry.geo@undp.org Web-site: www.undp.org International Monetary Fund Office Address : 4 Freedom Sq., GMT Plaza, Tbilisi Tel: 292-04-32/33/34 E-mail: kdanelia@imf.org Web-site: www.imf.ge Asian Development Bank Georgian Resident Mission Address: 1, G. Tabidze Street

Freedom Square 0114 Tbilisi, Georgia Tel: +995 32 225 06 19 E-mail: adbgrm@adb.org; Web-site: www.adb.org World Bank Office Address : 5a Chavchavadze Av., lane-I, Tbilisi, Georgia Tel: 291-30-96, 291-26-89/59 Web-site: www.worldbank.org.ge Regional Office of European Bank for Reconstruction and Development Address: 6 Marjanishvili St. Tbilisi Tel: 244 74 00, 292 05 13, 292 05 14 Web-site: www.ebrd.com Representation of the Council of Europe in Georgia Address : 26 Br. Kakabadze, Tbilisi Tel: 995 32 291 38 70/71/72/73 Fax: 995 32 291 38 74 Web-site: www.coe.ge

Hotels in Georgia TBILISI MARRIOTT Tbilisi , 13 Rustaveli Ave. Tel: 77 92 00, www.marriott.com COURTYARD MARRIOTT Tbilisi , 4 Freedom Sq. Tel: 77 91 00 www.marriott.com RADISSON BLU HOTEL, TBILISI Rose Revolution Square 1 0108, Tbilisi Tel: +995 32 402200 radissonblu.com/hotel-tbilisi RADISSON BLU HOTEL, BATUMI Ninoshvili Str. 1, 6000 Bat’umi, Georgia Tel: 8 422255555 http://radissonblu.com/hotel-batumi SHERATON METECHI PALACE Tbilisi , 20 Telavi St. Tel: 77 20 20, www.starwoodhotels.com SHERATON BATUMI 28 Rustaveli Street • Batumi Tel: (995)(422) 229000 www.sheratonbatumi.com HOLIDAY INN TBILISI Business hotel Addr: 1, 26 May Square Tel: +995 32 230 00 99 E-mail: info@hi-tbilisi.com Website: http://www.hi-tbilisi.com BETSY’S HOTEL With Marvellous Tbilisi Views Addr: 32/34 Makashvili St. Tbilisi Tel: +995 32 293 14 04; +995 32 292 39 96 Fax: +995 32 99 93 11 E-mail: info@betsyshotel.com Website: http://www.betsyshotel.com

Restaurants CHARDIN 12 Tbilisi , 12 Chardin St. , Tel: 92 32 38 CHINA TOWN Tbilisi , 44 Leselidze St. (ent. from Chardin St.) Tel: 43 93 08, 43 93 80, Fax: 43 93 08 BREAD HOUSE Tbilisi , 7 Gorgasali St. , Tel: 30 30 30 BUFETTI - ITALIAN RESTAURANT Tbilisi , 31 I. Abashidze St. , Tel: 22 49 61 DZVELI SAKHLI Tbilisi , 3 Right embankment , Tel: 92 34 97, 36 53 65, Fax: 98 27 81 IN THE SHADOW OF METEKHI Tbilisi , 29a Tsamebuli Ave. , Tel: 77 93 83, Fax: 77 93 83 PICASSO Tbilisi , 4 Miminoshvili St. , Tel: 98 90 86 SAKURA - JAPANESE RESTAURANT Tbilisi , 29 I. Abashidze St. , Tel: 29 31 08, Fax: 29 31 08 SIANGAN - CHINESE RESTAURANT Tbilisi , 41 Peking St , Tel: 37 96 88 VERA STEAK HOUSE Tbilisi , 37a Kostava St , Tel: 98 37 67 BELLE DE JOUR 29 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 VONG 31 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 BRASSERIE L’EXPRESS 14 Chardin str, Tbilisi Tel: (+995 32) 230 30 30 TWO SIDE PARTY CLUB 7 Bambis Rigi, Tbilisi Tel: (+995 32) 230 30 30 LOFT 11. I. Mosashvili str, Tbilisi Tel: (+995 32) 230 30 30 RESTAURANT NERO 21 Abano Street, Tbilisi Tel: (+995 32) 292 10 15

