Caucasus Business Week #117 by Caucasian Business Week

DISTRIBUTED FREE OF CHARGE

BUSINESS WEEK caucasus1

WWW.CBW.GE

October 12, 2015 #117

www.facebook.com/CBW.ge

October 12, 2015, Issue 117

caucasus business Partnerweek News Agency

BE INFORMED, DO BUSINESS

STATE BUDGET 2016

EU SUPPORTS GEORGIA’S PRIVATE SECTOR THROUGH DCFTA

he European Union (EU) is supporting Georgia’s small businesses to ensure they enjoy beneﬁts from the Deep and Comprehensive Free Trade Area agreement. Pg. 7

GEORGIA EXPECTS PLENTIFUL, HIGH QUALITY CITRUS HARVEST 2015

fter the last year’s poor citrus harvest, Georgia is expecting a rich and high quality ‘orange harvest’ this season. Pg. 10

WORLD’S LARGEST WENDY’S TO OPEN IN TBILISI

estaurant will open on 15th of November, US and Georgian authorities will attend the opening ceremony. Recently Wendy’s Georgia was awarded Jim Near Legacy Award for Talent & Organizational Excellence. Pg. 11

Healthcare Ministry to Receive 3.070 billion GEL

The 2016 state budget will allocate 3.070 billion GEL (30.9% of all state spending) to the Healthcare Ministry. The Healthcare Ministry will ﬁnance social protection and pension allowances by 2.182 million GEL, including social expenditures as part of the highland regions development law; healthcare programs will be supported by 799.5 million GEL; medical assets rehabilitation and equipment programs will be ﬁnanced by 32 million GEL. The Ministry of Education and Science will re-

Pg. 4

ceive 975.2 million GEL to finance the general education sector by 572.9 million GEL, a growth in salaries to secondary school teachers (the basis wage increased from 305 GEL to 355 GEL starting September 2015, while the figure will reach 405 GEL by April 2016), bonuses for teachers working in highland regions, five vocational schools by 36 million GEL, higher educational and scientific programs by 174 million GEL, educational assets infrastructure development programs by 94.4 million GEL. Pg. 5

FLYUIA STARTS REGULAR FLIGHTS FROM KUTAISI TO KHARKOV

lyUIA will have direct ﬂights from Kutaisi to Kharkov twice a week: on Tuesdays and Fridays. Boeing-737 and Embraer-190 will conduct ﬂights in this direction. Pg. 11

RESORT “GODERDZI” TO RECEIVE TOURISTS SOON

EXPORT FROM GEORGIA CONTINUES TO DECREASE

he volume of export from Georgia signiﬁcantly decreased in January-August period of this year. In the ﬁrst eight months of 2015, the export volume from Georgia reduced by 24% and amounted to $1,459 million. Pg. 9

Danish Saxo Bank Eyeing the Georgian Market

Pg. 6

GEORGIAN WINE Plan for the Worst, Hope for the Best Georgia’s Beneﬁts from Free Trade Regime with EU are Miserable

As the Bank representatives told CBW, the Bank is not planning to open an ofﬁce in Georgia yet. However, Saxo has many private clients in the country and will announce its new partner on the Georgian market in November. Saxo Bank is an online multi-asset trading and investment specialist, offering private investors and institutional clients a complete set of tools for their trading and investment strategies. Pg. 11

Georgia’s exports to the EU market have grown by only 1% after the country signed the deep and comprehensive free trade agreement with the EU. The Authorities expected the agreement to boost Georgia’s exports and investments inﬂows, but the results are pitiful, the Rezonansi newspaper reads. According to GeoStat, the national statistic service of Georgia, in January to August 2015 Georgia’s foreign trade turnover with EU countries made up 1.982 billion USD, up 2% year on year, including the exports constituted 413 million USD, up 1% and the imports marked 1.569 billion USD, up 2% year on year. The ratio of EU

TBC Renovates Mortgage Center on Chavchavadze Avenue

Liberty Bank Awards Teachers of Children with Special Needs

Pg. 11

George Kakauridze: No Plans for Pensions Growth in 2016 State Budget Pg. 5

Soso Shatberashvili: Medicine Prices Were Growing in Georgia Contrary to Global Market Tendencies

Pg. 8

Tbilisi to Host Silk Road Forum

s Ministry of Finance and Economy of Adjara declares, the resort should be opened by the winter season 2015-2016. Construction works of 6 hotel-type cottages are being ﬁnished by that time, which will receive a Pg. 10 total of 72 visitors.

