AJARA BUSINESS WEEK #11 by Caucasian Business Week

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BUSINESS WEEK September 21, 2015 #11

September 21, 2015, Issue 11

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BE INFORMED, DO BUSINESS IN AJARA

Way from Food Products Imports to Development Industry

IRAKLI JIJAVADZE The Imeri Executive Director

Agro Service Center Grows Saplings of Foreign Grapes in Ajara MIRZA SUQNISVILI Pg. 4

Argus Caspian – Black Sea Transport Corridor 2015

Batumi Investment Forum 2015 Summary

International Conference ‘Argus Caspian – Black Sea Transport Corridor 2015’ has been opened in Hilton Batumi today. Chairman of Ajara AR Government Archil Khabadze welcomed the invited guests. The heads of 14 countries’ vehicles and transportation companies will share experience and innovations of their companies for two days. They will also talk about the development of transport corridor in economic turbulence conditions, regional transit devaluation and decreased business activities. Pg. 2

With over 200 participants, Investment Forum Batumi 2015 was successfully held in Batumi at the Hilton Hotel in the Black Sea Region of Ajara. The event was organized by Cushman & Wakefield | Veritas Brown together with the Georgian National Investment Agency and the Government of Autonomous Republic of Ajara.

Georgian Blueberries On Sale In The Uk

New Building Code – Coming Restrictions on Ajara-based Developers The new building code has been already developed. The parliament will discuss the document in autumn session. Construction companies and the housing sector experts have been long waiting for developing and enacting this document. Finally, the Authorities have satisﬁed this demand. The new building code is expected to be enacted at the end of 2015. A new code implies new regulations and development companies will have to take them into account. The new standards are expected to inspire

fundamental shifts in the Ajara Region too. The sector specialists assert amid the boom of ongoing construction projects, more and more pretences are expressed that elementary standards for space planning are violated. In one word, Ajara-based developers will have to fundamentally revise their activities. The bill was forwarded to the Government. The working variant was developed jointly with construction companies, sectoral associations and various ofﬁces. The document includes many

Batumi Socar Hosted Reception of Eliso Bolkvadze’s Music Festival

Pg. 11

regulations, the Economy Ministry says. The document obliges construction companies to submit geological and expert conclusions. The new code also introduces mandatory certiﬁcation of engineers and architects, as well as a concept of adjacent zones near public spaces. The revised variant of the code was agreed with all parties and forwarded to the Government, David Gigineishvili, a head of the Economy Ministry Department for Space planning and Building Policy, noted. Pg. 5

The American blueberry, which adapted well to the climactic conditions of the Guria and Adjara highlands, is in high demand on the global market because of its unique properties. This year, 12 tons of blueberries grown in Georgia were delivered for sale on the British market for the ﬁrst time. In addition, they are also being exported to Russia. Vanrik Agro Group started cultivating blueberries in the village of Laituri, in the municipality of Ozurgeti, at the end of 2012. Pg. 5

MAIN EVENTS

2 NEWS 10 MILLION DOLLAR TO BE INVESTED IN BATUMI

Memorandum Signed Between Ajara And Nikolayev

hairman of Ajara AR Government Archil Khabadze and Minister of Finance and Economics of Ajara David Baladze met with Casinos International Group XO representatives. The company will build a casino on Hotel Metro City’s territory in the new boulevard where 500 people will be employed. The Casino will be located on 2800 sq. Meters area. Construction works will start this year and will be completed by 2016. The lease agreement is for 15 years with the company. Casinos International Group XO and Metro Atlas Georgia Company will sign agreement in the near future.

GEORGIAN RAILWAY STARTS FULFILLING GEORGIA-EU ASSOCIATION AGREEMENT

eorgian Railway has started fulﬁlling the Georgia-EU associated membership agreement, under which the company must introduce 8 main instructions and regulations. In this respect the experience of the EU member countries is of crucial importance. To share their experience representatives of the European Railway Agency (ERA) arrived in Georgia. The delegation is led by ERA executive director Libor Lochman, who attended the September 18 workshop at the Radisson hotel and shared the ERA experience to the Georgian Railway representatives. At the workshop Lochman provided a detailed description of the recommendations that must be introduced in Georgia for establishing EU directives and regulations in the railway ﬁeld. David Bakradze, the Georgian State Minister for European and Euro-Atlantic Integration Issues, opened the workshop. The due regulations must be enacted in Georgia in 2018-2020-2012 years, he noted.

NEW US AMBASSADOR IAN KELLY ARRIVED IN TBILISI

mbassador Ian Kelly and his wife Francesca have arrived in Tbilisi. As the Ambassador has told reporters at Tbilisi International Airport, he has been working as a diplomat for 30 years and always wanted to serve in Georgia. “I feel very confident in saying that I don’t think you will find a stronger advocate for Georgia and its Euro-Atlantic vocation, and I don’t think you’ll find a more passionate supporter for deepening U.S. – Georgian relations” – said Ambassador Kelly I hope to present my credentials tomorrow and because I have to present my credentials, I obviously don’t want to say too much before I meet the President tomorrow. But let me just say that my main priority I think will be to support Georgia and to deepen bilateral relationships between the U.S. and Georgia.

GEORGIAN PARLIAMENT HOSTS INTERNATIONAL CONFERENCE ON TRANSPARENCY

fﬁcials from about 20 countries are in Tbilisi to participate in an international conference about legislative openness. Parliament of Georgia is hosting the two-day Open Government Partnership’s (OGP) Legislative Openness Working Group (LOWG) conference. The OGP is a multilateral initiative of the United States and Brazil, in which 63 governments work together with citizens to promote transparency, ﬁght corruption and use technology as an enabler of governmental openness. The two-day forum Openness Obligation: the Parliamentary Action Plans, Standards and Tools focused on the progress of the working group in terms of legislative openness, including development of Open Parliament action plans and Open Parliamentary Data International norms and standards establishment aspects.

September 21, 2015 #11

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hairman of Ajara AR Government Archil Khabadze met with the delegation of Nikolayev Oblast at Radisson Batumi Hotel. The delegation consists of Nikolayev oblast state administration ofﬁcials, lawmakers and the press and media representatives. The Chairman

introduced the region’s tourism and investment potential to the delegation members. He also talked about the ongoing projects and future events. Memorandum of Understanding was signed after the meeting between Ajara Autonomous Republic and Nikolayev Oblast for trade-economic, scientiﬁc-technical and cultural cooperation. The

memorandum provides development of mutual cooperation in trade, industrial, investment and other economic fields. The parties will organize product exhibitions and fairs; also will cooperate in the field of agriculture. The parties will share information about local export products and services in order to improve trade and economic cooperation. Exchange programs will be implemented according to which specialists will be trained in foreign economic activities and their experience. The Memorandum also provides joint exchange projects in health and education fields for students and professionals. Exhibition of Ukrainian artists and photographs’ works will be held at Art Museum of Ajara called ‘Infernal Airport’ in the frame of the official visit. Exhibition will stay in Batumi for several days. The visit includes meetings with Batumi Mayor and council chairman. Ukrainian delegation members will also attend the investment forum ‘Batumi 2015’ at Hilton on 18th of September.

Meeting With Mercy Corps Small Caucasus Alliances Program Representatives

hairman of Ajara AR Government Archil Khabadze met with Small Caucasus Alliances Program Representatives of the Non Governmental Organization in Ajara Mer-

cy Corps. The meeting was attended by Hellen Brudberry – leader of group “Program of Small Caucasus Alliance”, Giorgi Sadunishvili – manager of “Program of Small Caucasus Alliance Kvemo Kartli”, Lela Putkaradze – manager of “Program of Small Caucasus Alliance Ajara”, Merab Abashi – head of agriculture and self-government commission

of Supreme Council and Kakha Shashikadze – head of administrative bodies relation department of Ajara A.R. Government. The aim of the meeting was to discuss Mercy Corps projects in Ajara. Organization is now realizing a new project to support agriculture – “Program of Small Caucasus Alliance”. The goal of the project is to support sustainable marketing economics in three regions – Kvemo Kartli, Samtskhe-Javakheti and Ajara and straighten and development of meat, milk and honey productsproduction. The program began of the 1st of March, 2014 and

will ﬁnish on 28th of February, 2019. The budget of the program is 7 million 181 thousands SEK. The program is ﬁnanced by Swiss Agency for Development and Cooperation.

Argus Caspian – Black Sea Transport Corridor 2015

nternational Conference ‘Argus Caspian – Black Sea Transport Corridor 2015’ has been opened in Hilton Batumi today. Chairman of Ajara AR Government Archil Khabadze welcomed the invited guests. The heads of 14 countries’ vehicles and transportation companies will share experience and innovations of their companies for two days. They will also talk about the development of transport

corridor in economic turbulence conditions, regional transit devaluation and decreased business activities. The forum is attended by representatives of major oil and transportation – logistics companies, including more than 120 delegates from oil reﬁneries and fuel users from Azerbaijan, Bulgaria, Ukraine, Turkey, Spain, Venezuela, Singapore and other countries.

