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December 01, 2014 #78

December 01, 2014, Issue 78

BE INFORMED, DO BUSINESS

GEORGIA THE 2014 STATE BUDGET FULFILLMENT MAY FAIL

IMF SAYS GEORGIA’S ECONOMIC GROWTH COULD REACH 5% IN 2015

everal years ago the Georgian society used to associate the Georgian state budget with one unpleasant word – sequestration. Pg. 6

INTERNET SIGNAL TO FULLY COVER GEORGIAN TERRITORY BY 2020

he Agency of Innovation and Technology established by the Government of Georgia is working on a project that provides for the creation of internet network by 2020. Pg. 2

IMPORTERS PREPARING TO RAISE PRICES OF FOOD PRODUCTS

caucasian1

ccording to importers, if GEL continues depreciation, prices of products will increase by 5%. Pg. 10

NEIGHBORHOOD US PRESSING CHINESE AND ARAB BANKS TO SANCTION RUSSIA – HEAD OF VTB BANK

Reasons for Growth in Market of Microfinance Organizations

Pg. 5

Pg. 13

oca-Cola is launching a new kind of milk nationwide that the company says will “rain MONEY.”

Pg. 2

David Mirtskhulava: Khudoni HPP Construction Works will Start in Pg. 4

he US is putting pressure on Chinese and Arab banks, forbidding them to work with Russian sanctioned companies.

WORLD NEWS COCA-COLA LAUNCHES PRODUCTION OF MILK

Giorgi Chogovadze to Head National Tourism Administration

Pg. 5

FOREIGN TURNOVER GROWS BY 10% eorgia’s foreign trade turnover saw positive movement in the first 10 months of the year, increasing its number of trade partner countries from 131 to 142. Pg. 7

President: Georgia Opens 900 million Market to Investors Pg. 2

DO BANKERS LIE OR NOT? GEORGIAN BUSINESSMEN’S VIEWS

Pg. 13

Pg. 5

Huawei in Georgia: Future of 4G network and more MARCO XU Huawei’s representative in Georgia Pg. 8

Pg. 7

TBC BANK NAMED BANK OF THE YEAR IN GEORGIA 2014 BY Pg. 9 THE BANKER

DISCOVER LATVIA

GEL DEPRECIATES AGAIN

Pg. 11

Pg. 6

CBW Congratulates the Romanian People and the Romanian Embassy in Georgia on the 1918 Great Unification Day of Romania that is marked on December 1 to commemorate the unification of Transylvania, Bessarabia and Bukovina with the Romanian Kingdom in 1918. On December 1, 2014 the Romanian Embassy in Georgia will hold a solemn reception at Radisson BLU Iveria Hotel from 19 to 21 o’clock.

PASHA BANK - SPONSOR OF GEORGIAN PANORAMA AT 15TH TBILISI INTERNATIONAL FILM FESTIVAL Pg. 9

IFAD: GEORGIA SHOWS HIGHEST INDICATOR IN REGULATORY QUALITY CATEGORY Pg. 13

Research

INSURANCE GAINS POPULARITY IN GEORGIAN SOCIETY

Pg. 12

Currency

Exchange Rate Monitoring

IMPORTANT ECONOMIC RELEASES TO DRIVE THE MARKET

2 MAIN EVENTS PARLIAMENT ENDORSES GOVTBACKED SURVEILLANCE BILL

D parliamentary majority voted down competing bill, tabled by the Republican Party. The government-backed package of bills allows the Interior Ministry to retain its direct access to telecom operators’ networks.

GOVERNMENT NEWS caucasian business week

PRESIDENT: GEORGIA OPENS 900 MILLION MARKET TO INVESTORS

he President of Georgia, Giorgi Margvelashvili says Georgia is opening market of about 900 million for foreign investors if they start their businesses in Georgia Giorgi Margvelashvili made this statement at the Georgia-Latvia business forum held in Batumi, which was also attended by the President of Latvia, Mr. Andris Berzins. The Deep and Comprehensive Free Trade Agreement gives Georgia serious potential, President Giorgi Margvelashvili saidThis step does not restrict Georgia from signing free trade agreements with other countries, as well as to deepening relations with them. “If we assess the potential gained by Georgia

NEW CHARGE AGAINST EXPRESIDENT MIKHEIL SAAKASHVILI

he Chief Prosecutor’s Office of Georgia has laid new charges against the former president of Georgia in connection with the notorious case of kidnapping, torture and murder of Sandro Girgvliani in 2006.

MINISTER OF EDUCATION HOLDS MEETINGS IN THE USA

eorgian delegation going to the United States in the framework of strategic partnership in education sector. With request of Georgian government, World Bank experts are involved in elaborating the education system.

BY 2020, GEORGIA TO BE FULLY COVERED BY INTERNET

ccording to head of the Agency of Innovation and Technology Irakli Kashibadze, the main objective is to maximize the availability of the Internet for all citizens

GEORGIAN RAILWAY GOES ON STRIKE

he negotiations between new professional union of Georgia’s Railway and the Railway Administration have been underway for some time; however, these negotiations have not yielded any tangible result yet.

DETAILS OF DEFENSE MINISTRY’S PROCUREMENT CASE DECLASSIFIED

iorgi Chogovadze has been appointed as a new head of the National Tourism Administration. His candidacy was selected among 31 ones by competition. First Deputy Economy Minister Dimitri Kumsiashvili told reporters at the introduction ceremony, besides government officials, representatives of nongovernmental organizations involved in the tourism sector were also represented in the competition commission. Giorgi Chogovadze has graduated from ESM and holds a MA degree in business management and

he Agency of Innovation and Technology established by the Government of Georgia is working on a project that provides for the creation of internet network by 2020 covering the entire territory of the country. It is planned to provide access to faster broadband internet in all localities with population of 200 people. According to the head of the Agency Irakli Kashibadze, the main objective is to maximize the availability of the Internet for all citizens. Works have already begun and soon they will move into an active phase. We are talking about large-scale project of about the same level as the electrification of the whole country. Therefore, its implementation needs a lot of time,”- he adds. According to a member of the National Communications Commission Irakli Moseshvili, the Commission has been actively involved in the implementation of the program within its competence. “The project was developed by the European

he issue of return of Kazakh management in KazTransGas-Tbilisi will be finally resolved by early 2015 – Energy Minister Kakha Kaladze states.

PM URGES BUSINESSMEN TO JOIN REGIONAL DEVELOPMENT PROJECTS

rakli Garibashvili signed an agreement together with new EU Commissioner for Enlargement and Neighborhood Policy Johannes Han, under which Georgia will receive 30 million euros to help the region’s development.

he ‘Alliance and Strategic Partnership’ treaty signed between Russia and Georgia’s breakaway region Abkhazia is a step towards annexation of Georgia, President Giorgi Margvelashvili said.

PM OPENS TRANSPORT TERMINAL IN WESTERN GEORGIA

eorgia’s Prime Minister Irakli Garibashvili opened a new transport terminal on the Shah Deniz-2 gas pipeline in Poti, western Georgia’s Black Sea coastal town. About a hundred locals will be employed in the new facility

GOV’T WILL SPEND UP TO 19 MLN GEL TO BUY APARTMENTS FOR REFUGEES

overnment will buy 19 million laris’ worth of apartments from construction companies to be given to internally displaced people and refugees.

administration. In 1993-97 he passed a joint program of Preston University and ESM Tbilisi. Giorgi Chogovadze has got much working experience in the business sector. In various periods he has worked as a director for Properties Management company. He is also a founder of the company. He has also worked as a manager general for LLC Business Protocol, as a chairman of the PR office of International Chamber of Commerce of Georgia and as a manager general for LLC Central Travel. Giorgi Chogovadze speaks English and Russian languages.

INTERNET SIGNAL TO FULLY COVER GEORGIAN TERRITORY BY 2020

KAZAKH MANAGEMENT EXPECTED TO RETURN IN KAZTRANSGASTBILISI EARLY 2015

after signing this agreement, we can see that on the one hand, we are opening a 500-million European market for investors, and we also have a free trade agreement with Turkey and the CIS countries. This means that in total we are opening about a 900-million market for investors if they do their business in Georgia,” said the President. According to Margvelashvili, at the same time, Georgia’s traditional role in business and its geopolitical role are also important. “In this regard, the role of Georgia in connecting the Caspian and Black Sea regions is crucial. Georgia is a transit country for 8 out of 14 countries of the Eurasian region, which do not have access to the sea,” said the President, adding that this underlines the transit potential of Georgia.

GIORGI CHOGOVADZE TO HEAD NATIONAL TOURISM ADMINISTRATION

he Chief Prosecutor’s Office of Georgia has declassified some of the controversial procurement documents that relate to an alleged unlawful tender and the misspending of 4.1 million GEL.

GEORGIA’S PRESIDENT CALLS ON INTERNATIONAL COMMUNITY TO PREVENT ANNEXATION OF ABKHAZIA

December 01, 2014 #78

Bank for Reconstruction and Development with the assistance of international organizations as well as the Innovation Agency and is planned to be implemented by 2020. This is quite a difficult task which requires an entire infrastructure, underground fiber-optic cable that will allow reaching the most remote villages. The project worth USD 20-30 million will be funded jointly. Business companies are also interested in the project and along with the state will participate in its implementation,”- Moseshvili notes. Prime Minister of Georgia Irakli Garibashvili announced about his intention to implement the project. According to him, the government program “Broadband Internet - for all citizens of Georgia” has been approved this year to provide the Internet access throughout the country. “The Georgian government will encourage all businessmen who will invest in the development of modern communication technologies in the country,” - said the Prime Minister.

PRODUCE IN GEORGIA PROGRAM APPROVES THREE NEW PROJECTS

n the Friday government session 3 new projects have been approved in the framework of the state program Produce in Georgia. First deputy Minsiter of Economy and Sustainable Development Dimitri Kumsishvili presented the enterprise projects. Kumsishvili states that 35 persons will be employed in the enterprise of LTD Solidorty, which will produce medical-orthopedic products. Currently such products are exported from USA, France and Turkey into Georgia. The state gave non-agricultural plot of 4142 square meters area and 4 attached buildings (located in the village Bagi-chala, Dusheti municipality) to the company Solidorty for a symbolic price - 1 GEL to create the enterprise. The company takes obligation that will invest 144

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000 GEL and provide opening of the enterprise in 2 years. According to submitted project, products will be sold on the local market, in 8 months after the start of product issue export will also start. In the Infrastructural Support component of the state program Produce in Georgia a high technology and intensive poultry meat producing enterprise will be creates. For this aim LTD Toro got non-agricultural land of 10 000 square meters and attached building (farm) located in the village Tsinarekhi, Kaspi Municipality for a symbolic price (1 GEL). The company is responsible to establish the enterprise in 2 years and invest 100 580 GEL in it. 20-25 persons will be employed in the new enterprise. The products will be sold on the local market. Enterprise of the same direction will be created in Tetritrskaro city, for which LTD Agricultural Invest-

ments Group Georgia will spend 897 200 GEL. The company got non-agricultural land of 7706 square meters and attached buildings from the state for a symbolic price (1 GEL) to create high technology and intensive poultry meat producing enterprise. The new enterprise will start working in 2 years and 20 persons will be employed there.