Giorgi Barabadze: Business Should Be Treated Skillfully

countries in Georgia’s total foreign trade turnover made up 31%, including the EU ratio in Georgia’s total exports increased by 7% to 28%, but this growth was driven by contraction in Georgia’s exports to the CIS countries, particularly, to the Russian Federation and Ukraine. More than one year has passed after the EU admitted the Georgian exports to its market. On September 1, 2014 a main part of the Georgia-EU Associated Membership Agreement was enacted, including the deep and comprehensive free trade area (DCFTA) component. This signiﬁes Georgia additionally acquired a market of 28 countries with over 500 million residents. Pg. 7

Large-scale event is held under the patronage of the Prime Minister for the ﬁrst time this year. Representatives of over 30 countries (China, United Arab Emirates, the US, Turkey, South Korea, Azerbaijan, Afghanistan, Slovenia, Hungary, Italy, Armenia, Czech Republic, Kazakhstan and etc.), governments, including –vice premiers and ministers, as well as authorities of 20 international, ﬁnance and donor organizations. Representatives of business sector from the different countries. More than 700 guests should arrive in order to participate in the forum in Tbilisi. Pg. 2

Fitch Rating Affirmed Georgia’s Sovereign Rating International rating agency Fitch Ratings has affirmed Georgia’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘BB-’ with Stable Outlooks. The issue ratings on Georgia’s senior unsecured foreign and local currency bonds have also been affirmed at ‘BB-’ by the influential agency. As the agency estimates, external finances remain a key credit weakness. GEL has depreciated by about 19% since the start of the year against the US dollar. Pg. 9

Restaurant OUR GARDEN welcomes you! Visit OUR GARDEN and see that it’s not just another restaurant!

Pg. 11

Come and relax at OUR GARDEN, Between Tsiteli Sopeli and Bulachauri turns. Contact us: +995 599 801 801

GOVERNMENT NEWS

October 12, 2015 #117

caucasus business week

MAIN EVENTS ENERGY MINISTER: OUR RELATIONS WITH GAZPROM WILL LAST IN THE FUTURE

elations with “Gazprom” have not started today and will last in the future too - Kakha Kaladze Deputy Prime Minister and Energy Minister Kakha Kaladze has conﬁrmed reports about holding another meeting with “Gazprom” company. As the Energy Minister said, relations with “Gazprom” have not started today, we have been receiving gas from Russia for years and these relations will last in the future too. “Any developed country thinks of diversiﬁcation of energy sources and here I mean not only import of additional volume from Russia. We are actively working with Iran, as we see today that there is a real opportunity for Georgia to become a transit country due to our geopolitical location”, he said.

EU LAUNCHES € 1.1 MILLION PROJECT TO SUPPORT EMPLOYMENT SERVICE

he objective of the € 1.1 million project is to provide complex institutional and capacity building to empower the ESS and the Ministry of Labour, Health and Social Affairs of Georgia and other relevant staff to effectively fulﬁl its mission and duties and deliver well-targeted, high-quality, gender-sensitive and cost-effective services to job seekers.

GEORGIAN RAILWAY TO GET CONNECTED TO KUTAISI INTERNATIONAL AIRPORT

ccording to the government administration, Economic Council has approved draft project of “Georgian Railway” at the session held on Wednesday. The project concerns to passenger service to the Kutaisi International Airport. “Georgian Railway” declares, that several projects are discussed and the best will be carried on in order to make connection between the air and the rail easier and facilitate comfortable transportation of the passengers.

GOVERNMENT HAS NO PLANS FOR SALES OF 25% STAKE IN TELASI

s Energy Minister has declared to reporters at the meeting held with the representative of “InterRao”, the government did not consider alienation of state-owned share of “TELASI”. “As for the alienation of the share, honestly to say, there has not been discussion on this topic. If this issue is raised in the agenda and such decision should be adopted, it will become clear for everyone. Of course, the offer should be made to the “InterRao” and any interested investor will be able to participate in this process.

