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BUSINESS WEEK May 12, 2014 #53

May 12, 2014, Issue 53

GEORGIA GEORGIA’S PM ASSURES TURKEY IN SAFE INVESTMENT ENVIRONMENT

here is really fair, transparent and safe investment environment in Georgia and each cent of invested funds will be protected by the law and state. Pg. 2

RATING OF INSURANCE COMPANIES: THE SITUATION ON THE MARKET IS CHANGING

EY ENTREPRENEUR OF THE YEAR™ - FIRST ENTREPRENEURS CONTEST IN GEORGIA

Y Georgia” company with the support of Economy and Sustainable Development Ministry holds business rewarding for the first time in order to reveal “Entrepreneur of the year”. Pg. 5

RAILWAY IS GOING TO UTILIZE EUROPE-CENTRAL ASIA CONTAINER SHIPMENT ROUTE

CIS UKRAINE RECEIVES FIRST $3.2 BILLION FROM IMF

kraine, a nation on the brink of civil war and bankruptcy, has received its first emergency rescue money from the International Monetary Fund (IMF), the National Bank of Ukraine reported. Pg. 10

EAST, NOT WEST: RUSSIA’S TOP 5 TRADE PARTNERS IN ASIA

eopolitics are changing fast, and the Ukraine crisis has brought Russia closer to its eastern neighbors. Pg. 10

AZERBAIJAN MOODY’S CONFIRMS STABILITY IN AZERBAIJAN’S BANKING SYSTEM

T A

he outlook on Azerbaijan’s banking system remains stable, Moody’s Investors Service reported on April 29. Pg. 11

AZERBAIJAN TO CHAIR ADB IN 2015

zerbaijan is set to take the presidency of Asian Development Bank (ADB) in 2015. The news was announced by ADB’s Governor for Kazakhstan Erbolat Dossaev on May 5. Pg. 11

WORLD NEWS BARCLAYS ‘BOLD SIMPLIFICATION’ WILL SLASH 19,000 JOBS, CREATE ‘BAD BANK’

WARREN BUFFETT WON’T ‘GO TO WAR’ WITH COCA-COLA

arren Buffett defended his decision to abstain from a shareholder vote on Coca-Cola’s new controversial executive compensation scheme at this weekend’s Berkshire Hathaway investor meeting. Pg. 13

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RATING OF COMMERCIAL BANKS IN TERMS OF TOTAL ASSETS, STOCK CAPITAL, TOTAL LOANS, TERM DEPOSITS, NET PROFITS AND RESERVES ON AVAILABLE LOSSES Pg. 3

THE REASONS FOR BLOCKING 4G COMMUNICATION TECHNOLOGY IN GEORGIA

Turkish President: Construction of BakuTbilisi-Kars Railway will be Completed Soon Pg. 4 Levan Berdzenishvili: “Arguments from Khudoni HPP Opposers are Weak” eak” Pg. 8

Georgian Health Minister is Content with Healthcare Program Results Pg. 6

Majority of Voters Why Does the National Communications Commission Wants to See David Lobby Magticom Interests? Pg. 6 Narmania as or Tbilisi Mayor Pg. 4

Mirian Gogiashvili: State Development Bank is Nnecessary for the Georgian Economy Pg. 4

MAIN EVENTS caucasian business week

May 12, 2014 #53

GEORGIA SEEKS MORE INVESTMENTS FROM AZERBAIJAN, TURKEY

AZERBAIJANI, GEORGIAN, TURKISH PRESIDENTS CALL FOR EXPANSION OF TRILATERAL CO-OP

eorgia’s capital, Tbilisi hosted a trilateral summit of the presidents of Azerbaijan, Georgia and Turkey on May 6. Opening the summit in the Georgian National Library, Georgian President Giorgi Margvelashvili stressed that Georgia’s recent cooperation with Azerbaijan and Turkey is very impressive, Trend Agency reported. He underscored that he has warm relationships with both Azerbaijani President Ilham Aliyev and Turkish President Abdullah Gul. “I was very warmly greeted in Turkey, and I have already had the pleasure of meeting Ilham Aliyev twice. We both were very pleased to see each other again,” Margvelashvili said. He went on to note that the summit’s aim is to push ahead the economic projects, which are being implemented in the region. Speaking at the summit Turkish President Abdullah Gul said Turkey, Azerbaijan and Georgia have cooperation in various fields. Gul recalled that the presidents met in 2007 at the foundation laying ceremony of the Baku-TbilisiKars railway section, passing through the territory of Georgia. “Along with the presidential meetings, the meetings of foreign ministers are held on a regular basis,” he added. “Azerbaijan, Georgia and Turkey implemented a number of regional and international projects,” Gul said. “Everybody appreciates the contribution of the three countries in maintaining peace and stability in the region.” Gul expressed hope that such meetings continue in future adding that the meetings are an example of cooperation and brotherhood among the three countries in many areas. Addressing the summit, President Ilham Aliyev thanked his Georgian counterpart Giorgi Margvelashvili for taking an initiative to hold this summit. President Aliyev said he is pleased to be in Georgia again. “The ties between our countries have a long history. The bilateral relations also stand at a high level. In many cases we make joint efforts in trilateral format and put forward our joint initiatives,” he said. He went on to add that today the GeorgianTurkish-Azerbaijani cooperation is of great importance not only for these countries themselves, but also for the region and the entire world. “Our cooperation is based on common interests. At the same time, the joint projects that we are implementing have gone beyond the regional boundaries and became global,” President Aliyev underscored. Following the summit the three presidents held a trilateral meeting, during which they expressed their satisfaction with the successful cooperation among the three countries. The presidents also voiced their hope that the

Tbilisi summit would contribute to a further broadening of these relations and emphasized the significance of the global projects implemented by Azerbaijan, Turkey and Georgia to develop these relations. After the trilateral meeting Margvelashvili said as many countries as possible must be involved in regional projects to provide stability in the Caspian-Black Sea and Mediterranean regions. “We intend to expand the involvement of all new countries in regional projects, as their involvement will ensure the stability in the CaspianBlack Sea and Mediterranean regions,” he said at the joint press-conference. “We are expanding our cooperation to the European and Asian countries, so that more countries could use the benefits resulting from our close cooperation,” he said. President Abdullah Gul in turn said the conflicts in the South Caucasus must be resolved as part of the territorial integrity of the countries. He also stressed that along with regional issues, global issues were also discussed during the tripartite meeting. “We reiterated our support for the territorial integrity of Georgia and Azerbaijan,” President Gul said. “We stressed the importance of resolving the regional conflicts as part of peace and territorial integrity.” He added that the Ukrainian crisis was also discussed during the meeting. “We have a common opinion that the Ukrainian political crisis will have an impact on peace and stability in our region,” he said. “We stand for the settlement of the political crisis in Ukraine as part of the territorial integrity and international law.” Gul added that Turkey is closely monitoring the status of the Crimean Tatars. As for the projects implemented jointly by Azerbaijan, Georgia and Turkey, he stressed that these projects play an important role in the development and stability of the region. “Being a major energy project, TANAP increases the importance of the region,” Gul added. President Aliyev expressed confidence that a trilateral summit will be important for further development of trilateral cooperation. “I can say this trilateral format currently is of interest not only in the region but also on the global level,” President Aliyev said. “This is actually a unique format, as the three independent states have built modern, cultural and equal relations based on mutual understanding, respect and which correspond to the interests of our peoples.” President Aliyev went on to add that the sides had a very broad and honest exchange of views on future cooperation. “The ministers offered various projects to the heads of states.” Following the press-conference Margvelashvili hosted an official lunch in honor of President Aliyev and President Gul.

eorgia expects more investments from Azerbaijan and Turkey as part of joint regional projects. The news was announced by Georgian Deputy Prime Minister and Minister of Energy Kakha Kaladze who talked to Trend Agency on May 6. He made the comments at the opening ceremony of the Tbilisi Summit 2014 with the participation of Presidents of Azerbaijan, Georgia, and Turkey. “We are on the verge of implementing the big Shah Deniz-2 energy project, which provides another opportunity for realizing our country’s transit potential,” he said. The final investment decision was made on the second phase of the Azerbaijani Shah Deniz offshore gas and condensate field’s development on December 17, 2013. Some 10 billion cubic meters of gas from the field will be supplied to the European market. The gas which will be produced in the second phase of the field’s development is to be exported to Turkey and European markets through the expansion of the South Caucasus Pipeline and construction of the Trans-Anatolian Gas Pipeline (TANAP) and the Trans-Adriatic Pipeline (TAP). The contract for developing the Shah Deniz offshore field, which has proven reserves of 1.2 trillion cubic meters of gas, was signed on June 4, 1996. Participants in the Shah Deniz field development are the State Oil Company of Azerbaijan (SOCAR) with a share of 16.7 percent, British BP (28.8 percent), Norway’s Statoil (15.5 percent),

Iran’s NICO (10 percent), French Total (10 percent), Russia’s Lukoil (10 percent), and Turkish TPAO (9 percent). Kaladze said the implementation of the BakuTbilisi-Kars railway communication project is near completion. “It will give a new impetus to the development of regional economy,” he added. “We expect that the forum promote the integration of the three countries in the economic sphere, which will increase our people’s welfare,” the minister added. A new 105-kilometre railroad branch line within the Baku-Tbilisi-Kars project is planned to be constructed. The Akhalkalaki-Tbilisi-Marabda railway section will also be reconstructed in Georgia, increasing its capacity to 15 million tons of cargo per year. A station in Akhalkalaki for the transition of trains from the rail tracks in Georgia to Europe is also planned to be built. The corridor’s peak capacity will be 17 million tons of cargo per year. This figure will stand at one million passengers and 6.5 million tons of cargo at the initial stage. Georgian State Minister on European and EuroAtlantic Integration Alexi Petriashvili said the meeting of the leaders of the three countries contributes to strengthening regional security, especially considering the general critical background. “The Presidents of Azerbaijan, Turkey, and Georgia will discuss regional security,” he told Trend Agency. “I think that these meetings contribute to strengthening stability in the region, which is very important in this case.”

