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BUSINESS WEEK May 19, 2014 #54

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May 19, 2014, Issue 54

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GEORGIA GEORGIA’S EXPORTS TO UKRAINE SHRINK BY 5%

GEORGIA AND MOLDOVA WILL SIGN ASSOCIATION AGREEMENT WITH EU ON JUNE 27

PASHA BANK GEORGIA PLANS TO BE AMONG THE TEN LEADING BANKS OF GEORGIA

ASHA Bank OJSC increases charter capital of the subsidiary bank in Georgia in 3 times. Pg. 9

COLLIERS INTERNATIONAL STARTS ITS OPERATION IN GEORGIA

Pg. 5

Hollands Holds Talks with Georgian Officials in Tbilisi Pg. 2 Ilham Aliyev: Azerbaijan’s foreign policy underpinned by protection of national interests Pg. 11 Zurab Abashidze: Georgia must Become a Bridge to Europe Pg. 7

Pg. 2

FITCH AFFIRMED “BB-” TO GEORGIA

CIS TOTAL FREE FALL: UKRAINE ECONOMY TO PLUNGE 7% IN 2014, NO GROWTH IN 2015

WORLD NEWS INTERNATIONAL TOURISM GENERATES US$ 1.4 TRILLION IN EXPORT EARNINGS

otal export earnings generated by international tourism in 2013 reached US$ 1.4 trillion. Pg. 13

nternational rating agency Fitch Ratings affirmed sovereign rating of Georgia at “BB-”, outlook “stable”. Fitch explains that the rating reflects the fiscal deficit shrank to 2.6% of GDP in 2013 on the back of lower capital expenditure. As the government reviewed some of its public contracts. Also the government commitment to continue supporting GDP growth. Fitch mentions that the the main risk factors that may influence the rating, are: renewed pressure on reserves and the exchange rate, brought about by a widening in the CAD combined with a fall in capital inflows; A departure from prudent fiscal and monetary policymaking; A souring of the domestic or regional political climate. Besides, in the case of a revival of strong and sustainable GDP growth combined with fiscal discipline the rating may change positively. Other

positive factors may be: A moderation of external imbalances, underpinned by continuing export growth; a significant reduction in the dollarization ratio; - Further evidence of improvements in governance and political stability. Fitch experts consider that slowdown of Russian economic growth will have a limited influence over Georgian economy, which will be mainly reflected on the money transfers. The agency assumes that Georgian government will maintain fiscal deficit bellow 3% of GDP, foreign debt - over 40%. Besides, Fitch does not expect deterioration of Georgian-Russian relations and the lifting of trade barriers to be maintained. Fitch also Fitch assumes that Georgia regains access to IMF funding by keeping to agreed targets. A departure from these targets could expose external finances to greater risks.

Zurab Tkemaladze: “If we built Khudoni HPP in 90s, Georgia would have been in a completely different situation now“ Who Prevents the Introduction of “4-G” on the Georgian Communications Market? Pg. 4

Pg. 8

MAIN EVENTS caucasian business week

May 19, 2014 #54

HOLLANDS HOLDS TALKS WITH GEORGIAN OFFICIALS IN TBILISI

VAN ROMPUY: ASSOCIATION AGREEMENT ‘NOT THE FINAL GOAL’

resident of the European Council Herman Van Rompuy, who is holding talks with the Georgian leadership in Tbilisi on May 14, said that signing of the EU-Georgia Association Agreement on June 27 in Brussels “is not the final goal in our cooperation.” From the Georgian side the agreement, which also includes deep and comprehensive free trade treaty, will be signed by PM Irakli Garibashvili at a ceremony in Brussels in presence of EU heads of states and governments. “This important milestone will mark the beginning of a new phase in our relations and in the history of your country,” Van Rompuy said after meeting PM Garibashvili in Tbilisi. “By choosing this path, Georgia is signaling its commitment to strong democratic institutions, respect for the rights of its citizens, and firmly upholding the rule of law.” Van Rompuy, who arrived in Tbilisi after visiting Ukraine and Moldova, said that the EU “will stand firmly by Georgia’s side” as it embarks on implementation of the agreement. Along with Georgia, EU will also sign the Association Agreement with Moldova in Brussels on June 27. Speaking at a joint news conference after the meeting, PM Garibashvili reaffirmed that Georgia follows European integration course “unwaveringly”. “This is the cornerstone of our country’s domestic and foreign policy and most importantly this is the choice of our people,” Garibashvili said. “We understand that association process is very laborious, requiring wide-ranging reforms; so we are ready to further intensify our efforts in this regard,” the Georgian PM added. The President of the European Council expressed “strong appreciation for the efforts, which the Prime Minister has made to implement an ambitious reform agenda”, which, among others, also includes “the impartiality of the judiciary and the fight against abuses.” He welcomed adoption of anti-discrimination legislation by Georgia and said that the “diversity is in our DNA”. “Modern societies defend human rights and the dignity of all human beings, irrespective of their skin color, religion, gender or sexual orientation. This is not about ‘traditional values’ or ‘European values’. It’s about universal human values. By adopting the anti-discrimination law, Georgia has demonstrated that it shares those values and is prepared to defend them – to the benefit of all citizens,” Van Rompuy said. He also said that Georgia “continues to have a strong record on democratic elections” and avoiding “polarization will make this even stronger.” The President of the European Council said that

“troubling regional situation” was also discussed during the meeting. He reiterated EU’s support to Georgia’s territorial integrity and said that the EU is “concerned by obstacles to free movement” across the administrative boundary lines of Georgia’s breakaway regions. On Ukraine, Van Rompuy said that the EU is ready to “increase the cost for Russia” should it take more steps to further destabilize the situation. “For now the immediate goal is to ensure free and fair presidential elections” in Ukraine on May 25, he said. The Georgian PM said that in the view of “current difficulties in the Eastern Partnership region, we expect EU’s more active efforts.” “We believe that the EU will provide more assistance and help to the Eastern Partnership countries, which have made the European choice,” PM Garibashvili said. “Europe whole and free has not yet been accomplished; we hope that united, strong and successful European Union will play an active role in achieving this goal,” he added. The President of the European Council spoke more about Georgia’s association process with the EU and challenges on this path in his speech delivered at Europe House in Tbilisi before meeting President Giorgi Margvelashvili. Van Rompuy said that choosing the path of political association and market integration with the EU “should not be seen as a rejection of close relationships with other partners.” “It should not be seen as a zero-sum game. Russia is a neighbor. But good neighbors respect each other’s borders. Respect of territorial integrity is a precondition for stability, here and elsewhere in Europe,” he said. “The Association Agreement, with its free trade aspect, is fully compatible with improved trade across the Caucasus.” He said that there’s always a risk that security challenges could be played on “to scare you.” “But your country knows how to resist such pressure. You are the ones who are best placed not to let such risk happen. Don’t let yourselves be abused by appearances: violence is not strength. Don’t let yourselves fall victim of those who want to ‘divide and rule’. Your way of life as a free society is your greatest strength,” Van Rompuy said. Speaking about internal challenges, Van Rompuy stressed that the Association Agreement is about values and the EU is looking to Georgia to uphold these values. “This relates to the independence of the courts, the respect of the presumption of innocence, pluralism, and the fight against abuses. This also relates to a normal interaction between opposition and majority, away from polarization. All this gives content to the notion of a mature and healthy democracy,” Van Rompuy said.

rench President François Hollande, who visited Tbilisi on May 13, praised Georgia’s progress and reiterated support to country’s territorial integrity and European aspiration. He called on the Georgian authorities to focus on implementing the Association Agreement, which Georgia and the EU will sign in June, and not to hurry with “other perspectives” with the EU – apparently referring to membership perspective. The French President said being in a rush in this regard will only “make things complicated.” Georgia was the last leg of French President’s three-day trip to three South Caucasus countries, which also took him to Azerbaijan and Armenia. “I wanted to conclude this long journey in the South Caucasus with Georgia to remind the support of France to your country, its territorial integrity, its development and its European aspiration,” he said. During his seven-hour stay in Tbilisi, President Hollande met PM Irakli Garibashvili, delivered a speech at the French-Georgian economic forum and held talks with his Georgian counterpart Giorgi Margvelashvili. The last time when French leader visited Georgia was in October, 2011 when then President Nicolas Sarkozy delivered an outdoor speech in Tbilisi center during a brief visit also as part of his trip to the South Caucasus countries; Sarkozy mediated cease-fire agreement between Georgia and Russia during the August, 2008 war, which Tbilisi says remains unfulfilled by Moscow. Speaking at a joint news conference with his Georgian counterpart, President Hollande said that Georgia’s territories remain occupied and the cease-fire agreement is not fully respected. While thanking France for its mediation in the August, 2008 war, President Margvelashvili also said that the cease-fire treaty is not fully observed by Russia. Situation that is playing out now in Ukraine, Margvelashvili said, is repetition of policy that Russia started in 2008 in Georgia. The French President stressed for multiple times during the visit about importance of Georgia’s decision to contribute troops to the EU military operation in the Central African Republic (CAR). About 150 Georgian soldiers from the Batumibased light infantry battalion, which completed its tour of duty in Afghanistan’s Helmand province earlier this year, will be deployed in CAR in the French-led mission in June. The unit has already undergone pre-deployment training, including with participation of the French military instructors, according to the chief of staff of the Georgian armed forces major general Vakhtang Kapanadze. During his brief meeting with Foreign Minister Maia Panjikidze the French President said that Georgia’s intention to send troops to the Central African Republic demonstrates well what Georgia can do in frames of the EU “as a partner at this stage, and as a member state in the long-run perspective, but before that we should observe every stage of this process of course.” In opening remarks at the joint news conference, unlike his French counterpart, President Margvelashvili touched upon Georgia’s NATO integration and said that with its progress and contribution to the international security, including through providing troops to ISAF mission in Afghanistan, Georgia expects “adequate support” from NATO allies at the alliance’s summit in Wales in early September. Georgia wants to get Membership Action Plan (MAP) at the NATO summit in Wales, but there

is no consensus about the issue within the alliance. The French President said at the news conference when responding a question on Georgia’s security that Georgia will be part of the agenda of the upcoming NATO summit. Bloomberg reported quoting an official from the French President’s office traveling with President Hollande that Georgia’s NATO membership should not be rushed. The official was also quoted that Russia is wary of NATO and extending membership of the alliance to Georgia would be seen by Russia as an act of aggression. A senior lawmaker from the Georgian Dream ruling coalition, Tedo Japaridze, said in his opinion piece, published on May 13, that “to deny Georgia a Membership Action Plan at September’s NATO summit would be to confirm to Russia that the West will always give in to Moscow’s pressure tactics.” Georgian Foreign Minister, Maia Panjikidze, said that Georgia’s NATO integration was part of the talks with the French President. She said that Georgia is ready to make “next step” on the path of NATO integration. She also said that discussions will continue in the lead up to the NATO summit about what this “next step” might be. After the meeting earlier on May 13, President Hollande and Prime Minister Irakli Garibashvili addressed the Georgian-French economic forum. President Hollande said in his speech that the joint economic forum in Tbilisi demonstrated confidence France has in Georgia’s development,