GOVERNMENT ABSTAINS FROM REJECTING INCOME TAX BENEFITS

he business has made an offered to the government, but the government does not try to accelerate the process.’ As Dimitri Kumsishvili, minister of Economy and Sustainable Development declared to TVcompany Maestro, the government carries on analysis and tries to study the world experience in this direction.

GOVERNMENT BUYS 30% OF GRAPES HARVEST

he government purchased 30% of the grapes crop in the main wine region of Kakheti, – George Samanishvili, Director of the National Wine Agency told CBW. According to him, the state bought up the surplus of grapes that has not been bought by the private wine companies. “I can say that everything was very orderly. The state buys grapes not to get a proﬁt, but in order grapes not to spoil and the peasants not to be left without income. From purchased grapes alcohol will be produced, which occupies 10 times less space than wine.”.

GEORGIAN PM MET ASIAN DEVELOPMENT BANK’S NEW HEAD IN GEORGIA

rakli Garibashvili held an introductory meeting with Asian Development Bank’s new Director in Georgia Yesim ElhanKayalar. The two sides discussed the issues of cooperation between ADB and Georgia. The discussion focused on Asian Development Bank-funded projects in Georgia and future mutual. Cooperation for 2014-2018 Strategy (CPS) was especially stressed during the meeting. According to CPS, Georgia will receive support from ADB in the following areas: energy sector, roads,

water supply and sewerage systems, infrastructure and services; ADB will also assist Georgia with Public Sector; Private sector development. Other areas of cooperation include deepening of the ﬁnancial sector; Governance; Gender equality and knowledge-based decision-making. The Georgian Prime Minister wished Yesim Elhan-Kayalar success in her future work in Georgia. Yesim Elhan-kaialari was appointed as the new head of the Asian Development Bank’s Permanent Mission in Georgia on September 30, 2015.

Prior to her appointment to Georgia, Ms. ElhanKayalar has held public ADB-management positions in 10 countries of the Central and West Asia. Ms. Elhan-Kayalar has 25 years of work experience development agencies across the globe, the private sector, as well as higher education institutions. Yesim Elhan-Kayalar holds a PhD in Economics from the University of California, as well as qualifications from Harvard and University of Michigan in finance and management.

FOREIGN MINISTER: “NATO MEMBERSHIP IS TOP PRIORITY FOR GEORGIAN GOV’T”

embership to the North Atlantic Treaty Organisation (NATO) remains as the major topic in Georgia’s political agenda,” stated Georgia’s Foreign Minister Giorgi Kvirikashvili after meeting NATO’s top ofﬁcial at the Alliance’s headquarters in Belgium, Brussels yesterday. I met with NATO Secretary General Jens Stoltenberg with Georgia’s Minister of Defence Tinatin Khidasheli [and] it was a signal and a show of demonstration that NATO membership is a top priority for us,” Kvirikashvili said in a statement released by the Foreign Ministry. The Georgian and NATO sides discussed a wide range of topics, ranging from next year’s NATO Summit in Warsaw, Poland to Georgia’s merit of involvement in international peace and security missions.

Kvirikashvili said becoming a member of NATO was the ultimate goal and emphasized that the Georgian and NATO ofﬁcials discussed the speciﬁc steps Georgia could take to gain unanimity about Georgia-related issues among all 28 NATO member states. He added the NATO Secretary General promised to help the Alliance come together with a consolidated view to “appropriately appreciate” the progress Georgia had made towards NATO membership. What type of appreciation it might be, a Membership Action Plan (MAP) or some other, only time will tell. Of course a MAP is the logical continuation of the process however our main aim is NATO membership,” Kvirikashvili said. During the meeting Stoltenberg thanked Georgia for its commitment to international peacekeeping missions and praised Georgian soldiers and their

NEW PROJECTS SUPPORT ECONOMIC GROWTH IN GEORGIA

dding a new line to Georgia’s railway system, installing roof-top solar panels and boosting tea production in Georgia are some of the initiatives that were voiced at today’s Economic Council Meeting. Members of the Economic Council discussed the state strategy regarding the country’s energy efficiency, noting the importance of moving into a modern, energy-efficient nation. Georgia’s Prime Minister Irakli Garibashvili spoke of the benefits

of roof-top solar panels and said pending Parliament’s approval solar panels would be installed in all residential buildings in Tbilisi. The Economic Council also decided to support the country develop its tea producing capabilities and announced new state program in this direction. The program included building new storage plants in Georgia’s the regions, rehabilitating abandoned tea plantations and employing local people to work in tea production activities. In general there were plans to build several storage plants to keep different agricultural products throughout Georgia. Furthermore, Georgian Railway will soon reach Kutaisi International Airport once a new branch was added to its main line.