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Editor-in-Chief: Evgeni Mikeladze Reporters: Nutsa Galumashvili; Nino Gojiashvili, Tamar Kakabadze

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PUBLICITY December 01, 2014 #78

According to the GOEuroâ&#x20AC;&#x2122;s 2014 research, Georgia ranks second worldwide in terms of cheapest train tickets. Only South Africa is recorded ahead of Georgia. GOEuro is one of the major multifunctional research companies in the travel sector. The company compares and calculates prices for travel by train, bus and airplanes. GOEuro published the report in August 2014.

caucasian business week

4 HEADLINES INVESTMENTS INFLOWS TO ACHARA GROWS BY 25%

ccording to minister of Finances and Economics of adjara,David Baladze investments have increased by 25% in region and reached 183,4 million USD in 9 months.

AFTER A SLIGHT STRENGTHENING, GEL STARTED DEPRECIATION AGAIN

eorgian national currency has fallen again – its official rate for tomorrow against the dollar was established at 1.8367.

COMMERCIAL BANKS INCREASE LOAN PORTFOLIO BY 196.7 MILLION GEL

he volume of lending to resident individuals increased by 2.2 percent, or 123.2 million GEL, during October 2014 and exceeded 5.6 billion GEL by November 1, 2014.

GEORGIA RELIES ON ICT SECTOR

he information technologies contribute to further political, economic and social development of Georgia,” Garibashvili said. “The rapid development of this strategically important sphere is one of the priorities of the country’s government.”

NON-BANK DEPOSITS AMOUNTED 10.7 BILLION GEL

on-bank deposits in the banking sector amounted 10.7 billion GEL by November 1 , 8 million ( 0.1% ) higher than the previous month ‘s figure

GEORGIAN INDUSTRIAL GROUP BEGINS ELECTRICITY TRANSIT TO TURKEY

he transit of electricity will be implemented through Akhaltsikhe-Borcka 400 kV interconnection line. By this project, Georgia is becoming important strategic player on the regional electricity market, which represents one of the most important priorities of the Georgian Government.

EXCISE ON BEER MAY NOT DOUBLE AND TAXATION INCREASE DELAYED

INTERVIEW December 01, 2014 #78

caucasian business week

GOVERNMENT PROVIDES HUGE EFFORTS TO CREATE COMFORTABLE CONDITIONS TO INVESTORS Khudoni HPP Construction Works will Start in December 2015 Interview with TransElectrica director DAVID MIRTSKHULAVA -MR. David, a year ago the Khudoni HPP construction project was under active considerations and discussions, but today this interest has declined and the issue seems to have lost the relevance. What is a real situation in this respect? -No, it is not true. The project has not lost its significance, because it is one of the major and main projects for the Georgian power system. As to the current situation, the government has asked for making amendments to the memorandum. The issue refers to a growth in volumes on the domestic level. I cannot divulge the details, as negotiations are being continued. Our representatives financiers and lawyers will arrive from London and they will assist us in holding these negotiations. I believe by the end of this November the memorandum will be amended and signed and the government will grant us an at least one-year term for inauguration of construction works. We should start construction works in autumn 2015. Before, we should take all required procedural licenses. -TransElectrica was expected to take a construction license on March 1, but the process failed. What has hampered this process? -Deadlines are not important in this case. The main thing is that the project must be implemented valuably. This is a state demand and request. One of the main reasons for the failure was the fact we had registered 1400 hectares of land plots for measurement, but for certain reasons we failed to measure the remaining 9% of the required land plots. We have decided to avoid further tensions.

Moreover, we have hired the worldwide famous Canadian company that works on important social issues for this region so as everything meet international standards. Thus, I believe it is acceptable to postpone deadlines because of the memorandum amendments and everyday works on Khudoni HPP to implement the project at a high level. -We remember local residents have showed very irreconcilable position. What is the current situation in this respect? -We are trying to outline common interests and reach a mutually beneficial solution with the local population. This is not my field, but naturally, I have got information on this issue. The state is also interested in solving the problem in line with the world’s best standards. To this end we should find due way out, compensations and offers. -According to unofficial information, the local population will receive unprecedented compensations. -The project is an unprecedented one in itself. This is the biggest project in the Georgian power system history. Everything will meet international standards. Even the resettlement issue implies providing best living conditions to the current and future generations. Similar projects will maximally improve the living conditions. The company plans to supervise this process in long-term perspective so as to prevent Soviet era precedents. We will implement monitoring, and not only we, but commercial banks of various countries that will be involved in the project implementation. -I would also ask you about a new, but unpublicized state policy over the power system, under which en-

ergy generated by HPPs, first of all, will be purchased by the state. Do you think such a policy will ensure Georgia’s energy independence? -According to my information, the government plans to purchase four basic stations that are of crucial importance for the power system. A conference was held on the issue and very interesting projects were introduced, including by Deputy Energy Minister Ilia Eloshvili and Deputy Environment Protection Minister Maya Bitadze. In practice, new perspectives were outlined in this direction in the country. -Do you think similar policy will be interesting for investors? -The government provides huge efforts to create comfortable con-

xcise on beer may not double and taxation increase delayed by 2 months.

PILOT TRAIN TO CROSS BTK RAILROAD AT THE END OF 2014

pilot train is set to test the Baku-Tbilisi-Kars railroad that links Azerbaijan with Turkey via Georgia before the end of the year.

ARMENIA REGISTERS LAVASH AS INTANGIBLE CULTURAL HERITAGE

ANDREW SPINDLER’S RECOMMENDATIONS TO GEORGIAN GOVERNMENT’S ECONOMIC TEAM An interview with President of the Financial Services Volunteer Corp and President at theFederal Reserve Bank of New York Andrew Spindler

rmenia hurt neighboring countries that arrogated lavash to itself.

HOTEL BUSINESS DEMANDS SEASONAL TAXATION

otel business is waiting for the promised by the government seasonal tax for over a year, but a bill on this issue has not yet been prepared.

4G INTERNET TO BE AVAILABLE IN GEORGIA IN 3 MONTHS

NCC will announce conditions of competition (auction ) for supply of the market with 4G Internet on December 2 while consumers will be able to use this service in the spring of next year.

FATE OF TBILISI INDUSTRIAL ZONE REMAINS UNCLEAR

he Israeli Terra One and the Georgian government failed to reach an agreement on this issue.

ditions to the investors. Naturally, the sales tariffs will be negotiated. At the same time, investors should find returns from the projects reasonable. Low tariffs are inadmissible, because this will frighten the investors. The tariff should not be too high either. Hence, we should take a compromise decision. As to the government approach, they are interested in drawing and promoting investors, especially as part of this major project. -When do you expect Khudoni HPP initial construction works to start? -I expect the preparatory works to start in December 2015. At the end of the 2015 autumn we will start preparing construction camps. This is a big interest of the government and the company. We have mobilized financial resources and there are no problems in this respect. Engineers and technical staff are also ready for the project implementation. Hence, the company is trying to apply best international practice for successful implementation of the project. This will be a unique and special project for Georgia.

- In recent years, the banking sector of Georgia isconsidered one of the most successful sectors of the economy, even though the banks are very often blamed for engaging in non-core activities, as well as inflating interest rates. What do you think, can the bank have non-core assets, and how interest rates in Georgian banks differ from Eastern European?

- Our organization has implemented up to 25 projects in Georgia and has significantly contributed to the development of the banking system. It is very difficult to name the optimal interest rate in the country, although, the need to support small and medium businesses is obvious. It should play a leading role in the dynamics of growth of the banking sector. The central bank is obliged to create maximum conditions for both commercial and non-commercial financial sector in order Georgia to be able to compete with other developing countries. It is necessary to create a stable financial infrastructure and reduce corruption to a minimum. In some segments , Georgia occupies quite advanced positions, such as in the procedures of doing business, which are very simple and clear. In this area, Georgia is ranked 8th in the world and is ahead of even some developed countries, such as Britain. But there are other indicators, such as the avail-

ability of credit, and here there is still work to do. - What would you recommend to the Georgian government’s economic team? How can we improve the business climate in the country, especially in an environment when the country needs investments as air? - I believe that Georgia is quite successful country from an economic and financial point of view, which managed to solve a number of very serious problems - the conflict with Russia, the crisis of 2008-2009. The geographical location of the country is so favorable that as much as possible funds should be directed for infrastructure development. Recipes are simple - to minimize corruption, to be as transparent as possible in decisionmaking, and to create a stable financial system. Georgia has all the possibilities for building much more stable economy than it has now.

ANALYTICS December 01, 2014 #78

caucasian business week

DO BANKERS LIE OR NOT? - GEORGIAN BUSINESSMEN’S VIEWS

eorgian businessmen respond to the article published in the Financial Times. Swiss researchers have come up with what they say is compelling scientific evidence that bankers have a tendency to lie if they’ll gain from it financially. The team at the University of Zurich used game playing experiments to show “that the prevailing culture in the banking industry weakens and undermines the honesty norm, implying that measures to re-establish an honest culture are very important”. The study, published in the leading journal Nature, probes the psychology behind what the researchers call “a dramatic loss of reputation and a crisis of trust in the financial sector”, as a result of rogue trading, rigged interest rates such as Libor and tax evasion scandals. Two hundred bankers took part in the study (including 128 from a single unnamed international bank). The researchers divided participants randomly into two halves. The Zurich researchers suggest a series of mea-

sures that could restore honesty to the financial sector. For example, they support the idea of bankers taking a professional oath akin to the Hippocratic oath for physicians, which would “prompt them to consider the impact of their behaviour on society rather than focusing on their own short-term benefits”. CEO of the development company Arci Tornike Abuladze agrees with the Swiss scientists. He says that if bankers lie in Switzerland, the problem is even much more widespread in Georgia. In Abuladze’s words, TV advertising on free loan is an obvious deception. Businessman Lasha Papashvili believes that not the bankers, but in general, people are inclined to lie. In his assessment, better protection of consumer rights or the strict regulation of all service providers will help to resolve the problem. Businessman Cezar Chocheli partly shares this opinion. In his words, there are “plunderer” banks in Georgia “ and the banks that are more or less normal. According to Armaz Tavadze, a founder of the insurance company Ardi, customers do not like

bankers in any country, but in Georgia these feelings have much more real reasons. In his words, banks have massively used our population’s ignorance in the financial field for their own selfish purposes for many years . Along with that, over the years it was hard to find a businessman who had a good knowledge of finance. “A lie, how else can it be called when years ago customers were offered such banking products which were directed to bankrupt them intrinsically. Unfortunately, the goal was achieved and today it is hard to find healthy borrower in the country “, - Tavadzeadds. Tavadze assesses the current situation noting that bankers have not lost a desire to cheat but the population has become more cautious and do no longer trust them. The state was forced to toughen up regulations to protect clients. Businessman Anzor Kokoladze thinks differently. In his opinion, to say that the bankers lie and others not, or vice versa, will be a little bit wrong. The banking process is the same business process in any other company. As Kokoladze adds, a bank as well as any company can have a disguised marketing, so the separation of the bankers will not be correct. Zurab Ramazashvili, Chairman of the Supervisory Board of Telavi Wine Cellar, states that he was not deceived by the bank or the banker, and in general, nobody deceives anybody.He estimates that every person who interacts with the bank should carefully read the contract and evaluate his own capabilities to avoid misunderstandings.