as well as showed France’s willingness to stimulate bilateral economic ties. The French President noted “stable” and “predictable” legislative and fiscal framework, as well as Georgia’s geographic location and government’s political will to modernize economy and to continue reforms as important factors for attracting investments. He also noted Georgia’s importance as a transit route for energy resources, which, he said, is important for Europe, which seeks to diversify its energy supplies. In his address to the forum, Georgian PM Garibashvili said that France is Georgia’s “friend” and “partner country.” “We value highly France’s support to Georgia’s territorial integrity and our EU and NATO integration,” PM Garibashvili said. He said that efforts should be made to enhance the untapped potential of bilateral trade and economic ties. Asked about timeframe in which Georgia plans to meet all the requirements under the Association Agreement, Garibashvili responded: “We understand that this process is not painless and that many principle issues have to be tackled in quite a short period of time, but we also understand that it should not be done rigidly. We should take into account interests of local entrepreneurs and do it without damaging their interests. We have a vision and concrete action plan how to implement it and we are very optimistic that we will be able to accomplish it in a short period of time and do it painlessly. We are following the action plan presented by the EU.”

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PUBLICITY May 19, 2014 #54

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INTERVIEW May 19, 2014 #54

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DLA PIPER ANNOUNCES PROMOTIONS IN TBILISI OFFICE

LA Piper Georgia is proud to announce that Avto Svanidze has been promoted to Partner in the Corporate Group of DLA Piper International LLP. Avto has been with the firm since 2005, the year DLA Piper opened its office in Georgia. He has earned a strong reputation for meticulous and careful work in corporate, real estate and finance matters. Avto’s clients include US OPIC, TBC Bank, CBD Development, and the Millennium Challenge Corporation. Prior to joining DLA Piper, Avto worked as a lawyer for the International Finance Corporation (“IFC”) on its Georgia business development project. He is the author of significant revisions to the Georgian Law of Entrepreneurs. A graduate of Cambridge University (LLM), Avto recently passed the English law qualification test and will be admitted as a solicitor in England and Wales this year.

“Avto has been a key player and a good manager since the day he started with us more than 8 years ago. I am proud that he has achieved this promotion that he so richly deserved,” said Office Managing Partner Ted Jonas. In addition, the firm is pleased to announce two other promotions among the Georgia team. Nino Suknidze, formerly a Senior Associate , has been promoted to Legal Director in the firm’s Finance and Projects group. Nino has led all of the firm’s work for issuers in international debt and equity capital market listings since 2008. She leads major representations for the firm on due diligence, financial transactions, regulatory and tax matters and significant disputes in the Georgian courts. “Nino is a favourite of many clients because of her loyalty to their cause, her incredible hard work and her responsiveness to their needs. She has a bright future with DLA Piper,” said Jonas. Lastly the firm is pleased to announce that Erekle Glurjidze, formerly an associate, has been promoted to Senior Associate in the firm’s Litigation and Regulatory practice. “Erekle has made important contributions to our litigation practice for the past several years” said Litigation & Regulatory Group partner Otar Kipshidze. “He has been especially valuable in providing support to clients and foreign lawyers in international arbitration and foreign court matters,” said Kipshidze. DLA Piper Georgia L.P. is a Georgian limited partnership and a part of DLA Piper, a global law firm. The firm is rated first tier in Georgia by Chambers & Partners, the global law firm rating agency, for General Business Law, Capital Markets and Dispute (litigation and arbitration) work. The firm is also top-rated by IFLR 1000, the leading rating agency for law firms in the financial sector, and by EMEA Legal 500, a leading general index of law firms.

NATIG ALIYEV: SHAH-DENIZ 2 WILL MAKE GREAT CONTRIBUTION IN THE ECONOMY OF GEORGIA AND OTHER COUNTRIES

mount of the investments made on the second stage of Shah-Deniz deposit procession, also creation and expansion of the gas transportation infrastructure on the Azerbaijani and Turkish territories is evaluated for $46,5 billion. Minsiter of Energy of Azerbaijan Natig Aliev stated about it in the interview with The Business Year. In particular, the minister said that cost of the deposit procession second state equals to $37 billion, for Sanchagal terminal and South Caucasus pipeline - $6,5 billion, orientation price of TransAnatolian pipeline (TANAP) is only $13 billion. “Realization of the second stage of Shah-Deniz project will make a great contribution in the economic development of many countries, among them Azerbaijan, Turkey, Georgia, Italy, Greece and Albania”, - Aliev stated. Final investment decision about utilization of the Azerbaijani naval gas condensated deposit ShahDeniz was made in December of last year. On the

second stage of the gas deposit utilization Turkey and European market will get gas by South Caucasus pipeline expansion and through TransAnatolian (TANAP) and Trans-Adriatic (TAP) pipelines. In September 2013 Shah-Deniz consortium signed a long-term contract (25 years) about gas supply to 9 European companies. Baku has already signed contracts about second stage gas deliveries with the companies: “Shell”, “Bulgar gas”, DEPA, “Gas Natural Fenosa”, EON, “Gaz de France”, “Hera”, “Enel”, and “Axpo”. First gas will be supplied to Turkey in 2018, to Europe - in 2019. The contract about gas supply from Shah-Deniz deposit (according to approved supplies, 1,2 trillion cubic meters) was signed in 1996. Partners in Shah-Deniz utilization are the companies, such as SOCAR with 16,7% share, British BP (28,8%), Norwegian Statoil (15,5%), Iranian NICO (10%), French Total (10%), Russian Lukoil (10 %), Turkish TPAO (9 %).

WHO PREVENTS THE INTRODUCTION OF “4-G” ON THE GEORGIAN COMMUNICATIONS MARKET? An interview with “Beeline” Director General GIORGI TKESHELASHVILI - “Beeline” has recently appeared on the Georgian market, what is the company’s position, what has changed in the market since the day of your entry? - From the moment of the entry, “Beeline” position in the market is getting stronger and firmer from year to year. We detected quite useful growth for us in all directions. Before the company’s appearance in Georgia, a duopoly was formed on the Georgian communications market with the same prices and competition not by prices, but the coverage zone, beautiful advertisements, etc. Prices in mobile communications sector have been unchanged for almost 10 years, while events were developing rapidly and prices were falling in the world’s communications market. - What has your entry changed? - When we started operating on the Georgian market, access to mobile communication was rather low on the market and only 60-65% of the population enjoyed this service. Our task was to make mobile communication more available for the population and increase it up to 100%. I think this task has been performed step-by-step. This was due to the fact that we offered quite competitive and interesting suggestions. Many were fascinated and moved to our network. Consequently, for a while we had to get involved in a struggle with competitors. In the end the users only benefit from this. Nowadays, “Beeline” is serving more than one million hundred thousand subscribers and holds about 23% of the market. And most importantly, this trend is increasing and we expect further strengthening of these positions. - What is the secret of your success, how did you manage to take away the share from the companies already established in the market ? - First of all, during these seven years we proved to the world that there will be always the most competitive offer, whatever happens. It is a message not only to our subscribers, but also for the country’s population. The second - technologies

are constantly evolving. We lay great hopes on the introduction of new technologies and their offering to our and potential customers. We are talking about the so-called 4G cellularcommunication system. It is distinguished by very high speed internet, which is a very important for the country’s Internet market and in general, the country’s development. Information is the most important resource in the modern world, the most powerful and flexible weapon of the access to this resources is quality Internet. However, today, unfortunately, there are some factors, which is why the state failed to make up 4G licenses for the auction. However, this process will bring significant benefits to the country. Only in terms of investments, the introduction of 4G will bring 300 million GEL to the country. - Whether there is an alternative to the “4-G”, is it only in the interests of mobile communications companies? - Not only cellular communications companies but also Internet providers are interested in 4G. Today, fast internet connection is provided only in areas with fiber optic network. - If this system is so important and useful, why its introduction is delayed, can you name the specific reasons? - It will be difficult to talk about specific reasons, but I know that some legal nuances are to be solved so that the Communications Regulation Commission will be given an opportunity to auction these frequencies. A huge amount of money is on the scale. One part of the amount, about 100 million GEL, will be directed to the budget, as the cost of a sold license and the remaining 100 or 200 million will be spent on investments. To develop 4-G network it is necessarily to construct baseline stations, modernize and change mobile communications infrastructure. When the issue concerns such financial resource, representatives of various branches of power should expedite this issue. Companies have expressed readiness to

invest a huge amount for several months, specifically our company has requested this for the second year, but an adequate interest of the state is not visible, thus, I’ll call all parties involved in this business to expedite this process. - As far as it is known, “Beeline” does not own the “3G” Internet license, “4G” licenses are not made up for auction, it turns out that you are in unequal conditions compared to other companies... - Today the situation in the market is not competitive in terms of technological development, out of three mobile operator companies, 2 holds “3G” communications license, one does not possess. Why? As it turns out, at the time all licenses were sold and the third company was left without a license. - What will “4-G” change? - It will change too many things. As I mentioned, our market share is 23%. We face some hindrances on the way to faster growth. We could grow more quickly, if we technologically would have the opportunity to provide the same quality of the internet as our competitors. When we have the “4-G”, it will remove the barrier and the subscriber will choose the operator no only by the speed, but will comprehensively evaluate the offered package in all parameters, including the coverage zone and so on. - “Beeline” operates in other countries, what is the situation there? - As you know, “Beeline” is a structural unit of the International Corporation “VimpelCom”. Our head office is located in Amsterdam, our stocks are traded on the New York Stock Exchange, it operates in the world’s 17 countries, 4 continents. In many countries 4-G is not introduced, however, is offered in our neighboring countries, for example in Armenia, Russia, Azerbaijan and some regions of Turkey. - If we touch on other components of business environment, what factors affect attention?

- There are such moments. For example, we have a claim to a meaning of some taxes, though not to tax administration, in general. Not only our company, but also other mobile operators have claims. It comes to the excise tax. Mobile operators are paying excise tax of 10%. This fee was imposed in 2011 to collect more taxes from this sector. If excise tax is cut, mobile communication will become even cheaper. - And lastly, to finish our interview on the “4-G” issue, how much is the introduction of this system delayed? What will the country lose, if the 4-G is not introduced or its introduction is delayed? - Our position is the following - to do it as quickly as possible. It will bring the benefits of a very wide public interest, every effort should be used for this purpose. If this issue is resolved in a timely manner, in 3-4 months subscribers will be able to use the 4-G services.