GEORGIA, TURKEY RESPECT RELIGIOUS MINORITIES’ RIGHTS

he standards of protecting the rights of religious minorities are equally respected in Georgia and Turkey. Georgian President Giorgi Margvelashvili made the statement at a joint press conference with his Turkish counterpart Abdullah Gul in Tbilisi. “I want to re-emphasize the infrastructural projects that are implemented jointly with the Turkish side,” he said. “These projects include making some gas pipelines and a railway. The Tbilisi summit gave additional impetus to these projects,” he added. Margvelashvili noted that during their talks, the

sides also discussed expanding cooperation in economic, cultural and military spheres. “We stressed our common view regarding the protection of cultural heritage, as well as religious groups and their rights,” he added. President Gul in turn said everyone should have the integral right of believing in the god that he has chosen. “Cultural heritage is a very important issue. Our countries have rich cultural heritage. Its restoration, taking care of it and its preservation is very important for all of us,” he said. “The religious freedom is also important. It is an integral part of democracy.”

GEORGIA’S PM ASSURES TURKEY IN SAFE INVESTMENT ENVIRONMENT

here is really fair, transparent and safe investment environment in Georgia and each cent of invested funds will be protected by the law and state. Georgian Prime Minister Irakli Garibashvili made the remark at the Georgian-Turkish Business Forum held in Tbilisi on May 6. The event was attended by Turkish President Adullah Gul. Azerbaijani businessmen also attended the business forum. Garibashvili emphasized the volume of Turkish investment and expressed his hope for continuation of this tendency. “The door of Georgia is open for you, if you decide to start business in Georgia,” he said. Turkey is among the largest investor countries in

Georgia. Turkish companies have invested more than $1.1 billion in projects in Georgia. Garibashvili further mentioned that Turkey is a reliable ally and strategic partner of Georgia. He declared that Georgia can offer various types of high quality production for Turkish market. President Gul in turn emphasized a friendship of the two countries and welcomed the position of the Georgian government regarding to direct investments. “Friendship is the basis for everything, but for the investor to start business has not less importance the belief in the fairness,” he said. “I duly appreciate the steps made by your government in this regard. You are doing your best in order to pass all the phases of development very quickly.”

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PUBLICITY May 12, 2014 #53

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INTERVIEW caucasian business week

May 12, 2014 #53

MAJORITY OF VOTERS WANTS TO SEE DAVID NARMANIA AS TBILISI MAYOR

GEORGIA, UK MULL EUROPEAN INTEGRATION ISSUES

eorgian Foreign Minister Maia Panjikidze and British Foreign Secretary William Hague discussed the issues regarding acceleration of the process of Georgia’s integration into Europe in Tbilisi on May 8. The sides expressed satisfaction with the acceleration of the process of signing the association agreement between Georgia and EU, Panjikidze said. Georgia initialed association agreement with the EU at the Vilnius summit on November 29, 2013. The association agreement will be signed by June. Hague stressed that the UK supports this process and was one of the initiators of signing the association agreement in June, instead of autumn.

“The UK supports Georgia’s territorial integrity and its sovereignty.” He pointed out that his visit to Georgia is a part of his tour in the region, adding that he visited Chisinau and Kiev before. “The purpose of my visit is to support the European aspirations of these countries, since each of these three countries should be a part of Europe,” Hague added. Panjikidze, for her part, stressed that Georgia is systematically and progressively moving towards integration with Europe and nothing can prevent this. “We appreciate the support of the UK as one of the most important countries in the world, significantly contributing to international security,” she said.

GEORGIA AND MOLDOVA WILL GET 30-30 MILLION EUROS FROM EU

uropean Commission made a decision to allocate 30-30 million Euros to Georgia and Moldova. It will be assistance for realization of future Association Agreements with EU. Press service of EU releases this information. “Moldova will receive 30 million euros to improve the competitiveness of small businesses; harmonize its quality standards with the EU;

promote export and investment”, - says the statement. 30 million Euro received by Georgia should be directed to modernizing public institutions; improving the competitiveness of rural businesses; boosting trade with the EU; and protecting minority rights, the commission wrote in a statement. Signing of Association Agreement is scheduled in June of the current year.

ccording to the NDI survey results, most respondents would vote for David Narmania, Georgian Dream coalition candidate as Tbilisi Mayor. David Narmania is the first choice of 39% and second choice of 5% of respondents as Tbilisi Mayor. 20% don’t know the answer, 13% - chose no candidate. 10% would vote for National Movement candidate Nikoloz Melia first choice, 9% - Nino Burjanadze – United opposition, 4% refused to answer, 2% - Labour party first choice. 3% would vote for other parties. David Narmania is named second choice by 5%, Nikoloz Melia by – 6%, CDM/Democratic Movement candidate – 5%; Labor Party candidate –

5%. 40% said they have no second choice. NDI survey fieldwork was conducted from March 26 till April 18 with 3,942 completed interviews.

TURKISH PRESIDENT: CONSTRUCTION OF BAKUTBILISI-KARS RAILWAY WILL BE COMPLETED SOON

he construction of Baku-TbilisiKars railway will soon be completed- Turkish President Abdullah Gul stated during his visit to Georgia. “The turnover of goods between Turkey and Georgia is 1, 5 billion USD, Turkish businesses have invested in Georgia’s economy more than $ 1 billion, and interest on the part of entrepreneurs is still high. We are not only neighbors, but also relatives. In Turkey there are many people who are relatives to each other. Contact between people is very important. Turkey, Georgia, Azerbaijan complement each other and are a continuation of each other. The integration of these territories into Euro-Atlantic structures would be very important from the point of view of economic values, and I am sure that we are on the verge of separation of the importance of this integration,” - said Abdullah Gul. He also noted the fact that a visa and passport are not required today to movement between Turkey and Georgia. “We have made the state border only administrative borders. If Europe managed to implement this through a number of processes, we have achieved this through negotiation,” said the Turkish President.

“The cooperation between Georgia, Turkey and Azerbaijan will make the region attractive for investments. There are very important large projects such as Baku-Tbilisi-Ceyhan, BakuErzurum gas pipeline, and Baku-Kars railway, which will soon be completed. The cooperation in the energy sphere is no less important, as well as the coordination between our countries on this issue is very important from the practical point of view,” - said Abdullah Gul.

EX-MINISTER OF FINANCE: STATE DEVELOPMENT BANK IS NNECESSARY FOR THE GEORGIAN ECONOMY

An interview with exFinance Minister Mirian Gogiashvili - How do you assess the government’s intention to create a State Development Bank? How this structure can benefit the economy of the country ?

- This is a very good idea, and I do not understand why it had not been carried out earlier. The state Bank of development is a very important tool which exists in many countries, including developed. As it is known, the economy goes in cycles, and therefore the state should have an instrument to counter the crisis. State-owned banks are created just for this purpose. - But the Co-investment Fund also funds big business-projects that require long-term investments. What are the benefits of the Development Bank? - The creation of such a Bank should be assessed in the long term. There is no sense to look at it in the short term. From this point of view the country should have a Bank, which will strengthen their capital, will increase the availability of finance and will be independent in making decisions. There can be a lot of universal banks in the country, but where long-term investments are necessary aimed at the development of technologies, science, introduction of international standards, etc – there should be either the Bank or the Fund, which will not chase for quick profit. International experience shows that in most cases the activities of such banks is usually successful in almost 80%. More than 40% of development banks were created in the past 20 years, as everyone understood that a free economy is not an effective mechanism for the prevention of crises, as free money

goes where it is more profitable and faster, and the state banks invest money in the long perspective and more risky industry. - Will a new financial institution be an obstacle for Georgian commercial banks? - The idea of the development Bank is that it invests in the areas which are not used by commercial banks. If you want to build a factory, even if you have a business plan and qualified staff, you still will not get a credit. In general, the functioning of the development Bank is very profitable for commercial banks, as the state financial institute will offer private ones to share risks, to take loans on beneficial terms, etc. Besides, after one or another project will be launched and will start to make a profit, the state bank will get out of it, as today the Partnership Fund. It will be interesting first of all for commercial banks. - As it is known, the profit of the Development Bank is exempt from taxes. What is the reason, and how this practice is common? In almost all countries such banks are exempt from tax if the profit is reinvested. The situation will be the same in our country as well. - How do you assess the social policy of the government? - I’m not an ardent supporter of active social policy, and I think that people should be able to earn a living for themselves. In the last 10-12 years the number of people dependent on budget has in-

creased. Even businessmen largely depend on the participation in public procurement and tenders. It all has its place, but the lower the dependence of people from the state, the better for all. The creation of the Development Bank is one of the means that will be directed on support of business. It will bring more benefits, including from the social point of view. - According to statistics, in 2014 economic growth will be 5%. How would you rate this forecast? - In general, it is necessary to separate the two concepts - the economic growth and economic development. Of course, now economic growth is registered in Georgia, but there is no development, as we do not see the emergence of new sectors of the economy. We are still in a state of postSoviet economy, and only growth is not enough, if new industries are not created. - How do you assess the creation of the Antimonopoly Agency? Was it necessary? - If we go to the European Union, where the rights of consumers are protected, there are no monopolies and cartel deals, then such an Agency is necessary. Without this we will not be able to achievesynchronization of legislation with the EU. In this sense, Georgia made a lot of mistakes, for example, we have monopolies in the transportation, business terminals, etc. Based on this, the Antimonopoly service is required, though the time will show how it will be effective in Georgia.