REASONS FOR GROWTH IN MARKET OF MICROFINANCE ORGANIZATIONS

he Georgian financial market registered an appearance of microfinance organizations in 2006, when on July 18, 2006 the parliament adopted a law on microfinance organizations. Today, a total of 85 microfinance organizations with 307 service centres and branches are registered on the market. They employ 3 813 citizens as of 3Q14. The sector players have issued 406 955 loans of 761 401 439 GEL as of 3Q14. Total assets of the sector account for 1 .9 billion GEL, while total capital stands at 254 140 315 GEL. In January to September 2014 the sector’s undivided profits marked 171 million GEL. THE SECTOR IN FIGURES The microfinance sector is one of the rapidly growing fields of the Georgian economy. Even in 2008 amid the hostilities and the global financial crisis, the microfinance sector’s assets rose by 100% compared to 2007, while the undivided profits rose by 8 times. As reported, microfinance organizations launched operation in Georgia in 2006 and today a total of 85 bodies are recorded in Georgia. They have increased their financial indicators too. Namely, total assets in the third quarter of 2014 rose 360 times compared to 2006, total loans rose 350 times and net profits increased about 1800 times. Other indicators have also increased in the microfinance sector. Namely, the sector employs 3 398

citizens as of the third quarter of 2014, up by 658 citizens compared to the same period of 2013, while the quantity of branches and services centres rose by 65 units to 307 ones year on year. According to the recent statistics of the National Bank of Georgia (NBG), Georgia’s microfinance sector has totally issued 761 401 439 GEL loans, including the ratio of corporate loans is 0.6%.

PRODUCTS AND RATES Microfinance organizations offer the same package of credit products as commercial banks, including mortgage loans, auto loans, agro loans, business loans, pawn loans and consumer loans. The companies will also introduce credit cards in the near future. As to interest rates, quite high yields are registered in the sector, especially on auto loans and pawn loans. The NBG does not provide as accurate statistics on the microfinance sector as in the bank sector. Consequently, there is no official statistics on interest rates in the microfinance sector. However, the analysis of the market terms enables to calculate an averaged interest rate. Interest rates range from 18% to 72% due to the products and this is quite high indicators. In this respect the situation in other countries is very interesting. The NBG official report shows in European countries interest rates on micro credits are far lower than in Georgia. As of July 2013, the indicators are as follows: Bulgaria – 7.07% averaged

interest rate, Finland – 1.18%, Czech Republic – 2.68%, Estonia – 2.65%, Hungary – 7%, Latvia – 2.71%, Lithuania – 3.15%, Romania – 9.02%, Poland – 4.9%, Slovenia 4.1% and so on. REASONS FOR SUCCESS OF MICROFINANCE ORGANIZATIONS What drives the growth in demand for credits of microfinance organizations amid so high interest rates? As reported, there are several ways to borrow money, including commercial banks are the most famous and widespread institutions for that, but commercial banks set quite high standards and requirements to borrowers, while a major part of the society cannot meet these standards, but they need financial resources and they have to find alternative sources. Microfinance organizations are similar alternative instances, but they charge very high interest rates. Thus, a major part of clients of similar credit organizations are in economic and financial needs and they cannot apply to commercial banks (they do not have sufficient incomes or there are other reasons). This category has to take loans with very high interest rates from alternative financial institutions. This category is very major and numerous and this is the main reason for success of microfinance organizations, because citizens with stable financial conditions will not apply to the microfinance sector. Those who are able to take loans from commercial banks will not apply to microfinance organizations.

TOP STORY

IMF SAYS GEORGIA’S ECONOMIC GROWTH COULD REACH 5% IN 2015

rowth in Georgia is expected to reach five percent in 2014-15 but the forecast is subject to risks, the International Monetary Fund said this week. Russia-Ukraine crisis had limited economic impact so far, given Georgia’s limited (but growing) trade links with Russia, however escalation of regional tensions or further disappointment over the strength of the Euro area recovery could weaken foreign investment and trade. On a positive note, IMF stressed there was a potential upside and pointed to the recent decline in oil prices, stating: “if sustained, should lead to higher growth and a lower current account deficit”. According to IMF estimation the economy recovers from the slowdown in 2013, supported by stronger consumption, private investment, and export,so growth will reach five percent. “The economic impact of geopolitical tensions has been contained so far, given Georgia’s growing (but still limited) trade links with Russia and increasing remittances from Southern Europe. All of the program’s quantitative targets for endSeptember were met,” IMF said. The international agency expected this year’s budget deficit will be slightly below the program’s 3.7 percent of GDP limit. Tax revenues have exceeded program projections. “Overall spending has been broadly in line with expectations but its composition has shifted from capital to current expenditure, pointing to the need to strengthen project appraisal and procurement,” IMF said. IMF officials were confident that the authorities would continue allowing the Georgian Lari to float in line with market forces to preserve competitiveness and to strengthen the economy’s ability to withstand external shocks. IMF Resident Representative in Georgia Azim Sadikov presented the IMF’s latest regional assessment on November 17, and said Caucasus and Central Asia countries were dealing with economic implications of geopolitical tensions and the related slowdown in Russia. “With weaker economic prospects and longstanding vulnerabilities, it is more urgent to implement reforms to increase competitiveness, reduce unemployment and improve living standards.” Georgia’s high current account deficit and external debt remain sources of vulnerability to the economy. After increasing this year, the current account deficit is projected to decline starting 2015, supported by fiscal consolidation, greater exchange rate flexibility, reforms to improve competitiveness, and opportunities provided by the free trade agreement with the EU. The authorities will continue allowing the lari to float in line with market forces to preserve competitiveness and to strengthen the economy’s ability to withstand external shocks.

OPINION caucasian business week

December 01, 2014 #78

GEL DEPRECIATES AGAIN

A LEVAN KALANDADZE Economic Analyst, Chairman of Georgian Infrastructure Projects Initiative

nfortunately, this year we continued and still continue the negative trend that has taken place in late 2013. The government has not made the proper conclusions from the results of the failure 2013 fiscal year. Talking about the depreciation lari of up to 76 to 83 caused seasonal factors and there is nothing alarming is very far from reality. It all looks like put blame the season and hide mistakes made by government and his is not adequate assessment of the situation. The problem of this year was the same as in the fourth quarter of 2013 - Improperly planned and implemented budgetary and financial process in the year 2014 led to a non-compliance budgets for six and nine months. At present, by the end of

fter a slight strengthening, the exchange rate of the Georgian national currency has fallen again. The Minister of Finance of Georgia has spoken about the devaluation of the national currency today. In recent weeks, the rate of GEL against US dollar decreased by 4%, although, a reduction has not yet caused a rise in consumer prices, but according to experts, inflation is expected. The fall of more than 5% would lead to higher prices for imported products. A few days ago, the National Bank spent USD 40 million to keep the rate. Georgia’s consumer market is clogged with imported goods, so changes in exchange rate are always very sensitive, and in the case of its sharp decline, there is concern that the products will go up. According to importers if the gel point has depreciated with 2-3% products get more expensive. Prices of imported products linked to LARI exchange rate. If LARI exchange rates raises more than 1,9 point, products will become with 10% more expensive.

the year the Ministry of Finance has planned to spend more than a billion. This directly contributes to excess supply in the market and stimulates the depreciation of the lari. In addition, the balance of payments and the current account of the country is not in a good condition. Reducing the flow of foreign direct investment and other sources of foreign exchange are directly reflected in the demand for dollars. This has a negative impact on the exchange rate of GEL. A depreciation trend Of LARI has negative impact on consumer prices. Georgian consumer market too much oriented on import. Consumer demand for the dollar and the depreciation of LARI aggravated the burden of all of us and this increases the cost of living.

Stabilization of the LARI exchange rate and maximum loss management processes highly depends on consistent and coordinated working of the Ministry of Finance and with the National Bank in this period and how much will be agreed and the corresponding expenditure policy priorities of the Ministry of Finance and the National Bank of anti-inflation measures instruments. IRAKLI LEKVINADZE Unfortunately, we are facing the same problem at the end of this year. The increased costs at the end of the year affect a decrease in the rate and at the stage a falling rate is within 4%. However, apart from spending policies, reduced exports in the last 3 months, reduced remittances in the last month, an increase in imports, 3% strength-

IRAKLI LEKVINADZE Expert of Economy

ening of the US dollar against the euro, reduced tourist flow and income, which is a seasonal factor for this period, are among the important factors. We have no information about the investment flows. However, a significant change is not expected in this regard with respect to the previous quarter. Also we should not forget the impact of the international economic processes. There is a shortage of US dollars in Ukraine and Russia which could be a factor causing the weakening of GEL. I advise people not to hurry to convert GEL to other currencies as they may be affected, since the rate will be decreased and balanced. The process is manageable, and the National Bank has all the resources to control the process.

