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August 10, 2015 #111

August 10, 2015, Issue 111

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BE INFORMED, DO BUSINESS

Giorgi Chogovadze: Four Months Record Rise in Visitors Inflows

GEORGIA CHINA-CAUCASUS-EUROPE TRANSPORTATION CORRIDOR IMPROVEMENT UNDERWAY

rans-Caspian transport route is already opened and has great potential of development. Azerbaijan received first test train sent from China on Monday. It is expected that the next train, which will bring cargo from China to Turkey via Georgia, will be sent in September. Pg. 2

George Khukhashvili: Presidential Veto is HarmfulPg. 4

JULY INFLATION RECORDS 31 MONTHS’ MAXIMUM

nnual inflation has been accelerated up to 4,9%, despite the monthly deflation in July. According to “Sakstat”, annual inflation in July is on the maximum of 31 months. Pg. 6

VEHICLES RE-EXPORTS TO AZERBAIJAN SHRINKS

e-export of Japanese cars produced for the US from Georgia to Azerbaijan remains problematic. Pg. 6

POTI SEAPORT HANDLES 16% LESS CARGO YEAR ON YEAR

oti Sea Port has processed cargo of 3,5 million t in the H1 of this year. According to Ministry of Economy, the volume of processed cargo is less by 16% through January-June. Pg. 6

OIL COMPANIES TO SUE AGAINST COMPETITION AGENCY

eorgian oil companies are going to make a lawsuit against the Competition Agency’s decision until August 15. Pg. 11

ENVIRONMENTALLY FRIENDLY FUEL TRUCK SCANIA IS ALREADY IN GEORGIA

rom today, environmentally friendly fuel track Scania, will appear on Georgian roads. A special event was devoted to the formal delivery of a truck of the future. Pg. 11

BILLIONAIRE FROM PETERSBURG PLANS TO DEVELOP HYPERMARKET CHAIN IN GEORGIA

emur Psuturi, billionaire from Petersburg plans to develop hypermarket chain in Georgia under the name of MaxHome. Pg. 11

Research

Pg. 13

COMSUMER PRICES JANUARY JUNE, 2015

Economic Outlook and Indicators

More Than Three mln International Guests Visited Georgia in 2015

showed in July this year the number of visitors to the country was 9.5 percent higher than in the same month in 2014. In the second quarter of 2015 number of international arrivals in Georgia equaled 1 345 937, percentage increase 8% over the same period of the last year. Pg. 3

AYFB: National Bank Ignores IMF Instructions

lenges, AYFB says. Unfulfilled recommendations blink behind the positive evaluations the international organizations are making and this fact negatively affects the economic processes. Frustration in the national production, devaluation of revenues of businessmen and consumers, unbearable aggravation of the credit burden, economic growth suspension, hike in deficit – this is an incomplete list of the outcomes in the aftermath of ignoring IMF recommendations. The crisis will deepen if the current reality does not change. Pg. 5

Real Estate Business in Crisis, Prices Slip 10%-15%

“LET’S LIVE IN A CLEAN WORLD”

Pg. 12

Pg. 5

of a square meter of the white frame is 900 USD, while the figure marked 1100-1200 USD several months ago. The price of a square meter in the Saburtalo District is 600-800 USD. The price of a square meter in fashionable buildings in the Vake and Mtatsminda Districts reaches even 2000 USD. The situation will be improved in late August, Neli Goguadze, representative of the Kibe real estate agency, said. The agency will make focus on rentals, not on sales and purchase of apartments and the August-September period is the most optimal time for similar deals. Pg. 8

Georgia’s Preferred Real Estate Firm NINA KIPIANI Country Director at Cushman & Wakefield | Veritas Brown Pg. 7

David Mirtskhulava: There is no Alternative to Hydropower Development in Georgia Pg. 4

Mamuka Katsitadze: In Healthcare, We Should Not Save Money Pg. 5

Analitycs

2013, 2014 VS. 2015

TRANSACTION ANALYSIS

Pg. 8

2 MAIN EVENTS PM: GOVERNMENT WILL NOT INTERVENE IN TRIAL OVER RUSTAVI 2 TV COMPANY

GOVERNMENT NEWS

ANCIENT GEORGIAN GRAPE AND WHEAT VARIETIES SAVED FROM EXTINCTION

he Prime Minister of Georgia says he supports restoration of justice, though according to him, the dispute over the Rustavi 2 TV company is a private matter and governmental involvement in it is zero. According to him, he does not have any information on the matter except for what was published yesterday about businessman Kibar Khalvashi filing a lawsuit in court.

FORMER OWNER OF RUSTAVI 2 TV COMPANY AGAINST CURRENT STAKEHOLDERS

s Prime Minister and as a citizen, I fully support any kind restoration of justice but in my opinion this is a controversy of two subjects which should go before judges at the court,” Georgia’s Prime Minister Irakli Garibashvili told local media while responding to the developments about Rustavi 2, a privately owned broadcasting company.

GOVERNMENT CHANGES MIND ON PRIVATIZATION OF FORMER BUILDING OF NATIONAL BANK

istorical building of National Bank, locating on Leonidze str, Tbilisi is already taken from the privatization list. As Property Management Agency declared to GBC, alienation of the building is not planned at this stage, but it still remains unknown which organization will occupy the building. According to the information disseminated earlier, National Manuscript Center might be placed in the building.

RUSSIAN FOOD EMBARGO EXPECTED TO HIT GEORGIA

inistry of Russian Agriculture has already started preparation of application on establishment of food embargo for those countries, which have joined to the EU sanction against Russia, press cervices centre of the Ministry has declared to “RIA Novosti”. Georgia is among the candidates of embargo.

TURKISH LAW ENFORCEMENTS REVEALED THE LARGEST SMUGGLING STOCK OF CIGARETTE AT GEORGIANTURKISH BOARDER

urkish media disseminates the news relaying the Ministry of Revenue and Trade. According to the Turkish state department, 3.5 million cigarettes, loaded in 5 trailers were seized at customs checkpoint of Sarpi near Georgian-Turkish boarder. The total value of the product amounts to 22 million Turkish lira (7,9 million USD).

CHINESE DELEGATION’S TWO-DAY VISIT IN AJARA

s Davit Saganelidze says, they talked about railway infrastructure and future collaboration with Batumi Maritime Academy. Soon Representatives of Ministry of Agriculture of Ajara will visit China to deepen the partnership and exchange the experience. The officials of Ajara AR will attend different international tourism and economic exhibitions.

GEORGIA NEEDS WORLD SUPPORT TO PRESERVE SOVEREIGNTY, SAYS FOREIGN MINISTRY

wenty percent of Georgia's territory remains occupied, mass violations of human rights and ethnic cleansing is still ongoing in the areas affected by Russian ‘borderisation’ and creeping annexation - Georgia’s Ministry of Foreign Affairs is calling on the international community to react adequately after seven years of the tragic results of the Russian– Georgian war of 2008.

August 10, 2015 #111

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undreds of ancient grape and wheat varieties that were on the verge of extinction have been recovered and bred in a special centre in Georgia, bringing new confidence to the country’s agricultural industry.

Today Georgia’s Prime Minister Irakli Garibashvili visited the new agriculture scientific research centre with the country’s Agriculture Minister Otar Danelia and learned about more than 400 grape varieties that had been restored. The research centre, established on Jigaura farm

in Georgia’s Mtskheta-Mtianeti region, bred the forgotten-about wheat and grape varieties and distributed the seedlings around the country so they could be reintroduced to the industry. The centre was created last year by financing by ex-Prime Minister and billionaire Bidzina Ivanishvili. After creating the centre Ivanishvili handed over the Jigaura research centre to the Agriculture Ministry. “We saw the wheat varieties. The centre also restored 400 grape varieties, which is very important for the country. I would once again like to thank Bidzina Invanishvili for implementing the project and gifting it to the state,” said Garibashvili. He said no scientific research had been carried out in agricultural sector for 20 years. In addition, Garibashvili believed the centre would contribute to the development of the country’s agriculture industry, foster maximum use of existing resources, increase productivity and establish innovative technologies and methodologies. Recently Georgian farmers had been given seeds of the recovered grape and wheat varieties for free. Now the state will support farming cooperatives and provide them with the same seeds also for no cost.

CHINA-CAUCASUS-EUROPE TRANSPORTATION CORRIDOR IMPROVEMENT UNDERWAY

(4258 km - railway; 510 km - sea ferry). The train arrived from China to Azerbaijan Port via Kazakhstan). The train loaded by Caustic soda reached the destination in 6 days, while the alternative route for freight delivery needs 25-40 days, through Banderas-Abas Port and Poti Sea Port. New railway of Baku-Tbilisi-Kars will have a significant meaning in this corridor, which construction will be finished soon.

General director of “Georgian Railway” took part in the ceremony of test train arrival. “ Coordination is necessary not only for transport bodies, but also between custom and border authorities. Today, Korea, Japan and other Asian exporting countries are interest in the TransCaspian route, alongside the Republic of China. Trans-Caspian route has the potential of becoming an important channel for cross-border trade”, - Mamuka Bakhtadze notes.

PM URGES SPECIALISTS TO SOLVE PROBLEMS IN VILLAGES AFFECTED BY RUSSIAN CREEPING INVASION

eorgia’s Prime Minister Irakli Garibashvili is calling on a temporary Governmental Commission to come up with a proper solution to address the problems that exist at the Administrative Boundary Line (ABL) between breakaway Tskhinvali region (South Ossetia) and the rest of Georgia. Garibashvili met with Commission members today and discussed ways to address educational and health problems as well as the vital services that are still greatly in need, including development of a reliable gas supply, water system and other basic infrastructure. Deputy Minister of the Ministry of Georgia for Reconciliation and Civic Equality, Ketevan Tsikhelashvili attended today’s meeting and said the PM’s comments were valid. “Prime Minister’s involvement in the Commis-

sion emphasizes that responding to the needs of the population living in villages near the Administrative Boundary Line is one of the top priorities of the Government.” Authorities had already taken action to address the needs of those living at the ABL but realised more needed to be done. Earlier this month two Georgia villages located near the occupation line were supplied with natural gas for the first time. SOCAR Georgia Gas built a 14km gas pipe allowing 510 families in the villages of Khurvaleti and Tsitelubani to connect to the main pipeline and access natural gas. Typically once a central pipe was built in a village, families must pay up to 600 GEL to ensure their home was connected to the gas main. However thanks to a special Governmental project meant for villages near the occupation zone,

people here can access gas for free. When fully implemented, 58 villages in Georgia’s most troubled areas will have access to natural gas. Between 2014 and now, the Government of Georgia carried out the following reforms in the affected villages:

FREE SCHOOL TRANSPORT IN 22 VILLAGES; 2,335,400 GEL WAS ALLOCATED TO 11,677 FAMILIES; SCHOOLS AND THEIR LIBRARIES WERE RENOVATED; COMMUNITY CENTRES OPENED; AND A NEW MEDICAL CLINIC WILL SERVE 14,000 RESIDENTS IN RUKHISI VILLAGE.