BUSINESS May 12, 2014 #53

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RATING OF INSURANCE COMPANIES: THE SITUATION ON THE MARKET IS CHANGING

ating of five leading insurance companies of Georgia, excluding premiums attracted through the state programs, looks as follows: Aldagi-BCI - 91, 5 million GEL (36%), GPI-holding - 58, 4 million GEL (23%), Ardi - 22 million (9%), IRAO - 20, 3 million (8%), IC-group - 12, 5 million GEL (5%). According to Giorgi Gigolashvili, President of the Insurance Institute of Georgia, among leaders are companies with strong management, vast financial resources, access to market, and a clear development strategy. “After the final withdrawal of private companies from state programs, competition in the market will grow in all directions, and first of all, in car insurance. This is evidenced by the fact that only about 52 000 from one million cars are insured in Georgia. Competition in the insurance of real estate will also increase. Potential of insurance relating to apartments, houses, summer cottages is not practically used,” - he notes. Giorgi Gigolashvili particularly stressed the remarkable growth performance of the company “Ardi” for the past year. “Initially the company focused on innovative insurance products, study of market demand. It also did not take part in state programs of health and focused exclusively on the commercial insurance. Thanks to effective management and new products, “Ardi” managed to get a large share in the market. While other companies have increased their portfolio through government programs, “Ardi”, which appeared on a very competitive

market in 2010, managed to strengthen its positions through proper management and purposeful insurance policy. The introduction of non-profit projects - such as the publication of literature and the creation of mobile applications on the insurance topic, contributed to the growth and the entry of the company in the list of leaders,” - the expert says. In addition, the strong positions of the two leaders of the market have additional reasons - cooperation with large international companies and many years of experience. Against this background, success of the comparatively new and not related to the foreign capital company, underlines the professionalism of management. The Insurance Association of Georgia predicts a reduction of the volume of premiums attracted by private companies to 150 million GEL in 2014. As it is known, from April 1 the insurance companies don’t serve the socially vulnerable layers of the population that automatically reduces the total volume of premiums received by insurance companies in terms of state programs by 40%. From September insurance companies will also be excluded from insurance programs for students and teachers. The state program of insurance entered into force on February 28, 2013. Its implementation is phased, and provides for the complete exclusion of private insurance companies from all government projects. According to the head of the Association Devi Khechinashvili, in 2013 premiums of insurance companies decreased by 44 million GEL, in 2014 this figure will increase to 150 million. “Now the insurance industry faces two major challenges. The first is a withdrawal from the state programs, which will sharply reduce the income of companies, as almost half of the insurance market of Georgia is occupied by the state program. The second is the process of withdrawal from programs as its duration is important as well as an impact on the financial position of the insurance companies” - he notes.

WINE EXPORTS GROWTH TO RUSSIAN MARKET HIKES WINE PRODUCTS PRICES

arge-scale export growth to Russia has led to wine price hike in the local market. “Rezonansi” daily writes. According to the newspaper, family wine of the local production became expensive by 30-50% and one liter of

wine costs on average 4-5 GEL, while in some cases its value reaches 12-17 GEL. Winemakers say that the family wine supplies expired in the regions and some factories face serious wine shortfalls. The entrepreneur Otar Berdzenishvili notes that compared with last year, the family wine price has almost doubled in regions. According to him, price of Kakhetian family wine of high quality is on average 4-5 GEL. Last year at this time it cost 2.5-3 GEL. Price of family wine has changed in Kartli as well. Family wine price ranges within 2.5- 5 GEL in the consumer markets. In the same period of the previous year one liter of family wine varied within 2- 3 GEL.

”RACHA WATERS“ BRAND FOR SALE

acha waters” company is still in talks with potential investors regarding the sale of the company. As the company’s Deputy Director General states “Commersant”, at

this stage negotiations are being held with several companies, however, a concrete decision is not taken. Marina Kevlishvili doesn’t name the interested companies, however, says that investors are not engaged in the field of mineral waters manufacturing. According to him, a timely completion of negotiations depends on the tax inspection of the company’s activities in 2007-2013. ”Racha waters” value is estimated at one million USD. The company “Progress 2000” has been selling “Racha waters” brand and factory for several months. The company appeared in the market in 2000 and carried out export to Russia until 2006. The factory’s production capacity is 100 thousand bottles per month.

EY ENTREPRENEUR OF THE YEAR™ - FIRST ENTREPRENEURS CONTEST IN GEORGIA

Y Georgia” company with the support of Economy and Sustainable Development Ministry holds business rewarding for the first time in order to reveal “Entrepreneur of the year”. It should be noted that the company EY conducts the world’s most prestigious and largescale awarding ceremony in the field of the entrepreneurship in 145 cities of the world’s more than 60 countries. The award history goes back 28 years. In November 2014 Georgia will join a list of the countries and will reveal the year’s best entrepreneur. “Bank of Georgia” is the general sponsor of the event in Georgia, while the business edition of Forbes is the media sponsor. A press conference dedicated to “Entrepreneur of the year” contest was held yesterday, on May 7. Interested entrepreneurs will be able to fill out the application on the website ey.com/eoy/ge form May 7, 2014 through July 1.

In November 2014 winners will be revealed in various categories on the basis of a competent jury decision and the owner of “Entrepreneur of the year” 2014 title will also be named. The winner of “Entrepreneur of the year” contest in Georgia will travel to Monte Carlo in June 2015 at the world Entrepreneur of the Year competition - World Entrepreneur Of The Year ®.

“NATAKHTARI” TO EXPORT LEMONADE TO IRAN AND BELARUS THIS YEAR Georgian lemonade manufacturers are preparing for a new season. “Zedazeni” promises users novelties in the new season, although the company refrains from specifying the details at this stage. They say that “Zedazeni” work depends on user’s desires and orders and hence, there will be a new offer, which will be known in two weeks. “Zedazeni” produces 5 types of lemonade that is exported to 21 countries. Lemonade is represented in the local market as well. “Kazbegi” is not planning changes in the new season. The company will offer customers, traditionally, 5 species of lemonade. “Kazbegi” carries out lemonade export into 33 countries, including Russia. As for “Natakhtari,” as per 2013 year data, the company’s export sales improved 9 percent compared to the previous year. “Natakhtari” states that lemonade is the company’s business card which represents Georgia’s traditions in many countries of the world. In 2014 a significant increase in export volume is planned. Iran and Belarus will be added to export countries. “Natakhtari” carries out export to 20 countries,

including the US, Azerbaijan, Armenia, Ukraine, Kazakhstan, Israel, Cyprus, Belgium, Germany, Latvia, Tajikistan and the other. “Natakhtari” started products sales in Uzbekistan and China. “Natakhtari” exports 32 percent of produced lemonade. The biggest volume is exported to neighboring countries of Azerbaijan, Russia and Armenia. The company has developed a special advertising strategy for Azerbaijan and Armenia.

ONLY SERVICE AIR WISHES TO PERFORM TBILISI-MESTIA FLIGHTS

nly one company expressed wish to participate in the tender for Tbilisi-Mestia flights, although Union of Airports expected high activity because 3-year contract will be signed with the winner, which should have been attractive for the companies. Service Air has submitted the application, which serves to domestic flights with helicopter, private orders and 3-seat place (Cessna). Terms for subsidized domestic flights recently changed. Ministry of Economy should have provided a plane to the server company, although at first bringing plane from Ukraine procrastinated, later it complicated due to ongoing political affairs there. Equipment, pilot, navigation constructions of AN 28 are not relevant to the European standards. They does not have respective certificate. Antonovka Reconstruction Plant expressed readiness to test plane or undergo other necessary procedures, although this process is procrastinating. The tender winner will take responsibility on the plane or a helicopter by own. Airports Union states that the tender is very attractive for the companies and they expect high activity. The new state procurement considers 3-years contract, before that it was a short-term one. Last year Aviaservice served to the subsidized

flights with a helicopter, based on short-term contract. Tusheti performed last 2 flights. Passengers of both companies were transported by a helicopter. With the state co-funding, crew of Canadian company Kenn Borek Air with the leased19-seat DHC-6-300 place plane performed Mestia-Tbilisi flights 2 years ago as well. The ministry made choice on the place because its efficiency. Replacement of the helicopter with the plane reduces expenditures of the provider company by 3 times, and respectively subsidized amount. Average cost of 1 flight is about $12 000. For 3-years contract assumed starting total cost of the procurement is $3,9 million (equal in GEL). Starting price of the main service is $3,2 million.

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May 12, 2014 #53

GEORGIAN HEALTH MINISTER IS CONTENT WITH HEALTHCARE PROGRAM RESULTS

he purpose of the program was to resolve two problems: the first is the fact that in case of illness the citizens of Georgia were not left without treatment because of the lack of money, in order no one in the country to die due to financial problems. The second is to escape situations when the cost of treatment led to the impoverishment of entire families. I can say that the program of universal health care has reached the desired results on both issues,” said the Minister, commenting on the results of the sociological research, in which the program of universal health care is rated as one of the most successful steps of the present government of the country. According to him, the study showed that the costs of the Georgian population on medical services have considerably decreased. “We know that poverty and poor health are closely related with one another- one follows from the other, and vice versa. The survey showed that the financial burden on the population has significantly decreased, that is the program of the universal health care has not only medical, but also economic effect,” said Sergeenko. “We have done truly incredible – we have managed to achieve such progress in the issue of accessibility of health care for so short period of time,” - stated the Prime Minister of Georgia Irakli Garibashvili. In his words, the government will always take care of the fact that citizens do not feel insecure.