THE 2014 STATE BUDGET FULFILLMENT MAY FAIL

everal years ago the Georgian society used to associate the Georgian state budget with one unpleasant word – sequestration. Today another term - budget gap - has become relevant. In 2013 the state budget gap marked 640 million GEL. Economic experts do not rule out the 2014 budget fulfillment may also fail. According to the last report, the state budget revenues in January to October marked 7.174 billion GEL, while the total budget plan accounts for 9.105 billion GEL. It is evident 100% fulfillment is questionable. That’s why our citizens argue whether the 2014 state budget fulfillment may fail. BPN.Ge has asked Paata Kvizhinadze, a head for the parliamentary committee for branch economy and economic policy, to make comments on the issue. PAATA KVIZHINADZE: “I would not agree with these pessimistic expectations over the issue, because the revenues part is being fulfilled by surplus. There are unimportant problems with incomes part, but it will be also fulfilled by the end of the year. Even if this part fails, the gap will be unimportant. The problem is mostly related to the expenditures part, but I hope this problem will not bring catastrophic outcomes, because the implementation of infrastructural projects has evidently improved”. A report on the expenditures part will be intro-

duced to the parliament in the near future, Kvizhinadze noted. Therefore, it is untimely to discuss the issue before the final results: “I believe the budget will not fail, but if the expenditures part fails, no serious problems will arise for our economy”, MP noted and added the GEL exchange rate fluctuations are related to the strengthened USD. Analyst DEMUR GIORKHELIDZE assures there is no threat for the state budget failure: -I receive information on the budget expenditures and revenues every day and I have found nothing catastrophic in these data. There is no threat the budget will fail or some programs will not be financed. Ministries have not spent even the planned expenditures because of lack of professionalism and organization skills. Seemingly, they have only now started spending the due expenditures part and the process has affected the GEL exchange rate too. At the same time, there are several factors that coincide with each other: the demand for USD grows, the end of the year is coming, investors withdraw money, our citizens got frightened and hurried to currency exchange booths – these factors are partly conditioned by the fact the unemployed budget expenditures are used at the end of the year and this makes negative affect on the currency exchange rate. Anyway, I find no threats the budget gap will be too serious. Demur Giorkhelidze assures the national curren-

cy was artificially strengthened and it would be expedient if the National Bank of Georgia (NBG) starts gradual devaluation of the GEL rate. Naturally, this process should be affixed to the economy, he says. “They will not abandon GEL, but I expect the GEL exchange rate against USD will stop at 1.9 point and this tendency will be maintained in 2015”, Demur Giorkhelidze said. Economic expert LEVAN KALANDADZE also makes pessimistic forecasts like other specialists: “Some experts expect the state budget gap to mark 300 million GEL in late December. I would say this would be the best variant. I will explain why I think so: the budget plan for tax revenues has been fulfilled. The Revenues Service provides genuinely good job and there is no problem in this direction in 2014, but the budget revenues consist of not only tax revenues, but also grants, credits and other incomes. Unfortunately, there is a serious gap in the credits part and this is an evident problem with management. The fact is that the Government fails to use credits planned at the beginning of the year. Therefore, the budget fails in the revenues part. This is one problem, but we also have the expenditures part with serious problems. Some state offices have fully employed the funds, but a number of Ministries, especially, the Infrastructure Ministry fails to use planned expenditures and we have got due outcomes”. “It is easy to determine whether the budget will

be fulfilled or not. We should just look into reports that show the plan has been fulfilled in neither revenues nor expenditures part. Someone does not like to recognize this because of political context and they are indifferent to this reality. This is another issue. The treasury department report reads the plan has not been fulfilled in these directions. Therefore, the forecast for expected budget gap in 2014 is realistic and substantiated. I personally do not expect the 10-month gap will be replenished now. This is unrealistic”, Kalandadze noted. The 2013 state budget was not fulfilled either, but no one has taken responsibility for that. No one is expected to bear responsibility for the 2014 state budget failure either, Levan Kalandadze says. “They are indifferent and they assure neither the GEL devaluation nor the inflation level bring threats. Today we have to choose either to fulfill the budget on the paper and make serious strike to the GEL exchange rate, or take the responsibility and say the budget was planned incorrectly, the plan was fulfilled incorrectly, investments were not drawn and that’s why we have budget gap. This recognition will enable us to somehow save the GEL exchange rate and preserve currency reserves. Regretfully, this is an issue of political responsibility, not economic, because the economy is based on accurate figures and data and it does not reconcile with similar mistakes”.

ECONOMY December 01, 2014 #78

caucasian business week

FOREIGN TURNOVER GROWS BY 10%

IFAD: GEORGIA SHOWS HIGHEST INDICATOR IN REGULATORY QUALITY CATEGORY

n November 19 the Caucasus University Center for Economy and Health Research (CU EHRC) held a final forum:IFAD Expertise – Georgia Government’s Management Quality. The forum was proposed by the EHRC analytical laboratory: International Monitoring Center of the Government. The Forum discussed a report on expertise developed by the UN International Fund for Agriculture Development as part of the Worldwide Governance Indicators (WGI) of the World Bank (WB). IFAD has assessed the regulatory quality indicators in various countries. The indicator consists of three components: 1) Enabling Conditions for Rural Financial Services Development; 2) Investment Climate for Rural Susinesses; 3) Access to Agricultural Input and Product Markets. According to the IFAD report, the highest indicator in this category was registered in 2013 and the figure marked 80%, up 17% compared to the 2004 to 2012 period. The figure takes Georgia ahead of Azerbaijan and Turkey, but leaves the country behind Armenia by 2%. The 2013 IFAD report on Regulatory Quality contains indicators from 97 countries (excluding European countries). In the report the top three places are occupied by Mauritius, Armenia and Thailand, while Georgia ranks 4th. ENABLING CONDITIONS FOR RURAL FINANCIAL SERVICES DEVELOPMENT Under the IFAD report, the 2013 indicator of Enabling Conditions for Rural Financial Services Development marked 80%, up 11.7% compared to the 2004 to 2012 period. The highest figure was recorded in 2009 that dropped to 70% in 2012, but returned to the 2009 level in 2013. The 2013 indicator makes Georgia at the same level with Armenia and is ahead of Azerbaijan and Turkey by 20% and 15% respectively. The ten top countries in terms of the Enabling Conditions for Rural Financial Services Development are as follows: Rating

Country

Egypt

Enabling conditions for rural financial services development indicator % 90.0

Ecuador

85.0

Brazil

82.6

Thailand

80.0

5 Rating 6

Mauritius Country Armenia

80.0

Georgia

80.0

Morocco

80.0

Uruguay

77.4

10 Rating

Pakistan Country

73.8

80.0

INVESTMENT CLIMATE FOR RURAL BUSINESSES Under the 2013 indicator in terms of Investment Climate for Rural Businesses Ratingthe IFAD report, Country marked 86.6%, up 24% compared to the 2004 to 2012 averaged indicators. The highest figure for the last 9 years emerged in 2013. The figure stood at 66.6% in 2011 and 2012, down 20% compared to the 2013 indicator. Georgia is ahead of Azerbaijan by 26.6% in terms of the 2013 Investment Climate for Rural Businesses indicator, comes behind Turkey by 6.8% and is at the same level with Armenia. The ten top countries in this category are as follows: Rating 1

Country

Investment climate for rural businesses %

Turkey

93.4

Georgia

86.6

Mauritius

86.6

Armenia

86.6

5Rating

Country Thailand

80.0

6 Rating 7

Uruguay Country Jordan

80.0

Tunis

80.0

Brazil

76.6

Peru

76.6

80.0

ACCESS TO AGRICULTURAL INPUT AND PRODUCT MARKETS Ratingthe IFAD report, Country Under the 2013 Access to Agricultural Input and Product Markets indicator marked 73.4%, up 15.4% compared to the 2004 to 2012 period. The indicator stood at 60% in 2011 and 2012, down 13.4% compared to the 2013 indicator. Georgia is ahead of only Azerbaijan with 30% in this category. The ten top countries in terms of Access to Agricultural Input and Product Markets indicator are as follows: Country

Access to agricultural input and product markets %

Rating 1

Mauritius

100.0

Turkey

80.0

Armenia

80.0

Thailand

80.0

Jordan

80.0

Tunis

80.0

Cabo Verde

80.0

China

76.6

Georgia

73.4

Rwanda

73.4

eorgia’s foreign trade turnover saw positive movement in the first 10 months of the year, increasing its number of trade partner countries from 131 to 142. Figures released today by state statistics office Geostat showed Georgia’s foreign trade had increased by 10 percent year-on-year (y/y) to $9.43 billion USD. In particular, exports grew five percent y/y and reached $2.42 billion, while imports increased by 11 percent and amounted to $7 billion in the same period. In addition, the trade gap was 49 percent in total trade turnover. Georgia’s Deputy Finance Minister Giorgi Kakauridze believed the country’s foreign trade had increased with European Union countries by more than 23 percent but had decreased with Commonwealth of Independent States (CIS) member countries. “CIS countries economies are connected with Russia’s and Ukraine’s economies [and] that caused the decline of exports from Georgia,” Kakauridze said at todays’ Parliamentary Finance and Budget Committee while presenting the 2014 budget report. Georgia’s trade with CIS member countries stood at $2.9 billion for the first ten months of 2014 – a 0.5 percent y/y decrease. Georgian exports to these countries grew one percent to $1.2 billion while imports from CIS member states decreased by two percent to $1.6 billion. The share of CIS countries in Georgia’s external trade decreased by three percent and constituted 31 percent.

EU-GEORGIA TRADE Georgia’s foreign trade with EU countries saw positive movement in the first ten months of the year and amounted 26 percent of Georgia’s total foreign trade. Latest y/y figures revealed foreign trade with EU countries increased by seven percent, equaling $2.47 billion, while exports increased by 14 percent to $522 million. Similarly, imports from the EU grew by six percent to $1.9 billion. TOP TRADE PARTNER From January to October 2014, Georgia’s top three trading partners were Turkey, Azerbaijan and China. Georgia’s largest trading partner, Turkey, generated a total turnover of $1.5 billion, which was ahead of Azerbaijan’s $983 million and China’s $682 million total turnover. Azerbaijan, Armenia and Russia were Georgia’s largest export markets in the reported period. Exports to Azerbaijan stood at $473.7 million– down from 25.3 percent to 19.5 percent when compared with the same period of 2013. Kakauridze believed the trade decrease with Azerbaijan was caused by the decline of motorcars export from Georgia. Azerbaijan recently adopted strict car import rules, which stopped the imports of cars manufactured in the EU before 2005. Meanwhile, exports also decreased to Armenia by one percent y/y to $248.5 million, while exports to Russia more than doubled to $234.5 million.

16 HYDROPOWER PLANTS TO BE BUILT ON THE MTKVARI RIVER IN GEORGIA

he Chinese energy company China Power Ipek intends to invest USD 620 million in the construction of 16 hydroelectric power stations on the Mtkvari river. The right to implement this ambitious project Mtkvari Energy received from the Government of Georgia in 2013. According to the company’s

CEO Bakur Gulua, the agreement on the construction will soon be signed with Chinese investors. A final approval for the construction of the HPP cascade will be received from the state at the beginning of 2016, construction will last 4-5 years. It is expected that the annual output of power plants will be 2.5 billion kWh.