SOCIALLY VULNERABLE FAMILIES TO RECEIVE ELECTRICITY SUBSIDIES

he government will refund part of the cost of consumed electricity to the socially vulnerable families, whose rating score is less or does not exceed 70 000. The government’s decree “on partial subsidies of consumed electricity cost to the socially vulnerable families” has entered under the force. Socially vulnerable persons will be refunded additional sum caused by the electricity tariff increase (1 kwh – 3,95 tetri, VAT included), the

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document reports. The decree notes, that the data of vulnerable families will be submitted to the license holder of electricity distribution with agreed format, which will make calculation of subsidy amount with its own responsibility and they will send the request on refunding sum to the Social Service Agency. In addition, the Agency is not authorized to verify or make any kind of correction of the provided data (amount of money). To remind, electricity tariff has been increased

for the subscribers of “Energo-pro Georgia” in the regions from August 1 (exempt Kakheti). The reason has been devaluation of national currency towards USD. However, minister of Energy has declared, that at the first stage, 6 million GEL should be allocated for subsiding the vulnerable families. Electricity tariff might be grown in Tbilisi as well – Tbilisi electricity supply company “Telasi” has already appealed to Regulatory Commission in order to review the tariff.

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Editor: Nino Gojiashvili. Mobile phone: 595 050404 Reporters: Nutsa Galumashvili; Lazare Gvimradze

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August 10, 2015 #111

MORE THAN THREE MLN INTERNATIONAL GUESTS VISITED GEORGIA IN 2015

n increase in visitor numbers was reflected in latest statistics, which showed the country enjoyed increased number of visitors in July 2015. Latest data from the Information-Analytical Department of the Ministry of Internal Affairs showed in July this year the number of visitors to the country was 9.5 percent higher than in the same month in 2014. In the second quarter of 2015 number of international arrivals in Georgia equaled 1 345 937, percentage increase 8% over the same period of the last year. The largest share of international arrivals was registered from the neighbouring countries. In the 2nd quarter of 2015 number of international arrivals from these countries was 1 175 583, which is 87% of the total international arrivals. The largest share of visitors, 85% arrived in Georgia by land transport. In the second quarter this number was 1 141 466 international arrivals. The number of accommodation units registered in the database of the Georgian National Tourism Administration was 1 420, while number of bed places 48 996. Turkey was a leader with the number of international arrivals. Data (2nd quarter, 2015) showed Turkey on a first place with 343 397 (-8%), data (first 6 months 2015) adds up to 605 153 (-9%). The largest share of international arrivals was registered from neighbor countries. Number (2nd quarter, 2015) of international arrivals from these countries was 1 175 583, which is 87% of the total international arrivals. Data (first 6 months 2015) showed 2 072 257, which is 89% of the total international arrivals. Last year this share was 88%. There was significant increase in number of arrivals from Armenia, Russia and Azerbaijan. It is important to mention significant role of marketing campaigns administered by Georgian National Tourism Administration. Data showed following quantitative increase in number of arrivals: Armenia +53 030 (+20%), Russia +49 457 (+29%), and Azerbaijan +29 110 (+11%). Significant increase was observed from Belarus (+2 010, +51%), caused by intensification of direct flights and marketing campaigns administered by Georgian National Tourism Administration. Data (first 6 months 2015) showed +2 759 (+47%) increase in number of international arrivals from Belarus. Introduction of direct flights in the direction of United Arab Emirates and marketing activities administered by Georgian National Tourism Administration boosted number of arrivals from this country. The number of arrivals was 4 607, percentage increase of 788% over the same period of the last year. In 2015, 2nd quarter number of international arrivals from European Union was 63 443 (5% of total international arrivals). Respectively first 6 months numbers were 94 797 and 4% respectively. Border Crossing Statistics In the 2nd quarter 2015, 85% (1 141 466) arrived in Georgia by land transport, followed by air transport, 184 412. The first 6 month figure was 2 002 103 arrivals by land, followed by air transport with 292 033 arrivals. The busiest border was Sarpi (Turkish border), which saw 336 665 crossings in the 2nd quarter 2015, and 583 222 crossings in the first 6 months. In the 2nd quarter 2015 total number of accommodation units was 1 420, while number of bed places 48 996. Tbilibsi was the leader with the number of bed places; its share was 24%. Hotels dominate with the number of bed places, their share was 65%.

INFOGRAPHICS

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TOP STORY

ANTITRUST SERVICE: FUEL RETAIL PRICES ARE ARTIFICIALLY GROWN BY 0.45-0.60 GEL

uel has been sold for extra charge of 45-60 tetri in the retail chain through Georgia. Competition Agency has made the corresponding calculations and made the results of oil product market research public. However, additional clarifications are not made on the 37-page report in the Agency. The report includes a period of 2004-2014, price formation trend has been processed on the fuel commodity market and it was found that the extra charge on the fuel does not comply with price formation in the competition conditions. Comparative analysis of the retail-selling price and cleared fuel value (separate admission; annual import) and comparative analysis of retail selling prices. “According to cost factors, the difference between the value of the cleared fuel and retail price should not exceed 20-25 tetri during the formation of retail prices by the fuel importers. However, fuel has been sold with a difference of 45-60 tetri (difference between the cleared fuel cost and retail price) in the retail chain on the market through August-September, 2014 – February, 2015”, - the report notes. The Agency explains, that “when the difference amount to 66 tetri between the cleared fuel cost and retail price, the fact must not remain without the estimation of the Agency”. The Agency estimates, that the company’s expenditure totals to 1.5-2 tetri on per liter (fuel for receiving the product in the port and placement in the wholesale warehouse). In addition, value of the fuel transportation by different type of transport totals to 3-4 tetri on per fuel. Extra charge (operating profit; technical losses, expenditures arising from exchange rate change, entrepreneurial risk factors and other expenses of the economic agent, who makes qualified import, 30-36 times per year) on the wholesale amounts to 4-5 tetri as of the exports’ calculation. The Competitive Agency declares, that the Agency carried out comparative analysis of the operating expenses according to the petrol stations and regarded, that retail expenses of fuel significantly differ. “However, this is not reflected in the economic efficiency of the commodity. This dose not proof that the work is carried out without protection of competition on the commodity market”. To remind, a fine of 55 million GEL has been imposed on “LUKOIL Georgia”, “Wissol Petroleum Georgia”, LLC “Rometrol Georgia”, LLC “SOCAR Georgia Petroleum”, LLC “SUN Petroleum Georgia”, LLC “Binuli 1”, LLC “E T I” and LLC “L Oil”. However, 23 economic agents, franchisers of LLC “LUKOIL Georgia” and “Rompetrol Georgia” have to pay a fine of 200 GEL.

4 HEADLINES

INTERVIEW EXPERT: PRESIDENTIAL VETO IS HARMFUL

“POTI AMMONIA TERMINAL” TO INVEST $20 MILLION IN THE IMPROVEMENT OF LIQUID CARGO TERMINAL

An interview with the expert George Khukhashvili

ccording to government decree, land plot of 31 000 square m will be delivered to the company free with building rights through 49 years. The investor must arrange reservoirs for 30 000 t liquid cargo, corresponding infrastructure and a dock.

BS METAL GROUP PLANS TO LAUNCH CEMENT AND ARTIFICIAL STONE PLANT

he company participates in the project “Produce in Georgia”. Real estate located in Daba Khelvachauri has been delivered to the company at 1 GEL. The management takes commitments to make investment at least 1 388 160 GEL in order to launch the enterprise. At that, the company will make 25% of the investment in the first year.

BREAD PRICES SET TO RISE IN GEORGIA

ccording to Malkhaz Dolidze, Chairman of the Bakery Products Association, bread prices are expected to rise in Georgia. As Dolidze said on Palitra TV today, the symptoms have already been observed in the country: some bakeries have increased their prices, while others have decreased the weight of their products.

AVTANDIL STORE TO OPEN IN AZERBAIJAN

amous Georgian designer Avtandil Tskvitinidze expanding his store chains abroad, in Azerbaijan. According to the famous Georgian designer, his store will open in Azerbaijan in October, however, he holds talks about the opening of stores with representatives of different cities of Ukraine, Russia and Kazakhstan.

BUSINESSMAN KODUA GAINED THE RIGHT TO FLY UNDER A GEORGIAN FLAG

fter six months of waiting, the businessman George Kodua has gained the right to fly a business jet under the Georgian flag. A 5-seater jet will launch private commercial flights in mid-August. In a conversation with “Commersant”, George Kodua does not rule he will bring a 12-seat aircraft, if necessary.

- Presidential veto on the decision of the Parliament to strip the National Bank of a supervisory role was evaluated by representatives of the ruling majority as political. At the same time, the President said that the veto is not an instrument of political confrontation. In your opinion, how politicized is the process around the National Bank? - No one, including the authorities themselves, hide that the authority’s position is political. It’s quite a dangerous precedent that represents a personal problem - the rejection of the central bank’s president by the ruling majority who is one of the last representatives of the former government – and is sufficient for the adoption of legislative changes. The country should be is amended because of the personal factor - it does not matter how justified are the claims to a particular person. If the President of the National Bank violates the law, then we should not change the law but involve the law enforcement bodies. - Such actions are dangerous. Today, the National Bank is managed by the ‘wrong’ presi-

he number of users in the historical and shopping center “Meidan bazaar” created by “New Way” company has decreased by 6070%. Mikheil Kobiashvili, Director of the trade center, explains a lack of tourists by a hot summer season and anomalous heat when tourists prefer to rest in Adjara. He also suggests that Russia - Ukraine conflict and Tbilisi flood also had an impact.