The conference is supported by Ajara AR Government and Georgian Railways. It is supported by the largest transport-logistic companies of Georgia: Georgia Transit, Petrocas Energy Group, Batumi Sea Port, Batumi Oil Terminal, Caspian Transit and GR Trans Line. Representatives of the companies will introduce participants to new initiatives and projects that are related to the importance of maintaining the issue of transit corridor. The issue of the CaspianBlack Sea region is an important factor for economic interaction, Such as the Baku-Tbilisi-Kars railway, the new terminals in Georgia, Azerbaijan and Kazakhstan. The conference was addressed by representatives of the Azerbaijan and Georgian Railway, members of the maritime administrations of Georgia and Ukraine, Transport and freight companies’ delegates. Conference participants will have the opportunity to visit the “KazTransOil” Company of Batumi oil terminal tomorrow, also the Poti Oil Terminal, where most of the oil and oil products are loaded. Achievements of SGS Expertise and laboratory of one of the biggest companies in the ﬁeld of inspection will be presented on the conference.

Archil Khabadze Meets With Simone Wolken

n 15th of September, 2015 the Head of Ajara A.R. Government Archil Khabadze met head of regional mission of the UN Refugee Agency in South Caucasus (Armenia, Azeirbaijan, Georgia) Simone Wolken. The head of Publich Relations ofﬁce of UNHCR Nino Kajaia, the head of International Relations Department of Ajara A.R. Khatuna Nakeuri and

BUSINESS WEEK

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the head Supreme Council Relations Department Parmen Jalagonia also attended the meeting. The meeting was informational and sides discussed UNHCR goals in involvement in solving problems and widening humanitarian space. In 2014-2015 organization ﬁnished united program of UN and UNHCR, which is directed towards solving humanitarian and development problems.

Organization always helps TRPs, especially in Shida Kartli and West Georgia, also protects them, helps in coordination, monitoring and reaction, supports the creation of referral mechanisms and realizes protection interventions for special purpose. UNHCR is the main acting subject in questions of TRP’s protection and is oriented on the longterm settlement of their problems.

The English-language weekly is distributed to over 1000 assets in Ajara, including, major companies, commercial banks, international organizations, state offices, high-class hotels, shopping malls, Batumi airport, Kobuleti, Sarpi. Businessmen and Managers Read ABW.

Source: www.commersant.ge, www.bpi.ge, www.gbc.ge, www.agenda.ge, www.civil.ge

INVESTMENT FORUM September 21, 2015 #11

ajara business week

BATUMI INVESTMENT FORUM 2015 SUMMARY

he forum brought together key policy-makers, government officials, investors and businesspeople who discussed different investment opportunities and business prospects across the Ajara region. Business Week is proud to share the insights of the event that have significantly changed the investment climate in Georgia. Ajara A.R. Finance and Economy Minister David Baladze opened the Forum with the speech that was followed by Minister of Economy and Sustainable Development of Georgia Mr. Dimitri Kumsishvili, the Chairman of Government of Ajara A.R. Mr. Archil Khabadze. The speeches covered the curren dynamics in the Georgian economy and reform initiatives that have improved the country’s business environment. They gave the general overview of the investment opportunities in the region and updated the audience on the projects that are planned for this year. “Ajara is a quite significant region of Georgia in terms of investment opportunities. Ajara government’s objective is to closely cooperate with the local and international investors; let them know more about our region’s investment potential. In 2012, 152 million U.S. dollars worth of investments were made in Ajara. In only two quarters of 2015, this number has already grown to 165 million U.S. dollars,” said David Baladze. Welcoming speeches were followed by eight hours of interactive panel discussions, high-level presentations and interaction between delegates and speakers. It was an unparalleled experience for all attendees in terms of the informational update they received about the investment climate and opportunities in Ajara region and Georgia. Bruno Balvanera, the Director for Caucasus, Moldova and Belarus at European Bank of Reconstruction and Development (EBRD) moderated the panels. Giorgi Pertaia, Director of the Georgian National Investment Agency stressed in his presentation that Georgia occupies 15th place in the World Bank’s category of Doing Business and is 22nd on Heritage Foundation’s Index of Economic

Freedom. He talked about the general positive business atmosphere of Georgia. The day was designed to provide an opportunity for guests to make contact and network with senior figures from the business and financial communities, as well as the public sector and the government. “Delegate feedback was highly positive and Cushman & Wakefield | Veritas Brown can announce that several high profile projects in Batumi have received investor pre-contacts as a direct result of the conference” said Tom Day, Regional Director- Hospitality & Investor Services of Cushman & Wakefield | Veritas Brown” On the next day participants were invited to the site tour where they had the opportunity to get acquainted with the current investment projects in the region such as Metro City, Atlas Georgia, Babillon Tower, Alphabet Tower, Grand Hotel Batumi Sea, Grand Resort Development, Dreamland Oasis, Porta Tower Batumi, Princess Hotel Batumi, Crown Plaza Batumi, Semiramida Gardens Holiday Complex, Gogebashvili str. 18. It is obvious that Georgia has demonstrated its repeated readiness to serve as a positive investment environment with its different investment opportunities and ready projects, thus Georgia is definitely a competitive country to invest.

DIMITRI QUMSISHVILI Minister of Economy and Sustainable Development of Georgia “At the forum we will comprehensively discuss the issue of accessibility of finances and opportunities in the Ajara Region and the whole country. About 200 delegates have arrived from several tens of countries, including representatives of international financial institutions and foundations. All forums are of crucial importance for us. At the Forum we will offer the existing instruments to investors and all persons interested in making investments in Georgia. We will also discuss the issue of accessibility of finances in details, as well as the potential in the Ajara Region and the whole country”.

ARCHIL KHABADZE The Ajara Government Chairman “Today’s meeting represents a platform for a constructive dialogue between the domestic business and the Government. This dialogue is necessary and important for successfully planning investment projects. This forum will enable to better introduce investment environment in our countries. We will deliver detailed information about the business projects in the region and encourage the new relations”.

DAVID BALADZE The Ajara Finance and Economy Minister “For the last 3 years we have done our best to increase investments inflows by 100%. I would like to express my deep gratitude to you for arriving and participating in the forum. We will thoroughly introduce our potential and provide comprehensive information on the region’s investment environment and the ongoing projects”, Baladze noted.

INTERVIEW

September 21, 2015 #11

ajara business week

Agro Service Center Grows Saplings of Foreign Grapes in Ajara “Nursery Garden Grows 7 200 Saplings of Vine and Fruits” The Agro Service Center was founded by the Ajara Agriculture Ministry in 2011. This is an only noncommercial organization in the Region that implements various demonstration projects to develop various sectors of the agriculture business. The main objective of the Agro Service Center is to refurbish various agriculture species in the Region. To this end the organization has arranged collection-demonstration nursery gardens with saplings of vine and fruit and citrus. Perspective species are grown in the garden and distributed to farms. In Gvara-Khutsubani, Kobuleti the nursery garden has been operating for two years, where 7 300 saplings of various species of vine and fruit grow on 11 hectares. MIRZA SUQNISHVILI, a head of the Agro Service Center extension service, says the growth process of these saplings is under continuous supervision.

- About 32 Georgian and foreign table and wine species of grapes are passing a garden acclimatization period, as well as saplings of apple, pear, cherry, peach, bilberry, persimmon, actinide, kiwi, feijoa, plumb, olive, nut and mulberry. Today table grapes are mainly imported from Armenia and we want to replace the imports and develop the domestic production. The garden represents an exemplar demonstrative-consulting asset for farmers and interested bodies in the Ajara Region and the western Georgia in terms of high agro technical background, phytosanitary healthiness and variety of species. The Gvara-Khutsubani nursery garden of grapes and fruits grows about 7 300 saplings of grapes and fruits. - Which specific saplings of fruit grow there and how much does one sampling cost? - The organization provides farmers with such species of grapes as Kardinal, Ojaleshi, Tsolikouri, Aleksandrouli, Chkhveri, Prima and so on. These varieties of table and wine grapes were selected due to proﬁtability perspectives. Moreover, they will better put up with the local climate conditions. The price of a sapling ranges from 2 to 3 GEL. Moreover, the garden grows about 32 varieties of Georgian and foreign table grapes, as well as saplings of apple, pear, cherry, peach, bilberry, persimmon, actinide, kiwi, feijoa, plumb, olive, nut and mulberry. At this stage, we sell only grapes saplings. - A fruits drying and shock freezing refrigerator machines have been also arranged in the agro service center in Gvara-Khutsubani. What volume of raw materials can be dried simultaneously? - Farmers are able to make a use of the fruit drying machinery at affordable tariffs. The company has bought the equipment as part of the UN program. The machinery works on solar energy and it dries about 500-700 kilograms of raw materials simultaneously. The drying process lasts 48-72 hours and the duration depends on characteristics of raw materials. Besides fruit drying equipment, we have also installed shock freezing machinery, which was ﬁrst used by company Avarnik that froze 6 tons