“The construction of new hospitals is planned, the existed clinics will be very close to modern standards. Special attention is paid to increase of the quality of services and improvement of conditions of work and life for the medical personnel. For example, most recently, the financing of rural doctors and nurses increased by 30%,”- said the Prime Minister. Irakli Garibashvili also touched upon the topic of demography, which, according to him, is one of the key issues for the country’s development. “Upon my initiative, a system of financial incentives was introduced in 6 regions with low fertility, a family will receive 150 GEL for each third and more child per month in plain areas, in a mountainous area – 200 GEL. I think that this will stimulate the birth rate,” said the head of government. The Prime Minister also spoke about the social program, which aims to social rehabilitation and custody of children from socially unprotected families. “Our goal is to create all conditions for development and social integration. We will expand the range of services provided to children in specialized institutions, and hope that no child will be left without attention. In particular, we used a program providing a refuge for street children. There is also another innovation - a program that will provide emergency social assistance to children from severely disadvantaged families. It will allow to provide the most necessary things to those in greatest need,”- Garibashvili notes.

VEHICLE OWNERS RESPONSIBILITY INSURANCE TO BECOME OBLIGATORY

ill about vehicle owner liability insurance is likely to enter to the parliament in autumn. Head of State Insurance Supervision Service Lasha Nikoladze states that intensive work is going on the bill, the law is supposed to be valid next year. Nikoladze explains that the state will determine policy cost, reimbursement conditions and insurance terms for vehicle owner liability insurance, which will be common for all the operating companies. During the offer of compulsory insurance policies the private companies will not be able to offer additional benefits, to avoid establishment of damping price by any of them. Meanwhile, Nikoladze does not exclude that after the vehicle owner buys required insurance package, he will be able to purchase other improved package as well. Policy purchase will be able through banks, Internet banking, insurance company or quick payment machines. Besides, price of the insurance policy will be different for the owners of various categories. For example, it will be cheaper for motorcars, more expensive for buses and trucks. Exact cost of the vehicle owner liability insurance policies is still unknown. Lasha Nikoladze explains that currently calculation of the policy value is going and the price will be known in

1,5-2 months. According to the regulator’s calculations, by establishment of the required insurance, total amount of the bonuses attracted by insurance industry will be about 70-80 million GEL in a year and somehow it will help insurance sector in strengthening. According to the most recent statistic of Ministry of Internal Affairs, by the end 2012 806 323 vehicles (motorcars, trucks, jeep, transportation and motorcycles) were registered in Georgia. Considering this statistic, amount of the bonus per vehicle will be average 7-8 GEL/month. Although, it’s a mechanical calculation and does not consider the factor, that the state will determine various bonuses for each category. The calculation is approximate because by the time insurance is valid number of vehicles will be different. Although, NIkoladze mentions that establishment of vehicle owners’ required liability insurance is not a compensation of the withdrawal of state healthcare programs from the private insurance industry. NIkoladze says that Georgia is has belated introduction of the products, because such insurance is required in all developed countries and even European and postSoviet countries Georgia is among the small exceptions.

“ECO-GEORGIA” ABANDONS PLANS FOR THE RETAIL NETWORK DEVELOPMENT

he oil company “Eco-Georgia” abandons the plans for the retail network development on the Georgian market. “Eco-Georgia’s Executive Director Levan Akhvlediani states commersant.ge that the company has fundamentally studied the fuel market and considers launching petrol stations inappropriate. Akhvlediani explains that the local market is very saturated in this direction and the new player’s appearance will not be effective. “Accordingly, the company does not consider the opening

of petrol stations at this stage “, - he notes. “Eco-Georgia” presented the 3-year development plan yet last year, which included the opening of 80-100 petrol stations both in Tbilisi and in the regions. The company planned to open petrol stations in Armenia as well. The company intended to focus on import of highquality, premium class fuel which cost would be relatively expensive compared with other European fuel. “Eco-Georgia” handed over 20 petrol stations to “Gulf” in 2011. During that period, “Senta” and “Magnat” merged under “Gulf” brand.

RAILWAY IS GOING TO UTILIZE EUROPE-CENTRAL ASIA CONTAINER SHIPMENT ROUTE

eorgian Railway will use a new container park for shipments to Central Asia direction. Director general of the subsidiary of JSC Georgian Railway - Trans Caucasus Terminals - Levan Janjgava states that it is the first case when Georgia has own container park. Currently international companies, to which competition is difficult, operate on the world market. Although there is a free segment, utilization of which Georgia plans. “Currently Central Asia is absolutely free, on which we will focus. If there is a cargo, which needs to be shipped from Europe t Central Asia, it should be

carried out by our container park. Therefore, of we make a cycle, which we plane, that we’ll provide shipment from Europe, Turkey to Central Asia of the cargo and other container production, respectively, we’ll be able to provide shipping back from Western China with the same container park and the same route”, - Janjgava states. Reminding that 3D Group will supply new containers to Georgian Railway. 3D group should provide 480 units of 20-feet universal containers, which are not exploited, to Georgian Railway, for which they get 3 353 760 GEL without VAT. The company takes obligation to bring containers to Poti, in the container terminal of Trans Caucasus Terminal in 135 days after contact signing.

THE REASONS FOR BLOCKING 4G COMMUNICATION TECHNOLOGY IN GEORGIA

Why Does the National Communications Commission Lobby Magticom Interests?

evelopment and Introduction of modern technologies on Georgia’s cell communications market is one of the driving mechanisms for competition. Cell communications services do not imply only mobile phone calls. Mobile internet becomes the widespread service too. Mobile phone internet service is very popular in Georgia and it is strange it is impossible in Georgia to use mobile internet services at full capacity. We mean the introduction of 4G services in Georgia. This project remains failed in Georgia because of certain subjective or objective reasons. The talks about introduction of the 4G technology started several years ago. Beeline cell communications company was the first one that introduced and tested 4G technology services. Consumers were able to get known with the internet connection speed and quality. Results turned out impressive. Namely, one gigabyte file was downloaded in 2.10 minutes via wireless internet. 4G technology means that the operator is able to transfer data faster compared to the 3G technology. Theoretically, the data transfer speed is 4.2 megabytes in the 3G technology, while the speed is accelerated to one gigabyte in the 4G technology. The 4G represents a technological evolution, LTE (long term evolution) that is widely used by the world’s leading operators. The 4G potential

prevails over the 3G potential about 11 times. The development of wireless internet services in Georgia is especially important for regions. According to our information, the 4G internet service has the same connection speed that is offered by internet providers. Consequently, the demand for this service will be impressive. According to our information, the introduction of 4G technology internet in Georgia is hampered because of inactivity of the Georgian National Communications Commission (GNCC). Mobile operators note the commission is to put up the right for use of the 4G communications for auction. “The commission provides active job with both Georgian government and Parliament of Georgia to put up the license for use of radio frequency spectrum as soon as possible for auction to introduce the 4G service”, the commission says. The introduction of 4G technology will boost competition between cell communications companies, experts noted. First of all, Beeline company cannot provide the 3G connection, as the right for the license use had been already sold when the company entered the Georgian market. Therefore, the company is not able to provide valuable competition with competitor companies. In this situation inactivity of GNCC raises certain doubts. Experts presume the commission may lobby the interests of the market leader Magticom company. The introduction of the 4G technology will make Magticom lower service tariffs.

STATISTICS May 12, 2014 #53

ANNUAL GROWTH OF VISITORS EQUALED TO 7,4%

caucasian business week

n April 2014 390 685 visitors crossed borders of Georgia, which is 7,15 more than in the same period last year. Ministry of Internal Affairs reports that in January-April the flow (1 396 952 visits) is 7,4% more than in the 4 months of previous year. Like in the previous months, in the reporting period majority of the visitors (104 106) crossed border from Turkey, although growth is negative.

HPP caucasian business week

LEVAN BERDZENISHVILI: “ARGUMENTS FROM KHUDONI HPP OPPOSERS ARE WEAK”

ow important is the Khudoni HPP project for the country’s development and what benefits will it bring to Georgia? And what do parliament members think about this issue, how do they evaluate the project’s importance? One of the leaders of the republican party, Levan Berdzenishvili, thinks that hydro energy is one of the most important resources of our country and should undoubtedly be utilized. “I’m no expert, but I stand for economic development and environmental protection. From this standpoint, I can tell you that if the ecology isn’t adequately protected and, as specialists say, there won’t be an ecologic catastrophe – then economic advancement is necessary. Every hydro power plant in every country breaks regulations, what matters is not to overdo it and cause a disaster,” said Berdzenishvili.

“As to the topics of population and graveyard relocation, this aspect should be agreed upon between the government and the citizens. I remember it well how we went through the Zhinvali HPP ordeal, burying a centennial statue. If the government and the locals reach an agreement, this will turn out relatively less painful for Svaneti. It’s just nonsensical to say that not one power plant should ever be built in Georgia – water is one of our primary resources and it should be utilized. If it’s still a sticky issue and there’s no economic benefit and someone manages to prove this, then yes, but the arguments I’ve heard from the opposers of the Khudoni HPP construction so far aren’t strong enough to make us say that this project should be halted. But I repeat once more that I’m but a normal parliament member, a philologist, and not a specialist. And obviously what matters more here is a specialist’s opinion.”

May 12, 2014 #53

KAKHA OKRIASHVILI: KHUDONI PROJECT REFUSAL MEANS TO SAY GOODBYE TO OUR FUTURE!

akha Okriashvili, a PSP company founder and Dmanisi municipality member, says Khudoni HPP project has no alternative for Georgia’s valuable economic development. Kakha Okriashvili: “Khudoni HPP is the most important project and it must be implemented. The state economy will not be developed without energy resources. Indeed, we should take into account the interests of local population and their demands should be satisfied within reasonable limits and the church must be relocated. The relocation of graveyards is sensitive, but if we refuse Khudoni HPP project because, this means to say goodbye to our future. There is no other HPP project of similar huge scales. I believe this project has no alternative and it must be implemented. I think the environment will not be damaged. A certain part of the forest zone will be sunk, but without this we will have 200-500 hectares of woodland, but we will not have economy, pensions, wages and electricity. We should cede a little to gain more. You know we are not a oil mining country. We can only generate energy power. This field is only way to increase the state’s energy security and quality. Why should we reject this opportunity?! This is impossible.