BUSINESS WEEK caucasus

The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Address: Aleksidze Street 12 Director: Levan Beglarishvili Mobile phone: +995 591 013936 WWW.CBW.GE Email: caucasianbusiness@gmail.com

professionalism, as well as Georgia’s successful reforms. He also reiterated NATO’s strong support for Georgia’s sovereignty and territorial integrity, the statement said. Kvirikashvili was scheduled to complete his three-day trip to Belgium tomorrow. Before departing Kvirikashvili will meet High Representative of the European Union for Foreign Affairs and Security Policy and Vice President of the European Commission Federica Mogherini, Commissioner for European Neighbourhood Policy and Enlargement Negotiations Johannes Hahn, Special Representative of the European Union for the South Caucasus and the Crisis in Georgia Herbert Salber, European Commissioner for Trade Cecilia Malmström, Belgium’s Deputy Prime Minister and Foreign Minister Didier Reynders and several others.

TBILISI TO HOST SILK ROAD FORUM

arge-scale event is held under the patronage of the Prime Minister for the ﬁrst time this year. Representatives of over 30 countries (China, United Arab Emirates, the US, Turkey, South Korea, Azerbaijan, Afghanistan, Slovenia, Hungary, Italy, Armenia, Czech Republic, Kazakhstan and etc.), governments, including –vice premiers and ministers, as well as authorities of 20 international, ﬁnance and donor organizations. Representatives of business sector from the different countries. More than 700 guests should arrive in order to participate in the forum in Tbilisi. The schedule of the event is already known: “Tbilisi Silk Road Forum” will be opened with a welcome speech of the Prime Minister at 10.00 on October 15. Coopera-

tion Declaration is planned to be adopted. World famous economist, president of Institute of Liberty and Democracy Dr. Hernando de Soto will moderate the event. Several panels should be held on the following topics within the frame of “Tbilisi Silk Road Forum”: To raise awareness and brief the investment community of the scale and range of potential cooperation across the Region; to facilitate regional cooperation and trade; to enhance partnership in: transport, energy, trade and people -to-people contacts; to reﬂect Georgia’s drive for foreign direct investment and economic growth. To remind, co-organizer of the forum is government of the People’s Republic of China. While the forum is supported Asian Development Bank (ADB).

Editor: Nino Gojiashvili. Mobile phone: 595 050404 Reporters: Nutsa Galumashvili; Lazare Gvimradze; Shiva Parizad. Designer illustrator: Giorgi Magradze. Technical Assistant: Giorgi Kheladze

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

PUBLICITY October 12, 2015 #117

caucasus business week

4 HEADLINES RADISSON TELEGRAPH HOTEL TO OPEN AT FORMER POST-OFFICE BUILDING IN TBILISI

BW has been informed that Silk Road Group decided not to build Park Inn hotel in the former building of the Georgian Post. According to the company’s representative, Radisson Telegraph hotel will be located on Rustaveli 31 and can be considered as Radisson’s expansion in Tbilisi. According to Silk Road, a change in the project caused changes in the interior design due to Radisson’s higher requirements.

INTERVIEW

COMPETITION AGENCY CHAIRMAN: BUSINESS SHOULD BE TREATED SKILLFULLY

MARNEULI-500 CONSTRUCTION WORKS UNDERWAY

The oil products market, grains imports, the Black Sea ports, coffee market, lawbreaking in state tenders and the revenue service – these directions represent a small part of the cases the competition agency has been exploring. The competition agency head Giorgi Barabadze updated the IPress on the year on year performance. “Our job and specific cases enable the society to make realistic conclusions on the agency performance”, GIORGI BARABADZE told the IPress.

ubstation of 500 kWh is a part of “Regional Power Transmission Enhancement Project”, cost of 50 million EUR, which is funded by Asian Development Bank (ADB). “Our and our partners’ goal is to become Georgia reliable, stable and prosperous country, which is carried on in line of the strategy “, - Kakha Kaladze declared. The new substation (2020/110 kWh) will be connected to existed “Marneuli” (220 kWh) with the energy transmission line, which is built with own resources of GSE. Turkish company “Best” will implement construction works of substation of 500 kwh.