of bilberries for exports. The advantage of shock freezing technology is that the product maintains its form and quality. - Besides fruits drying what other services does the agro service center offer to farmers? -We also provide soil agrochemical research and cow artificial insemination services as part of the ENAPRD Ajara program. Farmers use our services to determine what fertilizers to use in their soil to receive high-quality and higher harvest. Soil patterns are delivered to Kobuleti, to the branch of the Agro Service Center, where the express laboratory explores the pattern for several hours and issues recommendations to the farmers. As to the cow artificial insemination services, the organization launched the program in 2012 with the UNDP support and the EU financial contribution. Since then, the Region has acquired about 3 000 calves with improved genetic characteristics. Farmers are able to contact artificial insemination specialists by phone. The service price is 20 GEL in plain and 10 GEL in highland zones. The advantage of the services is that the species are improved and the cow’s productivity hikes. - According to my information, you also own greenhouses. What is their designation? - We own strawberry and Bulgarian pepper demonstrative greenhouses in Kobuleti. The strawberry greenhouse is equipped with modern technologies and Spanish strawberry grows there. The plant with wonderful taste and high productivity was imported from Poland. 10 100 saplings of strawberry grow on 480 square meters and they give 10-11 tons of harvest a year. The greenhouse is of demonstrative character. The objective of the agro service center is to demonstrate advantages and benefits of the strawberry greenhouse to farmers. Members of various organizations and cooperatives visit the strawberry greenhouse as part of agro tours to receive information on conditions of growing strawberry and its benefits. The greenhouse opened in November 2014. We have recently planted various species of the Bulgarian Pepper and arranged a greenhouse for the Bulgarian Pepper. The research works have showed the Bulgarian Pepper is one of the most demanded products on the market and we want to popularize the growing technologies among farmers so as they receive profits from this business too. - You also own a citrus farm in Chakvi. What

species grow there and is there sufficient demand for are your saplings? - To renovate the citrus gardens in the Ajara Region, in 2011-2012 a citrus demonstrative-collection nursery garden was arranged in Chakvi, where mandarin, lemon, orange, pomelo and other varieties imported from China, Spain, Turkey and Japan grow on 17 hectares. We periodically supervise over citrus saplings in the nursery garden. The saplings are supplied to farmers at the cost price. There is much demand for our saplings. We receive many phone calls every day for saplings. We have already started selling early varieties of saplings. Farmers are able to reap the harvest in the ﬁrst half of October. In whole, 71 varieties of citrus grow in the nursery garden. As part of the memorandum between the agro service center and Batumi Shota Rustaveli State University, the university scientists provide everyday supervision over the saplings of citrus,

grapes and fruits. - How many individuals are employed in the organization and how much is the profits of the agro service center? - The agro service center employs about 80 individuals, including 40 ones work in the nursery garden. The center is not a commercial organization and it is not oriented on profits. Our main objective is to promote local farmers in receiving maximum profits, to teach them to valuable management skills. We have printed and distributed various information books and booklets to farmers as part of the ENPARD Ajara program. For 2 years we have issued 9 books and 80 000 units of booklets on 31 topics. We also systematically hold agro tours and trainings for farmers. We systematically try to change the consciousness of farmers through our tours and meetings. We want them to receive maximum benefits from our organization.

IV Batumi International Birdwatching Festival

rom 20 to 26 September 2015, under the support of the Department of Tourism and Resorts of Ajara, the fourth international festival of bird watching will be held in Batumi. Within the festival excursions to places of bird watching as well as thematic conferences with the participation of both local and foreign experts are planned. Birdwatching, being one of the most popular types of eco-tourism, develops greater and greater potential in Ajara. Ajara is considered one of the world’s largest migration corridors for birds. Bird watching is organized in places such as Sakhalvasho village, Mtirala National Park, Chorokhi delta and the village of Shuamta. It should be noted that in recent years, with the support of the Department of Tourism, watch points and shelters for birds were created in Shuamta village. Department of Tourism also contributes to

the development of the local family type hotels, by attracting tourists and providing trainings to the staff. Information about bird watching is distributed in the brochures and promotional videos during international exhibitions, as well as thematic internet sites and in social media resources, which helps promote this type of tourism, both at the local and foreign tourism markets. Every year bird watching festival attracts more and more foreign tourists to Ajara . Last autumn, a special growth was recorded among the lovers of ornithology. In particular, about 2 000 overnight tourists stays were recorded, and the amount of money spent by them totaled to 160 000 Gel. This income plays an important role in the economic prosperity of the village where watch points are located. Every year a growth in statistical data points to the fact that the development of this type of tourism in the region has a great potential.

September 21, 2015 #11

ECONO-MIX ajara business week

New Building Code – Coming Restrictions on Ajara-based Developers

he new building code has been already developed. The parliament will discuss the document in autumn session. Construction companies and the housing sector experts have been long waiting for developing and enacting this document. Finally, the Authorities have satisﬁed this demand. The new building code is expected to be enacted at the end of 2015.

A new code implies new regulations and development companies will have to take them into account. The new standards are expected to inspire fundamental shifts in the Ajara Region too. The sector specialists assert amid the boom of ongoing construction projects, more and more pretences are expressed that elementary standards for space planning are violated. In one word, Ajara-based developers will have to fundamentally revise their activities.

The bill was forwarded to the Government. The working variant was developed jointly with construction companies, sectoral associations and various offices. The document includes many regulations, the Economy Ministry says. The document obliges construction companies to submit geological and expert conclusions. The new code also introduces mandatory certification of engineers and architects, as well as a concept of adjacent zones near public spaces. The revised variant of the code was agreed with all parties and forwarded to the Government, David Gigineishvili, a head of the Economy Ministry Department for Space planning and Building Policy, noted. “In the working process, a lot of remarks were expressed from various sectors. All remarks and recommendations have been analyzed and embodied. Consensus has been achieved to a certain extent with the private sector, associations and various Ministries”, Gigineishvili said. The development sector backs the current variant of the building code, as the business association has submitted a letter to the Economy Ministry confirming the association members approve the code, Gigineisvili added. “There are many development companies united in the business association and their letter signifies the development companies also approve the submitted bill”, Gigineishvili noted. The government meeting will discuss the bill in the near future and the document will be forwarded to the Parliament, he added. The association of developers of Georgia joined the working process form the very beginning. All parties have provided huge job, the association chairman Irakli Rostomashvili said.

‘There were several issues on which I was agreeing or not with the bill authors, but finally we achieved a consensus. In general, the law may be a good one, but it must be executed. I am genuinely interested how they will execute the law, what leverages they will use. If anything is not performed valuably, the legislation should not be accused. The code cannot do anything in itself. Professional officials are required to perform due works. If a professional specialist, we will receive good results. Therefore, I cannot insist something with full persuasion. Officials appointed by political

grounds will fail. The current situation in the housing sector was brought by ignorance. Lack of experience has mostly damaged the construction sector. Professionals should have been involved in the process and we would receive entirely different results”, Irakli Rostomashvili noted.

Georgian Blueberries On Sale In The Uk Vanrik Agro Group Expands Blueberry Plantation

he American blueberry, which adapted well to the climactic conditions of the Guria and Adjara highlands, is in high demand on the global market because of its unique properties. This year, 12 tons of blueberries grown in Georgia were delivered for sale on the British market for the ﬁrst time. In addition, they are also being exported to Russia. Vanrik Agro Group started cultivating blueber-

ries in the village of Laituri, in the municipality of Ozurgeti, at the end of 2012. In total, US$5 million was invested in the project. The Group’s blueberry plantation covers 50 ha but the company’s management is set to expand the farm to 400 ha. Georgian farmers became interested in cultivating blueberries after USAID released a research report, as Vanrik Agro Group ﬁnancial manager Archil Paichadze explains: “The research mentioned western Georgia as having high potential for growing blueberries. They need acidic soil, and in Guria there is exactly this kind of soil. In the ﬁrst stage we planted 147,000 seeds. In total, 16 types of species of blueberries are being cultivated and they are harvested before the 15th of August. Every species is ripe for picking at different times.” Going into further detail, Paichadze added: “This year we harvested for the

first time. A sample of 12 tons of blueberries was exported to the UK market. The blueberries grown in Georgia are distinguished by their taste and are appreciated on the EU market. The majority of the harvest (25 tons) will be exported to Russia. Our main goal is to access the US and the EU markets. The EU has stricter regulations than Russia.” Vanrik Agro Group is also planning to build a blueberry-processing factory for which the setting up of the processing line has already started. According to Paichadze, worldwide demand for blueberries is increasing every year and, accordingly, production is also on the rise. Next year, Vanrik Agro Group is expecting approximately 50 tons from its harvest, most of which will be exported to the EU. Indeed, a memorandum with a Polish company has already been signed, making provisions for the export of blueberries grown in Georgia to the EU. Although there is significant foreign demand for the product, its production requires significant financial input, as Paichadze outlined: “Starting up a blueberry plantation is not a cheap business. Approximately 17,000 GEL is needed to cultivate blueberries for every one ha. It is necessary to install drip systems for irrigation, which requires extra investment. However, proper planning and good management makes a blueberry plantation highly profitable and can provide significant economic effect for small land farmers.” With the support of the UNDP, blueberries are cultivated in three demonstration plots in Adjara region, on the sites of Shuakhevi, Keda and Khulo. UNDP representative in Adjara, Lasha Komakh-