I believe this is an ungrounded position. There is no alternative”. Every informed and professional person who can calculate and appraise the importance of this project for the country and the state economy, will reject all emotions, he added. “Many people will be employed during the project implementation. This is a huge investments project. Local residents of the Svaneti Region will be employed”, Kakha Okriashvili noted.

TRANS ELECTRICA GEORGIA PROVIDES STUDENTS FESTIVAL SUPPORT

T KETI BOCHORISHVILI: KHUDONI HPP CONSTRUCTION IS IMPORTANT FOR ENERGY SECURITY AND BUSINESS DEVELOPMENT

etevan Bochorishvili, a deputy Minster for Economy and Sustainable Development, says the implementation of large-scale investments projects like Khudoni HPP project is very important for the state economy development. “This is a vitally important project for not only the state economy development, but also for the state energy security. This project will provide both energy security and exports of electricity

to foreign countries. Implementation of similar large-scale projects is important for business development and stabilizing electricity tariffs”, Keti Bochorishvili noted. As reported, Khudoni HPP is planned to be constructed on the river Enguri. The HPP’s installed generation is presumed to be 702 megawatts and Indian-British consortium Tans Electrica Georgia will invest 1.2 billion USD in the project implementation.

bilisi State Medical University has conducted a final part of the students’ international festival. The event was held on May 6 to May 8 by the initiative of the students’ self-government and by support of the Tbilisi medical university and Trans Electrica Georgia company. During the three-day festival the medical university students of 37 nationalities from various countries competed with each other in various fields of sports. A students’ festival, concert and national cuisines festival was also held. The students’ international festival opened at the Tbilisi Medical University with sports competition on May 6. A flash mob was also held in the university yard on May 7, as well as competition in various national and sports games. Students

also held competition in BodyArt. Finally, the festival of national dishes was also held. The festival ended in a grand concert, where students of various nationalities introduced their art. The final event was attended by the university principal Zurab Vadachkoria and the university chancellor Zurab Orjonikidze. Trans Electrica Georgia plans to continue active support of popularizing health lifestyle among students. The Medical University student Kshitich Kushar was one of the festival organizers. “The university administration always assists us in organizing similar events. We express our gratitude to Trans Electrica Georgia company and we hope this initiative will be shared by other students too”, the festival organizers noted.

RATINGS May 12, 2014 #53

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RATING OF COMMERCIAL BANKS IN TERMS OF TOTAL ASSETS, STOCK CAPITAL, TOTAL LOANS, TERM DEPOSITS, NET PROFITS AND RESERVES ON AVAILABLE LOSSES

ccording to the financial transparency regulations approved by the president of the National Bank of Georgia (NBG) in 2006, Georgia-based commercial banks have published quarter financial reports. The banks have published financial reports for the first quarter of 2014 (as of 31.03.2014). We have decided to introduce the rating of commercial banks to the interested society due to several main indicators that provide comprehensive information on the work and development tendencies in both the whole sector and this or that distinct commercial bank. The previous issue of the Banks and Finances news-

paper published a quarter financial report for 18 commercial banks (out of 21 ones) in Georgia. Today we are introducing a bank rating in terms of total assets, stock capital, total loans, term deposits, net profits and reserves on available loses. The report is based on indicators of all Georgia-based commercial banks. It is worth noting total assets of commercial banks have considerably increased compared to the same period of the previous year. Consequently, growth tendency is recorded for total assets and term deposits. Net profits of commercial banks have also increased. For example, in the reporting period total assets of Bank of Georgia rose by over 900 million GEL. TBC

Bank total assets increased by over 600 million GEL year on year. Liberty Bank total assets grew by over 400 million GEL. VTB Bank total assets rose by over 340 million GEL. Azerbaijani Pasha Bank’s assets rose to 120 million GEL from 34 million GEL. Turkish Is Bank assets have increased by over 30 million GEL to 44 million GEL from 13 million GEL. Kazakh Halyk Bank and Constanta Bank assets have also increased considerably. Halyk Bank total assets have increased by over 50 million GEL year on year to 130 million GEL. Constanta Bank assets have grown by over 100 million GEL to 373 million GEL. Four commercial banks Progress Bank, Pasha Bank-

Georgia, Investbank and BTA Bank ended the reporting period in losses. Their total losses marked 2.7 million GEL, while net profits of remaining 17 commercial banks marked 100 million GEL. It is worth noting 2/3 of the sector’s total profits (6.3 million GEL) is recorded for Bank of Georgia and TBC Bank. The bank sector’s total loan portfolio marked 10.6 billion GEL as of March 31, 2014, while the figure stood at 8.9 billion GEL as of March 13. 2013. You may see this and all other interesting indicators in the below rating: B&F Analytics Group

RATING OF COMMERCIAL BANKS IN TERMS OF TOTAL ASSETS (IN THOUSANDS OF GEL)

RATING OF COMMERCIAL BANKS IN TERMS OF TERM DEPOSITS (IN THOUSANDS OF GEL)

RATING OF COMMERCIAL BANKS IN TERMS OF STOCK CAPITAL (IN THOUSANDS OF GEL)

RATING OF COMMERCIAL BANKS IN TERMS OF NET PROFITS (IN THOUSANDS OF GEL)

RATING OF COMMERCIAL BANK IN TERMS OF TOTAL LOANS ( IN THOUSANDS OF GEL)

RATING OF COMMERCIAL BANKS IN TERMS OF RESERVES ON AVAILABLE LOSSES (%)

CIS caucasian business week

EAST, NOT WEST: RUSSIA’S TOP 5 TRADE PARTNERS IN ASIA

eopolitics are changing fast, and the Ukraine crisis has brought Russia closer to its eastern neighbors. Russia has trillion dollar deals with the West, but may swap them for faster growing and bigger economies like India and China. The West is likely to continue sanctions against Russia over its suspected involvement in Ukraine, and put further restrictions on the Russian economy, whether goods or services, thus shifting Russia towards Asian markets which are growing faster. “It’s a case of when you shut a door, another opens elsewhere. As far as sanctions are concerned, yes it will damage Russia temporarily, but then Russia will have to start looking elsewhere to sell the goods that it makes,” David Duo, Market Analyst at The Motley Fool told RT. A shift in the world’s eighth largest country by GDP, and supplier of 12 percent of global energy will make ripples, even waves. Russia’s trade turnover with China is $88.8 billion per year, $33.2 billion with Japan, $32.7 billion with Turkey, $26.4 billion with Kazakhstan, and $25.1 billion with South Korea. Bilateral trade with China is set to reach $100 billion by 2015, according to Russia’s Deputy Prime Minister Dmitry Rogozin. Russia’s ties with the EU remain strong, as member states account for about 50 percent of the total imports and exports, with trade turnover reaching over $330 billion in 2012. China’s gross domestic product is catching up with the EU’s $13 trillion economy. In 2013, China’s GDP was $9.4 trillion. Russian President Vladimir Putin will visit China on May 19 before heading to the St. Petersburg International Economic Forum. Trade with the US is nominal, just slightly more than Japan, as it was only $38.1 billion in 2014, according to US Chamber of Commerce Data. Trade with India, though currently not in the top

five, is about $15 billion per year, and by 2015 the Russian government hopes to boost it to $20 billion. Russia and India have many areas of mutual cooperation, from IT and telecoms to pharmaceuticals and energy “Pharmaceuticals are one very big area, and Indian companies can really encourage and support Russian companies to manufacture medicines. Similarly in India we welcome a lot of Russian companies that can support oil and natural gas and other petroleum products,” Yaduvendra Mathur, of the Export-Import Bank of India, told RT. Oil and Natural Gas Corporation Limited (ONGC), an Indian multinational oil and gas company has a large presence in the Tomsk region of Russia. Russia, which sits on the world’s largest reserves of natural gas and oil, also has oil links with China, which is hoping to move away from its polluting and coal-dependent energy system. “What does China want- clean energy, and that is something Russia can provide, so I think there is a ready-made relationship between the two countries,” Duo told RT. “It’s always been a case of east versus West,” Duo said. In the next 25 years Russia will export more than 700 million tons of oil to China. Rosneft, Russia’s state-owned oil company, has a 25 year $270 billion deal with China’s National Petroleum Company. Many Russian companies have made the first move and have begun to re-orientate their business towards booming eastern markets, and away from Europe and the US. In Asia, Russia companies hope to either use the ruble or yuan to settle trades, to avoid dependence on the US dollar. Russia’s Economics Minister Aleksey Ulyukaev has expressed interest in increasing trade volumes in national currencies, especially when it comes to energy and gas. China, India, and Turkey could be prioritized as partners.