GOVERNMENT TO BOLSTER RESTORATION OF TEA PLANTATIONS

conomic Council has approved 2 projects, which should be implemented in this branch, at the session on Wednesday. According to the government administration, Georgian tea support program by the state will be started, whereas savings farms are to be built in the regions. Tea support state program envisages rehabilitation of abandoned tea plantations, which will assist to the population employment and tea-growing development. The project will be submitted to the government for approval at the upcoming session.

GOVERNMENT SELLS GRUZWINPROM AT TRIPLE HIGHER PRICE COMPARED TO STARTING PRICE

00%-share of state-owned company “Gruzvinprom” has been sold at 31,105 million GEL at the auction. Initial price amounted to 11,6 million GEL, the bid was 5000 GEL. As result of tense trading, the price has exceeded 31 million. The new owner of the enterprise is Bolero & Company, while Mamuka Potolashvili is 100%shareholder of the company.

GEORGIAN SEAPORTS’ CARGO TURNOVER SHRINKS BY 900 000 TONS YEAR ON YEAR

s of 8 months data, Georgian Sea Ports and maritime terminals have served 13,1 million t cargo, the ﬁgure is less by 6,4% comparing to the last year. Reduction trend of cargo turnover is sustained in Poti Sea Port, where 4,6 million t cargo has been processed, the rate is less by 1,1 million t comparing to the same period of 2014. Cargo turnover is declined in Batumi Sea Port, where 3,9 million t cargo is processed through January-August, the ﬁgure is reduced by 0,2 million comparing to the same period of the previous year.

SPANISH VUELING AIRLINES TO LAUNCH OPERATION IN GEORGIA

he competition intensiﬁes on the low-cost carriers market of Georgia. A Spanish lowcost airline Vueling Airlines wants to enter the Georgian market. Vueling Airlines is going to launch ﬂights in Tbilisi-Barselona directions since next summer. “Commersant” was told by the head of the Civil Aviation Agency (GCAA ) Guram Jalagonia that he had already had a meeting with representatives of the company and acquainted them with the procedures they have to go through to enter the market.

October 12, 2015 #117

caucasus business week

- Mr. Giorgi, what principles does the agency follow to choose this or that commodity market for examination? - The legislation promulgates three variants: 1) application; 2) appeal and 3) the agency’s initiative. There are several issues on which companies have applied to us and we have launched examining these issues. There were issues that we started examining by our own initiative, including the oil market examination. There are markets that are being monitored, including the coffee market. The oil products market inspection started because of the sharp public interest. We also follow other parameters. We watchdog the markets to identify the available risks. Each case is an individual one and each commodity market contains its own characteristics peculiarities. - The information was spread as if the agency requested the right for carrying out searches in business companies, but you refused any plans for making similar amendments to the legislation, but you confirmed the agency commissions were to be refined. What specific job is being carried out? - There are certain details in the competition agency legislation. For instance, EU and World Bank (WB) representatives have expressed remarks in relation to schedules. The legislation sets a 2-month period for amalgamation, and this term should be extended. The administration methods should be improved. For example, two bodies are obliged to notify me on amalgamation, but if they ignore this obligation, there is no regulation what I must do, what kind of sanctions and ﬁnes must be imposed. There are many similar gaps in the legislation.

The competition agency could not have the right for carrying out search activities, because the agency is neither a law enforcement body nor a criminal procedural body. At this stage, we are studying foreign experience. We should receive consultations from experts and the business sector. We will talk with all parties in behalf of the business sector.