idze said: “We were studying this issue for a long time. Our goal was to find an agricultural product, which would provide small land farmers with a significant economic effect, unlike the traditional, but at the same time low income, agricultural products. The blueberry is exactly such kind of plant.”- Giving an extensive picture of the blueberry business, Komakhidze continued: “The cost chain of its production gives such an economic effect, starting from its cultivation and ending up with the product sales. Typically, the farmers in Adjara have land which cannot be worked on by heavy machinery. However, now the Adjarian farmer can produce blueberries that value at least 7000 GEL on 2000-2200 square meters of land, which previously brought in 200 GEL worth of corn. Market realization is not difficult, since the demand for the blueberry is higher than the supply on the local market.” Komakhidze finished by noting the currently advantageous market conditions for blueberries grown in Georgia: “European consumers need large quantities of the product, therefore 2-3 farmers cannot provide the amount of the harvest, which is demanded by European markets. On our demonstration plot only five tons of blueberries are being harvested. This is a very low amount. In order to establish Georgian blueberries on the EU market, the farmers should increase the capacity of the blueberry plantations, or increase the volume of the sales.” eugeorgia.info

BUSINESS ajara business week

September 21, 2015 #11

All Roads Lead to Privet or “Privet Iz Batuma” All Roads Lead to Rome, but in Batumi All Roads Lead to “Privet” Interview with Mrs. LANA CHIKHLADZE, the Privet Iz Batuma restaurant manager

ne of the favorite cafes for Batumi residents opened in August 2003 and the asset’s popularity has been growing for these years. Initially, we opened a pastry shop. Later we expanded our business and introduced a wide assortment of dishes. -The idea comes from the history of this place. Previously, a photo studio used to function in this building. Even the interior has saved many details of that photo studio. The pictures on the walls of

this café derive absolutely from that time. Averaged age of these works range from 30 to 40 years. We have also saved a collection of photo cameras characteristic to that period. This name comes from the previous photo studio and the founder has maintained this appellation. It should be also noted photos that beautify this café were taken in the studio and these photos indicate this appellation. - When and how did this idea arise? -The founder planned to arrange a comfortable environment in this place for spending a pleasant time and tasting delicious dishes. In 2003 the photo studio closed and we decided to implement our idea and opened the café. This is the ﬁrst café in Batumi with the French interior, because the founder wanted Batumi to have a similar asset. The founder is Mrs. Marina Ashba, a Batumi resident, who is currently working in the Russian Federation. - What is the reason “Privet” is Batumi’s most popular café? What is the secret of this success? - First of all, I would name the quality. There are many cafes in Batumi, as well as in Tbilisi with high-quality services. These assets provide huge job to achieve highest standards, but our café provides a unique environment, aura, interior and positive atmosphere that saturate the whole café. The reﬁned cuisine gives additional advantage to the café that provides a family environment. The asset offers a wide range of classical dishes

adapted with the Georgian cuisine. Moreover, our café is popular because we have been tirelessly keeping top standards and quality for 10 years. We do not let the quality to fall. - What is more priority for the local population - price or quality? -This is a very interesting issue. I would try to answer brieﬂy. I am a marketer and I consider this issue as a professional. Having explored the Ajara Region’s business sector, I think both prices and quality matter in this region. Because the Ajara residents had to earlier get to know the European (western) market thanks to close ties with the sea and sailing. Therefore, the Ajara residents have far earlier familiarized with the western standards compared to the remaining part of Georgia. As to our clients, they make focus on quality. We maintain our market positions thanks to high quality services and warmth to our visitors. Our clients stress the café provides higher quality compared to prices.

Ajara Wine House will Ensure Growth in Winemakers’ Revenues The Ajara Wine House is located at the Gvara-Khutsubani highway, a 5-minute way from Kobuleti. A multifunctional complex with a wine cellar, oenotheque, exhibition hall, ethnographic zone and laboratory will be arranged in the wine house. GOCHA BERIDZE, the Ajara Wine House director:

he main objective of constructing the wine house is to popularize the Georgian wine, promote the agro business and agro tourism in the region, popularize modern winemaking methods, as well as traditional winemaking in pitchers. A major part of the wine house will give room to the cellar with a scope on reviving the old Georgian winemaking technology by use of pitchers. A technological mini-enterprise will be also arranged in the building that will be equipped with modern technological winemaking machineries. We will hold special trainings for farmers in modern winemaking technologies. As a result, the quality of family wines will be improved and farmers will receive higher ﬁnancial revenues. Farmers will be able to enjoy the wine technological line of the agro service center and bottle their family wines”.

The wine house visitors will be able to taste and buy wines from all over Georgia. The project aims to popularize the Georgia wine, Beridze noted. “For creating interesting and attractive interior for tourists, an exhibition hall and ethnographic zone for wine and related handicraft patterns will be arranged. The wine house will also have an

oenotheque, where collection wines made by the agro service center will be stored. Multifunctional hall will be one of the main spaces in the Wine House. Agro exhibitions will be organized for popularizing wines and food products of cooperatives, private ﬁrms and household economies. Beside various wines from regions, tea and honey products will be also exposed at the hall to assist farmers in advertising and sales. Various agriculture products festivals will be held on the territory of the wine house, for example, wine festivals, honey festivals and similar events to popularize products and draw people interested in agro tourism. The information center will also work in the wine house, where interested persons will be able to receive information on the Ajara Region’s agro tourism potential. The wine house will launch operation in October 2015. The location of the wine house and surrounding vineyards will become the best agro tourism destination for the Region visitors who will be able to see vineyards, receive information on modern and traditional winemaking methods, wine-related archeological discoveries and history. They will be also able to buy wine and food products manufactured by desirable companies. Many tourists interested in the agro tourism visit the Ajara Region and the wine house of the agro service center will also host them with much pleasure”, Beridze said.

INTERVIEW September 21, 2015 #11

ajara business week

Way from Food Products Imports to Development Industry Imeri Company Reveals Ambitious Plans in Tobacco Manufacturing Imeri company has been operating on the Georgian market for 23 years. Founded in the Ajara Region, initially the company used to import food products. Today, Imeri operates in various segments and has founded several subsidiaries. In his interview with the Ajara Business Week (ABW) IRAKLI JIJAVADZE, the Imeri executive director, talks about the way the company has passed from the inception till today. - Imeri has been operating on the market since 1992. Initially, the company was involved in foreign trade business. Today, Imeri has been represented in various segments. What is the way the company has passed from the foundation till today? - Imeri has been genuinely operating on the Georgian market since 2012. At the beginning the company was carrying our exports and imports of food products. Today Imeri makes focus on production of Georgian cigars and related accessories. However, in the course of time various companies with different proﬁles were set up on the basis of Imeri company. Today, these companies are united in Mardi Holding. - In 2001 Imeri company used to supply shotgun butts to such famous guns manufacturers as Beretta, Benelli. What is situation with this production today? - Naturally, it was huge experience and honor to cooperate with the world’s leading brands. Regretfully, this cooperation ceased because of certain legislative obstacles. We keep intense communication with the Authorities on this problem and I hope we will be able to resume relations with old partners in the near future. According to our estimations, this direction includes much exports potential and its promotion will advance ﬁnancial and image aspects. - Mardi Holding is a Imeri company subsidiary that actively operates in the development business in the Ajara Region and Tbilisi. What projects are you implementing at this stage? - Mardi Holding launched construction works in Batumi in 2010 and in Tbilisi in 2011. The company has become one of the leading development entities in the Ajara Region. The holding unites construction, projecting, architectural, real estate and transportation companies such as Imeri, Old Batumi, Tbilisi