SH. RUSTAVELI STATE THEATRE Tbilisi. 17 Rustaveli Ave. Tel: 93 65 83, Fax: 99 63 73 TBILISI STATE MARIONETTE THEATRE Tbilisi. 26 Shavteli St. Tel: 98 65 89, Fax: 98 65 89 THEATRE OF PANTOMIME Tbilisi. 37 Rustaveli Ave. Tel: 99 63 14, (77) 41 41 50 Z. PALIASHVILI TBILISI STATE THEATRE OF OPERA AND BALLET Tbilisi. 25 Rustaveli Ave. Tel: 98 32 49, Fax: 98 32 50

Galleries ART GALLERY LINE Tbilisi. 44 Leselidze St. BAIA GALLERY Tbilisi. 10 Chardin St. Tel: 75 45 10 GALLERY Tbilisi. 12 Erekle II St. Tel: 93 12 89 GEORGIAN NATIONAL MUSEUM - PICTURE GALLERY Tbilisi. 11 Rustaveli Ave. Tel: 98 48 14 KARVASLA’S EXHIBITION HALL Tbilisi. 8 Sioni St. Tel: 92 32 27, KOPALA Tbilisi. 7 Zubalashvilebi St. Tel: 99 99 02, Fax: 99 99 02 MODERN ART GALLERY Tbilisi. 3 Rustaveli Ave. Tel: 98 21 33, Fax: 98 21 33 M GALLERY Tbilisi. 11 Taktakishvili St. Tel: 25 23 34 ORNAMENT - ENAMEL GALLERY Tbilisi. 7 Erekle II St. Tel: 93 64 12, Fax: 98 90 13

Akhvledianis Khevi N13, Tbilisi, GE. +995322958377; +995599265432

Cinemas AKHMETELI Tbilisi. “Akhmeteli” Subway Station Tel: 58 66 69 AMIRANI Tbilisi. 36 Kostava St. Tel: 99 99 55, RUSTAVELI Tbilisi. 5 Rustaveli Ave. Tel: 92 03 57, 92 02 85, SAKARTVELO Tbilisi. 2/9 Guramishvili Ave. Tel: 8 322308080,

Theatres A. GRIBOEDOV RUSSIAN STATE DRAMA THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 93 58 11, Fax: 93 31 15 INDEPENDENT THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 98 58 21, Fax: 93 31 15 K. MARJANISHVILI STATE ACADEMIC THEATRE Tbilisi. 8 Marjanishvili St. Tel: 95 35 82, Fax: 95 40 01 M. TUMANISHVILI CINEMA ACTORS THEATRE Tbilisi. 164 Agmashenebeli Ave. Tel: 35 31 52, 34 28 99, Fax: 35 01 94 METEKHI – THEATRE OF GEORGIAN NATIONAL BALLET Tbilisi. 69 Balanchivadze St. Tel: (99) 20 22 10 MUSIC AND DRAMATIC STATE THEATRE Tbilisi. 182 Agmashenebeli Ave. Tel: 34 80 90, Fax: 34 80 90 NABADI - GEORGIAN FOLKLORE THEATRE Tbilisi. 19 Rustaveli Ave. Tel: 98 99 91 S. AKHMETELI STATE DRAMATIC THEATRE Tbilisi. 8 I. Vekua St. Tel: 62 59 73

THE BEST GEORGIAN HONEY OF CHESTNUTS,ACACIA AND LIME FLOWERS FROM THE VERY HART OF ADJARA MATCHAKHELA GORGE IN THE NETWORK OF GOODWILL, NIKORA AND SMART

PUBLICITY caucasian business week

March 31, 2014 #48