PARENT COMPANY OF “TBILGAZ” HAS NEW SHAREHOLDERS

he Ministry of Energy of Georgia announces interest expression on the construction “Khani HES 7”. Construction of the HES is planned on the river Khanistskali in the Imereti Region. The winner company will make technical and economic feasibility study of “Khani HES 7” and in the case of positive results, the company will build the HES. The Expression of Interest was announced due to letter of interest from the company LTD “SVS Georgia.

spiracy against the interests of the state by the bankers - is absurd. We also need to understand that the bank executes instructions of the client. It seems the government wants to control the banks that violates the right to privacy. It is very dangerous. - There is information that the banks are unhappy with the adopted decision, and some of them are planning to leave the Banks Association which agrees with the new law. How logical is the banks’ dissatisfaction ? - It’s difficult to say something about the Association’s position, because it has changed several times. I have no information regarding the banks’ intentions to leave the Association, but there is nothing surprising in the fact that banks are dissatisfied. The Association cannot understand that the new law is at least useless, and at best, it just will not harm, but definitely will not bring any good. - What can be expected after the presidential veto? - The head of state has sent a clear signal to the government and parliament that such behavior is unacceptable. President refused to take the responsibility for this decision. The new solution is in a sense a great service to the current President of the National Bank. God forbid, if the lari devaluation continues in the fall, then the government will not be able to blame the National Bank’s President and the current government will have to take full responsibility. What will they say then? So, this decision is harmful even in terms of political tactics, not to mention its content. - By this logic, if the national currency regains, it will be an additional argument against the current leadership of the National Bank? - It is practically impossible. It’s obvious that in September the pressure on the lari will intensify. A hope for the lari strengthening is an illusion and nothing more.

An interview with ex-Georgian Energy Minister David Mirtskhulava

INTEREST EXPRESSION ON KHANI HPP 7 CONSTRUCTION COMES OUT

dent, but if tomorrow it is led by worthy, then what? Will the supervision function be returned to the National Bank? - The government and parliament have performed completely inexplicable actions, and the president’s veto is justified. Based on all of this, we cannot say that the process is not associated with politics. In general, the president’s veto can be assessed positively, as head of the state is trying to explain the government how to act, what issues and how to solve. I rule out a political game from president, since he has no political goals. His mission is to strengthen state institutions. - If we do not have in mind the problem with the central bank’s President, are there points in a new law that create a specific systemic threat ? - We are not talking about specific dangers, but about a fact that such decisions cannot be taken this way. Parliament and the government say they are taking the new law because of distrust to the central bank’s president. This is their main argument. The second is that the new law will not bring harm. - Authors of the bill claim that stripping the national bank of the monitoring service will help the government to obtain information necessary to determine the real exchange rate. Is this argument convincing? - If the government wants to understand the details of the activities of commercial banks, it has all the possibilities. I do not think the National Bank could withhold information. However, the problem is that the government has a direct access to monitor all financial flows , both corporate and private. This is even more dangerous than the precedent of decision -making based on personal animosity Of course, we cannot exclude anything, but if there is some kind of conspiracy, the function of law enforcement to uncover it. With that, the very suggestion that there is some kind of con-

EX-MINISTER: THERE IS NO ALTERNATIVE TO HYDROPOWER DEVELOPMENT IN GEORGIA

NUMBER OF MEIDAN BAZAAR USERS SLIP 60%-70%

azakhstan’s state oil and gas company “KazMunaiGas” has alienated 58 420 748 ordinary shares. News Agency Trend spreads the news relying on Kazakhstan Stock Exchange (KASE). The value of the deal amounted to 750 billion tenge ($ 1 / 187,65 tenge). Initial price has been 749,98 billion tenge.

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- Why did the tariff hiked just as much as it happened ? How is it calculated? - To calculate the electricity tariff is a simple affair. Before the devaluation of the national currency the tariff calculated based on the exchange rate of GEL 1, 73 for one dollar. If the rate had not changed after nearly a 30% depreciation of the currency, the power generation by thermal power plants would have decreased by 280 million kw per hour and the majority of thermal power plants would be stopped due to lack of gas in the spring. In addition, import would have significantly reduced or ceased, and, in general, taking into account both factors, Georgia would have suffered a deficit of 500 million kWh in the energy system. With regard to the distribution companies, due to

the high degree of monopolization, this sector is in need of reforms that an association agreement with the EU also requires. Tariff grows approximately at the level that is required for a smooth operation of the power system. Many experts argue with that, but if they have the actual numbers, which show that the rates should be lower – let present their data, and then apply to the National Energy Regulatory Commission, or to the court. But the current numbers are real, in fact, I expected the growth at such level. Of course, if I saw half a chance not to raise tariffs, then I would appeal to the court, but unfortunately, due to the devaluation of the GEL, energy companies had to revise their figures. With regard to the intentions of the government to subsidize the fare for the vulnerable citizens, I have always opposed any subsidies, but in the current situation, this limited measure is justified. It is good that the government doesn’t subsidize the full fare. - What is the share of thermal power plants in Georgia’s total energy balance ? - Hydroelectric power stations account for 8% of the total energy generation as Georgia is a hydropower country. However, in the winter thermal power plants dominate, and in this period their share reaches 48%. Thermal power plants run on gas, and electricity imports mainly come from Russia. That is why it is necessary to develop hydropower. Since 2012, several large hydroelectric power stations have been put into operation, another will launch in September. But first of all it is necessary to focus on large strategic objects - Khudoni and Namahvami HPPs that will help to achieve

energy independence, and there is no alternative. For example, the Khudoni HPP will produce additional 500 mln KW/ h, which will largely fill the deficit, which we have in winter. If these giant projects are implemented, it will stimulate the economy of Georgia as the development of water resources creates a lot of jobs. If we want to achieve energy independence, the potential of hydropower should definitely be explored. Of course, it is not necessary to reject the thermal power plants, particularly from new and hightech as the newly built Gardabani thermal power plant which produces 24% more energy than other power plants. An increased tariff is a hard, but forced and necessary step. Currently, Georgia provides only 30% of its energy consumption, which means that the rate is largely dependent on international prices and exchange rates. If hydropower develops , this situation can be changed. It is often said that it is necessary to build a hydroelectric power station due to the fact that it can be exported to Turkey, Russia, and other countries. This is undoubtedly true, but the development of hydro potential will help Georgia to be energy independent. - Is the growth of tariffs a signal to investors, as in the last 2 years a volume of investment has sharply decreased? - Investments in the energy sector have never been particularly active, only in recent years. An intensive construction of hydroelectric power plants began after 2012. As for investors, the increase in tariffs for market reasons is a positive signal for them indicating that the country has a healthy economy in which they can invest.

August 10, 2015 #111

ECONOMIX

AYFB: NATIONAL BANK IGNORES IMF INSTRUCTIONS VETO-supporting Arguments Contradict Recommendations of International Organizations

he National Bank of Georgia (NBG) keeps ignoring recommendations of the International Monetary Fund (IMF). As a result, various aspects of the Georgian economy suffer from negative affects, the Association of Young Financiers and Businessmen (AYFB) says. International organizations positively appraise the NBG performance, in whole. As a result, illusions are created as if the NBG makes no errors and its policy fully complies with current economic challenges, AYFB says. Unfulfilled recommendations blink behind the positive evaluations the international organizations are making and this fact negatively affects the economic processes. Frustration in the national production, devaluation of revenues of businessmen and consumers, unbearable aggravation of the credit burden, economic growth suspension, hike in deficit – this is an incomplete list of the outcomes in the aftermath of ignoring IMF recommendations. The crisis will deepen if the current reality does not change. Despite IMF recommendations and requirements, the NBG has not formed a regime of contra-cycle capital buffers for the bank system. Moreover, the central bank has not introduced the loan to value adequacy principle (the loans and capital long-term value principle for borrowers) and the revenues parity principle (payment-to-income). Consequently, the heaviest situation is expected in the bank sector. Namely, commercial banks do not provide adequate financial injection to the national

production, because they follow the current mechanisms of risks evaluation, in accordance with the NBG requirements. Moreover, unhedged demands are credited contrary to the IMF requirements and in accordance with the NBG regulations. For example, loans are issued in USD to the clients, who receive salaries in GEL. Consequently, currency risks are shifted to the clients. This problem was clearly outlined during the recent currency fluctuations, when many citizens have to serve considerably increased loan liabilities. This is the effect of ignoring the IMF recommendations. Instead of restricting the issuance of unhedged loans, that is, an issuance of foreign currency denominated loans to the GEL-paid employees, the NBG policy shifted the currency risks completely to the borrowers, who in most cases are not aware of financial details. The national bank has in practice abandoned this category of our citizens, as borrowers have to deal with heavy currency risks arisen in November 2014. Currently, borrowers have to serve 30% more expensive loans. The IMF report positively appraises the NBG monetary policy, but prudential management issues are criticized. At the same time, the current adapted practice of the monetary policy, according to the IMF report, can bring positive results amid the stable exchange rate, not amid the GEL current fluctuations. Consequently, the excessive supply of GEL must be revised, because this policy further deteriorates the GEL condition. The NBG ignores other instructions of the IMF too. Namely:

MAMUKA KATSITADZE: IN HEALTHCARE, WE SHOULD NOT SAVE MONEY

fter Universal healthcare and Hepatitis C elimination programs, Ministry of Healthcare of Georgia, has made primary healthcare reform its priority. Preparatory works have already begun. The Ministry, as well as primary care doctors from all over Georgia are involved in it. In this reform, the international consulting company “Global Alliance“, fully supports the Ministry. General Secretary of “New Rights” Mamuka Katsitadze responds to primary healthcare reform. He assesses and welcomes the implementation of this process as an important step toward

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Georgia’s healthcare: “Primary healthcare reform is very important and necessary. It is inevitable, as for the development of the family doctor institution,ins as well as patient recovery system. This is vital in terms of disease prevention, and also for preventing complications of the disease. However, primary health care reform should not be seen only in the context of saving money for surgeries or other types of high-tech medical interventions. “This reform will be the initial stage of disease prevention and not – for saving expenses. When it comes to health care, we should not save money,” Mamuka Katsitadze noted.