House, Mardi World, Best Invest, M Architect, Mardi House. It should be noted each body has various partners, marketing and management. Mardi House employs 40 persons, Old Batumi – 30 individuals, Imeri – 21 persons, M Architect – 4 persons, Tbilisi House – 55 persons. In whole, Mardi Holding employs 154 citizens. Starting 2010 Mardi Holding has implemented 11 projects and is currently implementing 6 other development projects in Batumi and Tbilisi, including elite residential complexes with one and two entrances, apart-hotels and apartments for the middle segment. Construction projects are being implemented in both the city center and developing zones and recreation zones like the Green Cape and Batumgora. Since 2014 we have been working on small HPP projects. In the same year we sealed a memorandum with the Energy Ministry on constructing a 5.7 megawatt HPP. The company plans to launch winemaking business and supply wines to both domestic and foreign markets through its own distribution network. Every year Mardi Holding participates in the international real estate exhibitions, mainly in the major cities of the CIS countries: Moscow, Kyiv, Minsk, Novosibirsk, Astana and so on. These activities foster further growth and development of the company, as well as introduction of innovations, new approaches and innovative methods. Moreover, Mardi Holding cooperates with partners in the CIS major cities and this factor creates an additional efﬁcient chain in relation to clients. Serious mistakes were made in the Georgian development business for many years. Based on the recent years’ experience, the Georgian customer has become more cautious. The company management, therefore, makes focus on meeting the customer

needs and interests, because content client is the best advertisement for any business. - In 2007 you launched cigarette manufacturing. What was the inspiration and how would you assess the production from inception till today? - In 2007 in the Ajara highland we started growing trial batches of Georgian oriental tobacco leaves of the traditional variety. We also launched a production of cigars and cigarillos from tobacco. It should be noted the production of cigars from oriental tobacco is a rare trade. Patterns of the ﬁrst Georgian cigars was manufactured by distinguished company Taru Martani 1918 in Indonesia on May 5, 2009, where professionals and sommeliers determined an optimal variant by combining Indonesian, Cuban and Domenic Republic’s tobacco with the Georgian oriental tobacco called as Keda. Starting 2014 LLC Imeri has been manufacturing upper strength handmade 23 varieties of cigars, cigarillos and 6 varieties of wrapping tobacco. The peculiarity of the product has taken huge efforts for penetrating the market. Today we can openly say the sales trend is rising and the company is inspired to expand the assortment and offer more various products to the customer. - Which markets have you entered and do you plan to export your products? - At this stage we fully cover the Ajara Region. Our products are sold in Tbilisi and other regions too. Recently we have sealed an agreement with Turkish partners. As a result, we have sent a small consignment of Imeri cigars to Turkey. In the near future we plan to export our products to the Baltic countries too. - As to the price, what is the retail price of our products? Are prices and quality adequate to foreign analogues? - Our market research clearly proves foreign com-

petitors have set triple higher prices. It should be noted a major part of imported cigars to Georgia are manufactured by machines and are wrapped in the so-called restored tobacco leaves or paper, while we make our cigars by hand entirely of combination of Georgian, Cuban, Domenic Republic tobacco leaves. We have taken part in many international exhibitions as guests and gained essential experience and stimulus to attend similar international events as valuable participants in the future.

Global Alliance Expert Talks About Importance of Investing in Healthcare FRANCK DROIN expert in health insurance and management. Frank droins has 18 years of experience in a health and social care sector. He helped one of the biggest insurance operators in France, which has more than 6 million policy holders in managing risk management system. In recent years, he has worked as a head consultant for the Morocco’s largest insurance company, which operates in Africa and the Middle East.

- For medical control of the health cost developments! Progress in medicine, increasing life expectancy, aspiration of each individual for living in good health as long as possible are the principal factors of the increase in the health expenses in most countries of the planet. Proposing a high-quality health system to the population is first of all a way of providing for more efficient global economy: 1% of the social welfare system makes more than 2% of the GDP of the country! Nevertheless, it is not viable for a country to let increase the health costs without any mechanism of regulation both at the macroeconomic level and in respect of any medical documents presented for payment. Control of medical costs: first of all, medical control of the developments and not control of accounts! It is difficult to assess the intrinsic quality of a health professional, yet at the same time it is possible to assess his medical practice on the basis of a large number of quality references existing in the world, and especially in Europe. So, in any country, it is possible to define price reference scales reflecting the average level of salaries, the real estate prices and the general services. These elements enable to assess the value of treatment in a country as compared with other countries. The established difference in the health costs often results from other factors, such as: –multiplication of documents (blood analysis is done many times as a result of lack of coordination); – treatment prescriptions (inappropriate treatment is prescribed but with more considerable margins)

– poorly calculated treatment unit prices (the medicines pricing policy applied in the country playing the key role in the control) – absence of controlled successive stages of treatment or gaps in the successive stages (which may result in absence of control upon discharge from the hospital and grave consequences such as recurrence and entailed expenses) – fraud committed both by the patients and the health professionals (often resulting from insufficiency of means for rights verification) – inadequate treatment pricing (for example, very high prices for dentures and inadequately low prices for conservation treatment, which results in an avoidable explosive increase in very expensive prostheses) - Who must contribute to the control of treatment cost developments? All players are directly concerned. First of all, the public authorities who often finance the major part of the costs (particularly, paying the costs of treatment of the most grave diseases). Also private insurers; they often cover the expenses under collective agreements guaranteeing good coverage, also they are often very exposed to abuses or fraud. The patients themselves! Very often, people think that paying much for their health means having access to medicine of higher quality, which evidently is not the case as the pricing policy may be “adapted” to the solvency of the patient (they make pay more those who have more financial means)! - Different solutions, important points There are many answers to be obtained, surely they are complex, but obtainable, and many instances of international experience, particularly in Europe, have to be considered. - Limitation of expenses by regulatory provisions The tasks and objectives are at the national level, as well as the solutions. Political dimension connected

with decision-taking on distribution of financial resources (often depleted) is important (and, if possible, coherent with the decisions of the parliamentary representation). - Limitation of expenses by agreements concluded simultaneously with offering the treatment Partnership and negotiations with the health professionals are the cornerstones of the system. Therefore, discussion of the quality of treatment and the prices must be included in the more global approach to remuneration in each profession and transparency of the revenues of the health professionals. - Limitation of consumption by systematic payments of a certain amount of money by the patient, even a modest one (not including grave or lingering diseases) Even if it is not evident that payment by a third party (the patient pays nothing or little, and the health professional gets compensation directly from the public or private insurer) is inflationary for the expenses, there are strong presumptions that the “not expensive” notion understood as gratuitousness causes a bias in the expenses. Awareness by each individual of his responsibility is a key lever of intelligent control of expenses. - Mechanisms of anti-fraud control It is evident that deviations are many and they are catastrophic for the general confidence. Anyway, there are no infallible systems, and risk management must be constantly performed in respect of new types of fraud… - Use of a medical approach to financial commitments Paying differently for an image obtained using an old medical imaging device and an image obtained using a more modern and efficient device (for example, a device making it possible to identify a tumor 10 times better) is an obvious fact… which is not always evident for the health protection management systems.

- Systems of protection of the personal data of the citizens relating to their health, without which it is not possible to realize the medical control of the health costs. Medicalization of the conditions of reimbursement also requires use of the health data of each individual. Management by trusted external specialized bodies is indispensable for providing for the fundamental rights of the individuals. - Management mechanisms and efficient information systems at the service of the players Information is at the heart of this issue. An integral and comprehensive approach shared by the largest number of players is indispensable. Most integrated systems of management of reimbursements possible together with a system of tracking the medical processes relating to payment must be provided for. They make it possible for each individual to have easy access to different health professionals, and for the latter – to get payment for their services in a more simplified manner in administrative and financial respects to the benefit of the medical practice. In conclusion, Protection of persons who face health problems must be considered as an investment the return on which is sufficiently prompt and important. Risk management by medical control of the health expenses is imperative for the health protection system in Georgia as well as for the health protection systems complex of the world. Control of the unit prices (medicines, medical equipments, images), struggle against fraud and any abuses as well as an integral approach to the treatment processes are indispensable. This process must be developed in collaboration with the health professionals within the framework of agreements concluded with public authorities and private insurers. One of the cornerstones of the system is creation of solid mechanisms of management trusted by the citizens, financiers and health professionals.

BUSINESS ajara business week

September 21, 2015 #11

If Georgian Wine Companies Face the Problem of Market Diversification - Prime Minister’s Call and Companies’ Reply

Casinos International Brand XO Enters Batumi

BW was informed by the government of Adjara Autonomous Republic. They say the company will build the casino in the area of the apart hotel “Metro City” which is under construction in the new boulevard. More than 500 people will be employed in the new project. It is known that GEL 10 million will be spent to implement the project. Archil Khabadze, Chairman of Adjara govern-

ment, and David Baladze, the Minister of Finance and Economy, met representatives of the casinos international network today. According to the government of Adjara, the casino will be located on the area of 2800 m2. Casino construction will begin this year and be completed in 2016. It is known that the company will sign a 15-year lease agreement. casinos network XO and “Metro Atlas Georgia” will sign an agreement in the near future.

Ajara Government Refuses Sealing Memorandum with Company Interested in Gonio FIZ Construction

he Ajara Government does not plan to sign a memorandum with a Georgian company that is interested on constructing a free industrial zone in Gonio because of an invaluable and incomplete project, Levan Jashi, an assistant to the Ajara Government chairman and a head of the Economic Board, released this statement in response to the Commersant-spread information. In his interview with the Commersant Merab Davitadze, an executive director for Corporation Business and Tourism International Center, that is the zone administrator, noted a memorandum on implementing the Black Sea Pearl project was to be signed in July 2015 with the Ajara Government, but the issue remains open because of disagreements. The Ajara government demands that the company submit a bank guarantee. The Ajara Government holds information on the Black Sea Pearl project, but it is untimely to talk about signing any agreement with the investor. The project is not perfect and complete, only ﬁnal investment amount is named and no schedules

are indicated, Levan Jashi said. “This document does not represent a project that the government would discuss at this stage. Along with the valuable project the company must also submit a bank guarantee to confirm the investor is capable for implementing this investment project”, Jashi pointed out. The FIZ is planned to be constructed on the former military range of Gonio. As reported, the Ajara government has hired experts of the international consulting company Colliers International for preparing the territory development concept, he added. The concept calls for erecting buildings and premises, developing the territory in terms of infrastructure and implementing many other important projects, Jashi said. The main objective of the concept is to develop the Gonio territory in line with a specific plan, Jashi noted. As soon as foreign experts submit the former Gonio military range development concept, an interest expression will be announced, all submitted investment projects will be discussed and a final decision will be taken after that.