CHINESE INVESTMENTS SHARPLY SHRINK IN GEORGIA

he Georgian newspaper writes about a sharp decline in Chinese investments in Georgia - in particular, during 2013 they accounted to USD 89 million, whereas in the past period of 2014 - only USD 8 million. The representative of the Chinese Embassy in Georgia for Economic and Commercial Affairs states that the introduction of a visa regime had a negative impact on investments. “Recently, up to 30 major Chinese businessmen visited Georgia and announced their readiness to invest in energy projects, scheduled meetings

with potential partners and representatives of the Georgian government. Furthermore, China Airlines, which performs flights to Georgia, faces serious problems, if before September 100 passengers were carried per each flight, now - 15-20. If such a visa policy continues for another two months, it is likely the flight will be canceled, “said the diplomat. On September 1, the Georgian government has introduced a visa regime with several countries, including China, and limited the length of stay in the country for the citizens of the states with which visa-free regime was saved.

ELECTRICITY IS IN THE TOP-5 LIST OF THE EXPORTED PRODUCTS TO TURKEY

eostat informs that in 10 months of the current year export of $14,8 million cost (209 million KW/ hours) was exported from Georgia to Turkey and it takes last place in the to-5 list of the export basket to Turkey. It’s noteworthy that compared to last year, export to Turkey has increased by 27% and equaled to $195 million. Nitrogenous fertilizers take leading position in export with 34,65 million. Compared to last year, nitrogenous fertilizers export is $7,13 million more. Growth is mentioned in other groups as well. In particular, export of knitted garments has increased from 17,7 million to 30,6 million; export of iron and non-alloyed steel semi-fabricates - from 22,8 million to 27,2 million. Growth is mentioned in meat and fish flour export as well - export of this group exceeded to 15 million. Import from Turkey increased as well.

Products of $1,40 billion were imported from Turkey, which is 337 million more than in January-October 227. Air turbines rank second among the imported commodity groups wit 66,6 million, remedies - 55,2 million, black metal constructions - 34,7 million, cables and wires - 32,1 million, sanitary-hygienic products - 30,7 million. All groups have increased. It’s noteworthy that Turkey remains as number one trade partner of Georgia. Trade turnover with it equaled to $1,596 billion and 17% of the total turnover.

TELECOMMUNICATIONS caucasian business week

December 01, 2014 #78

HUAWEI IN GEORGIA: FUTURE OF 4G NETWORK AND MORE The Chinese telecommunications giant Huawei entered Georgia in 2001 and has since then established meaningful partnerships with the local mobile networking companies. The company offers innovative products to the Georgian consumers each year, having launched its latest mobile phone Honor 6 in Tbilisi last week. Not everyone in Georgia knows that, apart from smartphones, Huawei’s main forte lies in its telecommunications equipment services – the company technologically sustains local mobile providers, such as MagtiCom, Geocell, Mobitel and Silknet’s network coverage. Today the company plays a crucial role in implementing the latest 4G network in Georgia, which will completely transform the telecom picture of the country in the future. CBW met with Huawei’s representative in Georgia MARCO XU in the company’s Tbilisi office on a Wednesday afternoon. As we entered the office we were surprised by the general quietness and calm atmosphere while the employees were enjoining their afternoon nap. Turns out, post-lunch afternoon siestas are a Chinese workday ritual that the Georgian employees of Huawei share with their colleagues around the world. We spent some time talking with Marco about Huawei’s services and the company’s prospective on the Georgian market. For more details read our interview with Marco below: MARKET AND FROM AUTHORIZED DEALERS ONLY.

- What is your take on the state of telecommunications market in Georgia today? Does it have its own specificities, in your opinion? - I’ve been working in the telecommunications industry for more than 13 years. Before coming here I worked in Europe for almost 9 years. I see the Georgian telecommunications market as quite open, with a fair competition compared to other former CIS countries, both in mobile services and fixed broadband Internet at home and IP-TV. One challenge that this “openness” of the market poses is the creation of the so-called “Grey Market,” which forms as a result of importing cheap mobile devices from other countries – mostly, Dubai. Some of these devices are not built to operate on the mobile frequency that is the standard in Georgia, so they jeopardize our company’s services. IT IS VERY IMPORTANT THAT CONSUMERS BUY MOBILE DEVICES CUSTOMIZED FOR GEORGIAN

- What is the state of implementing the 4G network in Georgia? - All mobile operators right now are actively promoting the development of the 4G network in Georgia. The equipment is already being built, but none of the local mobile operators have the 4G network license yet. This is a very important question. DEVELOPMENT OF THE 4G NETWORK WOULD ENABLE FULL WIRELESS COVERAGE OF THE GEORGIAN VILLAGES. 4G is much faster than 3G. This network is already implemented worldwide. 4G will be extremely necessary for the Georgian consumers to experience fast mobile Internet on their smartphones. I see bright future of 4G in Georgia, especially for the rural coverage of Georgia. - So 4G network could potentially stimulate the rural coverage of Georgia? - Your country’s economy minister and also GNCC were talking about this issue. I think the rural coverage of Georgia in terms of mobile and home Internet is still not good enough. Your country has a lot of mountains and remote vil-

lages, which makes good network coverage a complicated matter. Huawei can help in this regard. I was talking with GNCC (Georgian National Communication Commission) last week and they asked my opinion about the future of rural coverage of Georgia. This is a common issue, not just here, but also in Europe and China. These countries work on improving their status quo. For instance, in Europe they have the 2020 plan coverage of villages. Similar programs exist in China. - When such a large telecommunications equipment and services company as Huawei enters a small market like Georgia, questions regarding the training and developing of the local human resources arise. Does Huawei have a Research and Development team in Georgia? - We are a global company with more than 136 offices around the world -- we cover almost all countries. One of them is Georgia. Huawei’s last year’s net revenue globally reached 39 billion USD and this year expectations are 45 billion dollars. We could be easily recruiting people globally, and yet, you can see that most people in our office -- 75% -- are Georgians. Collaboration and localization is our strategy. WE SEE GEORGIAN PEOPLE AS VERY TALENTED AND ALSO HIGHLY

EDUCATED, ESPECIALLY IN THE IT INDUSTRY. I believe this is a very good basis to stimulate more international companies to come here and invest. We also give trainings to our employees. For example, Huawei is cooperating with Tbilisi Technological University. Every year we have internships and some of successful students have a chance to become members of our team. Now, for example, we are supporting Tbilisi State University to open Chinese culture and language classroom for Georgian students - How did Huawei build a successful customer base in Georgia? How does the company go about marketing its business here? - Huawei recently entered the World’s Top 100 companies ranking. We are very proud of this achievement and think that the best combination of quality and price made this possible. Our product branding focuses on young people mainly, since they are the ones using smartphones and mobile services the most. Huawei is a very innovative brand that is not afraid to try out new things. We want to be role models for exactly such young people who lead this country, have new ideas and are brave to make changes. We want to encourage young people to be innovative.

THE WORLD’S FIRST OCTA CORE 4G CAT6 LTE SMARTPHONE HUAWEI HONOR 6 ALREADY IN GEORGIA

uawei officially introduced to the public the world’s first Octa core 4G CAT6 LTE Smartphone Huawei Honor 6. Giant Chinese smartphones producing company and successful brand Huawei continues to offer surprises to Georgian customers and offers them new model Honor 6. The aim of the company is to offer new owners the latest technical possibilities of smartphones. Honor 6 is created for brave, young generation, who are not afraid to think in a different way and to change their everyday lifestyle. ZURA VASADZE “Representative of Huawei Georgia” - the world’s first Octa core 4G CAT6 LTE Smartphone Huawei Honor 6 is already in Georgia. This is a flagship model, which is already soled in Alta stores. This is first smartphone on the market, which has such comfortable price and technical abilities. “ “Very comfortable, easy to work with and what is the most important- with an available price”… this is how new model Honor 6 is characterized by the first owner of the smartphone Khatuna Lomidze. Huawei Honor 6 main characteristics which make this model different and unique: • The world’s first Octa core 4G CAT6 LTE Smartphone

• 3 GB of RAM • Durability – Honor 6 can work unstoppably for 2-3 days which is a fascinating result • Fastest technology – the smartphone which is in an inert mode, can take picture only in 0,6 seconds! The model has two cameras – 13 megapixel main and 5 megapixel front • Honor 6 having Full HD, 445 ppi 5 inch screen makes watching videos and playing games an impressive thing to do • Honor 6 has 4th generation LTE 4G Internet support. Which means that when 4G internet will be active in Georgia, customers will have opportunity to “surf” in the internet with the speed of 300 MB/sec Huawei Technologies Co. Ltd is Chinese multinational networking and Telecommunications Corporation. The company was founded in 1988. Today Huawei is presented in 130 countries, with 140,000 employees, 46% of them are working on direction of technological research and development. In telecommunication market, 2 G/3G mobile technologies, Huawei is in Top Three, as for the fixed, fiber transmission and CDMA/WIMax technologies Huawei is on the First place. From the World’s 50 leading mobile operator companies 45 are using Huawei products and services. Huawei is also first Chinese company named among 100 best brands of the world.

BANKING NEWS December 01, 2014 #78

caucasian business week

TBC BANK NAMED BANK OF THE YEAR IN GEORGIA 2014 BY THE BANKER

PASHA BANK - SPONSOR OF GEORGIAN PANORAMA AT 15TH TBILISI INTERNATIONAL FILM FESTIVAL

he Banker magazine named TBC Bank Bank of the Year in Georgia 2014 during an Annual Awards ceremony in London on November 27. This is the seventh time TBC Bank has been awarded The Banker’s prize since 2002 and the fourth Best Bank award assigned to TBC by various publications throughout 2014. Every year The Banker, the London-based monthly financial publication owned by the Financial

Times Group, recognises the top financial institutions in 149 different countries based on their performance during the previous year. “We are honoured to be recognised as Bank of the Year in Georgia by a highly regarded publication like The Banker,” commented Vakhtang Butskhrikidze, TBC Bank’s Chief Executive Officer. “This award honours our continued focus on excellence in financial services and commitment to the highest industry standards.”

BY NOVEMBER 1 SHARE OF TBC EQUALS TO 23,6% ON THE RETAIL LENDING MARKET

y November 1 share of TBC equals to 23,6% on the retail lending market (01/01/2014 -23%). Amount of the retail loan portfolio equals to 1,328 billion GEL. Overall loan

portfolio equals to 2,9 billion GEL (01/01/14 2,786 billion). Credit investment of the commercial banks exceeds to 11,3 billion GEL. Among the loan portfolio of the individuals equals to 5,617 billion GEL (01/01/14 -4,7 billion).

COMMERCIAL BANKS CREDIT PORTFOLIO EXCEEDS 11.7 BILLION GEL

mount of the credit investment of the commercial banks (including loans issued on non-residents) has increased by 196.7 million GEL (1.7%) in October and exceeded to 11.7 billion GEL. Corporate loans portfolio equals to 4.6 billion

GEL, 1.3 billion is in GEL, 1% growth is mentioned. Portfolio denominated in the foreign currency has reduced by 0.7% (31 million). In October amount of the lending of resident individuals has increased by 123.2 million GEL (2,2%) and exceeds to 5.6 billion GEL by November 1.