- Despite the promises to the IMF, the NBG has not set up a financial stability committee that would establish prudential regulations. - Since 2012 the NBG has not published a financial stability report that must be developed every year by the IMF requirements in line with international standards; Finally, the NBG’s current policy encourages a growth in consumer loans and aggravates the burden of deficits. On the second hand, the current system of risks management hinders a growth in activities in the production sector of bank institutions. As to the law on bank sector supervision, the president has vetoed it. The separation of the supervisory functions was to create a good precondition to create valuable efficient macro prudent body accountable before the parliament in line with recommendations of the European System Risks Board (ESRB). In this situation the president’s veto is absolutely unclear and inadequate decision, especially on the ground of Safeguard and FSAP documents, because the first one has no relation to the bank sector supervision and it only regulates the NBG principles for internal accountability, while the FSAP in the banks supervision part is fully based on the ESRB requirements that does not oblige the national bank to control macro prudent policy. The main principle implies accountability of the supervisory body before the parliament and the bill includes this. Thereby, we would like to note that ignoring these principles will part us from the EU bank supervision framework requirements.

WINEMAKERS SEE POLITICAL MOTIVES IN RUSSIA’S MOVE TO BAN GEORGIAN WINE

eorgian winemakers consider the Russian Sanitary Service’s decision to ban portion of Georgian wine in the territory of the Russian Federation a political solution. Russia’s Health Watchdog Rospotrebnadzor has not allowed 10 parties of alcoholic beverages into Russia (cognac “Old Kakheti”, “Kolkhida” manufacturer “Kvareli Cellar” Ltd, table dry red wine “Saperavi” - the manufacturer Ltd. “AGORA”) as they did not meet the requirements of regulatory documents. In Rospotrebnadzor stressed that all batches of products that did not comply with safety and quality were not allowed in the territory of the Russian Federation. “Tsinandali Old Cellar” is among those companies whose products are not allowed to enter Russian territory. The company’s co-head Levan Mildiani states “Commersant” that the details are still unknown. Mildiani says they began to export wine as soon as the Russian market opened, however, have not had any problems. He notes that a week ago he received a call from Russia and was told about expected problems due to Georgia’s support of anti-Russian sanctions. Director of “Kakheti traditional winemaking” Zurab Chkhaidze evaluates “Rospotrebnadzor’s” solution a political decision and explains this by Georgia’s joining the anti-Russian sanctions. The winemaker considers that the parties should hold high-level meetings on the matter and submit their own justified interests as the both parties have interests. In Zurab Chkhaidze’s opinion, a possible imposition of the embargo that is already being discussed in Russia will significantly slow down the pace of Georgian production. Our economy has suffered the Russian embargo for a long time and we are continuing our ordinary life, however, the pace of Georgian business development was slow in that period. It became relatively fast after the Russian market opened. To maintain this pace, it is necessarily to hold a meeting and settle the problem through talks. We should regulate relations with Russia “, Zurab Chkhaidze believes. In his words, “Kakheti traditional winemaking” carries out wine exports to various countries and depends on Russia for 40%.

GIORGI CHOGOVADZE: FOUR MONTHS RECORD RISE IN VISITORS INFLOWS

he tourists’ inflows to Georgia are rising for the fourth month, Giorgi Chogovadze, head of the national tourism administration, told a news conference and updated reporters on foreign visitors’ activity in July. A total of 737 696 visitors arrived in Georgia in July, up 9.5% compared to July 2014. Moreover, the number of tourists, who have stayed in Georgia for more than 24 hours, has increased by 2.2% year on year. “The ongoing economic and political developments in the Region that have taken place in the second half of 2014 and at the beginning of 2015 have affected the whole economy of Georgia, including the tourists’ inflows. The national tourism agency has carried out intense international activities to change this negative statistics. We have carried out marketing campaigns in 9 countries and marketing campaigns at CNN and EuroNews. We have invited more than 300 reporters for covering Georgia’s tourism potential. As a result, it is the fourth month since April the international tourists inflows is constantly growing”, Chogovadze noted. The growth in April marked 0.4%, May – 14.7%, June – 9.3% and July - 9.5%. As to the January to July report, the foreign visitors inflows have increased by 4.9% year on year, Chogovadze noted. Transactions through international payments

cards have also risen and this factor makes positive influence on foreign currency inflows too, Chogovadze added. “The volume of transactions through international payment cards in April rose 47%, May – 43%, June – 24%. A major inflow of tourists in July 2015 was reported from Turkey, Azerbaijan, Armenia, Russia and Ukraine. The January to July report shows positive tendencies from the EU countries, including, growing inflows are reported from Lithuania, Czech Republic, Great Britain, Germany, Latvia and the Netherlands. Kazakhstan, UAE and Saudi Arabia are also worth mentioning in terms of growth in visitors inflows”, Chogovadze said.

ECONOMY

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August 10, 2015 #111

VEHICLES RE-EXPORTS TO AZERBAIJAN SHRINKS

JULY INFLATION RECORDS 31 MONTHS’ MAXIMUM

nnual inflation has been accelerated up to 4,9%, despite the monthly deflation in July. According to “Sakstat”, annual inflation in July is on the maximum

of 31 months. The analysis of consumer market has shown, that price reduction of 0,8% has been fixed on foodstaff and non-alcohol beverages in July comparing to June, vegetable and greens have been decreased in price by 9,2%, fruit and grape – 11,6%, while dairy products and egg – by 2,7%, however cost on fat has been increased by 1,4%. As for the annual inflation pace, price growth on tobacco, alcohol beverages and healthcare sector has made the basic impact on the formation of

inflation pace. Namely, prices are grown by 7,1% on food-staff and non-alcohol beverages through 12-month period. Including, fruit and grape, (31,7%), vegetable and greens (18,7%), oil and fat (11,2%) tea, coffee, cocoa (8,2%). Costs are increased by 7,3% in the healthcare sector. Prices are grown on medical products, apparatus and devise sub-group (16,6%) and outpatient services (6%). Alcohol beverages, tobacco: price growth of 11,7% has been fixed on alcohol beverages and tobacco, which has been reflected by 0,62 percentage point on the inflation rate. Costs are grown on alcohol beverages (13,1%), as well as on tobacco production (9,8%).

POTI SEAPORT HANDLES 16% LESS CARGO YEAR ON YEAR

oti Sea Port has processed cargo of 3,5 million t in the H1 of this year. According to Ministry of Economy, the volume of processed cargo is less by 16% through January-June, 2015 comparing to the same period of the previous year (4,2 million t). In addition, merely cargo of 600 thousand t has been processed in Poti Sea Port in

January-June. However, the volume of processed containers is declined through January-June in Poti Sea Port. The number of processed containers is reduced by 17 944 units through a year and amounted to 179 150 units. It should be noted, that the share of Poti Sea Port totals to 35% in the total volume of processed cargo by sea ports and terminals.

MINISTRY OF AGRICULTURE DISSEMINATED A STATEMENT ON THE TOPIC OF GEORGIAN WINE QUALITY

inistry of Georgian Agriculture disseminated a statement linked to the declaration of “Rospotrebnadzor”, that Russian Federation negatively estimates controlling mechanism of exporting wine: “Reasonable agencies of Agriculture Ministry got interested in the concrete case of the product indicated in the application of “Rospotrebnadzor”, they launched study of the issue and additional details should be elucidated soon. Reasonable agencies of Agriculture Ministry strictly control quality of Georgian wine and alcohol beverages. The product is checked in the accredited laboratories. Georgian wine is one of the key exporting product of the country. However, the state as well as the enraptures are interested in the quality of products and protection of safety standards. Export of wine and alcohol beverages is made from Georgia to 35 countries. It should be noted, that export growth has been fixed on important markets through January - July, 2015, the countries are as follows: China – 35%, France – 119%,

Korea – 221%, the USA – 20%, Germany – 17%, Canada – 100%, Japan – 10%; Poland – 2%, Lithuania – 9%, Estonia – 19% and etc”, - the statement of State Institution says. Therefore, “Rospotrebnadzor” declared to “RIA Novosti”, that import of 6,7 million l wine of 45 entrepreneurs has been made from Georgia to Russia in 2015. However, 10 stocks have been revealed (cognac “Old Kakheti”, “Kolkhida” produced by “Kvareli Caller” and “Sapervai” made by “Agora”), which are not in accordance with the normative documents. The product has not been allowed on the territory of Russia. Russian sanitary authorities complain, that Georgian wine producers “systematically violate technologies”. “Rospotrebnadzor” notes that quality control is continued on Russian territory. Russian media has also disseminated information on Tuesday, that Russia works on development of retaliatory sanctions for those countries, which have joined to the sanctions established by the EU against Russia. The list of the countries is not known yet.

REUTERS: GEORGIA’S ECONOMY SLOWS IN H1 FROM LAST YEAR

nternational news agency Reuters publishes article, on behalf of Geostat‘s report and says Georgia’s economy slowed due to plunge in the Russian Ruble. Reuters also mentions declined exports, remittances and lowered country’s growth. Georgia’s economic growth slowed to 2.6 percent in the first half of this year compared with 6 percent in the same period last year. “The former Soviet republic’s economy is suffering the side-effects of a plunge in the Russian rouble. Georgia, which is traversed by pipelines carrying Caspian oil and gas from Azerbaijan to Europe, has also suffered a decline in exports and

remittances and the government deficit is rising”, writes the article. Growth slowed each month of the first half: to 3.1 percent this June from 6.4 percent a year ago, to 2.1 percent in May from 6.3 percent, to 0.9 percent in April from 2.7 percent, to 4.3 percent in March from 8.3 percent, 4.9 percent in February from 5.4 percent and to 0.5 percent in January from 7.8 percent. The Georgian parliament confirmed the government’s decision to halve the country’s growth forecast for this year to 2.0 percent from 5 percent, and decided to reduce budget spending by 160 million lari ($70.5 million), pointing to serious problems in the economy.

e-export of Japanese cars produced for the US from Georgia to Azerbaijan remains problematic. Limitation operates within the regulation, which prohibits exports to Azerbaijan vehicles that don’t meet Euro-4 standard requirements. Currently, the problem has only the vehicles manufactured in Japan for the US market. This is due to the fact that American cars made since 2004 meet the Euro-4 standard, but in Japan this standard was enacted in 2011. Accordingly, the Japanese cars produced for example in 2009 cannot be exported to Azerbaijan. For this reason, the Azerbaijani customs officers do not pass through the border such cars. The Revenue Service of the Ministry of Finance tried to solve the problem and transported in test mode Japanese Lexus produced for the United States across the border. According to the head of the Caucasus Auto-Import George Surguladze, after long bureaucratic procedures, they’ve managed to transport the test car to Azerbaijan, but the problem still remains unresolved. “It was test transportation, but it does not solve the problem as a whole. In fact, Lexus was transported to Azerbaijan almost violently. By law, the vehicles can be transported across the border, but the export is artificially blocked. There is no

guarantee that a particular car can cross the border, so the Azerbaijani dealers do not create unnecessary problems for themselves and not buy cars from us, “- the businessman notes. In his words, the problem should be solved at the international level between Baku and Tbilisi, as it cannot be solved at the level of car dealers and customs officials. The Revenue Service confirmed presence of the problem in a conversation with CBW. “In order to solve it, the Revenue Service representatives met with the Azerbaijani customs officials, who said they are ready to examine each individual fact, if something like that happens again. So if someone has a problem at the border, they should apply to us and we will inform the leadership of the Azerbaijani customs,” Khatia Moistsrapishvili, the head of the PR department at Georgia’s Revenue Service, states. The new regulation on the import of cars to Azerbaijan entered into force on 1 April. From that day, the country banned the import of cars that don’t meet the Euro-4 standard, which means an automatic ban on import of vehicles older than 2004, which were traditionally in demand by Azeri buyers. Regulations delivered a nasty blow to the Georgian re-export to Azerbaijan. In 2014, the vehicles took first place in the list of exports from Georgia while in 2015 – only the third.