BUSINESS May 19, 2014 #54

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ACT: WINE REMAINS NUMBER ONE ALCOHOL DRINK FOR TBILISI RESIDENTS

ine remains number one alcohol drink for Tbilisi residents. Company ATC makes this conclusion. The researched how Georgian wine maintains leading positions on Georgian consumer market and how it will compete other alcohol drinks. The survey revealed that 43% of Tbilisi residents does not consume alcohols. As it was expected, higher share of males (79%) than females (40%) considers that hey are alcohol users. One of 4 males drinks once in a week or more frequently. Alcohol drinks are popular among the youth majority of 18-34 youth (76%) use them. Along with age increase, alcohol usage share reduces among Tbilisi residents. On the question - which alcohol drink they use the most frequently, turned out that wine remains historically important and it’s number one alcohol drink for Tbilisi residents even now - over

2/5 of them (44%) considers wine as their major drink. Besides, 39% of the interviewed persons use pouring wine, 5% - bottle wine. Beer is the most frequently consumed drink for 1/3 of Tbilisi residents (34%). Only one out of 10 Tbilisi residents state that they drink vodka most frequent out of the alcohol drinks (11%). It’s interesting that pouring wine is popular among the population above 35; youth bellow 35 prefer bottle beer. It’s also noteworthy that compared to other age groups, vodka consumption indicator is higher among the youth of 18-24. As for alcohol consumption situations, it was found out that 3.4 of Tbilisi residents (75%) use it at home. Such behavior is the most characteristic for the population of 45 and above. 12% named restaurants, 7% - faces and bars, 3% - yard/nature. 409 adult Tbilisi residents have been interviewed in April 2014. Statistic error of the data does not exceed 4.9%.

BEER MARKET SALES GROW BY 15% TO 20%

he beer companies interviewed by “Commersant” speak of a market activity with the approach of the summer season. According to David Nizharadze, Director of marketing and sales service of “Castel” company , compared with last year a 15-20% growth in sales is registered and by summer sales are expected to grow by another 20%.

According to him, on May 14 a draw started where the customers have a chance to win 10 “Hyundai” vehicles, a tour package to the World Championship and a large number of beer. “Natakhtari” PR manager Nino Surmava says that compared with last year activity has increased. However, the specific numbers are not named. “Natakhtari” produces 12, while “Castel” 5 names of beer.

ONLY ONE COMPANY 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 a 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 have 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.

COLLIERS INTERNATIONAL STARTS ITS OPERATION IN GEORGIA

lobal leader in real estate Colliers international launches its services in Georgia. EMEA CEO of the company Chris McLernon visited Georgia to announce the launch of Colliers’ Georgian operation from May 15th. “This means that we can offer clients a unique opportunity to expand their real estate portfolio in Georgia. It is a dynamic time in Georgia’s economic development with the country focused on tourism, real estate, agriculture and the energy sector. There are a lot of great opportunities for domestic and international investment.” Chris McLernon said. Colliers International Georgia will offer to Caucasus region broad range of property related services including development consulting, corporate and investment brokerage, research, valuation and advisory. “By uniting our local expertise in Georgia with Colliers’ broad service offering and global reach, we foresee significant opportunities to expand our client base and accelerate our growth” Colliers EMEA CEO mentioned during the news conference. Within the two-day visit Chris McLernon and his collegue EMEA Corporate Solutions Director

Karel Stransky held meetings with the Minister of Economy and Sustainable Development, Deputy Minister of Energy, PM’s Economic Council, President of National Bank of Georgia, Georgian CoInvestment Fund and other institutions. Also business meetings were held with leading buisness groups operating in Georgia: Rakia, Wissol, Silk Road, GPC, GIG and others. “The market entry of the company of this scale apparently makes Georgia more attractive to institutional investors. Our goal is to offer real estate owners and investors in Georgia a new, exceptional service standard and link local opportunities with the world’s capital markets,” the Managing Director of Colliers International Georgia Irakli Kilauridze noted. Colliers have already worked on several projects in Georgia mainly contracted by the state. Previously this was managed through offices in London, Kiev or Istanbul and now local and regional clients will deal directly with the office in Tbilisi. Colliers are a global leader in real estate, represented in 63 countries and 485 offices. The annual transactions volume of the company exceeds USD 75 billion and their EMEA head office located in London. Tbilisi office will operate under the London office supervision.

FRENCH POMAGALSK WILL BE INVOLVED IN CHIATURA CABLEWAY REHABILITATION

eorgia will get loan with annual 0,17% rate for rehabilitation of Chiatura cableways. Ministry of Regional Development and Infrastructure stated about it. France will assign long-term loan of 13,2 million EURO for rehabilitation and modernization of the cableways. The amount will be spent for the installation of 2 new cableways in

Chiatura. French construction company Pomagalsk will be involved in this process. Ministry of Regional Development and Infrastructure met with company representatives on Tuesday. On the meeting they discussed technical, legal and financial details of the cableway construction. The construction contract will be signed as soon as final agreement on these issues is made.

GEORGIA’S EXPORTS TO UKRAINE SHRINK BY 5%

ue to the Russian-Ukrainian crisis, export from Georgia to Ukraine dropped by 55% and this was the basis for the European Bank for Reconstruction and Development (EBRD) to reduce projected for 2014 indicator of economic growth to 4%, which is 0, 5% less than the forecast at the beginning of January. For the same reason EBRD has lowered the forecast of economic growth of the countries of Europe from 2, 7% to 1, 4%. In 2013, Ukraine was

ANAKLIA TO HOST KAZANTIP ELECTRONIC MUSIC FESTIVAL

lectronic music festival, which will be analogue of “Kazantip” adapted to local traditions, will be held in Georgia in the Black Sea village of Anaklia - the organizer of the festival Nikita Marshunok told the Russian TV company “Dozhd”. According to him, he liked this town and decided to hold a festival similar to that which takes place in the Crimea. “It will be a new era of traditional festival, and it

will be innovative and adapted to Georgian traditions. At the first stage we expect approximately 50 000 people at the festival, and I hope that over the years their number will grow. Millions of investment will be carried out in this town that will contribute to local business. We are negotiating with Director of the National Tourism Administration of Georgia Giorgi Sigua. We were offered two cities - Anaklia and Batumi. We chose Anaklia and it will be the symbol of the festival,”Marshunok notes.

the 3rd trade partner of Georgia, and the problems existing in this country, have had a significant impact on foreign trade of Georgia. In March 2014 export from Georgia and Ukraine decreased by 55%, in comparison with February, the import of products from Ukraine to Georgia – by 22, 5%. According to the research centre “PMS”, statistics data for April-May will be deteriorated as well and on this basis Georgia should diversify its exports that will be facilitated by the Association Agreement with the EU.

TURKISH DIVAN GROUP OPENS THIRD HOTEL IN GEORGIA

urkish Divan Group opened a new hotel in Batumi. Divan Suites Batumi is third hotel of Divan Group in Georgia, located at #15 Zviad Gamsakhurdia Street. Adjara government informs that the newly opened hotel has 65 rooms, 2 conference halls, health and spa center. Hotel offers following rooms to the vacationers: 39 standard, 8 Superior, 5 Deluxe, 3 Junior Suit, 6 Corner Suit, 2 Business Suit and 2 Penthouse Tower Suit.

BUSINESS May 19, 2014 #54

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NATAKHTARI’S „WELCOME EVENING” FOR GEORGIAN RUGBY PLAYERS

USD 150,000 Bonus to Georgia’s Rugby Union

atakhtari Company congratulated Georgia’s National Rugby Team on moving to final stage of World Cup and awarded it with the bonus of USD150,000.

Levan Kipiani, the Minister of Sports and Youth Affairs of Georgia attended the awarding ceremony. He congratulated rugby players and thanked for their achievements they brought to Georgia. Company Natakhtari awarded the Minister with

the Certificate of Appreciation for his contribution to Georgian sports development. “Company Natakhtari organized a wonderful event so that we once again and together celebrate great victories the Rugby brought to our country. Many thanks to Company Natakhtari for support, this is the proof that business is actively participating in sports activities and its role is inseparable from sports development,”said Levan Kipiani. “Today, as agreed, the Company Natakhtari is transferring the bonus to Georgia’s Rugby Union in the amount of USD 150,000. In addition, on company’s behalf, I would like to thank all those people and organizations who made contribution to development of Georgian Rugby,”- noted Tornike Nikolaishvili, Natakhtari’s Marketing Director. Representatives of sports media and famous rugby fans along with players attended the evening. Natakhtari also awarded journalists with the Certificates of Appreciation, among them were: Zaal Gigineishvili (Commentator, Channel I), Temur Japaridze (Commentator, Channel I),

David Minashvili (Channel I), Lasha Dvalishvili (Channel I), Vova Nikoleishvili (Channel I), Elene Bilikhodze (Public Broadcaster), Dima Oboladze (Rustavi 2), Zura Ksovreli (World Sport), Beso Jangavadze (Lelo Newspaper), Akaki Gvimradze (Rezonanse Newspaper), Gogita Bukhaidze (Photo Reporter), Tamuna Kulumbegashvili (Photo Reporter), David Khvadagiani (Sports Journalist), Nika Ramishvili (Head of Rugby Fan Club), Irakli Dateshidze (Director of Abkhazia’s Voice), Gia Gorgodze (Sports Journalist). Apart from Rugby Company, Natakhtari is supporting other sports including football. World Cup is starting in a few weeks. The company will offer special events for Georgian football fans. “We are supporting not only sports and sponsor national federations and teams, but also we are trying to make our contribution to development of support culture. In our opinion, supporting is a part of our life. Therefore we’ll have a special place where fans can get together, taste a good beer and support their favorite team…”- it was noted at the evening.