Yanair Introduces Promo Tariffs on Kyiv-Tbilisi and Kyiv-Batumi Flights

anair airline has introduced promo tariffs on Kyiv-Tbilisi and KyivBatumi ﬂights for the coming winter period. The promo prices will run till October 15. The ticket may be used from October 1 till March 26, 2016. The price includes meals and luggage transportation services (23 kilograms).

It is worth noting in October Yanair will perform Kyiv-Tbilisi and Kyiv-Batumi flights twice a week. At the same time, in November Tbilisi-Batumi flights will be performed once a week. It should be noted the Kyiv-Tbilisi flight is also performed by Flyuia airline, while Yanair is an only airline performing Kyiv-Batumi flights.

n 8 months of 2015, Georgian wine exports went down by 46%. The current economic situation in the region was named the main reason for this. The National Wine Agency officials say that the sharp decline in exports in the two largest exporter countries Russia (-58%) and Ukraine (-63%) had an impact on total exports for 8 months, which is 46% less compared to the same period of 2014. Georgia’s Prime Minister says the government is doing everything to diversify markets in the current situation. At the same time Prime Minister calls the wineries to be more active. Whether the companies are working to diversify the markets and how the government is involved in this process? Director of “Tbilvino” Zurab Margvelashvili notes in a conversation with “Commersant” that the company has one of the most diversified markets among wine companies and exports its products to more than 30 states. However, Margvelashvili says that they carry out the market diversification through the company’s financial and human resources. Nevertheless, the head of “Tbilvino” notes that the state really promotes this process and it would be ungrateful not to mention this. In Margvelashvili’s words, the government offers the companies co-financing to participate in wine exhibitions. The Ministry of Agriculture has signed a contract which ensures the arrival of the experts from the target markets. Zurab Margvelashvili adds that the Georgian companies are visited by foreign specialists, who own the wine shops, or are consultants. According to Director of Kakhetian Traditional Winemaking (KTW) Zurab Chkhaidze, if the

Prime Minister’s call to the companies to be more active aims to increase sales, then this is absolutely right move. As for the company and the steps that are taken in this reality, in Chkhaidze’s words, the company has done everything possible to prevent a drop in sales. Specifically, the wine was exported to a new market of Malaysia, at the same time the number of contractors in export countries have increased. The company increased capacity and added a new building that allows to process additional 3 tons of grapes. At this stage, the company exports wine to 15 countries. Chkhaidze believes that the diversification process is very time consuming and requires the market investigation, study, however, the fact that Georgia’s name is unknown in many countries creates the problem. In Chkhaidze’s opinion, the traditional markets like the CIS countries are more familiar with Georgian wine while the rest of the world recognizes France, Italy and Spain the largest producers of wine. Zurab Chkheidze says that the current difficult situation requires putting emotions aside and working. He notes that last year there was a stir and chaos around the harvest that led to unrealistic prices for grapes. “Telliani Valley” exports wine to about 25 countries both in Europe and the US. The company is trying to export wine to China. According to them, the diversification process is individual for each country. They say in the company that the entry into the US market is more difficult than in other markets. As for sales, due to recent developments, the sales to Russia didn’t decline while in Ukraine a drop is being observed.

European Market Closed for the Georgian Dairy and Meat Products

xport of Georgian dairy and meat products was scheduled to start this year - in particular, that was the intention of the “Georgian Business Zone” company. However, the company was forced to abandon its plans. According to the founder of the company Nino Zambakhidze, it was caused by the regulation and the reforms Georgia must fulfill as part of the Association Agreement with the EU. Despite the fact that “Georgian Business Zone” has ISO-certificate required for the export of the products in the European Union, it will not be able to export cheese to Europe during a few years. To fulfill the conditions allowing exports of perishable products of animal husbandry and the dairy industry to Europe, the country has a period until 2025, although rapid adoption of the necessary regulations is also allowed - Georgia is interested in this, in order to give businesses the opportunity to export their products to Europe. “In the end, the European Commission should recognize Georgia a trustworthy country in that sense, but it requires a lot of new regulations,” Nino Zambakhidze says. What kind of regulations are we talking about? According to the head of the legal department of the National Food Agency Maka Shubladze, for this, convergence of Georgian and European

legislation is necessary. “Once the state and business are ready to fulﬁll all the necessary conditions, Georgia should get a special list of EU countries, which will start the export of animal products to Europe. With regard to regulations, they relate to the entire production stage, including export. The protection of animal health should be provided in the farm as well mandatory vaccination, the overall epidemiological situation in the country should be satisfactory, modern technologies should be implemented on farmers and enterprises, and so on. Modern points of reception of milk must be organized, the whole chain of production and storage must meet certain health standards. The staff must have a certain minimum set of knowledge and skills. In general, there are a lot of requirements that must be met at all stages, “- she notes. According to her, labeling rules must also be complied, moreover, there must be detailed information on the ingredients. In her words, the government has begun the implementation of its commitments since 2014, and the Agency has already introduced a number of new standards. In general, the implementation of regulations is carried out by a specially approved schedule. “Sometimes the process goes faster than planned, as the country has a great interest in a possible opening of the European market,” - she adds.

September 21, 2015 #11

ECONOMY

ajara business week

Moody’s: Georgia’s High Rating Reflects Rate of Economic Growth

he high rating of Georgia - Ba3 reﬂects the high rate of economic growth of Georgia - stated in the report of the international rating agency Moody’s Credit Analysis:

Georgia”. “Georgia has many strong sides of lending, institutional sustainability and business -oriented environment that have contributed to economic development in the past 10 years. Although, due to lower demand since the middle of 2014 , in 2015 -2016 economic growth will be lower than

earlier forecast. The situation around the current account deﬁcit has worsened, exports and remittances from abroad have reduced ,”- one of the analysts Ernest Sergenti says. Moody’s forecasted economic growth of 2% in Georgia in 2015, and GDP growth of 3% in 2016. The report also says about a negative impact the situation in Russia has had on Georgia. “However, the signing of an association agreement with the European Union is a positive factor that promotes stability and high rating of the country, and this in turn contributes to the medium-term strengthening of state institutions and economic growth. The country also carries out modernization of transport infrastructure and reforms to strengthen its competitiveness, productivity and exports, “- the Moody’s report says. According to the report, the long-term continuation of the factors hindering the growth of Georgia’s economy and geopolitical tensions may have a negative effect on the country’s rating.

Cost of Living Grows to 157.9 GEL

s of the minimum food basket, a working man needs 157,9 GEL for living. The index exceeds by 2,3 GEL comparing to the rate of July, while - by 7,3 GEL if compared to

August, 2014. According to Sakstat, minimum living wage of an average family amounts to 264,8 GEL.

One member family needs 139,8 GEL for living, two-member family – 223,7 GEL, three-member – 251,7 GEL, four-member – 279,7 GEL, ﬁve-member – 314 GEL, while six member – 372 GEL. It should be noted, that as of the ofﬁcial statistics, more than 126,5 thousand families need subsistence allowance in Georgia, who get monthly aid from the state.

Last Year Records 10% Growth in Georgia’s Vehicle Market

here is one car per four citizens in Georgia on average, says Ministry of Interior, which seems much more when you are in the streets of Tbilisi. According to the Ministry’s data, the number of automobiles in the country grows consistently every year; last year’s growth constituted almost 10 percent.

Most of the vehicles (80%) in Georgia are passenger cars and SUV’s, among which the most popular colors are grey (27,7%) and white (16%). It is worth noting that most of the cars in Georgia have been manufactured more than 10 years ago. Only 2% of the total vehicle pool in Georgia was manufactured within the last 3 years. The most widespread vehicle models in Georgia are Mercedes-Benz and Opel. However, Nissan’ and Subaru’s presence on the Georgian market has considerably grown; the growth coefﬁcient amounts to 1,7 and 1,5. As to the speciﬁc models, Opel Astra and Opel Vectra are still the leaders on the Georgian automarket. After that, Mercedes Benz E and Mercedes-Benz C classes follow.

Negative Trade Balance Shrinks 9.4% in August

egative trade balance decreased by 9,4% at the expense of import reduction in August comparing to July. According to “Sakstat”, volume of negative trade balance has been 433 million USD in August, which is less by 45 million comparing to July.

Export volume from Georgia has made up 190 million USD in August, the figure exceeds by 3 million comparing to July, while the rate is less by 23% if compared to previous August. As for import, its volume has been 623 million USD and less by 42 million comparing to the index of July.