ASHA Bank, a full service corporate bank, is supporting one of the most important cultural events in Tbilisi, the 15th Tbilisi International Film Festival (TIFF). The Festival will bring a festive mood to movie fans who will be able to enjoy the most important and controversial films of the year at the event held from 1-7 December. The Festival will feature more than 120 films of various genres and formats which will be divided into the following sections: International Competition, Georgian Panorama, Forum of European Cinema, Films Across Borders, Made in Germany (in cooperation with loyal partner - the Goethe Institute), Country in Focus - Benelux countries, World in Docs, Director in Focus, Green Colour Focused on the Environment, and others. Awards will be distributed in two categories - International Competition and Georgian Panorama. Winners of the first category will receive a Prometheus, trophy, as a prize, while the winners of the second category - local film directors - will receive financing to travel to foreign festivals with their movies. PASHA Bank has special gifts for the winners - a trip to the Berlin International Film Festival. The Festival will also provide workshops, lectures, Q&A sessions and panel discussions to encourage the involvement of domestic and international film professionals. The workshops’ participants will become acquainted with all fields of the film industry from scriptwriting to soundtracks, writing and selection. PASHA Bank Georgia is presenting Georgian

Panorama, a traditional section, presenting the most interesting Georgian films of the year. The programme is focused on supporting Georgian cinematographers to present their works to wider audiences. Georgian Panorama will be held within the framework of full-length feature films in the competition. Seven Georgian films will take part. New nominations will be added to the section. Together with the Best Film and the Best Director, a Prometheus prize will be awarded for the best male and female performers. In addition, there will be documentary and short feature films, where the latest works of Georgian directors will be presented. On 27 November, representatives of the Festival together with honoured guests, including representatives of the British Council, Institute of Francais, Goethe Institute, Turkish Cultural Center, and the embassies of Turkey, Sweden and Poland arranged a press conference at the headquarters of PASHA Bank Georgia. The honoured guests underlined the importance of TIFF for the whole industry. „This is the first time, PASHA Bank Georgia supports the TIFF,” said Goga Japaridze, Commercial Director at PASHA Bank Georgia. “We are pleased to partner with TIFF in its mission of showcasing Georgian film industry. Apart from popularizing the local film industry the festival also provides an opportunity for wide range of audiences to view non-commercial production not readily accessible otherwise. Sponsoring Georgian Panorama is a great chance for us to take part in this great initiative, ”said Goga Japaridze.

GLOBAL FINANCE NAMES BANK OF TBC BANK RATIO IN INDIVIDUAL GEORGIA AS GEORGIA’S SAFEST LOANS PORTFOLIO ACCOUNTS FOR BANK ank of Georgia announced about panies Moody’s, Standard & Poor and Fitch Rat23.6% AS OF NOVEMBER 1 recognition of Global Finance. ings), also overall actives of the banks. Editor

ational Bank informs that in October actives reduced by 0,9% (176,2 million) (10/13 - reduction by 0,02%). Annual growth of actives equals to 20% (01/11/13 - 12,6%, 01/11/12 -18%). Own capital of the banking sector equals to 3.4 billion GEL, which is 18.1% of the total actives of the commercial banks (01/11/13 - 2,8 billion, 17,8%; 01/11/12 -2,3 billion GEL, 16,4%).

Contribution of the foreign capital in the total paid-in authorized capital equaled to 76.1% (01/11/13 -76,4%. 01/11/12 - 74,7%). Net profit of October was 55.9 million GEL (10/13 -33,9 million profit; 10/12 - 36,8 million GEL loss). Share of 5 banks with the largest actives equals to 76.1% of the total actives of the banking sector (01/11/13 - 77,1%, 01/11/12- 81.2%). The sector is represented by 21 banks, among them 17 with contribution of the foreign capital and 2 branches of the foreign banks.

PREFERENTIAL AGRO CREDIT PORTFOLIO EXCEEDS TO 645 MILLION GEL

ccording to statistic of Ministry of Agriculture, 25 000 loans have been issued, 89 new enterprises founded and 580 re-equipped. Minister of Agriculture Otar Danelia discussed the project with representatives of contractor banks. On the workshop they talked about necessity to increase project efficiency in the economically less active regions, among them at the borderline municipalities. On the meeting discussion also dealt to the guarantee issues required by the banks. Preferential

Agro Credit Portfolio was initiated by previous Prime Minsiter. It started last year, on March 27. At first it included 3 components, later leasing (IV), winery (V) and citrus (VI) components were added. This year grant and loans for fruit exports were added. From November 1 Preferential Agro Credit project was converted into 2 components. Optimization is related to the simpler perception of the project. Currently the project includes 3 directions: Preferential Agro Credit (1 - for working capital, 2 - main capital), Agro Leasing and Produce in Georgia.

The international edition recognized Bank of Georgia as the most secure bank in Georgia. Evaluation criteria were various, among them long-term credit ratings (awarded by rating com-

of Global Finance Joseph Giarraputo states that it’s important companies to clearly imagine how powerful and stable is their partner bank. Monthly international edition Global Finance was founded in 1987 and it has readers in 163 countries.

NBG ISSUES 30 MILLION GEL REFINANCING LOANS

n 70day refinancing auction of National Bank Of Georgia loans of 300 million GEL have been issued. Applications of 6 commercial banks have been approved. Interest rate equaled to 4%, 4,01%. Refinancing auctions (instrument for monetary policy) are held on Thursdays.

RATIO OF TRADE AND HOUSING SECTORS IN TOTAL LOANS SHRINK, INDUSTRY SECTOR SHOWS GROWTH

y November 1 share of trade sector in the legal entities portfolio equaled to 29,4% (01/11/13 -48%). NBG informs that in October it reduced by 8,1 million GEL (0,5%) and by November 1 equaled to 1.7 billion GEL (01/11/13 -2,3 billion). Lending to industry has increased by 11,8 million (0,9%), to 1,3 billion GEL and it share equals to

23,4% (01/11/13 -839,1 million.17,2%). 7,1% comes on construction. In October the amount has reduced by 10 million (2,4%), to 398,1 million GEL (01/11/13 -8%, 390,2 million). Therefore, 59,9% of the total lending to the legal entities (01/11/13 -73,2%) comes only 3 spheres - industry, construction and trade. In total, corporate loans portfolio equals to 5,6 billion GEL (01/11/13 - 4,908 billion GEL).

BUSINESS caucasian business week

GOODWILL STAKEHOLDERS EXPRESS GRATITUDE TO SOCIETY

oodwill stakeholders businessman Gogi Shevardnadze and Milano Investments Italian company have spread a special statement. CBW publishes the statement without

changes: Today we are able to manifestly announce Goodwill, Georgia’s first network of hypermarkets, has withstood all problems, valuably met all challenges and found the most optimal way our from the crisis. We, the founders of Goodwill, businessman Gogi Shevardnadze and representatives of Italian company Milano Investments, stress main difficulties have been overcome and we have set a new and irreversible process for the company development. Our society remembers Goodwill’s fate was questionable for over a year. We will not explain the details, because it is not worth to recall pressure and unjust sanctions imposed on our business in the past, including on our business. Our society remembers these facts in details anyway… We have faced many difficulties. Many problems arose, but the company management, suppliers, customers and employers have crossed the narrow bridge. We have passed tensed and emotional trial over moving to a rehabilitation regime and appointing a rehabilitation manager. The trials have evidently demonstrated the current court system makes the business sector feel calmer than before. Today we feel the justice reigns. We feel the business sector is developed in correct and modern way in our country, where partnership relations are healthy and relations with the government are regulated by the legislation. We believe this way

has no alternative in Georgia. We would like to address to our society and express our gratitude to everyone who has backed Goodwill in the heavy situation and showed support by word and affairs. We would like to express special gratitude to our customers and our personnel for devotion, to our business partners and suppliers for their trust, to our creditors for partnership approach; We would like to stress the merit of TBC Bank, an only secured creditor. Business relations are regulated by strict rules and therefore, our relations was quite complicated, but these difficulties have not went out of ethical norms and these relations were always academic and full of partnership respect. In this whole process the merit of Nodia, Urumashvili & Partners legal company is huge. Having selected this company for partnership, Goodwill has made an only correct choice available in this situation and this company has led all of us to full and successful resolution of all disputable issues of this complicated business case. They have also played a decisive role in drawing European standard investor to Goodwill. We believe the job Nodia, Urumashvili & Partners has provided will be thought and analyzed in future practical business handbooks as a remarkable example of making deals. We praise their professionalism and devotion. What about the tomorrow? – We, the Goodwill founders, assure joint efforts will ensure irreversible process for the fast development and thousands of people related to Goodwill (we mean consumers, suppliers and their staffs with families, indeed, our employees) will have a strong feeling of stability and we are full of hope for a better future. In new realities we will develop twice faster and offer more pleasant innovations to the Georgian consumer market. Goodwill Founders Gogi Shevardnadze In the name of Milano Investments Alessandro Azai

NODIA, URUMASHVILI & PARTNERS ANNOUNCE GOODWILL CASE RESOLVED

odia, Urumashvili & Partners legal company has spread a special statement. CBW publishes the document without changes: Nodia, Urumashvili & Partners legal company is pleased to announce about successful completion of business dispute over Goodwill, Georgia’s first network of hypermarkets. The Goodwill founder, creditors and suppliers have regained and strengthened valuable partnership relations. The control interest was bought by famous Italian concern Milano Investments that plans to make considerable investments in the Goodwill development. We are delighted to have acted in the center of this interesting business process. As a result of a yearlong hard work, in practice, for the first time in the Georgian business history, the largescale company with certain financial problems has achieved agreement with all creditors and moved to a rehabilitation regime that proceeds successfully within the court-determined legal terms. We also deeply appreciate high professionalism and healthy approach the Tbilisi City Court board for civil cases has demonstrated to this quite complicated business history.