NATAKHTARI INCREASES LEMONADE EXPORTS IN 2014

atakhtari exports its products to 20 countries, including USA, Azerbaijan, Armenia, Ukraine, Kazakhstan, Israel, Cyprus, Belgium, Germany, Latvia, Tajikistan and etc. Natakhtari started to export to Uzbekistan and Czech Republic as well. Respectively, export growth in 2013 was due to expansion of existing markets and penetration to new ones. Demand for lemonade increased significantly. 32% of produced Natakhtari lemonade is being exported. Azerbaijan, Russia and Armenia are the biggest importers of lemonade. The company even developed a special advertisement campaign for Azerbaijan and Armenia. The Ukrainian market is also remarkable by its volume. „The company is constantly working on expansion of export geography. Among leading export markets are Azerbaijan, Russia, Armenia, Ukraine and Kazakhstan. Azerbaijan is a leader by sales figures and 45% of total exports sales fall on this country. In 2013 Armenia got especially

activated. 55% of refreshment drinks imported to Azerbaijan belongs to Natakhtari lemonade, this indicator reaches 70% in Armenia. We have leader’s position in these countries. Natakhtari Lemonade is quite popular in Russia as well, where it successfully passed the examination and the products are being sold since 2011” – explained Nino Surmava, Company’s PR Manager. Overall, the company improved lemonade’s export sales in 2013 by 9% compared to the previous year. This growth is determined by strengthening positions on the existing markets and penetration to new ones. Lemonade in the company is regarded as a sort of business card, which represents Georgian traditions in many countries. Active consumption of lemonade can also be explained by high quality of products and correct marketing activities in countries where it is exported. Significant growth of export volume is planned in 2014. Iran and Belarus will be added to export countries. „Lemonade deserves special interest among Georgian products being exported. It occupies a decent place after wine and mineral water. Lemonade export is growing in a sustainable manner. The research proved that in countries of export as well as in Georgia Natakhtari Lemonade takes a special place in daily lives of people and in celebrations. We are also proud that Natakhtari Lemonade has a leader’s position among lemonade brands exported from Georgia” – noted Nino Surmava.

FROM COPPER TO GOLD - What is your association when you hear Czech Republic for the first time? - Czech Republic? Beer! Indeed the Czech Republic is famopus for its beer. The terms such as “Liquid Bread” and “Liquid Gold” are synonyms of a beer and used in an everyday Czech glossary. According to statistics, Czech citizen, at average, consumes 150 L of beer annually. This is a world record. Here the culture of brewing and beer drinking was developing for centuries. For example, Kozel is known to beer fans as a Czech beer, but not many people know that this is the #1 Brand in the world by sales and its history started in 1874. Before Frantisek Ringhoffer (III) engaged in “Liquid Gold” business, his grandfather Frantisek Richoffer (I) arrived in Village Velko Popovice and opened a copper workshop. Time was going by, business of Frantisek I was producing results and expanding its activities. History of Skoda automobile factory is related to Ringhoffer family. They also used to own Stirini Palace in the East Prague. When local priests asked Frantisek Ringhoffer (III)* (there were many cases of brewing beer by monks) to make a brewing pot from copper he decided to build brewery himself. And his beer got very popular shortly. Frantisek acquired ad-

NATAKHTARI LABORATORY ACQUIRED ISO 17025:2005 ACCREDITATION

aboratory of Natakhtari Company successfully passed the ISO 17025:2005 system accreditation. International experts visited the enterprise within the accreditation process framework. The company lab personnel were also engaged in the process. A special audit was conducted in the company during three days with participation of foreign experts. As a result, the Lab got awarded with ISO 17025:2005 accreditation. It is noteworthy that the company products (lemonade and beer) will be tested by already accredited Lab, meeting requirements of the ISO 17025:2005 standard. „When a company has a laboratory of such level it is important not only for the Georgian market,

it seriously affects relations with neghbour and the other foreign states as well. In particular, product testing results received in our lab will be easily accepted by other countries. Accreditation will also contribute to cooperation and data and experience exchange between the labs and the other agencies” – said Marina Chighladze, Quality Assurance Manager of Natakhtari. Natakhtari is the first Georgian company, which acquired ISO 17025:2005 accreditation in beer industry. This is the standard for the lab to demonstrate that it works not only in compliance with quality management standards, but also possesses professional skills and can receive technically substantiated results.

jacent land by generated revenues and expanded production. Currently the enterprise covers 13.5 hectares. It is an interesting fact that only Czech raw materials are used for making Kozel. Starting from 1874 many breweries got opened in Czech Republic, invisible hand of economy and business forced brewery owners to think of distinguished logo to emphasize uniqueness of their beer among the others. At that time, a French painter passed through Velke Popovice. He was moved by the hospitality of the local people, and out of gratitude decided to create for them an emblem for the brewery. He was inspired by the figure of the goat, and put it in the form of an emblem. It was after the logo that the beer was named Kozel (means goat in Czeck language). Based on the place of origin the name got complicated and prolonged – Velikopopovicky Kozel, however it is simply Kozel for Beer Fans. If you ever decide to visit the brewery you have to visit Olda XIV. Olda is a goat, which lives in the brewery. It

is several months old but will live there until its death (then this honorable position will be taken by its heir, it has been so since 1874) and will show off pleasantly for your facebook page. Apart from beer the Ringhoffers were producing arms as well. During the Second World War the family was exiled from Czech Republic. Afterwards the brewery got nationalized and in 2002 it was acquired by SAB Miller, the #2 Beer producer in the world. I was surprised to learn that the heirs of the Ringhoffer family did not attempt to get back the brewery because of pride, though they visit it when they can, especially when there is an open day organized. This happens twice a year (in spring and summer) and then any person can look around for free.

BUSINESS May 19, 2014 #54

caucasian business week

GEORGIA’S EXTERNAL MERCHANDISE TRADE IN JAUARY TO APRIL 2014

xternal Merchandise Trade (excluding non-organized trade) of Georgia amounted to USD 3441 million in January-April 2014 (preliminary data), up 14 percent from the same period of the previous year. The value of export

grew by 19 percent reaching USD 933 million, while the import grew by 13 percent and amounted to USD 2508 million with respect to the same period of the previous year. The trade deficit equaled USD 1576 million and its share in trade turnover constituted 46 percent.

ZURAB ABASHIDZE: GEORGIA MUST BECOME A BRIDGE TO EUROPE How will the signing of the Association Agreement of Georgia with the European Union scheduled for June 27 in Brussels affect Russian-Georgian relations? - Do you expect any complications in the relations between Tbilisi and Moscow after signing the document? - We received clear signals that Moscow is looking calmly at the signing of the agreement with the EU. We are told that no pressure should be expected. We hope that it will be so. - On what is your confidence based that Georgia will be able to combine simultaneously economic relations with the EU and Russia? - In my opinion, the signing of the agreement with the EU may be interesting in a certain way for the Russian capital, which will get a bridge through Georgia to Europe. Relations between Chambers of Commerce and Industry (CCI) of our countries have been already established. The delegation of the Georgian Chamber of Commerce has visited Russia this year and a return visit is being discussed. A conference of businessmen of Russia and Georgia may be held as well. - What was the return of Georgian wine and “Borzhomi” to the Russian shelves ? - In the first quarter of 2014 Georgia supplied Russia with nearly 10 million bottles of wine, yielding only France and Italy. “Borjomi” mineral water returned to the Russian market last year and millions of bottles were exported from Georgia. Previously Tbilisi offered Russia to exchange trade missions that could work in the conditions when the two countries have no diplomatic relations. While there are no specifics, but it is clear that

the businessmen of the two countries need regular contacts. - Will flights between Russia and Georgia, interrupted after the events in South Ossetia, be restored? - Perhaps the meeting of representatives of aviation authorities of the two countries will take place in May. Now the place of the event is being specified. Political obstacles to restore regular flights are cancelled. Business issues should be solved. - Do you expect that with the return of the regular flights the number of tourists from Russia will increase? - According to statistics, 765 thousand Russian tourists visited Georgia in 2013, almost 1.5-fold more than in 2012. In 2014 we wait for new growth. - Will the Russians, who visited Abkhazia or South Ossetia, be able to come to Georgia? - The law on occupied territories adopted by Georgia after the events of 2008, which implies the possibility of visiting Abkhazia and South Ossetia only with the consent of Tbilisi, continues to operate. But in the last two years there were virtually no incidents when the citizens of Russia violated the law. So, it is observed, people know about it, that is good. - When there will be another round of your negotiations with Deputy Minister of Foreign Affairs of the Russian Federation Grigori Karasin? - In early July.

EXPORTS GROWTH TO RUSSIAN MARKET HIKES WINE PRICES IN GEORGIA

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

NATIONAL WINE AGENCY LAUNCHED CADASTRE PROGRAM

he National Wine Agency is carrying out vineyards cadastre program. Measuring works began in the viticulture zone of Racha-Lechkhumi. Works are carried out by the tender winner company. According to the National Wine Agency, the cadastre program aimed at bringing viticulture and vineyards in order, includes the expansion of the vineyards areas, registration, passportization and the clarification of the specific zones borders. According to them, passportization of vineyards and

the registry production system did not exist until today. The agency states that the cadastral system effectively works in all leading European countries where viticulture and wine production is developed. They explain that cadastral base is necessary to make the right decisions in viticulture-wine-making and to properly plan the harvesting process. They need statistics to provide a proper analysis of the situation and make the right decisions. The program will be carried out in Racha-Lechkhumi and Kakheti regions by stages.

BECAUSE OF THE MORATORIUM ON SALE OF LAND TO FOREIGNERS, GEORGIA IS LOSING INVESTMENTS 10 months after the adoption of the Moratorium on sale of agricultural land to foreign citizens, representatives of business and expert say that it was a mistaken decision - writes “Netgazete”. “It was a big mistake. Absolutely short-sighted, anti-market decision aimed against the owners. Any half-hearted decisions about land are unacceptable. The best solution is to allow to buy land to everyone, otherwise it would be a step backwards in relation to business” - said President of the New Economic School Paata Sheshelidze. According to the analyst of the non-governmental organization “Transparency International Georgia” Natia Kutivadze, the Moratorium has limited competition in the market and lead to an infringement of the rights of foreign investors. “Big business in agriculture ceased to develop, and small farmers have not received the expected investment. After the adoption of the Moratorium, investment in agriculture dropped to zero. The government made a mistake when he made this decision, the agricultural sector cannot develop without foreign investment,” - said the farmer Otar Sibashvili. In his words, after the adoption of the moratorium, one Egyptian company, which was preparing to invest in agriculture a million dollars, has decided not to invest. “We had to build a large cattle-breeding farm. Egyptian investors arrived in Georgia twice, a decision about investing was already taken, but as soon as the moratorium was imposed, they have abandoned their intentions,” - said the farmer. According to a small farmer Kakha Machaidze, he owns a plot of 5 hectares and was going to build a greenhouse in 2013 together with the Israeli partners, and one of the conditions of the deal was the transfer of ownership rights to investors.