- Is the business sector ready for active cooperation with the competition agency? - I confirm we provide valuable cooperation. In the oil products market inspection process, we had close cooperation. In this case the issue was very extensive in itself. We have examined a 10-year period with huge materials and information. -What scheme does the report talk about that proves the cartel collusion? -The legislation obliges me to prepare a small annotation with 2-10 pages for each case by keeping confidential information secret. I cannot divulge the information on how many Tetris the companies were earning from a liter of fuel. If the court declassifies the case, then we will be able to divulge the classified information to a certain extent. The court is probing into the case and it will not be expedient that we divulge the details. We should wait for the court decision. - What are the criteria to determine the amount of fines and why was a different amount of fines imposed on various companies? - The fine is calculated due the company’s financial turnover of the previous year. Their financial turnovers are different and their fines are determined in this way. I would like to stress we have not applied maximum measures and sanctions. The first case is fined by 5%, the second case is fined by 10% of the turnover. The competition agency does not aim to persecute the private business and set an exhaustive anonymous control. Our goal is to improve the current situation in the market so as all market players have opportunity for simple operation. We do not want that our sanctions stifle companies, close them or something similar. Erroneous public opinion was created regarding the competition agency mission. Our mission is not to annihilate someone and our sanctions prove this strategy. We have not applied maximum sanctions, but they correspond to the law infringement degree. This is a standard in any European country. All lawbreakers must be called to account and we verify whether their activities contain law infringement signs. - Did you expect the case would have been appealed to the court? - Everybody is entitled to protect own interests at court and this is one of the

attributes of any country. We have prepared a report proving the existence of law violations. And the companies were entitled to apply to the court. Now it is upon the court to take a decision. I am sure we are right. - What changes are expected to take place in the market? According to certain information petrol prices were to decline…

- Before 2002 about 179 importers used to operate in the market. In the 2010 to 2012 period their number fell to 7 ones and only 7 importers remained in the market. All other companies left the market. Since 2012 the quantity increased to about 33 ones. The tendency is positive. Borders have opened and restrictions have been removed since 2012. I would like to make explanation regarding the prices. The competition agency is not a price controlling body. There is no similar practice in the world. This is a rude mistake when the competition agency is identiﬁed with tariff correction issues. Our ﬁeld is only to determine whether the existing tariffs represent a product of colluded actions. Prices are regulated by the market, not by the competition agency. No one has the right to intervene in pricing. This is a fundamental principle of the market economy. Our mission is to identify whether this or that economic agent misuses a dominating market position. We should realize that the current legislation does not ban a dominating state in the market. The main thing is that this dominating position must not be misused. The competition agency is not responsible for pricing issues. Our only mission is to determine whether the existing price is a product of colluded activities of 5-7 business companies. -After the oil products market examination, there were many considerations about the next target field. The pharmaceutical market was named among one of the most relevant directions. Will the competition agency

explore the pharmaceutical market? - We prioritize those 6-7 cases that we are exploring and the report will be prepared within the legal schedules, that is, in 3-10 months. After these terms the competition agency will probe into all commodity markets in which our society shows much interest, including the pharmaceutical market or other direction. It is untimely to divulge everything in advance, because there are certain risks that may hinder the commodity market examination process. Our society will receive comprehensive information as soon as we start examinations in this or that field. I cannot either confirm or refuse this information preliminarily. All investors will be frightened seeing the competition agency chairman makes ungrounded statements without preliminary research. We should treat the business sector carefully and skillfully. We try to make reasonable, balanced and thoroughly explored statements. Every my statement or statement of the agency may bring very negative results to the state economy and the business sector. - How often do business companies apply to the agency for exploring specific markets? - We have received many similar applications, including against the revenue service and we have fined it, as well as against state tenders. By the way, the revenues service appealed to the court against our decision. Legal dispute between two state offices brought positive reactions in both media space and the society. One state service was accusing another of violating the business sector interest.

If the competition agency makes sure this or that specific market bears high risks we will definitely explore that direction. This is our mission. - Is the Georgian market free and attractive today? - There are all conditions and we do our best to this end. There are no restrictions in this respect. On the contrary, we welcome investors. Georgia provides one of the simplest mechanisms in terms of doing business. We can boldly confirm this. We offer valuable and healthy competitive environment to investors. This is our mission.