UKRAINE RECEIVES FIRST $3.2 BILLION FROM IMF

kraine, a nation on the brink of civil war and bankruptcy, has received its first emergency rescue money from the International Monetary Fund (IMF), the National Bank of Ukraine reported. The two-year program will shell out over $17bn in aid to Ukraine’s troubled economy, and was approved by the IMF’s 24-member board at the end of April. National Bank Chairman Stepan Kubiv said that a portion of the first loan will be used to boost gold and currency reserves and help stabilize the fast-falling hryvnia. Foreign currency reserves have been wiped out as the Bank spends money to prop up the weak currency, and have reached a critically low level of under $12 billion. Ukraine has over $9 billion in debt it needs to address immediately. In total, $27 billion in international aid has been pledged to Ukraine, but this is the first monetary promise the West has delivered on. In December, Russia provided Ukraine with a $15 billion no-stringsattached loan. Ukraine only received $3 billion after Moscow rescinded the offer once protests broke out and a coup-appointed government was installed in Kiev. The IMF money comes with stringent terms, requiring various cuts and economic reforms. In the case of Ukraine, the re-

quirements include a 50 percent increase in the price of household gas, as well as a quick pension reform and lower government spending. The money came on the same day that Naftogaz, Ukraine’s money-hemorrhaging national oil and gas company, is due to start paying off its $3.5 billion debt to Russia’s Gazprom, or risk the introduction of a pre-payment system. It has been previously reported that Naftogaz may receive $2.16 billion of the first tranche of IMF money to pay off its massive debt to Gazprom, according to documents prepared by the IMF. If the money isn’t used to pay Gazprom, Russia’s gas company has the right to ask for advanced payments. Yury Prodan, Ukraine’s Energy Minister, has hailed the IMF loan as a needed reprieve for state-owned Naftogaz, as well as a way to ”switch on” the country’s dilapidated economy. Ukraine’s economy contracted 1.1 percent in the first three months of 2014, a poor performance that puts the economy on track to slow 4 percent overall in 2014. This year, the hryvnia has already slumped nearly 30 percent. The Central Bank, which is running dangerously low on foreign exchange reserves, may not be able to prop it up for much longer. Economic default is ‘imminent’ before the end of the year, Moody’s ratings agency says.

May 12, 2014 #53

FITCH AFFIRMS KAZAKH KAZAGRO AT ‘BBB’

he International Rating Agency Fitch Ratings has affirmed Kazakh KazAgro National Managing Holding JSC’s Long-term foreign currency Issuer Default Rating (IDR) at ‘BBB’ and its Long-term local currency IDR of ‘BBB+’ and removed them from Rating Watch Negative (RWN). The agency has also affirmed KazAgro’s Shortterm foreign currency IDR at ‘F3’, Fitch reported on April 8. Fitch has also affirmed the ‘BBB’ Long-term foreign currency rating of KazAgro’s senior unsecured $1 billion eurobond issue due 2023 (ISIN XS0934609016) and removed it from RWN. At the same time Fitch has also published the expected ‘BBB(exp)’ Long-term foreign currency rating of KazAgro’s upcoming eurobond issue of up to an equivalent of 600 million euro. “The removal of the Rating Watch reflects receding risks that the share of market funding will consistently overshoot above 50 percent of total at the expense of state funding,” the agency said. Market funding above the 50 percent level would have widened the rating differential with Kazakhstan (BBB+/A-/Stable), the 100 percent owner of KazAgro, to two notches. KazAgro was placed on RWN on 8 April 2014. Following information received by the company,

as well as audited statements for 2013 Fitch estimates that Kazagro’s market funding will be at about 40 percent of total over the medium term, declining from a spike to 47 percent in 2014 subsequent to the upcoming issue of the eurobond of up to 0.6 billion euro. KazAgro acts as the government’s agent in implementing the state’s agriculture policy. The agricultural sector is of high importance to the nation in terms of grain exports, production, employment and social issues. Fitch rates KazAgro based on a top-down approach under its criteria, taking into account continuous state support in the form of equity injections, subsidised budget loans and other stateoriginated funding. Fitch expects that KazAgro will continue to benefit from regular equity injections and access to subsidised government loans. Positive rating action may result from evidence of more formalised state support, including an explicit government guarantee on KazAgro’s debt. An upgrade of the Republic of Kazakhstan could also trigger a positive rating action. Negative rating action could be triggered if market debt becomes the major funding source for KazAgro on a sustained basis, signalling a long-term shift in the company’s financing approach. A negative rating action on the Republic of Kazakhstan would also be reflected in KazAgro’s rating.

RUSSIA TO DEMAND ADVANCED PAYMENT FOR GAS SUPPLIES TO UKRAINE FROM JUNE

azprom says Kiev has failed to pay its mounting gas bill, which now has hit $3.5 billion. This means that in June Ukraine will receive Russian gas only on the condition of advanced payment. “The deadline has passed, no payment has been received,” said Sergey Kupriyanov, the company’s representative. Earlier the company said that if the deadline was not met, Gazprom would issue an advance bill for June gas supplies on May 16. Naftogaz, Ukraine’s state-owned oil and gas company, has a long record of late payments and unpaid bills to Gazprom, a problem which has only gotten worse as Ukraine has slipped into civil unrest. The debt as of May 7, 2014 stands at $3.508 billion, Gazprom said Wednesday, up from the $2.2 billion tab at the end of April. The sum is contested by Ukraine. Moscow, Kiev and the European Commission plan to hold a new round of talks to negotiate the debt; its date will be discussed on May 12, Russia’s Energy Ministry said. The missed April payment came the same day Ukraine received its first tranche of $3 billion from the International Monetary Fund (IMF). Out of that sum, Naftogaz may be eligible to use up to $2.16 billion to pay off its massive debts to Russia, according to documents prepared by the fund. If the money isn’t used to pay to Gazprom, Russia’s gas company has the right to ask for advanced payments. Gazprom supplies Europe with 30 percent of the continent’s natural gas. Half of these Russian supplies are shipped through Ukraine. PRICE WARS Later on Wednesday, the prime minister of Ukraine’s coup-imposed government, Arseny Yatsenyuk, said that Kiev will quickly repay its Russian debt if Gazprom agrees to return the gas price to $268.50 per 1,000 cubic meters, the price the country enjoyed under ousted President Viktor Yanukovich. Moscow ended the discount in April, raising gas prices nearly 50 percent. “Once such price is established and the respective additional agreement signed, Ukraine will pay back its debt within ten days,” Yatsenyuk said, cited by Interfax. But this will only happen if Gazprom realizes that using “gas as a political weapon is unacceptable,” he added. Naftogaz CEO Andrey Kobolev said if the pricing conflict is not resolved, his company will take

the case to the Stockholm Arbitration Council. Meanwhile, the future cost of gas for Ukraine calculated separately by Russia and by the West is pretty much the same, but for different reasons. The IMF believes that Kiev will receive gas this year at the average European price of $380 per 1,000 cubic meters, a price the IMF took into account when calculating Kiev’s lending program, Kommersant reported. The number is given with a perspective that Russia would renew its $100 discount to Kiev based on Kharkov agreements. Although Russia says that there will be no more discounts, the gas price for Ukraine in 2015 predicted by the Russian Ministry of Economic Development is said to be $350 per 1,000 cubic meters. It’s even less than the IMF calculation and is based on the expected fall in the price of oil. As the situation with Ukraine is quiet unstable, the Ministry has taken into consideration a moderately pessimistic scenario, Kommersant was told by its source. The first gas hike came in after Gazprom cancelled the Yanukovich discount after the first quarter of 2014 and bumped prices up to $385.50 per 1,000 cubic meters. The second $100 gas hike came in April when Russia canceled its Black Sea Fleet host agreement with Ukraine after Crimea voted to join Russia. Moscow said Kiev owes $11.4 billion for all the discounts it received since the 2010 deal. SITUATION IS ‘CRITICAL’ Russian Energy Minister Aleksandr Novak warned over the weekend that the situation with gas transit through Ukraine had reached a “very critical point” as the gas supplies in underground storage facilities have dropped to a point where they can’t guarantee supplies from Russia to Europe. In 2009, Moscow was forced to turn off supplies through Ukraine over pricing disputes, but even after this “trigger” Gazprom didn’t demand that Kiev start a prepayment contract. State-owned Naftogaz is on the brink of bankruptcy because it has been selling gas domestically for only a fraction of the import price. Ukraine’s economy contracted 1.1 percent in the first three months of 2014, a poor performance that puts the economy on track to slow 4 percent overall in 2014. This year, the hryvna has already slumped nearly 30 percent. The Central Bank, which is running dangerously low on foreign exchange reserves, may not be able to prop it up for much longer. The country is likely to default before the end of the year, Standard & Poor ratings agency says.

AZERBAIJAN May 12, 2014 #53

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AZERBAIJAN TO CHAIR ADB IN 2015

zerbaijan is set to take the presidency of Asian Development Bank (ADB) in 2015. The news was announced by ADB’s Governor for Kazakhstan Erbolat Dossaev on May 5. The symbols of the ADB’s presiding country were handed to Azerbaijan’s Finance Minister Samir Sharifov during the 47th annual meeting of its Board of Governors in the Kazakh capital. “We are grateful to the ADB’s management board for the confidence given to Azerbaijan to be the chairman of the Asian Development Bank,” Sharifov said, addressing the event. “We want to thank Kazakhstan for the high quality of the 47th meeting. And, next year, we will be glad to see all the delegates in our hospitable capital - Baku.” The representatives of Sri Lanka and Ireland will be vice chairmen of the ADB in 2015. Having joined the ADB on December 22, 1999, Azerbaijan will host the 48th annual meeting of the ADB Board of Governors in 2015. Minister Sharifov noted that Azerbaijani President Ilham Aliyev had already ordered the creation of an organizing committee for the ADB’s 48th meeting. The 47th annual meeting in Astana brought together over 3,000 representatives from ADB member states, including ministers, central bankers, government officials, businessmen, representatives of international financial institutions and civil societies, renowned scholars, and experts. The main theme of the meeting, opened by ADB President Takehiko Nakao and Kazakh President Nursultan Nazarbayev, was ‘The Silk Road: Con-