“I have already agreed to such a proposal, but adopted in June Moratorium disrupted business plans. My partners believed that ownership of part of the land was a guarantee of their investment, so after the ban, they abandoned the project,” - said the farmer. According to the Center for service and training “Agricom”, which helps farmers in drafting, after the announcement of the Moratorium up to 100 agricultural projects have been suspended. “Foreign citizens are not investing in the agricultural sector of Georgia due to the fact that they were deprived of the right to land acquisition. This decision hurt Georgian farmers, who do not have sufficient resources to create a modern farms and enterprises, as well. Accordingly, they will not be able to produce high-quality products, which will be able to get to the European market” - the Center states. According to the expert of NGO “Transparency International - Georgia” Natia Kutivadze, after signing the free trade agreement with the EU, the situation on the land market will change. “The Association agreement with the EU provides for the establishment of conditions for competition, and this in turn will increase investment in agriculture,” - she notes. The draft agreement provides for the right of foreign citizens to buy land for non-agricultural purposes, and at least the possibility of transferring agricultural land in long-term lease for 49 years. According to the Agrarian Committee of the Parliament of Georgia, the moratorium will become invalid on December 31, 2014. At the same time, it was decided that as an exception the foreigners are allowed to buy land and can submit a corresponding request to the special Commission by the end of 2014.

HPP caucasian business week

May 19, 2014 #54

KAKHA OQRIASHVILI: “REJECTION OF KHUDONI PROJECT MEANS GIVING UP FUTURE!”

akha Oqriashvili, Majority MP from Dmanisi Municipality and Founder of PSP, thinks that Khudoni HPP does not have an alternative. Kakha Oqriashvili: “Khudoni is a significant project and needs to be implemented. Economic development is impossible without energy sector. Naturally, interests of population are to be considered and satisfied within the moderateness and the church needs to be moved. Transfer of graves is a sensitive issue, but rejection of Khudoni construction because of this reason means to giving up future. There is no other project for such a large station. In my opinion, it should be implemented and does not have alternative. The environment will not be impacted signifi-

ZURAB TKEMALADZE: “IF WE BUILT KHUDONI HPP IN 90S, GEORGIA WOULD HAVE BEEN IN A COMPLETELY DIFFERENT SITUATION NOW“ ZURAB TKEMALADZE, a Businessman and MP of three convocations, when addressing importance of Khudoni HPP for the country’s economic and social development stated that construction of Khudoni HPP was very important from the economic perspective, since it would contribute to country’s energy independence. Zurab Tkemaladze: “It will also become an export product. Growth in natural export products will facilitate the budget fulfillment, economic development and revival. This is a positive perspective also in the light of generation of country’s revenues in foreign currency. Of course there are threats that are being stressed repeatedly. These are economic threats and problems of locals that require immediate attendance. As regards the economic threat, there exist opinions of international experts. However, more research is required. If the opinions created with our and international experts’ participation are positive, there will be no problem. I am sure that the opinion will be positive. Problems of local population are very important, we have to listen to their positions and meet their needs. The state shall pay all types of compensations on its side so that the residents and estate owners are satisfied.” - Mr. Zurab, what should be the social importance of Khudoni HPP or how this can be achieved? - You can search a lot of information on the internet. You have to see how the similar projects are implemented in mountainous regions. I saw myself HPP construction and the infrastructure around it. It was an oasis I would say. You would envy and say why such project was not realized in Georgia. You would be surprised how well the territories adjacent to HPPs are well used and ar-

ranged for tourist infrastructure which represents a good income for the region. We inherited the possibility to construct HPP, however we are trying to import energy, it should not be like this. There should be an oasis built with a tourism and infrastructural objects. All of these will be attractive for Svaneti population in the first place. - They say that after implementing Khudoni Project Svaneti may get flooded. - Let us address this issue in this way. Of course, one village will get flooded. But we have to think not only about today, but also of tomorrow. Will it entail environmental changes in that area which could inflict damages to the regions and villages around? That is why I want everyone to see those oases that are developed in the other countries and force investors that are planning to implement such large projects in Georgia not only pay compensations to population but also to develop infrastructure on adjacent territories. If we have such oases then what is to talk about? We have to think of tomorrow. - In 90s Khudoni Project was used by certain political forces for their political reasons. There are still NGOs and a part of the society who oppose the project implementation. - If in 90s we did not obstruct construction of Khudoni HPP, there would have been completely different situation in Georgia now. Yes, this project was used for the other reasons. That is why I say, the situation, the economic situation and energy independence could have been different now. Economy is the lever by which one country can manipulate another. Energy independence is very important for the national security, since it contributes to country’s independence.

NUKRI KANTARIA: “KHUDONI HPP WILL BRING ENERGY INDEPENDENCE”

mplementation of Khudoni Project is very important for Georgian Economy. We have to implement such a large-scale project, which will bring energy independence” – said Nukri Kantaria, MP, Representative of the Parliamentary Majority. According to him, Svanetians will make their decision in favor of the country’s future. “Naturally there are problems, which we have to resolve so that their rights are not prejudiced. As far as I know, they are offered an alternative village, that will be constructed and where they will be provided in every way. They have to accept this proposal for the benefit of our country, which Svanetians have done many times before” – said Kantaria.

cantly. The forest will get flooded, and if this does not happen, we’ll have 200-500 hectares of forest and not have the economy, pension, payroll and energy. We have to compromise something in order to receive bigger benefit. You know that Georgia is not a oil producer, the only thing we have is hydro power. This is the only means for energy security and quality improvement. How can we reject this? That is impossible. I think this noise is useless. We just do not have the other option.” According to MP, any prudent person who can calculate the outcome of the project for the country and its economy would put emotions aside. “There will be many people employed in the HPP construction process. This is the big investment. Local Svanetians will get employed” – said Kakha Oqriashvili.

BIDZINA GUJABIDZE: “KHUDONI HPP IS ESSENTIAL FOR ECONOMIC DEVELOPMENT OF THE COUNTRY”

ow important is Khudoni Project for country’s energy independence and why it did not start under governance of the National Movement? What is new government’s policy and what are thoughts of the Parliamentary Majority? BIDZINA GUJABIDZE, a Representative of the Parliamentary Majority: “The fact that Khudoni implementation did not start under the previous government was determined by lack of communication. There was no dialogue with the population, their rights were not clarified, possible compensation versions were not reviewed. At various times different persons were interested in stopping the project. There were problems related with forest, pastures etc. which were used by certain persons for manipulations. Now dialogue has started among the locals, non-governmental sector and the government representatives. I am sure that the project will be implemented with consideration of people’s interests. I would say that this issue was being moved artificially in a different light. The country’s economy needs implementation of Khudoni Project, of course, with taking into account all those nuances that may come up in the agenda during the implementation. This project is essential for the country’s economic development. We have to be energy independent. The

more energy sources we have, the sooner we acquire energy independence. All self-respecting countries have to be self-sufficient in a good sense of this word. You may not have enough wheat to satisfy your population and therefore import products from other countries, but you don’t have to beg for resources that you have plenty of. You should not make such political and economic moves that are going to be loss-bearing for the country. When the construction of BakuCeyhan pipeline was being reviewed there were contradictory opinions being expressed, however the project got implemented with consideration of population’s interests and now we are thinking about construction of the second gas pipeline.”

BAGRAT MEZURNISHVILI: “WHEN IT IS NECESSARY WE HAVE TO COMPROMISE ACCOMMODATION FOR A BIGGER ECONOMIC BENEFIT”

arge and small hydro power stations are to be constructed in Georgia including Khudoni HPP, otherwise the economy will not develop. We, the population, have to learn and get used to new realities and when it is needed compromise our accommodation in exchange for a bigger economic benefit. Similar processes in the west took place long time ago. Unfortunately, we are now moving to the stage to create economically profitable resettlements. When a person lives on the territory, needed by the state, the individual has to compromise the land but receive a bigger benefit in any form in order to feel its role in the construction”, - said Bagrat Mesurnishvili, Director of Futures Trading. In businessman’s opinion, the government instead of subsidizing those villages that are hardly developing should contribute to creation of economically efficient settlements and resettlements based on whatever is profitable for the economy at a given moment. “It was a different historical period and required

those resettlements. Now we live in the XXIst century… The state has to provide guarantees to people that they would receive all benefits they need land, house, commercial interest. I am not specifically an expert of this field but as an entrepreneur I know how the price for power affects product cost. Large HPPs, the generation of which does not depend on seasonal factors, and respectively on power import represent a guarantee for the tariff stability. Khudoni is to be constructed for this guarantee” – said Bagrat Mezurnishvili.

BANKING NEWS May 19, 2014 #54

caucasian business week

PASHA BANK GEORGIA PLANS TO BE AMONG THE TEN LEADING BANKS OF GEORGIA

ASHA Bank OJSC increases charter capital of the subsidiary bank in Georgia in 3 times. According to a member of the Board, chief Financial Director Shahin Mammadov, it was decided to

increase the authorized capital of PASHA Bank Georgia (PBG) from 15 million AZN to 47 million AZN (about 103 million GEL). “Thanks to this recapitalization our subsidiary bank will be among 10 leading banks of Georgia in terms of capitalization. Along with that, PBG acts just over a year within the framework of the strategy designed up to 2017. The first year of activity showed the correctness of the chosen strategy – PBG losses were 50% less than planned,” - said Mammadov.

TBC SUBMITTED APPLICATION ON GDR ISSUE TO LONDON STOCK EXCHANGE YESTERDAY

he second largest bank of Georgia according to actives - TBC Bank submitted application for the issue of the own Global Depositary Receipts (GDR) yesterday, - The Financial Times reports. The British edition informs that the bank plans to attract $300 million from this operation. TBC Bank, which is the first according to indi-

viduals’ deposits, is going to sell GDR of $100 million, its investors plan to realize stocks of $200 million. Financial Times reports that large stockholders of TBC Bank, European Bank for Reconstruction and Development (ERD), International Financial Corporation (IFC) and German DEG plant to sell part of the stocks, which belong to them. Also, minority stockholders, among them JPMorgan Chase, Ashmore and the Netherlands Development Finance Company - may sell part of the stocks. Founders of the bank Badri Japaridze and Mamuka Khazaradze, which own 27% of the total stocks, are not going to sell them.