We would like to express our gratitude to Goodwill founder Gogi Shevardnadze for his confidence in us. We express our gratitude to all members of the Goodwill’s team we have cooperated with during this period. We are pleased to have found decisions acceptable to TBC Bank, an only secured creditor, and all other creditors. We would like to express special gratitude to Goodwill director general Mr. Besik, who has managed to solve all problems in very complicated situation and led the company to a positive phase. We believe our joint efforts, mutual confidence and respect to the professionalism of each party have brought this positive result in relation to Goodwill. This fact encourages us in our further activities. Today the task has been fulfilled and our team leaves Goodwill in terms of management and legal services. Today Goodwill works with new investor Milano Investments, an Italian company with huge experience on the European market. We believe the renewed management will be a success in implementing the determined strategy and Goodwill will remain as Georgia’s leading company in the retailing sector. We wish success to our friends and colleagues! Nodia, Urumashvili & Partners legal company

December 01, 2014 #78

IMPORTERS PREPARING TO RAISE PRICES OF FOOD PRODUCTS

ccording to importers, if GEL continues depreciation, prices of products will increase by 5%. Director General of one of the largest importers of food products Lux 2004 states “Commersant” that prices of the imported products are linked to the GEL rate. Guram Brodzeli explains when the exchange rate fluctuates rapidly, importers find themselves in deadlock. In the businessman’s opinion, the central bank should intervene in the process to avoid instant fluctuations in the exchange rate. In his words, so far prices of imported products have not grown up yet but the price increase would be inevitable

if the trend continues. General Director of another company Sharm Trading Guram Sadzaglishvili says that at this stage importers maintain prices by reducing profit margins. “Roughly, the current price level will last until the end of the year. But if the exchange rate is close to the mark of 1.9, then it will necessarily affect the value of the products. The rise in prices will be adequate to the depreciation of the currency,”- the businessman notes. Other importers claim that if the exchange rate reaches the level of 1.9 , the prices of imported goods will rise by 10%.

GEORGIAN SHOE MANUFACTURER LEVANTO TO INCREASE PRODUCTION IN 2015

stablished by local investors Levanto company producing shoes and located in the city of Kutaisi plans to increase production in 2015 and invest additional 200 000 Euro. The company was founded in 2004 and sews shoes worth GEL 60- GEL 200 for women, men and children. “Our company is one of the most advanced in Georgia, in addition, we are working on the design of the shoes. We import raw material from Italy, Spain, and Turkey “- said the company’s Director Ramaz Maglaperidze. According to him, at this stage the company does not use Georgian as well as poor-quality raw materials.

“If the quality of the leather produced in Georgia meets the foreign analogues, then of course, it will be much more profitable to use local raw materials,” - he notes. In Ramaz Maglaperidze’s words, due to lack of resources, the company is not yet able to export its products, with the exception of Kazakhstan. In the future they plan to sell products in Russia and Europe. At present, Levanto produces 3 000 pairs of shoes per year. According to the management of the company, the products are in great demand, and in 2014 sales grew by 20% in comparison with 2013. In total USD 500 thousand was invested in the factory where up to 30 people are employed.

BADAGONI TO BEGIN EXPORTS TO THE UNITED STATES IN 2015

ccording to the Head of the Public Relations Department at Badagoni company Liza Bagrationi, the company is in serious negotiations regarding wine exports in large quantities. “Unfortunately, Georgian wine is still traditionally focused on the Russian market. What we are doing now, would be a serious penetration the US market, and we are preparing for it. We are talking about a rather serious segment, and we are likely to begin exporting in 2015, “- she notes. Badagoni exports wine to 19 countries - Russia, Ukraine, Poland, China, Germany, etc. Exports began in 2007.

In Lisa Bagrationi’s words, in comparison with 2013, the demand for Badagoni products has grown considerably due to the company’s qualitative work. Badagoni intends to launch production of new products in 2015. According to the National Wine Agency, 36 million bottles of wine were exported to 38 countries in 8 months of 2014 – that is 69% more than in the same period of 2013. The leader of the export markets is Russia, its share in export of wine is 65% - during this period over 24 million bottles of Georgian wine have been sold in Russia. Ukraine, Kazakhstan, Poland and Belarus are included in the top five exporting countries.

FOODPANDA EXTENDS ITS BUSINESS TO BATUMI

rdering online on www.foodpanda.ge is getting increasingly popular. Starting November 17, 2014, foodpanda extends its availability to Batumi! The well-loved service favored by people of various ages and professions continues to grow and offers comfort in windy or snowy weathers, when you’re too lazy to go outside and yet yearn for a tasty meal. Foodpanda has already partnered with a large number of restaurants in Batumi, with the food delivery service already offering meals from dining points like “Privet Iz Batuma”, “Porto Franco”, “Batumi Pizza”, “Khinklis Sakhli #1” and “Marco Polo”. Foodpanda offers a large and secure choice in meals, delivering them to your doorstep without a hassle and raising e-commerce to new heights. Foodpanda’s business model has no alternative here at Georgia, and the company is planning on extending its services to more regions in the country. “We’re in this business for the long run, so whenever we see the possibility, we extend. This is our first step in Western Georgia and we can already say that the start in Batumi was a success. We are already planning on further broadening the

restaurants list there. At this point, we are considering going for Kutaisi next as a viable prospect, but current focus is set on developing Tbilisi and Batumi,” stated foodpanda’s director at Georgia, Giga Kerkadze.

EVENTS December 01, 2014 #78

caucasian business week

DISCOVER LATVIA

rom November 24 to December 10, Geogia hosts days of Latvia. Event is entitled “Discover Latvia”. During the event, president of Latvia Andris Bērziņš, the members of government delegation and the group of Latvian entrepreneurs paid official visit to Georgia. One of the main goals of holding of the “Days of Latvia” is to deepen bilateral ties in business, economics, tourism, cultural and educational fields and share of experience. Latvia is a beautiful country with unique atmosphere, wonderful nature, sandy beaches, rich cultural and historic heritage and world famous amber. A lot of fortresses, tens of modern resorts, hundreds of lakes and mineral waters attract tourists from many countries of the world. All necessary conditions for eco-tourism, health resorts, active beach and relax therapy are here at hand. Tourism in Georgia and Latvia is the priority direction. Every year 7-8 thousand of Latvian tourists visit Georgia. There’s a good potential of growth of the number of tourists from Latvia, because of the absence of language barrier and direct flights between the two countries. Latvian “Air Baltic Corporation” (airBaltic) performs flights. Besides, seminars about Latvian tourism potential are frequently organized and attended by Georgian travel companies and media representatives. Considering such a live interest, hopefully tourism will become the leading field in the background of successful economic relations between Latvia and Georgia. Political relationship between the two countries is exemplarily successful. It is worth noting, that Latvia issued a stamp dedicated to the 20th anniversary of the establishment of diplomatic relations with Georgia. This small Baltic country has always been considered as a “branch” of Europe. Today Latvia is one of the synonyms of Europe, not only in legal formation, but in doing business as well. A company established in Latvia becomes a part of European market instantly. Also, resources and capacities (financial, legal) and all the prospects of developed European market become available at once.

In the last few years, economic relations between Latvia and Georgia enhanced and deepened rapidly. Business forums are held on a regular basis where participants discuss issues of development of bilateral cooperation in various fields, modern trends in the world economy, the new challenges of strategic management, and methods of management of business information in recent conditions. Latvia and Georgia signed bilateral agreement between the Chambers of Commerce and the Trade Unions Confederations within Georgian-Latvian business forum. The history and culture of Latvia is a fascinating mixture of various cultures and unique Latvian traditions. None of the European nations preserves its identity as Latvians do. Riga is a blend of a medieval center and a modern city. Riga fits every taste with an enchanting and irresistible charm of old times and it is also a venue for cultural events in an international perspective - which is shown by the fact that it will become the cultural epicenter of Europe in 2014. Latvia is called a “Country which sings”. Life in the country is mixed up with concerts, musical events and festivals, opera performances, old music festivals and celebrations, jazz music concerts, ethno music and modern music events. Latvian fashion designers are creating and performing outstanding clothing, accessories and jewelry which are well-known worldwide. On November 25, Tbilisi hosted the fashion show which was organized by Latvian Fashion Chamber. Georgians were always interested in Latvian culture and heritage. Confirmation of this are widely met in XIX century press. In the late 90th of XIX century Ernests Birznieks-Upitis worked in Caucasus countries. He wrote stories where he expressed a big love to Georgia. “Vepkhistkaosani” by Shota Rustaveli and a lot of other stories and poems of classical Georgian writers and modern authors are translated in Latvian. Stories of Rainis, Ernests Birznieks-Upitis, Lācis and others are translated into Georgian. Special relations between the two countries are evidenced by the fact that the most numerous group of the Latvian Saeima is the Georgia-Latvia parliamentary friendship group.

CURRENCY caucasian business week

December 01, 2014 #78

EXCHANGE RATE MONITORING

he GEL exchange rate against USD has considerably shrunk week on week. The rate declined by 2.3% to 1.8367 point from 1.7938 point grom November 24 to November 28. The GEL exchange rate against EUR fell by 2.6% to 2.2905 point from 2.2313 point. As to GBP, on November 24 the national currency stood at

2.8111 against GBP, while the rate fell to 2.8641 point by November 28. At the same time, the GEL exchange rate strengthened against Ruble by 2% from 3.9172 point to 3.8535 point. As to the YTD correlation, the GEL exchange rate against USD has shrunk by 5.7% since January 2014, but the rate strengthened by 4.3% against

EUR, fell by 0.8% against GBP and rose by 28% against Ruble. As to the national currency rate in the same period for the last 10 years, the highest rate stood at 1.6215 against USD on November 28, 2007 and the lowest 1.7900 emerged on November 28, 2005. The highest GEL rate against EUR stood at

2.1136 on November 28. 2005 and the lowest 2.4976 was registered in November 2009. The highest GEL exchange rate against GBP was registered at 3.3589 on November 28, 2004 and the lowest 2.5400 emerged on November 28, 2008. The GEL exchange rate changes against various currencies are as follows:

EUR/GEL

GBP/GEL

USD/GEL

IMPORTANT ECONOMIC RELEASES TO DRIVE THE MARKET

hat looked like a lackluster, range-bound market ended with yet another week of strong performance for the overall US Dollar Index (I.USDX). The US Dollar strength was primarily trigger by ECB President Mario Draghi’s comments that took the Euro-zone common currency sharply lower and helped I.USDX rise to the highest weekly close in over 4 years, since June 2010. Also, Chinese central bank, the People’s Bank of China (PBOC), surprisingly lowered its benchmark interest rates. PBOC slashed its one-year deposit rate by 25 basis-points to 2.75% while one-year lending rate was lowered by 40 basis-points to 5.6%. Meanwhile, the FOMC meeting minutes released revealed that although the central bank remains on track to raise interest-rates in 2015, the committee is still worried about low inflation for a prolong period, which according to the data released, remained flat on a month-on-month basis. From the UK the inflation print came-in higher-than-expected while monthly retail sales data remained upbeat, beating consensus forecast. Also minutes from BoE’s November policy meeting, continued showing two members of the Monetary Policy Committee voting for rise in the BOE’s benchmark rate from its 0.5% low on the back of continuing economic growth. GOING FORWARD Moving to the last week of the month, US, UK and Canadian GDP data, along with Euro-zone inflation data will drive the Forex market. Other prominent economic releases from US economic calendar includes durable goods, new and pending home sales data for the month of October and the Conference Board’s Consumer Confidence index for the month of November. Let’s have a brief outlook of some important market moving events and how these events could impact the Forex market. US economic calendar begins with the release of the preliminary release (second estimate) of US GDP for the third-quarter of 2014. According to the Commerce Department’s initial estimates, the US economy grew by 3.5% annualized pace in the third-quarter of 2014 but economists this time are expecting a minor tick-down, with the consensus estimating the data to show an annualized growth of 3.3%. However, weaker-than-initially reported growth is unlikely to disturb the steady growth trajectory, which seems more likely to be carried forward in the last quarter of 2014. From the US housing sector, the release of new home sales and a forward-looking indicator, pending home sales, for the month of October are scheduled for release on Wednesday. New housing data will provide further cues over the health of US housing sector. Economists anticipate recovery momentum to continue with new home sales expected to reach seasonally adjusted annual pace of 471,000 units and pending home sales expected to show a rise of 0.9% in October. Investors will also have a look at the US manufacturing sector from Durable Goods orders data for October and Chicago manufacturing PMI for November. Data pertaining to durable goods orders will be keenly watched to further support the optimistic views of the economic growth-trend to continue for the rest of 2014. Durable and core durable goods (excluding transportation items) orders data are scheduled for release. Orders for durable goods, which also includes transportation items, is expected to decline by 0.4% while core durable goods are predicted to gain 0.5%. Chicago PMI data is scheduled for release as well. Also watch out for Conference Board’s Consumer Confidence index for the month of November. US economic releases, especially the economic growth rate, would portray strength of the US economic recovery, which would continue supporting the prospects of a stronger US Dollar in medium to long-term. (For a complete list of major economic releases, refer to Forex Calendar) From the Euro-zone investors will closely scrutinize the Euro-zone inflation and employment data. The flash version of Euro-zone CPI for the month of November is expected to remain subdued at 0.3%