necting Asia to a Changing World’. Addressing the event, Nakao spoke of the need for the ADB to sharpen its focus to better serve the needs of a developing Asia in rapid transition. He also looked forward to putting an end to extreme poverty in the region by 2020. Nakao then hailed Azerbaijan’s economic growth, expressing confidence that the Baku meeting would be a success. Saying that the annual meeting of the ADB Board of Governors would take place in the Caucasus region for the first time, he added that they had been looking forward to seeing Azerbaijan’s rapid development. The meeting featured the Day of Azerbaijan, which was attended by the delegations of member states, the ADB leadership, and prominent public and political figures of Kazakhstan and other countries. A promotional video about Azerbaijan was demonstrated afterwards, and the website of the 2015 Baku meeting was also presented. On the sidelines of the meeting, Minister Sharifov also held several meetings, including with Nakao, Secretary General Maria-Anne Birken, Vice-President of the WB Lora Tak, Director General of the Japan International Cooperation Agency Kiyoshi Kadero, and Director of the Japan Bank for International Cooperation Hirosh Vatanabe, to discuss expansion of bilateral cooperation. Following the meeting with Nakao, Azerbaijan and the ADB signed a loan agreement on the 4th tranche of Multi-Tranche Financing Facility (MFF) of Road Network Development Program. The agreement provides financing for the construction of the Agstafa-Poylu-Sadigli-Georgian border, as well as four bridges on the PoyluDuzgishlaq-Gazakh road. Established in 1966, the ADB has 67 member countries. The bank’s headquarters is located in Manila, the capital of the Philippines. The ADB’s leading shareholders are Japan and the U.S (31.2 percent of the total share capital), India and China (12.8 percent), Australia, South Korea and Canada (16 percent) and so on. Azerbaijan’s share in the bank’s capital is 0.5 percent.

MOODY’S CONFIRMS STABILITY IN AZERBAIJAN’S BANKING SYSTEM

he outlook on Azerbaijan’s banking system remains stable, Moody’s Investors Service reported on April 29. Azerbaijan’s banking system has remained stable since August 2010, and the outlook reflects Moody’s expectation that the country’s banks will continue to benefit from a favorable operating environment, stable asset quality, and sufficient capital buffers in the next 12-18 months. Moody’s also believes that demand for credit will be maintained by Azerbaijan’s robust economic growth, which will help banks maintain lending margins and profitability. However, these supportive factors are counterbalanced by the system’s structural weaknesses, including the economy’s persistent lack of diversification as a result of strong reliance on oil production, the banks’ limited access to long-term funding, and high single-name concentrations, the report shows. Relatively stable oil prices in the coming 12-18 months will continue to support the government’s efforts to grow the economy’s non-oil sectors, Moody’s says. Moody’s has stated that Azerbaijan’s GDP will increase by 5.0 percent in real terms in 2014. Azerbaijan’s supportive macroeconomic conditions remain a key factor that underpins the country’s stable outlook. The nominal growth of the loan portfolio at Azerbaijani banks will stand at around 20 percent in

2014, a report from the Moody’s Investors Service shows. “Moody’s forecasts annualized the nominal loan growth at around 20 percent in 2014 (against the expected inflation of 3.4 percent), compared to the loan growth of 25 percent in 2013,” the report says, adding that Azerbaijan’s operating environment is expected to broadly support credit demand and borrowers’ financial profile. The rating agency also highlighted Azerbaijan’s recent policy to tighten consumer lending, which should help curb growth in this booming segment. “While the current trend of strong loan growth may represent a latent risk for asset quality, potential credit costs are well-contained by current provisioning and capitalization,” Moody’s said. The assets of Azerbaijani banking sector stood at 2.08 billion manats in March 1, 2014, versus 1.67 billion manats in February 2013. Banking assets increased by 24.65 percent over the year. Moreover, local banks increased lending to the economy by 28.34 percent in the first two months of 2014 - up to about 15.7 billion manats. Out of the total portfolio, loans worth 831.6 million manats (5.31 percent) were overdue compared to 761 million manats in the first two months of 2013. The statistics of overdue loans do not include similar loans by the non-banking credit institution Aqrarkredit. The overdue loans have increased by 9.3 percent over the past year. Azerbaijan’s Central Bank (CBA) demanded the country’s banks to tighten control over the consumer lending. The CBA sent a letter to Azerbaijani banks, asking them to cease granting a loan to the borrowers without demanding their certificate of employment. In addition to that, the terms of granting loans for car purchase was tightened, which, the experts believe, is due to the worsening of the banking sector’s portfolio on this type of lending.

OVER 400 COMPANIES TO JOIN CASPIAN OIL AND GAS FAIR 2014

ore than 400 firms from 28 countries will come together in Azerbaijan`s capital, Baku, for the 21st Caspian Oil and Gas Fair. The organizer of the event, which will be held at the Expo Center in June, is Iteca Caspian. Caspian Oil and Gas Fair is held annually under the patronage of President Ilham Aliyev and is officially supported by the Industry and Energy Ministry of Azerbaijan and SOCAR. The Caspian International Oil & Gas Exhibition will take place alongside the adjourning conference which will be held on June 4 - 5 2014 at the JW Marriott Hotel Absheron Baku. About 500 experts from 30 countries are expected to take part in the event. The exhibition is aimed to bring together the manufacturers and suppliers of process plant and equipment, for this growing industry, all under one roof. The exhibition will provide an excellent platform for service providers to showcase their products and services to decision makers from leading Caspian Chemical manufacturers. Profile for exhibit include Environmental Services, Exploration & Production, Fire & Explosion Safety Clothing & Equipment, Gas Detection, Gas Processing, Generators, LNG Production & Transportation, Lubricants, Paints, Pipe Drilling & Fitting & Laying, Platforms, Pumps, Subsea

Production Systems & Equipment, Tanker Loading, Transportation of Oil & Gas. Caspian Oil & Gas Conference is one of the most significant international oil and gas events where the very topical issues of bi-lateral and multi-lateral energy relations and global energy security are discussed. This conference is appraised as a peculiar institute for the oil and gas industry by the leading specialists of this sphere. The event has become the traditional meeting place for the specialists of the oil and gas industry worldwide, serving as a striking example of industry achievements and of the amount of interest taken in projects implemented in the Caspian region. Participation in the conference enables the evaluation of both new trends in the oil and gas market and potential opportunities in the region, including issues of co-operation, the prospects for the solution of global energy security issues and large investment projects.

AZERBAIJAN, U.S. TO PRODUCE TRACTORS UNDER FOUR BRAND NAMES

zerbaijan and the U.S. are planning to jointly produce tractors under four brand names. Azerbaijan’s Ganja Automobile Plant and the U.S. AGCO company are holding negotiations on this issue, the plant’s Deputy Director of Marketing and Service Konstantin Barabanov told TrendAgency on May 8. He went on to say that the plant will produce tractors under the brand names of Challenger, Fendt, Massey Ferguson and Valtra. AGCO is one of the world’s leading manufacturers of agricultural machinery. “AGCO is a universally recognized leader in manufacturing agricultural machinery and spare parts which comply with high international standards. Currently, we are negotiating with the U.S. company on the possibility of starting this production in Azerbaijan,” he said.

Barabanov also said Ganja Automobile Plant pays great attention to the quality, innovations of its products and meeting the growing demands of consumers. “Also, the plant has established an extensive network of service centers throughout the country,” he said. “The use of modern equipment and technology will have positive effect on the development of agriculture and help us providing the consumers with necessary agricultural products.” The Ganja plant is able to assemble up to 1,000 trucks and around 2,000 tractors per year. Currently, tractors under the brand name of Belarus and MAZ cars are assembled at the plant. Along with tractors and cars, the Ganja plant also produces various kinds of equipment for Belarus tractors. There is a one-year guarantee for the equipment produced at the plant. Azerbaijan produced around 739 tractors in 2013, which is by 19.6 percent more compared to 2012.

SWISS MINING GROUP TO BUY COPPER FROM AZERBAIJAN

company that extracts precious metals in Azerbaijan signed a contract with a Geneva-based integrated trading, mining, and logistics group. The Anglo-Asian Mining plc signed the threeyear contract with Industrial Minerals SA, which will become its exclusive partner in selling the company’s copper concentrate product from the Gadabay gold, copper, and silver mine in western Azerbaijan, the company reported on May 6. The company produces copper in the form of a precipitated copper sulphide concentrate byproduct, which also contains silver with commercial value and a small amount of gold, from its Sulphidisation, Acidification, Recycling, and Thickening plant at Gadabay. Under the terms of the sales agreement, Industrial Minerals will purchase both dry and wet copper concentrates. Anglo-Asian Mining has 75 tonnes of dry copper concentrate and 550 tonnes of wet copper concentrate stockpiles ready to sell, and Gadabay expects to exceed its target to produce 595 tonnes of copper this year. Anglo Asian CEO Reza Vaziri said the exclusive sales contract with Industrial Minerals will increase the company’s profitability. “With record copper sales from Gadabay totalling $6.6 million in 2013, we are well placed to

continue this trend in 2014. I look forward to updating the shareholders on copper production and sales and also gold production from Gadabay in the coming months,” he said. Developments at the company’s second gold project Gosha, at which the first phase of gold production has started, will also materialize. “We now have two production projects in the country, which together sees Anglo Asian’s gold forecast between 62,000 and 67,000 ounce of gold for 2014,” Vaziri said. The company has the rights to develop six deposits in the south-west of Azerbaijan - Gadabay, Ordubad, Gosha Bulag, Gyzyl Bulag, Vezhnali, and Soyutlu- under a production sharing agreement signed in August 1997 with Azerbaijan’s government. The resource base of the company exceeds 36 tonnes of gold, 292 tonnes of silver and 94.000 tonnes of copper.