BY Q1 DOLLARIZATION COEFFICIENT OF THE BANKS’ LOAN PORTFOLIO IS 60,8%

oan rates, in the foreign currency is average 12,4%, in GEL - 18,7%. In the same period of last year these data equaled to 13,9% and 21,9%. In a year interest rate for the loans denominated in the foreign currency has reduced by 10,8% (1,5 percent points), in GEL - by 14,6%

VALUE OF PROPERTY SEIZED BY BANKS WAS RECORD IN 2013 2013 year stood out with the average activity for the banking system in terms of lending. Credit portfolio amounted to10.5 billion GEL (without interbank loans) by the end of the year. Portfolio annual growth in nominal terms was 20 percent, while considering the fixed rate effect - 17 percent. During 2013 the credit portfolio structure, according to segments, has changed. Portfolio structure change was conditioned by a quite high rate of retail credit portfolio growth which, in turn, significantly contributed to the interest rates reduction and period extension for retail products. Interest rates reducing tendency observed in the previous years continued in 2013, which was caused by even more increased competition. In the reporting year, consumer, mortgage loans

and instant installment were the main driver of the growth in retail portfolio. Annual growth rate of instant installment loans exceeded 100 percent in 2013. Inactive loans share in total portfolio significantly reduced by the end of the year and amounted to 7 percent, a similar rate in 2012 was 9.3 percent. As for the most painful topic – property seized by the banks, the trend is quite alarming in this regard. It is true that in the pre-election periods the authorities paid a considerable attention to this issue, however, the statistics testifies that actually nothing is done to resolve a problem. In 2008-2013 the value of the property seized by banks has increased almost 40-fold and exceeded historical maximum of 312 million GEL.

MONEY TRANSFERS IN APRIL

n April 2014, the volume of money transfers from abroad constituted 120.5 million USD (211.4 million GEL), which is 1.9 million USD (3.3 million GEL), or 1.5 percent less than the amount in April 2013. 90.4 percent of the total money transfers from abroad came from 9 big donor countries, with the volume of transfers from of these countries each exceeding 1.5 million USD in April 2014. In April 2013 the share of these 9 countries constituted 90.7 percent of the total volume of money transfers.

(3,2 percent points). Rate on the long-term loans in GEL equals to 16,3% (Q1 2013 - 19,1%), in the foreign currency - 12,3% (Q1 2013 - 13,6%). For the short-term loans rate in GEL is 22,9% (Q1 2013- 26,1%), in the foreign currency - 13,4% (Q12013 - 15,6%).

SOME MFOS LAUNCH CREDIT CARDS

icrofinance organizations return to the credit card project. Credit cards issued by MFOs had to appear on the market in December 2013, however, a part of the organizations postponed the project until 2014, while some changed their mind. Today, Chairman of the Board of the Association of Microfinance Organizations (AMFO) states “Commersant” that some of them have already started the implementation of the project. According to “Crystal” MFO CEO, they planned to issue the card by the end of last year, however, the market research showed that other products would be in greater demand. Nevertheless, Malkhaz Dzadzua notes that today the credit card is valid and this product is expected to be offered

to the customers in the fall. “Crystal” plans to link a credit card to other products in order the customer to have less expenses in comparison with the same product offered by banks. Dzadzua adds that the survey showed that the use of MFO credit card is 2 times more expensive than the bank so if it is linked to other products, the rate will be competitive within 24-36%. MFO “Georgian Credit” also plans to issue a credit card. The MFO Director-General explains to “Commersant” that they will offer business loans and consumer loans will not be the main segment of the organization. However, despite that, Giorgi Naskidashvili does not preclude the credit card issuance. In his words, they will think about the launch of this project next year.

BANK CONSTANTA ENDS 1Q14 IN 3.6 MILLION GEL PROFITS

onstanta completed Q1 with 3,6 million GEL profit (Q1 2013 - 2,6 million). By April 1 loan portfolio of the bank is 306,2 million GEL (Q1) 2013 - 220 million) (inactive loans/overall loans - 3,3%), deposits - 73 million GEL (Q1 2013 66,5 million). Overall obligations are 318 million GEL (Q1 2013 - 232 million), annual growth of the loans is 39%, deposits - 9,8%. Actives have increased by 37% and equals to 373,2 million GEL (Q1 2013 - 272,3 million), market share is 2,1% (Q1 2013 - 1,9%); liquid ac-

tives/overall actives - 11,3% (Q1 2013 - 11,5%), Return on Actives (ROA) - 3,98%, Return on Equity (ROE) - 26,5% (Q1 2013 - 4%, 28,45%). By Q1 share of TBC in the stock capital of Constanta is 91,08%. After the last change on April 23 it equals to 99,65%. By the end 2013 TBC Bank owned over 83% of Bank Constanta. With several additional transactions they bought over 15% form existing stockholders, in particular - around 4% from individuals (founders) and about 11% from the international company (Ioko Credit). It total, monetary investments of TBC Bank in Bank Constanta as a capital and long-term investments is around 100 million GEL (2011-2014).

In April 2014, 13.2 million USD (or 23.2 million GEL) was transferred from Georgia, as compared to 13.7 million USD (or 22.7 million GEL) in April 2013.

BANK SECTOR CONSIDERABLY SHRINKS NONPERFORMING LOANS PORTOFLIO

anking sector considerably reduced inactive loans in the portfolio. Coefficient has reduced by 23%. By Q1 problem loans to overall loans are 7,3% (Q1 2013 - 9,5%; Q1 2012 - 7,4%). Liberty has the lowest coefficient among the banks with the largest active. Top-6 list of the leading banks:

Since the same period of last year amount of the problem loans (nonstandard, dubious, hopeless) gas reduced by 6,2%, considering 23% growth of the overall loan portfolio of the sector.

CIS caucasian business week

May 19, 2014 #54

TOTAL FREE FALL: UKRAINE ECONOMY TO PLUNGE 7% IN 2014, NO GROWTH IN 2015

UKRAINE GETS €1.6BN IN LOANS FROM EUROPEAN COMMISSION

krainian government officials signed a memorandum in Brussels today, which will make €1.6 billion in macroeconomic loans available in Ukraine. The loans will be provided to Ukraine’s National Bank over the next 15 years. “Our meeting was a very successful one. It was unprecedented. I think we can say there was a great convergence,” Jose Barroso, the European Commission President said. The EU will soon disburse the first tranche of a combined €1.61 billion ($ 2.2 billion) Macro Financial Assistance (MFA) loan program, but specific dates were not given. Ukraine and the European Commission also signed a Financing Agreement for a State Building Contract that is worth €355 million and is intended to help the country’s economic transition. Another €10 million will be available for civil society, according to the European Comissions’s statement on its website. In total, €250 million was transferred after the document was signed. The loan is part of a broader total aid package worth €11 billion over the next 15 years. Up to €8 billion will be sourced from the European Investment Bank and the European Bank for Reconstruction and Development, another €3 billion will come from the EU budget, €1.6 billion from micro finance loans, €1.4 billion in assistance package grants, and possibly €3.5 billion through the Neighbourhood Investment Facility. The funds are intended to stabilize the country’s

economy, which is on the brink of collapse as foreign currency reserves are running empty and the currency has nosedived, having lost more than 30 percent against the dollar since January. At the meeting, Ukraine’s interim Prime Minister Arseniy Yatsenyuk says Ukraine has a comprehensive pro-European agenda and plans to sign the European Free Trade Agreement. He added that Ukraine’s next president will be urged to support it. Barroso said the EU Commission will eliminate customs duties from goods originating from Ukraine, which could provide an extra €500 million per year in tariff reductions. Ukraine and the EU are also expected to sign a common aviation agreement on June 5, when the Transport Council convenes. The allocation was approved by the European Commission in April and will help Ukraine’s rapidly deteriorating financial situation. The Commission has already deployed a mission on the ground to assess Ukraine’s financial needs and to prepare the ground for such microfinancial assistance. This team is working closely with the IMF. In real terms, the ‘help’ increases Ukraine’s already out-of-control debt. Public sector debt is about 57 percent of GDP, and external debt is nearly 100 percent of GDP. If debt exceeds 60 percent, Russia, under the parameters of the loan package signed with Ukraine in December, has the right to immediately demand a repayment of the $3 billion of debt it issued to Ukraine at the end of last year.

kraine’s economy, heading for darker depths than previously estimated, will contract seven percent this year and may not expand at all in 2015, the European Bank for Reconstruction and Development (EBRD) said in a new report. “Ukraine’s economy is going through a painful macroeconomic adjustment with high short-term costs for growth,” the report says. The EBRD slashed Ukraine’s growth forecast by 8.5 percent, as their last report estimated a 1.5 percent expansion in 2014. “Since our forecast in January 2014, events in Ukraine/Russia have significantly increased geopolitical and economic uncertainty, with direct negative effects on the economies of Ukraine and Russia and potentially wider implications for the region as a whole,” the report continues. In the first three months of 2014, Ukraine’s economy lost 1.1 percent, according to the country’s Bureau of Statistics. In 2013, GDP growth was zero. Economic pain existed in Ukraine long before Maidan protests, the ousting of President Viktor Yanukovich, the loss of Crimean territory to Russia, and unrest in southeastern provinces. As the crisis escalated, the hryvnia dropped, and has lost 28 percent since the beginning of January. The National Bank of Ukraine tried to interfere and prop up the currency, which has all but dissolved the country’s foreign currency reserves, which currently stand at US$12 billion. In 2013, more than $4 billion in international reserves were wiped out. Inflation in Ukraine is expected to continue to rise, and the IMF has predicted it will reach 12 percent in 2014. The country owes at least $3.5 billion to Russia’s Gazprom, but says this obligation will not be a priority. 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 has received a $3.2 billion loan from the

International Monetary Fund, the first tranche of a total of $17 billion. On Tuesday, it secured an additional €1.6 billion in macrofinance loans from the European Commission. SPILLOVER, RUSSIA AT RISK Further escalation in the geopolitical conflict will have negative spillover effects for neighboring states, and weigh down economic growth – especially in Russia, possibly dragging it into recession. “Under a more negative scenario, the Russian economy would enter recession and output contraction in Ukraine would deepen,” the EBRD said. Recession is a reality that Russia’s ministers have already addressed. On Tuesday, Russia’s Economic Minister Aleksey Ulyukaev said the country is headed towards a technical recession, with first quarter growth predicted to be just 0.7 percent, and second quarter GDP expected to fall flat. A technical recession is when an economy doesn’t expand for two consecutive quarters. Minister for Economic Development Alexei Ulyukayev (RIA Novosti / Vladimir Fedorenko) Like Ukraine, Russia’s economy was already slowing well before events in Ukraine began to unfold. The EBRD expects gross domestic product to reach 0.6 percent this year. Previously, the bank projected a 2.5 percent growth. “The negative spillovers are expected to be largely contained to the neighborhood of Russia and Ukraine under our central scenario, though several central and south-eastern European economies will also see some impact,” the report says. “What we are worried about, really, is the potential escalation of the sanctions, particularly on the financial system,” EBRD chief economist Erik Berglof told a news conference, referencing US-led sanctions against Russia, which is highly integrated into the world economy. If the crisis de-escalates, the European region could possibly attain 1.9 percent growth, according to the report.