ENPARD TO PROMOTE COOPERATION BETWEEN THE FARMERS AND BUSINESS ORGANIZATIONS

ne of the main goals of the European Neighborhood Program for Agriculture and Rural Development (ENPARD) is assisting farmers in promoting their products and establishing a strong network within the Georgian business field. A number of recent successes has proven the program’s effective execution of these goals. One such success is an agreement with Georgian online platform Kar.ge (www.kar.ge) on increasing awareness of products produced by Georgian farmers. The partnership will also focus on improving Georgian farmers’ relationships with businesses, supermarket chains, hotels and restaurants to raise awareness and increase the sales of Georgian products, contributing to the sustainable development of the Georgian economy. The cooperation was inspired by the recent promotion of two products through the online platform, which achieved very positive results. The first was the fresh mountain trout produced by the farmers’ cooperative Samegobro 2014 in the Chokhatauri region, while the second was the Georgian cheese produced by Lelo 2014 in the Khoni region. Under the agreement with Kar. ge, the online platform will promote agricultural products from Georgian cooperatives every Tuesday and Friday. The online platform was established in 2014 and receives 210,000 unique monthly visitors. Its customer base has shown interest in Georgian products and it has already fostered strong relations with supermarket chains across the country. Its appeal, however, is not limited only to Georgia, as the platform has also developed extensive relations with foreign investors who are interested in Georgian agricultural products. “We have

a request from the Netherlands to export Georgian dry fruit and we are in negotiations with local farmers to help facilitate the trade,” says Mr. Tariel Zivzivadze, managing director of Kar.ge. Another recent success of ENPARD involved facilitating meetings between Georgian mobile operator Geocell and farmers from the Imereti region. High quality dry fruits covered in chocolate going by the name of Chirkoladi are produced there and Geocell supported farmers in branding the product more effectively. Geocell also purchased batches of Chirkoladi to present as gifts to their valued customers. This fostering of improved dialogue between farmers and key stakeholders has also resulted in a further fruitful cooperation – the Georgian Ministry of Agriculture has agreed to organize agricultural product fairs featuring Georgian farmers. As such, businesses from across Georgia will be invited to network and establish strong links with Georgian farmers’ cooperatives.

TOURISTS INFLOWS IN JANUARY TO JULY SLIP 0.7% TO 1.9 MILLION 737 696 visitors have crossed the country’s border in July. Increase of 9,5% has been fixed year-overyear, while the growth pace is negative. However, the increase has amounted to 9,8% in the previous year (07/2013 – 16,4%; 2012 -58%). Most of the visitors have arrived from Armenia. According to Ministry of Internal Affairs, 336 664 (45,6% of the total number, increase – 2,2% comparing to the same period of the previous year) are tourists from the total stream of July; 182 693 are transit visitors ( 24,8% of the total number,

growth – 24,7% comparing to the same period of the previous year); others – 218 339 visits ( 29,6% of the total number, growth –10,4% comparing to the same period of the previous year). The stream of January - July amounts to 3 069 999 visitors. At that, 1,9 million accounts for tourism visits, which is less by 0,7% comparing to 7 months of the previous year. Total number of visitors is grown by 4,9%, while transits (709 611 visits) are increased by 29,6% comparing to January-July of the previous year.

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INTERVIEW

caucasus business week

GEORGIA’S PREFERRED REAL ESTATE FIRM Interview with Nina Kipiani, country director at Cushman & Wakefield | Veritas Brown - What is it like to work for Cushman & Wakefield? - I had already been operating in the commercial real estate industry for over 8 years before joining Cushman & Wakefield | Veritas Brown 3 years ago when it entered the Georgian market. Working for an international company such as Cushman & Wakefield has brought me to a different level of experience, opening doors to the global real estate market and to worldwide professional knowledge. C&W is one of the leading commercial real estate firms in the world and, after recently merging with DTZ, has become the world’s second largest commercial real estate consultancies. Veritas Brown is an alliance partner of C&W in the Caucasus as well as Central Asia. We have offices in Kazakhstan and Georgia and are planning to establish ourselves in other countries throughout the region. The company employs international industry professionals equipped to meet the real estate requirements of any individual, fund or corporation in Central Asia and the Caucasus. If you’re sure real estate is your industry, CW|VB, with its extensive range of commercial real estate services, is undoubtedly the best place to work. - How would you estimate your company’s performance in the Georgian market? - CW|VB advises and represents clients in all aspects of property occupancy and investment, and has established a preeminent position in the market, as evidenced by our frequent involvement in many significant property lease, sale and assignment transactions. When we opened our office in 2012, we were the first internationally recognized commercial property consultancy in Georgia that could provide professional services with in-depth local and international market knowledge. The country’s real estate market development is in active stage. Namely, there are many projects in the pipeline, as well as plenty of interesting investment opportunities, especially in the hospitality sector, where CW|VB has a strong team and unmatched expertise. Hotel and resort developers searching for investors/operators/brands or project monitoring services are able to benefit from a full range of specialist services at CW|VB. In addition, through our alliance agreement, we

provide real estate advice to all C&W global clients represented in the region. - What are the challenges you have faced? - By the time CW|VB entered the market, the understanding of the importance of professional advisory services was very limited and we had to put a lot of effort in to its promotion. The company’s first project in Georgia was to provide Property Management services at Tbilisi Mall, the 65,000 m2 shopping mall owned by RAK authorities. Our professional retail leasing team has filled the center with a number of local and international retail brands, such as LC Waikiki, Koton, Defacto and a family entertainment center operator. The management of the mall has been brought up to an international standard oriented towards keeping the tenants and the customers delighted. Foreign investors attach great importance to the presence of firms like C&W. Generally; Georgia is an attractive place to do business as well as enjoying a strategic geographical location and enjoyable climate. In terms of the future, we believe that ensuring foreign direct investment reach the levels seen in recent years is vital to the growth of the economy. - Which projects would you consider as your success stories? - Apart from Tbilisi Mall mentioned above, our company has already advised clients in respect of a number of highly significant development projects, such as, Black Sea Hotel & Residence (retail and residential part of Batumi Hilton project), Titan City (logistics and warehouse development in Tbilisi), Argo Anuria (Batumi funicular retail project), Babillon Tower (mixed use project in Batumi), Ureki Hotel and Residences, Sakanela (mixed use project in the downtown of Tbilisi owned by Silkroad Group). It’s also worth noting that CW|VB contributed to the success of attracting funds to restart the development of the Axis Tower project on Chavchavadze Avenue. More recently, we have been appointed to manage the Merani shopping center located in the heart of Tbilisi on Rustaveli Avenue. I hope we will add this project to our list of success stories soon. - What is your company’s competitive advantage in the market? - I can proudly say that we have best industry professionals working for CW|VB, the strongest

retail brokers and consultancy team manned by both local and international experts. C&W provides strong support to ensure that CW|VB clients benefit from the best results. Our vision is not to be the biggest, but the “preferred” real estate advisor in the region. This vision drives all that we do. We approach business with discipline, consistency and transparency; we strongly value the principles of an exceptional and long lasting partnership. We believe a successful relationship is built on trust, mutual respect and the alignment of interests and vision. - What are the goals you and your company are planning to achieve in the next 3-5 years? - CW|VB provides a full range of real estate services and is in a position to meet all kinds of client requirements, performed at a level of the highest quality. Taking into consideration the country’s promising prospect, especially in the hospitality sector, we are seeking to increase our

personnel resources in this direction and commit to new projects. As the Capital, Tbilisi has always been commercially active but we see an increased level of interest along the Black Sea coast, especially in Batumi. Besides, the government is working on different projects to redevelop and create other tourist destinations, where we see great potential to add value through our services. We are involved in several mountain resort developments that will lead to new investor interest and, of course, positively affect the country’s economy. Considering our strong presence in Kazakhstan and due to our extensive, long established relationships with Kazakh investors, we see great potential in attracting such funds to Georgia. Cushman & Wakefield has given us permission to expand our footprint across the region and open new offices. Therefore I assume we have busy and challenging upcoming years.