NEWS caucasian business week

May 12, 2014 #53

WORLD NEWS May 12, 2014 #53

caucasian business week

‘ROBIN HOOD’ WINS: EU TO LEVY FINANCIAL TRANSACTIONS TAX FROM 2016

he EU has established a financial accord on an EU financial transactions tax to be implemented from 2016. Eleven EU member states will be imposing a ‘Robin Hood’ tax on financial transactions, after it was proposed in 2011 to counter financial crises. The tax was proposed three years ago by German Chancellor Angela Merkel and then French President Nicolas Sarkozy to encourage banks to pay for the crippling financial crisis which had struck the eurozone, plunging a range of countries, including Greece, Ireland, Spain and Portugal, deep into debt. “I believe we will reach a political agreement on a financial transactions tax, all ministers are ready,” Luis de Guindos, Spain’s economy minister, told reporters ahead of the accord being reached. “I hope we will reach agreement on the assets to be included, mainly shares and some derivatives.” Once passed, the FTT will be adopted by 11 EU states, excluding Britain, from January 2016. Out of the 27 EU member states, those which will be implementing the tax are France, Germany, Estonia, Spain, Portugal, Italy, Greece, Austria, Belgium, Slovenia and Slovakia.

However, questions regarding how the tax will be imposed and how high it will be are still undecided. Not all countries have been supportive. London has claimed that the FTT will cause financial damage to British firms. “The government is determined to continue to ensure that the interests of countries outside of the single currency, but inside the single market, are properly protected,” a UK Treasury spokesman told the BBC last week. The tax has frequently been described as a ‘Robin Hood Tax’ in reference to the legend of the medieval tight-wearing, anti-poverty campaigner Robin Hood, who supposedly robbed the rich to give to the poor. “If governments took a tiny tax from international bankers’ transactions, it could generate hundreds of billions of pounds every year,” the UK-based Facebook ‘Robin Hood tax’ page states. “This is a fight between bankers and Robin Hood,” said Natalia Alonso, a campaigner at Oxfam, told Reuters on Tuesday. “We are saying that the money raised with this tax should go to fighting poverty.” The promise to impose the tax comes ahead of European elections, during which a swerve to the right has been anticipated. However, experts have stated that difficulties in the reality of implementing the tax mean that the policy could be shelved over the next couple of years, according to Reuters. “The lack of information on the proposal is a real problem,” Anders Borg, the Swedish finance minister and long-term critic of the project, told the agency.

BARCLAYS ‘BOLD SIMPLIFICATION’ WILL SLASH 19,000 JOBS, CREATE ‘BAD BANK’

ritain’s second-biggest bank will eliminate 19,000 jobs over the next three years, with major cuts aimed at its investment bank, signaling the lender has given up becoming a major player in global investment banking. Barclays will phase out about 15 percent of its staff of 140,000. By 2016, about 7,000 investment bankers in London and New York out of the total 26,000 will be given pink slips. The major overhaul will cut 14,000 positions this year, 2,000 more than announced in February. Another 5,000 jobs will be cut in 2015-2016. “This is a bold simplification of Barclays,” the bank’s chief executive, Antony P. Jenkins, said. Jenkins took over the bank after CEO Bob Diamond resigned following a slew of scandals and fines, including the Libor-rigging scandal. This is Jenkins’ second strategic review of the bank, and he thinks it will take 5-10 years before it can regain public trust and not simply be seen has a high risk, high reward corporate beast. Barclays PLC shares soared on the news, with shares up 6.98 percent at 15:00 London time. ENTER THE ‘BAD BANK’ Part of the ‘re-set’ includes setting up a “bad bank” an internal bank that will take on £115 billion ($195 billion) of non-core assets like that will eventually be sold or run down. Physical commodities outside of precious metals and the

European retail branch networks in Italy, France, Spain and Portugal will be part of the new ‘bad bank’. The company hopes to focus more on retail activates within Britain, its Barclaycard credit card division, and African business. Setting up a ‘bad bank’ is a way for Barclays to distinguish between past ‘bad’ business and the future strategy the group wishes to pursue. It was a technique used by many banks following the 2008-2009 financial crisis and subsequent recession. The bank anticipates the changes to take an additional £800 million in restructuring costs. Last year the bank said they expected the overhaul to cost about £2.7 billion. “We will be a focused international bank, operating only in areas where we have capability, scale and competitive advantage,” Mr. Jenkins said on Thursday. “In the future, Barclays will be leaner, stronger, much better balanced and well positioned to deliver lower volatility, higher returns, and growth.” First quarter profit was disappointing, dropping 5 percent in the first three months of 2014 hurt by fixed income, forex and commodity trading. Profits in 2013 dropped 32 percent, in part due to a poor performance by the investing team. Even though profits plummeted the bonus pool increased by nearly $4 billion. Senior managers refused their 2013 bonuses.

WARREN BUFFETT WON’T ‘GO TO WAR’ WITH COCA-COLA

arren Buffett defended his decision to abstain from a shareholder vote on CocaCola’s new controversial executive compensation scheme at this weekend’s Berkshire Hathaway investor meeting. The annual meeting, known as the ‘Woodstock for Capitalists’ was held in Omaha, Nebraska from May 4-5, and attendees grilled Buffett on his decision not to vote on restricting compensation packages for top executives at the beverage company. Berkshire Hathaway owns 9.1 percent of Coca-Cola making it the largest single stockholder. Buffett reaffirmed he thought the plan, which includes long term equity awards and issuing 340 million new shares and options over the next for years, was too much. “We made a very clear statement about the excessiveness of the plan and, at the same time, we in no way went to war with Coca-Cola,” Buffett said. “I don’t think going to war is a very good idea in most situations.” Berkshire chose not to vote because they didn’t

want to act directly in defiance of Coke’s management. Buffett has been putting pressure on Coca-Cola to cut back on its excessive salary plan, which will bump executives’ pay starting 2015. The plan, which Buffett denounced as a “lottery” giveaway, included long-term equity awards as well 340 million new shares and options over four years. Previously Buffett said the plan wasn’t completely “out of whack” as quality executive performance is very valuable to a company. Buffett, the world’s third-richest man, with a personal fortune estimated at $65.5 billion, said he talked with Coke’s president and CEO, Muhtar Kent at the investor meeting. Buffett has spoken out against the ‘excessive’ compensation scheme for top executives, but believes the decision for Berkshire to abstain from voting sends and even clearer message. In the US, pay inequality between employees and top bosses has increased dramatically. In 2012, CEO’s of the S&P 500 companies were on average paid 354 times more than their workers.

KAZAKHSTAN TO EXEMPT INVESTORS FROM CORPORATE INCOME TAX

azakhstan is planning to exempt the investors from corporate income tax for 10 years. It was announced by Kazakh President Nursultan Nazarbayev at the 47th annual meeting of ADB Board of Governors in Astana. “We intend to create the most appropriate ground for foreign investments. To this end, we will adopt a new law to improve investment laws this year. We plan to exempt investors from corporate income tax for 10 years, to input investment subsidies, to ensure a stable legislation and predictable tariff and to simplify import of foreign labor,” Nazarbayev said. He noted that cooperation with investors will be on a single window system. “In addition to the institute of investment ombudsman, we will pursue inclusive economic growth and increase investment in human capital development,” the Kazakh president added. In his remarks Kazakh Deputy Prime Minister and Minister of Industry and New Technologies Asset Isekeshev said Kazakhstan considers 160 transnational companies wishing to operate in the country as potential investors for priority industry sectors. “We have identified about 160 transnational companies which have the best technology and experience in the priority areas, including engineering, agriculture, transport and logistics, chemicals and petrochemicals, as well as metallurgy,” he noted. The minister went on to add that the transnational companies have expressed their desire to work in Kazakhstan, set up their production and enter the markets of Russia, Central Asia and Western China. “We expect to hear about new projects of major companies in the second half of the year. Today global giant Toyota Motors has announced its plans. This is a company that all countries across the world want to see it in their area. Toyota will produce cars in our country,” Isekeshev noted. Isekeshev also said Kazakhstan is creating all necessary conditions for investors. “Our country intends to actively support the development of tourism, pharmaceutical and light

industries. In this regard, the Kazakh government encourages foreign investors to get actively involved. We hope that during the ADB meeting, you will see that Kazakhstan is an ideal place for investment, regional center, the hub for investment in trade,” he said. “Kazakhstan also intends to develop food production, metallurgy, chemistry, petrochemicals, engineering and production of construction materials,” the minister added. Isekeshev stressed Kazakhstan has embassies in all countries and the Kaznext Invest agency operates as the ‘front office on work with investments.’ “We are ready to separately contact each company and support their projects,” Isekeshev said. He also noted that today all conditions have been created for foreign investments in Kazakhstan. Over the past 12 years, real GDP grew by average 8 percent in Kazakhstan and gross investment amounted to more than $180 billion since 2005. Inflow of direct investments from Asia to Kazakhstan’s economy has made up more than $23 billion in the last eight years. “Today, Asian investors have implemented more than 40 large investment projects in the country totaling over $12 billion. More than 50 projects worth $20 billion are at the implementation stage,” the Deputy Prime Minister said. Also, Kazakhstan intends to make a new breakthrough for the radical improvement of the investment climate. “We would like to invite Asian companies to work in Kazakhstan with a focus not only on our market - it is quite small - but also on the markets of our partners in the Customs Union and Central Asia, as well as fast-growing regions of Asia,” Isekeshev said. Kazakhstan is interested in taking several measures to improve the investment climate in the country. The country plans to introduce additional measures to improve the investment climate. A draft law on improving the investment climate is expected to be introduced at the Kazakh parliament before June 1, 2014. The draft law includes a new format of contracts with investors describing the government support measures in details.

PUBLICITY caucasian business week

May 12, 2014 #53

TBILISI GUIDE May 12, 2014 #53

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: +995 32 2 75 21 11, Fax: +995 32 2 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

May 12, 2014 #53