KAZAKHSTAN TO BAN ALCOHOLIC DRINKS TRADE

azakhstan will temporarily ban the import and sale of alcoholic beverages from June 1, 201, Kazakh Agency for Consumer Protection announced. “This measure was taken with the aim of identifying numerous cases of trafficking alcoholic beverages produced in Italy, France, Scotland, Russia, Belarus in Kazakhstan’s consumer market,” the agency said. There is no information regarding the maker’s name, place of production, or importer, and there are also damaged labels or illegible markings that make it impossible to read the contents. Another violation is the incomplete information in the official language. The Agency for Consumer Protection also noted Kazakhstan has banned meat imports from Australia.

“Kazakhstan has introduced a temporary sanitary measure to ban the import and sale of chilled beef under the trade name of “Black Angus Ribeye” (produced in Australia), in which a veterinary drug dangerous to human health - trenbolone acetate- was found,” the agency said. Trenbolone acetate is a growth stimulant, an anabolic steroid used in veterinary medicine to increase muscle mass in cattle and has a negative impact on human health with a variety of side effects, particularly increased blood pressure, insomnia, aggressiveness, baldness, etc. “In accordance with the laws of the member states of the Customs Union, using veterinary drugs (feed additives, animal growth promoters, and veterinary drugs) is not allowed in manufacturing raw food of animal origin,” the agency said.

CHINA READY TO ASSIST KAZAKHSTAN TO HOLD EXPO-2017

hina is ready to assist Kazakhstan to hold EXPO-2017, First Deputy Prime Minister Bakhytjan Sagintayev said on May 13. He noted this issue will be discussed during Kazakh President Nursultan Nazarbayev’s upcoming visit to China. Chinese President Xi Jinping has invited President Nazarbayev to pay an official visit to Beijing on May 19-20 and to attend the 4th Conference on Interaction and Confidence Building Measures in Asia (CICA) Summit in Shanghai. “Currently, work is underway on a number of joint projects in the oil and gas, energy, mining and transport sectors,” the deputy prime minister said. It is expected to sign a $400 million framework agreement on cooperation between Kazakh Development Bank and the China Export & Credit Insurance, Sagintayev stressed. The sides will also pay a particular attention to the joint use of transboundary rivers. “It is necessary to note regulated mechanism for addressing issues of equitable distribution of water resources in transboundary rivers, such as Khorgos. There is an agreement between the parties on the construction of water distribution

facilities on the Ulken Ulasti River,” he said. Sagintayev went on to say that cooperation of Kazakhstan and China in the oil and gas industry is developing rapidly. The question of financing the second stage of the Beyneu-Bozoi Shymkent gas pipeline has been resolved, and the construction of the second stage of the Kazakhstan-China oil pipeline has started. Touching on the bilateral trade between China and Kazakhstan, the deputy prime minister said the trade turnover between them amounted to around $5 billion in the first quarter of 2014. He noted this figure is 11 percent more compared to the same period of last year. Kazakhstan’s export to China stood at $3.5 billion while the import from China amounted to $1.4 billion. “This positive trend suggests the possibility of achieving the goal set by the head of state to increase trade with China to $40 billion by 2016,” he stressed. The Chinese - Kazakh relations have enjoyed rapid development since the establishment of diplomatic relations. China is the largest trading partner of Kazakhstan and Kazakhstan is China’s second largest trading partner in the CIS region after Russia.

AZERBAIJAN May 19, 2014 #54

caucasian business week

ILHAM ALIYEV: AZERBAIJAN’S FOREIGN POLICY UNDERPINNED BY PROTECTION OF NATIONAL INTERESTS

zerbaijani President Ilham Aliyev has been interviewed by “The Business Year” magazine. Below is the text of the interview, presented by AzerTAc. - Your Excellency won a third sweeping victory at the polls last October. What will be the priorities of your third term in office? - The presidential election of 2013 was an important event in the public and political life of Azerbaijan. It demonstrated the attitude of our society towards the political course we have pursued in the last 10 years. Over the course of the decade we followed the path of nationwide leader Heydar Aliyev and succeeded in meeting the goals we had set for our state and society. In terms of its economic performance, Azerbaijan has become one of the world leaders, which has made our country even stronger. As a result of the goal-oriented activities carried out on the basis of thought-out programs, our gross domestic product has increased 3.4 times, the non-oil sector of the economy 2.6 times and budget revenues 16 times, while the volume strategic exchange reserves now exceeds $50 billion. Over $170 billion has been invested in the national economy. Such a rapid development has also led to the improved well-being of our citizens. Over the last 10 years the incomes of our population have increased 6.5 times and the average salary 5.5 times. I think that the decline of poverty from 49 to 5.3 percent and the reduction of unemployment in half to 5 percent can be viewed as important achievements of the country. The last 10 years have seen extensive construction in the country, our cities, settlements and villages have significantly improved, modern standards and advanced technologies are being applied to all our cities. Azerbaijan’s achievements are received well by leading international organizations and prestigious rating agencies. According to the “Global Competitiveness Report 2013-2014” of the World Economic Forum, Azerbaijan is ranked in 39th place in the world for competitiveness. Over the years our standing in the world has strengthened further. Azerbaijan has earned itself a good reputation in the system of international relations and is treated with respect. The numerous international events held in Azerbaijan are evidence of the fact that our country is already seen as a political, economic and cultural center of the region. Against the backdrop of growing trends of tension, unemployment and poverty in the world, Azerbaijan is registering processes of a completely opposite nature - rapid development, progress, growing well-being of the population, public and political stability, national solidarity, etc. I think these have been the key contributors to the outcomes of the 2013 presidential election. The PACE, the European Parliament, the OSCE PA, the Organization of Islamic Cooperation, the CIS and other authoritative organizations have given unequivocally high assessments of the election and described it as free, fair and transparent. And this confirms yet again that our people and the international community see the election and its results in the same way. By their votes the people of Azerbaijan expressed their support for the policies pursued to this day and given us the mandate for a continuation of these activities. Our plans are even more ambitious. There are important issues on our agenda. Activities on further enhancing Azerbaijan’s potential, expanding the competitiveness of the economy, building a modern society, improving the well-being of our society, reinforcing our international standing in accordance with our foreign policy priorities, stepping up the systemic fight against corruption, bribery and other negative phenomena, etc. will be continued in a consistent manner. - Azerbaijan made great strides in ICT last year, the Year of ICT. Looking ahead, what role will technology play in Azerbaijan’s future development? - The advantage of the economic policy pursued in Azerbaijan is the fact that all the activities are carried out on the basis of the country’s real potential, best international practices and specific programs. Experience shows that the application of state-of-the-art technologies is one of the key preconditions of a competitive economy. For this reason, innovation is extensively used not only in the economy but also all other areas. The sector of information and communication technologies is developing very fast and has a great future. The adoption of the National ICT Strategy in 2003 and the subsequent adoption and implementation of the state program on electronic governance gave a major impetus to the development of this sector. In the years of independence more than $3 billion was invested in the ICT development in Azerbaijan. As a result, the sector of information and communication technologies has expanded 8.2 times in the last decade. The launch in 2013 of Azerbaijan’s first telecommunication satellite into orbit and the establishment of a space industry has been a historic event. Work is currently under way to launch two more satellites into space in the years ahead. The Internet has also developed very rapidly in recent

years. According to a report of the International Telecommunication Union, up to 70 percent of Azerbaijan’s population uses the Internet. We have started building broadband Internet channels to all cities of Azerbaijan. I want to draw your attention to another fact. We don’t just apply the innovations existing in the world but also try to initiate some innovations ourselves. I would like to emphasize what can be described as Azerbaijan’s own brand - the State Agency for Public Services and Social Innovations and its “ASAN Xidmət” [Easy Service] centers. The scope of “ASAN Xidmət” services includes coordination of services provided by public agencies, oversight and evaluation, mutual integration of government databases, effective provision of electronic services and modernization of management systems. This service is an example of a progressive government-citizen relationship. The centers currently provide a total of 25 legal services. It is no coincidence that over a million people have applied to the service in a matter of one year. Therefore, we intend to further expand the scope of services provided by “ASAN Xidmət”. As far as the role of advanced technologies in the future development of Azerbaijan is concerned, I can note that in order to facilitate the further dynamic development of the economy and increase its competitiveness, specific measures are taken to expand the ICT spheres based on advanced science and technology achievements, attract both domestic and foreign investment to this sector, create a database of qualified professionals, etc. To fulfill these goals, we have set up a High-Tech Park, established the Information Technology Development Fund and the Information Technology University. The creation of a strong economy based on innovation is one of our primary objectives and we are consistently moving in this direction. - You declared this year as the Year of Industry. What activities are to be carried out in this direction this year? - Azerbaijan used to be considered an agricultural republic before. In the 1970-80s, steps were taken to develop the industry and hundreds of new industrial enterprises were established to produce goods for partner republics. However, the collapse of the USSR led to a cessation of ties between the formerly Soviet republics. In general, the planned economy suffered a fiasco. At the same time, the Armenian aggression against Azerbaijan, the anarchy dominating the country at the time and the physical and moral obsolescence of the old enterprises led to a gradual economic decline and a disruption of to the manufacturing process. Only thanks to the efforts of nationwide leader Heydar Aliyev was it possible to restore production in the early 2000s to the level of the 1990s. In the last 10 years, a portion of the revenues obtained from oil and gas production has been specifically and under special programs channeled into the development of the non-oil sector, the establishment of new high-tech industrial facilities and diversification of the national economy. As a result, the non-oil sector has been registering an annual growth rate of 10 percent each year. In addition, the comprehensive support for private enterprise, the implementation of major investment programs, the establishment and reconstruction of the socioeconomic infrastructure, and the construction of competitive enterprises based on cutting-edge technologies have increased the volume of industrial production 2.7 times. One of the goals on our agenda today is to take advantage of the available potential to transform Azerbaijan into a powerful industrialized state. Certain work has already been done in the area of industrial diversification and modernization. We are engaging the existing natural and economic resources, creating new industrial estates and technology parks and speeding up the process of innovation. For this reason, 2014 has been declared the Year of Industry. A general plan of activities to be carried out this year has been prepared and approved. At the same time, there are plans to prepare and adopt the “State program on industrial development covering 2015-2020”. We believe that the experience we have accumulated and the overall economic potential of Azerbaijan will allow us the opportunity to meet these objectives. - The third state program on the socioeconomic development of districts covering 2014-2018 was adopted last year. What have the first two programs achieved and what are the expectations from the third program? - When we adopted the first state program in 2004, our goal was to ensure all-round development of the regions and eliminate the gap in the level of development between the capital and the rest of the country. I said even before the 2003 election that if I was shown the confidence of the people, I would first of all tackle the development of Azerbaijani regions and a special program would be adopted to this end. And so it happened. The adoption of two state programs covering 20032008 and 2009-2013 periods, the signing and implementation of around 250 resolutions in addition to the two programs created a watershed in the regions and changed the socioeconomic landscape of our districts