AN AGE LIMIT ON THE IMPORT OF CARS MAY BE INTRODUCED An interview with Bidzina Giorgobiani, Head of Tbilisi City Hall’s Ecology and Municipal Service

- Several components were identified in Tbilisi’s environmental protection strategy, in particular, the gradual tightening of the rules on fuel quality and ecology. How much time is needed to introduce new, more stringent restrictions? - We are working on the standardization of fuel as it is planned to tighten control over the import of petroleum products. I cannot confirm the information that low-quality fuel is imported in Georgia. Such assumption is exaggerated. However, one of our priorities is an approximation to EU standards in terms of

quality fuel. In this way, one step has been taken, I mean Prime Minister’s decree on the EU standards. This refers to such criteria as the content of sulfur and various additives in the fuel, etc. Now we intend to accelerate this process, and together with the Ministry of Environment to introduce European standards. - Whether the strategy includes the introduction of vehicle inspection? - Vehicle inspection is very important in terms of improving the environment because the quality control of fuel will not bring any results, if due to the low quality of cars the emission of harmful substances into the atmosphere will be the same as now. Besides, it applies to half of all cars in Tbilisi. The country faces an acute problem of outdated vehicle fleet, we are importing European cars without catalysts and other means of waste treatment modern cars are equipped with. All this must be addressed comprehensively. It is necessary to tighten controls over the quality of the gas station and introduce vehicle inspection

in stages so that it does not hit the population. - The possibility of establishing an age limit for imported cars was also mentioned. Are there any specific plans in this regard or it is just under discussion? - Such a rule exists in many countries, for example in Azerbaijan. We’ll have to come to this as well. We can make an exception for socially vulnerable layers of the population, or those who live in rural areas, but in the cities old vehicles pose a serious threat to the environment. - The strategy also envisages the need to de-

velop electric vehicles. Can we say that in 2020 the tram will run around Tbilisi? - The benefits of trams, trolleys, cable cars have long been recognized throughout the world. From an environmental perspective it is all nice, but such projects are very costly. Our strategy is designed for 5 years, from 2015 to 2020 we have to go in that direction. But this does not mean that everything will be done in a few months and tomorrow the tram will run in every street in Tbilisi. The implementation of the plans will depend on the capabilities of the state.

REAL ESTATE caucasus business week

August 10, 2015 #111

TRANSACTION ANALYSIS | 2013, 2014 VS. 2015

TBILISI REAL ESTATE BUSINESS IN CRISIS, PRICES SLIP 10%-15%

his summertime has brought a stagnant period in the real estate market, but the real estate business, in general, is in crisis, brokers assert. Despite summer offers, the sales, purchase and rental of apartments have become problematic, while the demand for mortgaging real estate has almost zeroed. The real estate agency says prices of apartments have shrunk 10%-15% in almost all districts of the capital city. The highest prices are registered in the Old Tbilisi District, Vake and Vera. The price of a square meter of the white frame is 900 USD, while the figure marked 1100-1200 USD several months ago. The price of a square meter in the Saburtalo District is 600-800 USD. The price of a square meter in fashionable buildings in the Vake and Mtatsminda Districts reaches even 2000 USD. The situation will be improved in late August, Neli Goguadze, representative of the Kibe real estate agency, said. The agency will make focus on rentals, not on sales and purchase of apartments and the August-September period is the most optimal time for similar deals, she added. “Seasonal factors make sensible affect on the real estate market. We expected problems with sales, but this is not an only reason for stagnancy. Several months ago the currency crisis created problems to this business. At this stage, it is difficult to improve the situation, even more so the national currency is unsteady. The clients, who were going to buy apartments, have lost interest in making deals in the summer period. We need serious stimulus to revive the market. In this respect, new investments would bring the most sensible results. But this tendency also absents. Therefore, we completely make focus on rental-mortgaging deals and this season will start in late August”, Goguadze said. The demand grows for apartments in the Dighomi Massive, but rentals in the same zone record low indicators, she said. “Starting late August, especially in September, we expect the students’ demand for rental to increase at once. In this period the demand exceeds the supply, and we hope the same tendency will be maintained in 2015 too. Last year the Dighomi Massive apartments were in high demand, but apartment rentals was not registered in the same district, in practice. Students are mainly interested in renting apartments near the Technical University territory to save transportation costs”, Neli Goguadze noted.

As reported, the GEL depreciation has lowered the real estate property value by 10%-15%. “The Georgian consumers mainly buy real estates through a mortgage loan that is issued in USD, while a major part of Georgian citizens receive salaries in GEL. Thus, those wishing to sell property should be adequate to this reality and decrease prices. This is a good time for purchasing real estate”, brokers assert. Domestic residents give preference to new ongoing projects, while foreign citizens show higher demand for old apartments, who want to buy apartments in the Old District, they noted. These considerations of brokers are also confirmed by the official statistics. According to the national agency of public registry (NAPR), the primary real estate market in the reporting period rose 15.8% compared to June 2014, while the secondary real estate market increased by 5.3% year on year. All over Georgia a total of 49 138 registration transactions were recorded in June 2015, up 7.3% compared to June 2014 and up 17.4% compared to May 2015. In the reporting period the primary real estate market increased by 15.8% compared to June 2014 and the secondary real estate market rose by 5.3%. The primary real estate market climbed up by 27.7% compared to May 2015 and the secondary real estate market grew by 15% compared to May 2015. Zurab Lachasvhili, director for Sigma company, says the old Soviet-era apartments have lost popularity and attractiveness, but customers have the different attitude to the same apartments that are located in suburbs. “There are various situations in various regions. Higher demand for real estate is registered in suburbs, where prices have not changed much. The new apartments are most required in the center. Customers consider the Soviet-period apartments to be outdated. Even owners of the old apartments are trying to sell them and buy new ones through bank credits or in other way. Various factors determine sales, including economic situation in the country, money-credit policy, investments and so on. Currently, fewer apartments are being constructed in outskirts compared to the city center. Tight competition has also influenced prices. Last period many development companies have launched operation in the housing sector. In practice, the supply considerably exceeds the demand and this misbalance has affected the prices”, Lachashvili said. The Business Resonance

Number of development land transactions in Tbilisi in the first half of 2014 increased by 20% compared to 2013 H1, however the total number of transactions in 2014 declined by 0.4% compared to the same figure in 2013. In the first half of 2015 there was a slight increase of 2.8% in the number of development land transactions compared to the 2014 figure. Despite the increase in number of transactions volume of land transactions declined by 37% and 21% in 2014 and 2015 respectively. Such a big volume in 2013 was caused by several land plot sales of very high volume.

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BANKING NEWS

caucasus business week

TBILISI GETS READY TO HOLD ASIAN INFRASTRUCTURE INVESTMENT BANK’S NEGOTIATIONS IN LATE AUGUST

odar Khaduri, Ministry of Finance met Yue Bin, the Chinese Ambassador to Georgia on Friday. The conversation concerned to the trade-economic relations between two countries in terms of technical assistance from China to the Georgia. The parties have highlighted the importance of the Asian Infrastructure Investment Bank’s sixth round of talks, which should be held on August 24-25 in Tbilisi. As Nodar Khaduri noted, Georgia is ready to host

the mentioned meeting of the bank on a high level. Georgian side will represent special presentation linked to the country’s investment possibilities within the frame of the forum. As it has been noted, membership in the mentioned bank is a chance for Georgia to attract additional preferential resources in order to fund the infrastructural projects. Georgia has become founder of Asian Infrastructure Investment Bank jointly with other 56 countries by June 29 of this year.

TBC BANK LAUNCHES ANOTHER “TRANSFER AND WIN”

THE WORLD BANK SHOULD ALLOCATE PREFERENTIAL FINANCIAL RESOURCE OF $60 MILLION

greement on “The Third Regional Development Project” has been signed between Georgia and European Bank for Reconstruction and Development

on Friday. The funding should be spent on the rehabilitation of urban, utilities and infrastructure in MtskhetaMtianeti and Samtskhe-Javakheti region, promo-

ADJARA IS THE LEADER AMONG THE REGIONS BY CREDITING

y July 1, Adjara is the leader among the regions by crediting volume with 29,9%-share (H1/2014 – 26,5%). Total portfolio amounts to 3,857 billion GEL (H1/2014 – 2,914 billion). Currency loans (1,775 billion GEL) increased by 49%. However, 32% is exchange rate effect and 17% - real growth. Regions by crediting volume:

option is necessary, otherwise the sum should be returned back after 14 days. In addition, scores should not be accumulated, which are envisaged by the encouragement action. A client can win prizes with the accumulated scores. The prize fund includes products of apple, MacBook Air, iPhone 6, iPad and over 100 cash gifts. The first 100 winners will be revealed according to the accumulated scores.

tion of cultural heritage and historical monuments, as well as to increase the number of visitors from different cities. The project should be carried out by “Municipal Development Fund”. It should be noted, that two similar projects are carried out with financial assistance of the World Bank in Imereti (30 million SUD) and Kakheti regions (60 million USD).

FOREIGN CURRENCY RESERVES SHRINK BY 37 MILLION USD ccording to NBG, reserve assets have been 2,447 billion GEL by August 1 (01/07/2015 - $2,484 billion). Reduction totals to 2% year-overyear. The pace is declined 9 times. However, reduction has been 18% y-o-y by the same period of 2014 (01/08/13 - growth 9,6% year-over-year). NBG has not made interventions in May and June.

BC Bank announced about the simplification of transfers without noting of an account, merely by a mobile number. However, the sender of the money should have TBC Bank Internet or Mobile Banking. The transfer is simple, after notification of the receiver’s name and mobile number, link and transfer code is sent. The customer selects GEL account and confirms receive of the money. The

To note, $40 million has been brought in April (28/04), $120 million (11/02), 19/02, 24/02) – in February. Currency was not brought on the market in January. Reserve assets include foreign-exchange reserves ($2,244 billion) and Special Drawing Rights (SDR). Georgia’s reserve position in the IMF amounts to 13,9% (01/08/14 – 15,3%).

BANK SECTOR’S SHARE CAPITAL 3.585 BILLION GEL AS OF JULY 1

ervice chain of banking sector is represented by 908 centers (branches and service centers). According to the statistics of National Bank of Georgia, as of July 1, 19 commercial banks are represented on the market, at that 18 – with foreign capital, 2 – branches of non-resident banks. By the reporting period, the announced chartered capital has amounted to 1,020,2 billion GEL

(H1/2014 – 1,137 billion; H1/2013 – 1,005 billion). The share capital amounts to 3,585 billion GEL (H1/2014 – 3,211 billion; H1/2013 -2,613 billion). Besides the banks, the country’s financial sector is represented by 73 micro finance organizations and 15 credit unions. Totally 1 228 institutes are on the non-banking market, at that 1 119 are exchange booths, 14 insurance companies, 5 pension funds and 2 stock exchanges.