Construction of Nenskra HPP Begins

he Partnership Fund has started the construction of the controversial Nenskra Hydropower Plant. The fund, along with the Korean company K-Water, the Georgian government, Commercial Operator of Electro-energetic Systems and JSC Georgia Electric System have signed the implementation agreements package at a meeting at Radisson Blu hotel on August 31. The package includes an implementation agreement, the electricity purchase agreement and other related contracts. According to director of the fund Irakli Kovzanadze, all the details have been agreed on and a construction company will now start the mobilization of resources for the HPP construction. “This is the largest hydropower plant ever constructed throughout independent Georgia’s history,” Irakli Kovzanadze said. A 280 mega-watt power station will be constructed on the Enguri tributary in Svaneti. It is estimated to be able to produce 1.2 billion kWh per year. The construction will take approximately ﬁve years. Georgia’s Green movements are against the

building of HPPs on Georgian territory, as according to them the constructs will seriously damage eco-systems and locals will have to leave their households. The statement released by the NGO Green Alternative reads that if the Nenskra HPP is constructed it will result in the cutting of 400 hectares of Svaneti forests and will change the natural landscape of the western Georgian region, which are especially attractive for tourists. The NGO also reads that the change of the climate of the area will cause worsening of health of locals and melting of icy slopes. Svaneti residents have been protesting the construction and vow that they will not allow big HPPs on their soil. The process of constructing big HPPs was launched under the previous government. The current state leadership promised before their election that they would have suspended the process as it might have been harmful to the environment. However, when elected, the building of HPPs has become one of the state priorities.Georgia’s Energy Minister Kakhi Kaladze has stated that the country required energy and big HPPs.

Number of Sighnaghi Visitors Grows by 53%

widely advertised by the previous government the town of Signagi is satisﬁed with the number of tourists as compared to July-August of last year, the number of tourists has increased by 53%. In the words of Signagi governor David Janikashvili, the city is manly visited by Polish, Israeli, Russian, Ukrainian and Saudi Arabian citizens. He says the owners of all hotels operating in the

town are satisfied with the current season. “The hotels will work at full capacity for at least one month. Both family-type and private hotels are filled. There are a lot of tourists everywhere. There are cases when tourists can’t find the apartment, “- Janikashvili notes. He says the overnight in the hotel costs GEL 10-200. Signagi governor expects the number of tourists will not reduce till the end of October.

Russian Tourists Spent $315.3 m in Georgia

ccording to the Georgian Economy Minister Dimitri Kumsishvili, revenues of the tourism industry received from Russian tourists in Georgia amounted to more than $315.3 million in January-August period of 2015. In January-August of 2015 the number of visitors from Russia increased by 15% compared to the same period of last year. During the ﬁrst eight months of 2015 642, 934 Russian visitors came to Georgia. The number of visitors from Rus-

sia grew due to the restoration of direct regular ﬂights between Georgia and Russia interrupted in 2008, says Minister of Economy and Sustainable Development of Georgia. “Visitors from Russia are solvent and their contribution to the economy of Georgia in JanuaryAugust 2015 amounted to GEL 756.7 million,” the head of the Department states. Kumsishvili also notes that in January-August 2015 passenger air transportation to Russia increased by 92% in comparison with the same period of last year.

Iran-Armenia Railway Project Will Be More Efficient If Georgia Joins

More Arab Tourists Show Interest in Georgia

ran-Armenia railway project will be more efﬁcient if Georgia also joins it, economist Ashot Tavadyan stated at the conference “Iran: Lifting of Sanctions and the Possible Regional Developments” held in Yerevan. These movements may put more pressure on Georgia to allow a northeast railway transit through its territory. Such a route would go through breakaway Abkhazia, where Russian troops have been busy restoring Soviet-era tracks. Faced with domestic pressure not to compromise on the railway with Russian troops stationed in Abkhazia, Tbilisi insists that restoration of the Russia-GeorgiaArmenia link is not possible for now. Armenia hopes China soon will agree to pay for

eorgia is quickly becoming one of hottest new holiday destinations among the UAE residents,Tradearabia reported. Travel searches for Georgia, which was negligible until the last few years, saw a 300 per cent growth since the last year with latest stats from the Georgian National Tourism Administration revealing that Georgia received 852,377 visitors in August– a 10 per cent increase from the same period in 2014. The number of guests who visited Georgia between January-August was also higher than previous years. In the ﬁrst eight months of 2015, a 6 per cent increase was seen in the number of

a planned railway to Iran. The planned railway could give Iran access to the Black Sea for largescale shipments of exports and landlocked Armenia a signiﬁcant role as a transit country. The state of the railway link is not clear yet. Iranian ofﬁcials said they are building their portion of it, while Armenia is looking for the means to construct its own. Armenian Prime Minister Hovik Abrahamian 17:30 wedn. Excel statistics 18:30 thu: consuner behavior 18:30 and on saturday at 12hopes to scare up investment for the railroad from China during his upcoming September 2325 visit. Yerevan and Beijing have already been in touch about the railway, according to Abrahamian.

visitors to Georgia (more than 3.9 million visitors.) The country has also recorded a 36 per cent increase in visitors from Kazakhstan while 54 per cent more guests came from Belarus and 35 per cent more came from Moldova. Visa on arrival, a short ﬂight duration and a unique mix of the European and Asian cultures, is making Georgia a favoured destination for the Middle East residents. Travellers with valid UAE residency visa or UAE citizenship can get Visa on Arrival to Georgia. Air Arabia, Etihad Airways as well as Fly Dubai have regular direct services to Tbilisi, the capital of Georgia from Sharjah, Abu Dhabi and Dubai respectively.

WORLD NEWS ajara business week

September 21, 2015 #11

The Bitcoin Community Disagrees on What Happens Next The cryptocurrency is now a commodity – but it’s still many things to many regulators

hat is Bitcoin? Is it property, something to be owned? Is it a currency, something to be spent? Or is it a commodity, deﬁned by Webster’s Dictionary as “any useful thing,” and/or “anything bought and sold; any article of commerce.” The U.S. Internal Revenue Service thinks bitcoin is property; a federal judge thinks it’s a currency; now the Commodity Futures Trading Commission (CFTC) has decreed it a commodity. That means the regulator can now bring charges against any wrongdoers trading cryptocurrency futures and options. In a statement, the CTFC’s Director of Enforcement, Aitan Goelman, said: “While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets,” said Aitan Goelman, the CFTC’s director of enforcement of the decision.” Does the ruling change the fundamental nature of what Bitcoin is, and how its advocates will use and develop it? We asked leading members of the bitcoin community for their views.

The Developer: ‘A Bizarre Ruling That Will Be Challenged’

“There are so many regulators in the U.S., and they all want more jurisdiction, which leads to a constant stream of bizarre rulings. None of them has much work to do because there’s not a whole lot of ﬁnancial innovation happening in the States. So when they ﬁnd a small one-man startup they can’t resist giving themselves work to do – so they go in and whack it, especially in California. “I’m not terribly surprised and not terribly worried. I think the CFTC has a very weak case here and it’s a very creative reinterpretation of what the word commodity means. The ruling will be challenged and judges will apply common sense and decide it to be a currency” as happened in the Silk Road case.” MIKE HEARN Software developer specializing in Bitcoin

The Researcher: ‘Don’t Take it Out of Context’

“This ruling is obviously very consequential to U.S.-based Bitcoin futures trading platforms, but it’s important not to overplay the implications. Last year, the U.K. tax authority ruled that Bitcoin is a currency. Last month a Japanese judge ruled that Bitcoin is not property. These rulings concerning what Bitcoin is or is not are for cer-

More views:

tain purposes only, but they often get taken out of context.” VILI LEHDONVIRTA Research Fellow at the Oxford Internet Institute The Exchange Founder: ‘It Will Send Companies Offshore’ “In the U.S. there are regulators that look at Bitcoin from their own perspective and just arbitrarily make up a rule or guidance. New York regulates it as a currency, for example. It’s just not sensible. If this ruling does affect anyone, they’ll just move to offshore jurisdictions. “Bitcoin has many uses – sometimes it’s used, traded as a commodity but it’s also used as a currency and a technology.” - Gareth Grobler, founder of the IceCUBED Bitcoin exchange

The CEO: ‘Regulators Need to Work Together’

“Regulators need to be talking with each other and engaging with industry. The CFTC doesn’t seem to have done either of those. Just claiming a platform is illegally offering bitcoin options isn’t helpful if they’re trying to have a relationship with these companies. “There’s a lot more collaboration in the U.K. between the Treasury, the FCA, HMRC and the top Bitcoin companies. To date the government hasn’t taken a public position that they’ve had to take back. “Having said that I’d rather Bitcoin were regulated as a commodity because commodity regulations are the lightest.” MARK LAMB CEO of Coinﬂoor Bitcoin exchange

The Lecturer: ‘A Very Prudent Move’