beyond recognition. As a result, the quality of public services and social infrastructure in the regions has substantially improved, the business environment has become more favorable, investment has increased, thousands of new enterprises have been commissioned and more than 1.2 million jobs have been created, including 900,000 permanent ones. Over the last 10 years, production of goods in the districts has increased 3.2 times and industrial production 3.1 times. All Azerbaijani districts and residential settlements have been landscaped and modernized. I can say with full confidence that this program has contributed a great deal to the development of the country’s regions and, in general, to Azerbaijan’s economic potential. Our strategic goal on our agenda is to further strengthen Azerbaijan’s independence and make it one of the most developed and competitive countries of the world in all respects. Therefore, taking into consideration the challenges of the contemporary world, the work on the dynamic development of the regions will be continued. I believe that the implementation of the newly-approved “State program on the socioeconomic development of districts of the Republic of Azerbaijan covering 2014-2018” will facilitate sustainable development of the non-oil sector, further improve the public services and the social infrastructure as a whole and elevate the country to the ranks of leading nations of the world. - As far as foreign policy is concerned, Azerbaijan has made important achievements in recent years. The country’s activities in the UN Security Council, the determination and implementation of new foreign policy priorities, etc. are among them. What will be the main directions of the country’s foreign policy in the years ahead? - The comprehensive development of Azerbaijan, the strengthening of its economic potential and an active foreign policy have enabled the country to strengthen its international reputation, facilitate its close integration into the international world and improve its relations with different countries in both bilateral and multilateral formats. Today, Azerbaijan is considered a country pursing an independent policy, possessing its own view on global political developments and the system of international relations and enjoying great international respect. Our election as a non-permanent member of the UN Security Council in 2011 in a trough competition with other countries is not only a historic achievement and a tremendous foreign political success, but also an indicator of great respect we enjoy in the world. As is evident, the world supports the position of our state and approves the steps we are taking. Azerbaijan acts with dignity in all international organizations and puts its national interests above everything else. In the two years of membership in the UN Security Council, especially at the times of its presidency in the organization, Azerbaijan made its contribution to global security, the establishment of peace in the world and development of a dialogue between cultures and civilizations. Azerbaijan has also initiated a number of transnational and regional projects. The energy policy pursued by our country represents significant importance not only to us but also to the region and the world. As you may be aware, the final investment decision on the Shah Deniz-2 project to produce and deliver the ample gas reserves from the Azerbaijani sector of the Caspian to world markets was signed in Baku on 17 December 2013. I believe that the Shah Deniz-2 project will contribute to the redrawing of the world’s energy map and go down in history as the Contract of the 21st century. Azerbaijan has become a political, economic and humanitarian center of the South Caucasus. Baku traditionally plays host to numerous international events. In 2013, the international conference on support for Palestine within the Organization of Islamic Cooperation, the Third Humanitarian Forum, the Second Forum on the Dialogue between Cultures, the Davos World Economic Forum and a number of other high-profile international events were held in Baku. Our bilateral and multilateral relations with the world’s leading international organizations and countries have also developed. Azerbaijan continued its effective operation within the OSCE, the Council of Europe, the Organization of Islamic Cooperation and other authoritative international organizations. Last year we signed an important agreement with the European Union on simplifying visa regulations. This is an indicator of our relations with the European Union. I am confident that we will succeed in creating a format of strategic part-

nership with the European Union to further expand our cooperation. In addition to developing our relations with regional countries and leading states of the world on the basis of mutual trust, we are also reaching out to non-traditional partners. In parallel to expanding our relations of cooperation with the traditional countries of Europe and Asia, we also seek to establish political, economic and humanitarian cooperation with countries of the Non-Aligned Movement, Latin America and Africa. We have identified this as another foreign political priority. It is no coincidence that a number of Latin American countries have recently expressed their support for Azerbaijan’s fair cause in the settlement of the Armenian-Azerbaijani conflict over Nagorno-Karabakh. A total of 10 countries have already recognized the massacre perpetrated by the Armenian armed forces in the Azerbaijani town of Khojaly in 1992 as an act of genocide. The parliaments of these countries have passed relevant decisions to this effect. In the coming years we intend to further strengthen the political and economic potential of our country, enhance our international reputation and expand our cooperation with international organizations and countries. Our foreign policy is underpinned by the protection of national interests, and all the necessary steps will continue to be taken in this direction. I regret to say that there is no progress in the settlement of the Armenian-Azerbaijani conflict over NagornoKarabakh, which is our top foreign political priority. The Armenian side continues to use different pretexts to delay the process of negotiations and tries to maintain the status-quo. There was some revitalization in the talks at the end of last year, which gives us grounds to expect some progress in the settlement of the issue in 2014. The Armenian leadership has got to understand that Azerbaijan will never tolerate the establishment of a second Armenian state on its soil. The conflict should and will be resolved on the basis of Azerbaijan’s territorial integrity. As long as the conflict remains unresolved, the Armenian state will remain sidelined from all transnational and regional projects, the plight of the Armenian people will continue to deteriorate and the already frugal potential of the country will be completely exhausted. - How are the preparations for the much-anticipated European Olympic Games advancing? - We have entered into a crucial year in the preparations for the inaugural European Olympic Games. As is known, preparations for a competition of such proportions usually take seven to eight years. We have only two and a half years to stage the European Summer Olympic Games. I am sure that we will succeed in meeting all our objectives in this respect. The Organizing Committee is already in place and is working very hard. The construction of most of the sport facilities which will host the Games is scheduled for completion this year. The Olympic stadium, the gymnastic center, the aquatic palace and the trap shooting complex are now under construction. The Heydar Aliyev Sports Center and the Hand Games Palace are being refurbished and other sport facilities are being set up. However, preparations for the Games are not limited to the construction of various facilities. Issues relating to security and transportation, the establishment of an Olympic village, accommodation of visitors and athletes, organization of training camps and other issues require a great deal of attention and effort. If we take into consideration the potential already available in Azerbaijan, the presence of a sophisticated sports infrastructure and our extensive experience in hosting prestigious international competitions, I have no doubt whatsoever that we will conduct the Games at a high level. I believe that the standards applied to the Games in Azerbaijan will lay the foundation for all future European Olympic Games.

PUBLICITY caucasian business week

May 19, 2014 #54

WORLD NEWS May 19, 2014 #54

caucasian business week

INTERNATIONAL TOURISM GENERATES US$ 1.4 TRILLION IN EXPORT EARNINGS

otal export earnings generated by international tourism in 2013 reached US$ 1.4 trillion. Receipts earned by destinations from international visitors grew by 5% to reach US$ 1159 billion, while an additional US$ 218 billion was earned by international passenger transport. According to the latest UNWTO World Tourism Barometer, receipts in destinations worldwide from expenditure by international visitors on accommodation, food and drink, entertainment, shopping and other services and goods, reached an estimated US$ 1159 billion (euro 873 billion) in 2013. Growth exceeded the long-term trend, reaching 5% in real terms (taking into account exchange rate fluctuations and inflation). The growth rate in receipts matched the increase in international tourist arrivals, also up by 5%, reaching 1087 million in 2013, from 1035 million in 2012. “These are very positive results as growth in international tourists last year was equal to growth in income generated by over one billion tourists that travelled the world in 2013, for business, leisure, visiting friends and relatives or other purposes. Such results confirm the increasingly important role of the tourism sector in stimulating economic growth and contributing to international trade,” said UNWTO Secretary-General, Taleb Rifai. “These results show that it is time to position tourism higher in the trade agenda so as to maximize its capacity to promote trade and regional integration,” he added. Apart from receipts in destinations (the travel credit item in the Balance of Payments), tourism also generates export earnings through international passenger transport services (rendered to non-residents). The latter amounted to an estimated US$ 218 billion in 2013, bringing total receipts generated by international tourism to US$ 1.4 trillion, or US$ 3.8 billion a day, on average. International tourism (travel and passenger transport) accounts for 29% of the world’s exports of services and 6% of overall exports of goods and services. As a worldwide export category, tourism ranks fifth after fuels, chemicals, food and automotive products, while ranking first in many developing countries.

Asia and the Pacific fastest growing region, while Europe takes biggest share

In absolute terms, receipts in destinations around the world increased by US$ 81 billion (euro 34

billion, comparatively less due to the depreciation of the dollar) from US$ 1078 billion (euro 839 billion) in 2012. Europe, which accounts for 42% of all international tourism receipts, saw the biggest growth in 2013: up US$ 35 billion to US$ 489 billion (euro 368 billion). Destinations in Asia and the Pacific (accounting for 31% of all tourism receipts) increased earnings by US$ 30 billion to US$ 359 billion (euro 270 bn). In the Americas (20% share), receipts increased by US$ 16 billion to a total of US$ 229 billion (euro 173 bn). In the Middle East (4% share) total tourism receipts are estimated at US$ 47 billion (euro 36 bn) and in Africa (3% share) at US$ 34 billion (euro 26 bn). In relative terms, Asia and the Pacific (+8%) recorded the largest increase in receipts, followed by the Americas(+6%) and Europe (+4%). Among the top ten tourism destinations by receipts, Asian destinations Thailand (+23%), Hong Kong (China) and Macao (China) (both +18%) saw strong growth, while the United Kingdom (+13%) and the United States (+11%) also posted double-digit increases. Receipts in Spain, France, China, Italy and Germany grew between 1% and 5%.

China, Russia and Brazil account for half the world’s increase in tourism expenditure The emerging economies of China, Russia and Brazil have been dynamic drivers of outbound tourism in recent years. In 2013, these three source markets accounted for some US$ 40 billion of the total US$ 81 billion increase in international tourism expenditure. China, which became the largest outbound market in 2012 with an expenditure of US$ 102 billion, saw an increase of 26% in spending last year to a total of US$ 129 billion. The Russian Federation became the fourth largest outbound market in 2013, following a 25% growth to US$ 54 billion. Brazil entered the top ten by expenditure at tenth place, on the back of a 13% increase to US$ 25 billion. The performance of key advanced economy source markets was comparatively more modest, with the exception of Australia which spent 9% more. France (+5%) recovered from a weak 2012, whereas the United States, Germany, the United Kingdom, and Canada all increased expenditure by between 2% and 4%.

PUBLICITY caucasian business week

May 19, 2014 #54

TBILISI GUIDE May 19, 2014 #54

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 19, 2014 #54