BANK SECTOR’S REVENUES MARK 1.8 BILLION GEL IN 1H15

ccording to National Bank, staff expense has amounted to 230,4 million GEL (01.07.2014 – 208,6 million). 37,5 million GEL has been transferred in the budget as income tax (01.07.14 – 34,1 million). 53% (949,1 million) of banks’ revenues are received from loans, 17,3% (266,6 million) of expenses is written off on the deposit. To note, 82,5% of deposits are placed in 5 banks. TOP -5

ANALITYCS 10 IS THERE A “NEW NORMAL” AWAITING GREECE? caucasus business week

ollowing what can only be described as momentous diplomatic and democratic efforts, Greece and the eurozone have stepped back from the brink. However, it will take some time for normality to return and one might in fact question whether a return to “normal” is possible or even preferable. - WHERE ARE WE NOW? - Hurdles still exist but the risk of an imminent Greek exit has receded. Significantly, the agreement leading to this involves two key stands that are essential if it is to succeed: namely, it is built on real reforms being introduced and on a reduction in the size of Greece’s crippling debt burden. Importantly is also introduces some serious breathing space into the process, at the very least kicking the can some way down the road, with the bailout intended to cover Greece’s borrowing needs for the next 3 years to allow time for confidence to be restored and reforms to start working. This should be reflected in a bounce in sentiment internally and externally. However economic growth will be slower to respond as credit controls remain in place and extra austerity will hit demand. Indeed, there is a real risk that falling GDP could mean Greece fails the bailout conditions even if cuts are made and that fresh austerity could then be needed. At the same time however, we should not forget that Greece’s competitive position has been enhanced by falling prices and longterm potential should be improved by the investment and reforms now planned. The critical next step, therefore, will be to see if Greece actually delivers on reform – or whether we see a return to the “old normal” whereby plans are diluted or ignored.

The targets set will be hard to meet but the first review will be crucial, signalling the start of the renegotiation of the debt burden and possibly opening access to other support programmes such as quantitative easing. - WHAT NEXT FOR REAL ESTATE INVESTMENT? - With capital controls still in place there are of course practical barriers to investment, but recent progress should nonetheless presage some degree of improvement in interest in a market that while starved of liquidity, offers some recovery potential. Some investors are reportedly already growing more interested, albeit for most it is very early days and typically these are limited to the very opportunistic or high net worth individuals perhaps looking anew at buying a Greek island. Opportunity will however steadily develop if reforms are followed through and as infrastructure investment opens up new areas. Sunday trading will benefit core retail areas for example while multi-family property may see a boost as necessity forces more younger Greeks to look at renting rather than owning. Logistics of-

fers potential productivity gains while Athens offices will benefit as more companies seek international representation. There should meanwhile be a readier source of supply than in the past and also more need for foreign capital as bank finance will remain restricted and some local investors will be seeking international diversification. Privatization in particular could be a source of stock but also an interesting test of whether a “new normal” can be established; the last programme being roundly considered a failure and tainted with corruption. While the pressure is on, €50bn will take time to achieve but again, time is being granted. There will be no fire sale but an orderly process of managing the assets to maximise profits, contribute to economic reform and undertake sales over a 3 to 10 year period or longer. A flow of assets and loans from the banks may be the first opportunities to come forward once they have been recapitalised and relieved of non-performing loans. Opportunities from the sale of state owned assets will be next in line, with companies, infra-

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structure, airports, hotels and sites with tourist potential all grabbing headlines. Overall, there is a very large portfolio of state-controlled properties, estimated at 70,000 by the IMF, and while many may be less than straight forward, with contested title claims common, there is considerable potential for raising revenue. Pricing will be key to whether this represents an unmissable opportunity – with recognition needed that there are now clearer limits to sharing risk within the eurozone and hence appropriate risk premiums must be maintained on a level playing field for domestic and foreign buyers. So the best hope for Greece, and the eurozone, seems to be not a return to the old normal but the discovery of a new normal that sees real privatization and reform together with greater transparency and equality – and that includes an appropriate cut in Greece’s debt burden and giving the country time to deliver. Reassuringly both are recognised in the bailout plan as it now stands. DAVID HUTCHINGS Head of European Investment Strategy

Sponsored by

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COMPANY NEWS

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OIL COMPANIES TO SUE AGAINST COMPETITION AGENCY

eorgian oil companies are going to make a lawsuit against the Competition Agency’s decision until August 15. According to the CEO of “Wissol”, the management is currently working on a claim to be filed in court. “We have a lot of materials, lawyers should get acquainted with them and prepare a lawsuit,” - he says. “Lukoil” company is also preparing the lawsuit. According to the company’s Director General Shavleg Mishveladze, the lawsuit will be filed within the period specified by law. In the words of Irakli Zubitashvili, head of the Corporate Business Communication Department at “SOCAR”, the company will file a lawsuit before 15 August. “We intend to prove our case in court. Let’s see how it all ends. All the companies are preparing lawsuits individually, although it can be assumed

that these cases will be combined in the court, “- he notes. The Union of Oil Products Importers hopes the judicial bodies will be objective. “I hope that the trial will be objective and fair, based on this, we expect that companies will be able to prove their case, “ – Vano Mtvralashvili, Chairman of the Union, says. Recall that the Competition Agency has revealed the presence of cartel agreements on the Georgian fuel market and fined five largest oil companies 55 million GEL. We are talking about Wissol (a fine in the amount of GEL 10 426 393), LUKOIL ( GEL 4 740 260), SOCAR (GEL 14 381 385), Rompetrol (GEL 10 885 806) and Gulf (GEL 11 267 384) and three economic agents which have close relations with the abovementioned companies. Oil companies themselves categorically deny the existence of any cartel deals and intend to appeal the Agency’s decision in court.

EVEX TO PURCHASE 50% IN NEUROSURGICAL CLINIC

edical Corporation Evex” buys 50% of “GNCo” at 17 million USD. The deal has been signed between the sides on August 3, which registry is carried out in the Public Registry. According to the deal, “Evex” will acquire 50% form the shareholders of “GNCo”, owner of “High-Technology Medical Center” – namely, 39,98% from Gerorge Ingorokva and 10,015% from Nino Ingorokva. They will split the share from the total value of transaction respectively, equivalent of 12 million USD in GEL. However, they will receive the remained 5 million before December 31, 2015. Competition Agency gave a permit to medical corporation “Evex” on acquiring the share of

LLC “GNCo” before the signing of an agreement. After the market research the Agency concluded, that the concentration implemented between the companies is compatible with the competitive environment. In addition, JSC “Medical Corporation Evex” will gain the dominant position on the neurosurgical service market after the concentration; the JSC is charged to submit information to the “Competition Agency” about this deal by late January of each year, which might significantly restrict competition on the market. It should be noted, that investment of several million is planned after the merger, including modernization of the enterprise and introduction of modern technologies, which might condition sustain of high quality service for the patients and further improvement.

DEMAND FOR LOW-COST HOTELS NOT OBSERVED DURING YOUTH OLYMPIC GAMES

long with an increased number of tourists due to the European Youth Olympics, high-class hotels clientele has also grown. However, relatively low-cost hotels say that during the Olympics no one used their services. In a conversation with “Commersant”, “Meidan” hotel owner talks about a lack of demand for low-cost hotels and notes that the average price of a room in their hotel reaches $ 40. During the Olympics, the hotel “Shine” worked almost at full capacity. In the words of Juliet

Trertsvadze, the hotel’s reservation manager, about 30% of the hotel visitors arrived in Georgia specifically to attend the Olympics. The average price of the hotel room is $ 100. “Argo Palace” hotel worked at full capacity as well. Most of the hotel guests came from Finland, Estonia and Russia and stayed in the hotel until the end of the Olympics. An average price of a room is $ 60. European Youth Olympic Festival “Tbilisi 2015” opened on July 26 and lasted until August 1. During this period, 2 334 athletes from 50 countries arrived in Tbilisi.

ENVIRONMENTALLY FRIENDLY FUEL TRUCK SCANIA IS ALREADY IN GEORGIA

rom today, environmentally friendly fuel track Scania, will appear on Georgian roads. A special event was devoted to the formal delivery of a truck of the future. Under the auspices of the Embassy of Sweden in Georgia, the brand new fuel truck Scania P360LB8X4HNA was inaugurated as the first of

its kind in Georgia. This outstanding and innovative Scania vehicle is equipped with cutting edge technology, fulfilling international environmental standards and providing safe, professional fuel handling on the roads of Georgia. Representatives of the Embassy of Sweden in Georgia Gustaf Winstrand, Socar and Tech-Service LTD took part in the event.

DELAMODE GROUP INTENDS TO DEVELOP A MULTI-FUNCTIONAL LOGISTICS CENTER

atia Mikeladze, Deputy Minister of Economy and Sustainable Development, met the officials of the British international logistics company Delamode Group. The sides discussed the development of a transport and logistics capability and the potential to attract foreign investment in these sectors. It was noted at the meeting that in the first stage the investment project proposed by the company envisages development of “A” class multi-functional logistics center. In addition, international

investors are interested in the functioning of free industrial zones in Georgia, and were provided with detailed information. In the words of Deputy Minister of Economy and Sustainable Development Natia Mikeladze, one of the main priorities of the government is to develop the country’s transit and logistics infrastructure. A delegation of the British international logistics company “Delamode Group” is paying a three-day visit to Georgia. The company managers say they will arrive in Georgia in the coming months in order to implement specific projects.

BILLIONAIRE FROM PETERSBURG PLANS TO DEVELOP HYPERMARKET CHAIN IN GEORGIA A NEW CASINO OPENED IN BATUMI

fter LeoGrand, another new casino Campione opened in Batumi. The complex is located on the new boulevard area, 5 kilometers from Batumi airport. Campione is a subsidiary of the Italian casino brand Campione d’Italia which in the words of its representative, is a breakthrough in the region. They say in the company’s PR and marketing department that the modern, innovation stylish casino located in the seaside city is mostly designed for foreigners, mostly Azerbaijani, Russian, Jewish, Turkish and Kazakh customers.

Casino Campione Batumi offers almost all kind of games: AMERICAN ROULETTE, BLACK JACK, STUD POKER, RUSSIAN POKER, SIX CARD POKER, TEXAS HOLDEM, CASINO HOLDEM; as well as state of-the-art INOVATION SLOT MACHINES by the world’s best manufacturers. The company also says that in the near future the casino plans to expand and its new facilities will be placed in Tbilisi and Batumi. The grand opening of the branch will be held on August 22. Campione opened in Batumi in late July. In August, another casino Austria is planned to be opened in the territory of Hilton hotel.

emur Psuturi, billionaire from Petersburg plans to develop hypermarket chain in Georgia under the name of MaxHome. The news is disseminated by website dp.ru. According to them, Georgian businessman by origin plans to invest 280 million USD in the development of hypermarket chain of building materials and prefabricated furniture. MaxHome will be the first hypermarket in Tbilisi, which should be opened in 2016. The market will be placed on the area of 185 thousand square m, and investment of over 80 million USD should be made. The chain will unite 15 small stores, which are already owned by Temur Psuturi and they are located in the different regions of Georgia. The businessman has declared to dp.ru, he plans to have at least 5 hyper markets and 100 small

shops in Georgia under the brand of MaxHome by 2020. As of dp.ru, another St. Petersburg construction company “North-West” will provide engineering of constructing MaxHome, the company is owned by Temur Psuturi as well. The edition notes, that the company won tender of 10 million USD announced on the road construction in Georgia and major part of the works must be finished before the end of 2015. This company plans to participate in the state tenders in Georgia as well and plans to leave St. Petersburg’s market gradually. However, the businessman notes, that he does not plant to leave St. Petersburg’s market. According to Russian media, Temur Psuturi has accumulated solid property by state orders and auto chemistry trade.