“As money, Bitcoin is terrible – a deeply deﬂationary currency that’s within a bubble. It’s an OK commodity but it’s the equivalent of selling real estate on the moon. There’s no inherent value. I applaud the ability of speculators to make money from selling it to other people, but I don’t think even calling it a commodity is enough. It’s a kind of shadow asset. “Moving towards a system where proponents of Bitcoin could use a less stark designation for marketing purposes would have been a mistake. So it’s very prudent to classify Bitcoin as something relatively uncontentious, simply something bought and sold for a price, rather than something contentious, like a currency or other ﬁnancial asset.” STEPHEN KINSELLA Senior Lecturer in Economics at the University of Limerick

The Entrepreneur: ‘Compliance Will Cost Startups’

“If you’re using Bitcoin as a remittance tool you’re not going to like this, but if you’re using it as a business this regulation gives you a framework that’s predictable. However a lot of the value proposition of Bitcoin is tied up in the non-compliance aspect. With the cost of compliance can companies stay competitive? “Regulation of Bitcoin is necessary and premature at the same time. It’s the fault of the federal

system. If you’re in England, everything happens in one city – regulators can easily visit the Chancellor, Bank of England and the companies. In the U.S. there’s a patchwork of inconsistent agencies who don’t coordinate their different ﬁefdoms.” PRESTON BYNE co-founder and COO of Eris Industries

September 21, 2015 #11

EVENT ajara business week

DIPLOMATIC MISSIONS IN BATUMI: • Azerbaijan - 14 Dumbadze street; t.: 0 422 27 67 00 • Estonia - 60 Gorgasali street; t.: 0 422 27 09 10 • Turkey - 9 Ninoshvili street; t.: 0 422 25 58 00 • Iran - 83 Parnavaz Mepe street; t.: 0 422 22 86 01, 0 422 22 86 02 • Armenia - 32 Gogebashvili street; t.: 0 422 21 63 02

Batumi Socar Hosted Reception of Eliso Bolkvadze’s Music Festival

atumi “SOCAR” Office held reception for Eliso Bokvadze music festival. Among the honored guests were globally well known Azerbaijan pianist Perhad Badalbeili, also UNESCO Artist for Peace, pianist Eliso Bolkvadze and others. Supreme Council Avtandil Beridze and the Mayor of Batumi Giorgi Ermakov also attended the ceremony. Perhad Badalbeili talked with CBW and made some comments in this regard. It is the first time I have visited Batumi and it’s amazing seaside town. I am really pleased that we have arrived to attend Eliso Bokvadze’s music festival. Mrs Eliso is doing a very significant job, not only for Georgia, but for other countries as

well. I’m glad that I know such pianists, like Alexander Toradze, Eliso Virsaladz and Eliso Bolkvadze. The people of the world famous name. “I know that music is a part of cultural heritage and belongs to the intangible cultural heritage for Georgia. With this festival, we are not only getting acquainted with Georgian music but with world famous artists.” Perhad Badalbeili said. Eliso Bokvadze who initiated the festival three years ago, notes that it aims at promoting classic music, discovering and supporting young artists. The fact that famous artists participate in festival is showing that festival has important name, I would like to thank Socar for hosting such ceremony. In addition serious statements were made at the festival and I think that festival will gain serious outcomes.

AJARA TOURIST INFORMATION CENTRES: • Batumi boulevard information centre - 2, Ninoshvili str.; m.: 577 90 90 91; t.: 0 422 29 44 12; w.h.: 09:00-22:00 (Everyday) • Batumi cable-way information centre Gogebashvili street; m.: 577 90 90 93; t.: 0 422 29 44 10; w.h.: 24/7 • Batumi airport information centre - 220, Airport highway; t.: 0 422 29 44 14; w.h.: according to ﬂights schedule • Sarpi information centre - Sarpi Customs; mob: 577 90 90 72; w.h.: 09:00-21:00 (Everyday) • Kobuleti information centre - 642 Aghmashenebeli street; tel: 0 422 29 44 13; w.h.: 09:00-20:00 (Everyday) • Keda information centre - Aghmashenebeli street; w.h.: 09:00-19:00 (In summer) • Shuakhevi information centre - 22 Rustaveli street; w.h.: 09:00-19:00 (In summer) • Khulo information centre 29 M. Abashidze street; w.h.: 09:00-19:00 (In summer) SIGHTSEEING AND CULTURE BATUMI CIRCUS - 13 Services: Parking, Toilet The staff speaks: Georgian, English, Russian Prices; Discounts are available CONTACT • Mob.: 599 68 02 23 PUPPET AND YOUTH STATE THEATRE - 13 Working hours: 10:00-17:00 Services: Parking, Toilet The staff speaks: Georgian, English, Russian Prices; Ticket: 2 Gel Discounts are available CONTACT • Tel.: 0 422 27 62 34 • Mob.: 599 40 45 38 • E-Mail: info@puppet-show.org • CINEMA APOLLO - 13 • Working hours: 12:00-00:00 • Services: Credit cards accepted, Free Wi-Fi, Exhibitions, Cafe, Toilet • The staff speaks: Georgian, English, Russian • Prices • Ticket: 6-10 Gel • Tel.: 0 422 22 72 27 BATUMI BOTANICAL GARDEN - 13 Working hours: 09:30-18:00 Services: Credit cards accepted, Free Wi-Fi, Exhibitions, Guide service, Cafe, Information board, Parking, Toilet The staff speaks: Georgian, English, Russian, German Prices Ticket: 8 Gel Guide service: 30 Gel Discounts are available • Tel.: 0 422 29 49 29 • Mob.: 577 10 16 07 • E-Mail: info@bbg.ge AJARA KHARITON AKHVLEDIANI STATE MUSEUM - 13 Working hours: 10:00-17:00 Services: Free Wi-Fi, Exhibitions, Guide service, Information board, Parking, Toilet The staff speaks: Georgian, Russian Prices Ticket: 2 Gel Guide service: 5 Gel Discounts are available • Tel.: 0 422 27 11 75 AJARA STATE ART MUSEUM - 13 Working hours: 10:00-18:00

Services: Exhibitions, Guide service, Information board The staff speaks: Georgian, English, Russian Prices Ticket: 2 Gel Guide service: Free Discounts are available • Tel.: 0 422 27 38 94 BATUMI ARCHEOLOGICAL MUSEUM Working hours: 10:00-18:00 Services: Exhibitions, Guide service, Information board The staff speaks: Georgian, Russian Prices Discounts are available • Tel.: 0 422 27 65 64 • Mob.: 599 15 41 50 THE NOBEL BROTHERS BATUMI TECHNOLOGICAL MUSEUM Working hours: 10:00-18:00 Services: Exhibitions, Guide service, Information board, Parking The staff speaks: Georgian, Russian Prices Ticket: 3 Gel Guide service: 5 Gel Discounts are available • Mob.: 599 43 03 68 DANCING FOUNTAINS Working hours: 20:00-00:00 Services: Parking • PricesTel.: 0 422 27 88 08 • E-Mail: info@boulevard.ge Ticket: Free BATUMI ILIA CHAVCHAVADZE STATE DRAMA THEATRE Working hours: CLOSED until late June / early July 2015 Services: Parking for around 15 cars. Accessible for disabled people with 10 wheelchair spaces. Toilets (but not accessible). No theatre bar or restaurant but plenty of bars and restaurants nearby. The staff speaks: Georgian, Russian, English, Turkish • Tel.: 0 422 27 06 14 • Mob.: 555 36 63 99 • E-Mail: info@batumitheatre.ge BATUMI SUMMER THEATRE Batumi Summer Theatre is located in a central part of Batumi Boulevard and is designed for concerts and other entertainment events. An architecturallyunique wooden building is adorned with wooden ornaments and features a ceiling painted in imitation of the sky. The Summer Theatre has a long history. It was renovated in 2013 and has operated since then. • Tel.: 0 422 29 45 24 Adress: Batumi boulevard BATUMI ART CENTER Working hours: 10:30-22:00 Services: Exhibitions, Parking, Toilet, Café, Concerts, Performances, Opera, Traditional Georgian Folk Song and Dance, Orchestra Performances The staff speaks: Georgian, English, Russian, Turkish, French Tel.: 0 422 27 62 40 • Mob.: 555 37 75 99 • E-Mail: info@muscenter.ge ZOO Working hours: 11:00-19:00 (Except for Monday) Services: Parking, Toilet The staff speaks: Georgian, English, Russian el.: 0 422 22 17 30 • E-Mail: ofﬁce@parkbatumi.ge CONTEMPORARY ART SPACE Working hours: 11:00-19:00 (Except Monday) The staff speaks: Georgian, English, Russian • E-Mail: batumiartspace@gmail.com Working hours: 11:00-20:00 The staff speaks: Georgian, English, Russian Prices:Free entrance • Tel.: 0 422 27 97 00 RUSUDAN PETVIASHVILI ART CAFE-GALLERY Working hours: 11:00-24:00 The staff speaks: Georgian, English, Russian • Mob.: 599 74 52 23

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September 21, 2015 #11

ajara business week

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