and the unemployment rate for the month of October is expected to remain stable at 11.5%. Following ECB’s decision to begin the purchase of asset-backed securities has already shattered investor’s confidence in the common currency. Further, given ECB’s readiness to provide additional stimulus, weaker inflation number is more likely to force the Euro-zone common currency, Euro, to continue sliding in the near-term.

The last highlights from the UK economic calendar includes BOE Governor Mark Carney and MPC members’ testimony before Parliament’s Treasury Committee and second estimate of GDP for the third-quarter of 2014. The UK third-quarter GDP print is scheduled for release and is expected to indicate continuation of UK economic recovery. The second estimate of growth for Q3 2014 is expected to remain at 0.7%. With the minutes of BoE’s latest policy meeting in November already hinting towards stronger economic recovery, any further hawkish signals accompanied with stronger GDP figure is likely to boost near to medium-term appeal for GBP. Meanwhile, the Canadian GDP growth for the month of August surprised on the downside, shrinking for the first time in 2014. However, GDP print is forecast to register a gain of 0.4% in September. Should the Canadian economy surprise again, this time on the upside, it might provide some relief for the Canadian Dollar (CAD), which recently has dropped significantly against the US Dollar. HARESH MENGHANI Senior Market Analyst Admiral Markets At any use of the analytical material taken from the site of company Admiral Markets, and the secondary publication on any other resources, the rights to intellectual property for a dealing center «Admiral Markets», reference to the company site is obligatory.

RESEARCH December 01, 2014 #78

caucasian business week

INSURANCE GAINS POPULARITY IN GEORGIAN SOCIETY To the attention of insurance companies: your potential and current clients get information about insurance products mostly through television (74.9%). The results of the survey, during which 1080 respondents were interviewed throughout Tbilisi, confirm that more and more people are finding it important to use the products offered by insurance companies: it is very important for over one half of people surveyed (56.2%) to use insurance services. At the same time, women find insurance more important than men.

Young people show more interest towards insurance market: having an insurance policy is more important for young people below 35, than for other age groups (35 and above).

NEIGHBORHOOD US pressing Chinese and Arab banks to sanction Russia – head of VTB bank

he US is putting pressure on Chinese and Arab banks, forbidding them to work with Russian sanctioned companies, says Andrey Kostin, head of Russia’s second biggest lender VTB. “We have information on Arab countries, China, and others that US officials come, gather the heads of banks and say: “We will punish everyone who is under Russian sanctions,” said Kostin, after a meeting organized by the Stuttgart Chamber of Commerce in Germany. “We need to take this into account. Nobody wants to become BNP Paribas”, he said, meaning the large French bank that was fined $9 billion for violating US sanctions against Cuba, Iran and Sudan. However, Kostin believes Chinese credit organizations will provide financing for projects that interest them. “The Chinese, on the one hand, will be cautious. Most Chinese banks have businesses in America as well,”said Kostin “They are more willing to finance transactions that are related to the financing of their own exports. And I don’t see any problems here.”

Turkey receives 33.5 mln visitors in 10 months

he number of foreign visitors to Turkey in the first 10 months of the year totaled 33.53 million, up 5.57 percent compared to the same period last year, government data showed

For Tbilisites, the significance of insurance is closely linked with the family’s financial position: the stronger the respondents evaluate the family’s financial position, the more important it is for them to have insurance (4.42 on a 5-point scale) Among insurance products, health insurance is most important for respondents. As it turned out, women find health insurance more important than men (statistically important difference). Travel insurance is less important compared to other products.

on Tuesday. Foreign visitors to Turkey rose 1.09 percent yearon-year in October, to 3.44 million people, Tourism Ministry data revealed on Tuesday. Based on the distribution by country of origin for the tourists coming to Turkey, according to the ministry report there has been great interest in Turkey from Germany since the beginning of this year. Germans constituted 14.36 percent of the inbound tourists to Turkey with 4.81 million visitors in the first nine months of 2014. Russia was next with 4.36 million visitors, and the UK followed with 2.5 million people in the given period. A total of 34.9 million tourists visited Turkey in 2013, a 9.84 increase compared to 2012. Turkey expects that inbound tourism figures may well reach beyond 40 or even 50 million over the next few years, but the question is whether such a high number will be sustainable from both an environmental and a business management perspective. Turkey’s tourism revenues rose 2.1 billion in the first nine months year-on-year to $26.63 billion, the Turkish Statistics Institute (TurkStat) said earlier in October. Tourism revenues constitute one of the most important contributors to the fight against Turkey’s current account deficit, its main economic weakness.

Iran may import Azerbaijani solar cells and LED lights

ndustry, Mining & Trade Minister Mammad Nemetzadeh of Iran continues a visit to Azerbaijan. The State Agency for Alternative & Renewable Energy Sources (ABOEMDA/AREA) informs that Nemetzadeh held today talks with the leadership of the Agency on the issue of cooperation in the field of alternative energy. “To make the conversation objective the Iranian minister visited Sumgait-based factory Azgüntex (Azerbaijani Lighting). We believe that solar panels and LEDdevices could be used in Iran,” the Agency said. Previously, Azerbaijan and Iran signed a memorandum of intentions on cooperation in the field of alternative energy. “We’re currently working to implement our intentions. Specific cooperation projects are being prepared, and in our view the Iranian minister’s visit will accelerate this process,” ABOEMDA emphasized. The Sumgait enterprise was opened in 2012.

WORLD NEWS Coca-Cola Launches Production of Milk

oca-Cola is launching a new kind of milk nationwide that the company says will “rain MONEY.” The product is called Fairlife and it will sell for twice the price of regular milk when it hits store shelves nationally in December, Coca-Cola’s North American chief Sandy Douglas said at Morgan Stanley’s Global Consumer Conference last week. “It’s basically the premiumisation of milk,” Douglas said. The milk doesn’t contain lactose, and it has 50% more protein and calcium than regular milk, as well as 30% less sugar.

German consumer confidence grows for 2nd consecutive month

eople in Germany are becoming more willing to buy things, as the forward looking GFK index which measures consumer confidence grew to 8.7 for December. The GfK consumer sentiment indicator, based on a survey of around 2,000 Germans, rose to 8.7 going into December from 8.5 in November, the market research group said Thursday. Economists had forecast a score of 8.6. Positive income expectations largely drove the improvement, as Germany’s Labor Agency said on Thursday that the jobless rate hit a low of 6.6 percent in October. However, overall economic expectations dropped by 2.7 points to 1.6 points.

Fitch names oil exporters ‘vulnerable’ to credit downgrades if weak prices persist

atings agency Fitch released a report Tuesday breaking down oil exporting countries into three rankings based on how well their economies are prepared to weather weak oil prices through 2015. The report looked at how quickly the domestic budget would erode under continued pressure in lost oil revenues. Bahrain, Angola, Venezuela, and Ecuador were named as most vulnerable since they have most overestimated the price of oil when planning their budgets. Low oil prices create less money for the national budget. This will affect the balance of payments in most countries, which could result in sovereign credit downgrades by the international rating agency. While some OPEC countries are quite vulnerable to oil prices, Kuwait is not, as its “break even” oil price is below $60 per barrel, similar to nonOPEC countries Abu Dhabi and Norway. Saudi Arabia, a heavyweight in OPEC decisions, has the largest fiscal surplus buffer, according to Fitch. Russia, which produces 14 percent of the world’s oil, is also in a similar position, as it has vast (more than $440 billion) in currency reserves. OPEC members meet Thursday in Vienna to discuss reducing production to push back up oil prices, which have fallen more than 30 percent since mid-June levels, and are hovering near $80 per barrel, a 4-year low.

Global economy to gradually improve over 2 years - OECD

he global economy will gradually improve over the next two years, the Organization for Economic Cooperation and Development said on Tuesday. The US and the UK will grow more strongly than the eurozone and Japan, while among emerging countries, India, Indonesia and South Africa are set to recover steadily. Russia’s economy is set to stagnate next year and China’s will soften, the OECD said in its bi-annual economic outlook. It added, confirming earlier forecasts, that overall, the global economy is set to grow by 3.3 percent this year, 3.7 percent in 2015 and 3.9 percent in 2016.

PUBLICITY caucasian business week

December 01, 2014 #78

TBILISI GUIDE December 01, 2014 #78

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 Kingdom of Spain Embassy Rustaveli Ave. 24, I floor, Tbilisi Tel: 230-54-64 E-mail: emb.tiflis@maec.es Romania Embassy

caucasian business week 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 Embassy of the Slovak Republic Address: Chancery: 85 Irakli Abashidze St. Tbilisi, 0162 Georgia Consular Office: 38 Nino Chkheidze St. Tbilisi, 0102 Georgia Phone: 2 222 4437, 2 296 1913 e-mail: emb.tbilisi@mzv.sk

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 RESTAURANT BARAKONI Restaurant with healthy food. Georgian-European Cuisine Agmashenebeli Alley 13th Phone: 555 77 33 77 www.barakoni.com CHARDIN 12 Tbilisi , 12 Chardin St. , Tel: 92 32 38 CAFE 78 Best of the East and the West Lado Asatiani 33, SOLOLAKI 032 2305785; 574736290 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

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

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

December 01, 2014 #78