EVENTS

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Septemb ber 24 - Octob ber 8

International Program 25,26 september

Incubator Theater, Israel

“THE CITY” Musical

About performance;

“The City” is the first Hebrew rap musical, telling the story of detective Joe. Sarah Bennet hires Joe’s services in the case of her missing sister. Joe takes on the case, a decision that can cost him his life. Duration: 75 Minutes www.tbilisiinternational.com www.facebook.com/TbilisiInternational

“LET’S LIVE IN A CLEAN WORLD” The journalists were hosted by the Clean World company

n 31 July, “Clean World” company held master class: “Let’s Live in a Clean World” for journalists. After the master class, volunteers tested their knowledge in the contest. The winners were revealed by the jury, especially by the head of the commission - the founder of “Clean World” Apolon Goletiani. Imedi TV journalist - Natalia Kajaia, Ipress photo-correspondent - Aleko Sharvadze, GPB TV journalist - Manana Gigineishvili and Radio commersant journalist - Maya Butbaia, competed with each other to clean the glass. The jury decided that friendship and professionalism won. Master class participants were awarded with certificates and gifts by the founder of the

company, Apolon Goletiani. “We are in an active communication with public. This is not a one-time master class. Similar events will introduce the public the specifics of cleaning and will remind people how important it is to live in a cleaner world, as it is one of the serious global problem that we face. Initially, we started to communicate with the media, because we think that media is the link between us and society. The similar events will raise the awareness of cleaning among the people. We want to maximize an involvement of community in this process. Caring for the environment starts with the cleaning of our own houses”- said Clean World’s head of the public relations department, Khatia Alphaidze.

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RESEARCH

caucasus business week

COMSUMER PRICES JANUARY - JUNE, 2015 Economic Outlook and Indicators

NEIGHBORHOOD

Azerbaijan allocates $60 mln in subsidies to farmers

zerbaijan has allocated 63.2 million manats ($60.21 million) to farmers for purchasing fuel and motor oil for the equipment used in the cultivation of lands. The relevant decision was taken on August 5 at a meeting of the state commission, Azerbaijan’s Agriculture Ministry reported on August 8. The subsidies were distributed among 372,234 farmers in 60 regions (cities) to cultivate around 1.264 million hectares land. The relevant paperwork was submitted to the country’s Finance Ministry, Kapital Bank, and the executive authorities of regions (cities). The state commission also discussed providing 50 manats ($47.6) per hectare of cultivated area to farmers from the state budget and subsidizing 70 percent of the cost of fertilizers sold to farmers of Agroleasing Open Joint Stock Company and other legal entities and individuals. Azerbaijan, a post-Soviet country with excellent natural conditions and unique priorities, has been allocating subsidies to agricultural producers since 2007. Azerbaijani farmers are exempt from all taxes (excepting land tax) in accordance with the law on providing tax privileges to agricultural producers adopted on November 27, 2001.

Low-cost Turkish carrier Pegasus sees 10 pct rise in passenger traffic

urkey’s Pegasus Airlines saw a 10 percent rise in the number of passengers using the low-cost carrier to 10.17 million in the first half of the year. The number of domestic flight passengers rose by 10.2 percent to 6.33 million and of foreign flight passengers by 9.6 percent to 3.84 million in the first six months of the year compared to the same period of 2014. While the number of total seats rose by 12 percent to 13 million in the same period, the load factor decreased by 1.4 percent to 77.9 percent, said the company. The number of scheduled destinations increased from 84 to 91 in the first half of the year, according to the statement. Pegasus Airlines had increased its passenger numbers by 10.8 percent in the first three months of the year from the same period of 2014.

Armenia to have specialized customs houses

pecialized customs houses will be set up in Armenia, and the respective decision was made at Thursday’s Cabinet meeting. The Deputy Minister of Finance, Armen Alaverdyan, stated at the session that they are planning to set up regional and specialized customs houses on Armenia’s borders with Iran and Georgia, and at the Ararat provincial customs house. These customs houses will be set up for the customs clearance of motor vehicles, excisable goods, international postal parcels and valuable international transportation, and pursuant to the Law on Customs Regulations.

Ruble hits 6-month low against major currencies

he Russian ruble plunged to a six-month low, hitting 64 against the US dollar and 70 against the euro during Thursday’s trade on the Moscow Exchange. Low crude prices are said to be the key driver of the ruble dive. The Russian currency continued to follow sliding oil prices as Brent futures for September on Thursday dropped by 54 percent to $49.32 a barrel at 15:30 MSK, which is about half its five-year average price. West Texas Intermediate (WTI) was down 1.06 percent at $44.67 a barrel. Some analysts expect the ruble’s slide to continue. The ruble can fall to 65 against the US dollar in the coming days, Globex Bank trader Andrey Bohun told RBC.

WORLD NEWS

Iran Seeks $29 Billion for Steel to Mining Projects

ran has $29 billion of mining investments attracting interest of companies from Europe to Asia, with plans to more than double steel production by 2025 and boost exports once international sanctions are lifted. Iran, home to the world’s biggest natural gas reserves, plans projects ranging from steel to aluminum production, gold mining and copper, Mehdi Karbasian, deputy minister of Iran’s Ministry of Industries, Mines & Trade, said in an interview in Tehran. German, French and Dutch delegations visited Iran in the past few weeks, and a two-day seminar on steel opportunities is tentatively set for September on Kish Island in the Persian Gulf, he said. Companies looking to invest don’t want to be identified until sanctions are removed, he said. Iran has more than 3,000 active mines, mostly privately owned, with 9 percent of the world’s gypsum production and 2 percent of molybdenum and nitrogen output, according to a 2010 report by the U.S. Geological Survey. Oil producers such as BP Plc and Royal Dutch Shell Plc have expressed interest in developing Iran’s crude reserves, the world’s fourth-biggest.

Global Economic Growth to Slow: NIESR

ccording to National Institute of Economic and Social Research (NIESR), Global economic growth will slow this year to the lowest rate since the financial crisis. • The world economy will grow by 3 per cent in 2015 – the slowest rate since the crisis – and 3.5 per cent in 2016. • Emerging market economies have slowed, while recoveries remain hesitant in most developed countries. • Growth may be boosted by delayed effects of lower oil prices, as well as by accommodative monetary policy and slower fiscal consolidation, but considerable risk remains. NIESR identifies the Greek economy as a key risk to global growth. however Greek economy is on a path of moderate recovery and the Euro Area to remain intact, which is currently far from certain. It says that the latest Greek crisis has revived doubts about whether the eurozone currency union can succeed without greater integration. The NIESR also says that the slowdown in China may threaten its forecast, with official figures predicting growth of 7%.

Global Dairy Prices Fall to 13-Year Low

nternational dairy prices fell to a 13-year low in the GlobalDairyTrade auction, a trading platform established by New Zealand’s Fonterra Co-Operative Group. The GDT Price Index fell 9.3% overnight Tuesday from the previous auction on July 15, with the average selling price at US$1,815 a metric ton, the lowest since 2002. The index covers a variety of products and contract periods and is viewed by the dairy industry as a market reference price. The average selling price for wholemilk powder was US$1,590 a metric ton, down 10% from the prior auction. The dairy industry is the backbone of New Zealand’s economy, accounting for more than a quarter of exports. But global dairy prices are down 64% since early 2014, and many of the country’s farmers are operating below the break-even level. Brent Crude Falls Below $50 a Barrel The world’s benchmark oil price fell to less than $50 a barrel Monday for the first time in six months as a sluggish global economy and rampant oil boom keep crude markets falling. Monday’s selloff widens losses from July that plunged oil into a bear market. Record production in the U.S. has led to an international competition to produce even more, cut prices and fight for customers around the world. The past week brought signs that production is still going strong, dashing hopes that low prices may force producers to slow down.

PUBLICITY

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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

TBILISI GUIDE

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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 CORNER HOUSE Tbilisi, I. Chavchavadze ave. 10, Tel: 0322 47 00 49; Email: contact@cornerhouse.ge 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 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

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,

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 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

Real Estate International Real Estate Company (IREC) Tbilisi. 9 P. Aslanidi St. Tel: +995 32 238 058 Mob: 599 95 76 71 Email: Info@irec.ge www.irec.ge

GSS Car rental offers a convenient service for those who are interested in renting car in Georgia. Rental fleet mainly consist of Japanese made SUV’s, the company has various models of cars including sedans and minivans which are in good technical condition. Contact information: Email: info@gsservices.ge. Address: Shalva Dadiani 10

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

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

caucasus business week

Two residential complexes include 464 apartments with parking, green area, outdoor swimming pool and playground for children. ”Metrocity” is unique with its special maintenance services. “Metrocity” integrates two five star hotels, private school and residences with private swimming pool, panoramic terrace restaurants, casinos, Spa, shopping center including 100 brand stores, sport club, cinema, bowling center, playground for children, gold sand beach and the biggest conference hall in Transcaucasia for 1500 guests.”MetroCity” can be found just 2 km from Batumi International Airport and 500m from the city center. The complex with its location is harmoniously mixed with mountains and sea views. The project implementation has begun in February 2015 and will be successfully completed in April 2017. Residences from 38 m2 to 300 m2 are available.

10% Deposit 36 MONTH INTERNAL CREDIT 25% Deposit 60 MONTH INTERNAL CREDIT

STARTING PRICE IS FROM 1425 $ Address: Leh and Maria Kachinsky Str.1, Batumi Tel: +995 577 14 17 14 sales@metrocity.ge www.facebook.com/MetroCity.GE

www.metrocity.ge

August 10, 2015 #111