October 12, 2015 #117

BUDGET

caucasus business week

STATE BUDGET 2016 No Plans for Pensions Growth in 2016 State Budget

Healthcare Ministry to Receive 3.070 billion GEL

he 2016 state budget will allocate 3.070 billion GEL (30.9% of all state spending) to the Healthcare Ministry. The Healthcare Ministry will finance social protection and pension allowances by 2.182 million GEL, including social expenditures as part of the highland regions development law; healthcare programs will be supported by 799.5 million GEL; medical assets rehabilitation and equipment programs will be financed by 32 million GEL. The Ministry of Education and Science will receive 975.2 million GEL to finance the general education sector by 572.9 million GEL, a growth in salaries to secondary school teachers (the basis wage increased from 305 GEL to 355 GEL starting September 2015, while the figure will reach 405 GEL by April 2016), bonuses for teachers working in highland regions, five vocational schools by 36 million GEL, higher educational and scientific programs by 174 million GEL, educational assets infrastructure development programs by 94.4 million GEL.

The Agriculture Ministry will receive 281.4 million GEL to finance melioration and irrigation system development programs by 64 million GEL, preferential agro credits program by 50 million GEL, vintage promotion programs by 25 million GEL, agriculture machines loan and leasing liabilities by 23 million GEL, agriculture cooperatives promotion programs by over 7 million GEL and agro insurance programs by 10 million GEL. The Ministry of Regional Development and Infrastructure will receive 950 million GEL to finance the road infrastructure improvement projects by 526.6 million GEL, regional and municipal infrastructure rehabilitation projects by 246.2 million GEL, water supply infrastructure rehabilitation and restoration programs by 170.6 million GEL. The Defense Ministry assignments constitute 670 million GEL. The Interior Ministry will receive 595 million GEL, while the State Security Service will be financed by 95 million GEL (the body was separated from the Interior Ministry on August 1, 2015). At the same time, the Interior Ministry assignments will finance the Emergency Management

Agency by 64.2 million GEL. In 2015 the agency was mainly financed by local self-governments. The Ministry of Correction and Legal Assistance will receive 153 million GEL. The Energy Ministry will receive 135 million GEL (gasification works will be financed by 20 million GEL). The Economy Ministry will be financed by 85million GEL (the Produce in Georgia program will be financed by 20 million GEL). The Foreign Ministry assignments will be 100 million GEL. The Ministry of Culture and Monuments Protection will be financed by 95 million GEL. The Justice Ministry will receive 68.5 million GEL. The Ministry of Refugees and Accommodation will be financed by 70 million GEL. The Ministry of Sports and Youth will be financed by 75 million GEL. The Ministry of Environment and Natural Resources will be financed by 40.7 million GEL. The Georgian Finance Ministry will receive 90 million GEL.

AYFB: THE 2016 STATE BUDGET PARAMETERS WILL STABILIZE GEL EXCHANGE RATE

he 2016 state budget is capable of stabilizing the GEL exchange rate, the Association of Young Financiers and Businessmen (AYFB) has assessed the main financial document in these words. The budget bill has been already submitted to the parliament. The GEL deprecation problem that has badly affected a considerable part of Georgian citizens and the business sector should not be omitted. We welcome the 2016 state budget parameters and we expect the document to make positive effect on the GEL exchange rate. This signifies the budget will make not neutral, but positive influence on the exchange rate. The positive influence will be ensured by the budget’s low deficit indicator, AYFB vice president Shota Gulbani noted at the Pirveli press-club. “The 2016 state budget bill shows that the 2016

budget deficit is planned at 3%, the last 10 years’ lowest indicator. We would like to also comment on salary issues that frequently fuel sharp disputes and misinterpretations. In 2016 the salary expenses will increase by 57 million GEL, that is, a 4.1% growth. As reported, in 2009, after the 2008 war, the salary expenses increased by 3%. On average, in previous years the salary expenses increased by 15%. Nevertheless, not absolute, but comparative indicators are more important, that is, not the amount for a specific budget component, but its ratio in total expenditures. We have the following situation: in 2016 the ratio of the salary expenses in the budget’s total expenditures will be 17.1%. This is a lower indicator compared to the previous years. Besides salary expenses, the state budget will also finance a purchase of various goods and services, including vehicles, furniture, equipment and so on. In whole, this part will be financed by 2.4 billion GEL in 2016, that is a 29% ratio in total expenditures. In previous years this indicator was around 38%-40%. Therefore, administrative expenditures will modestly increase in 2016 and this factor will make a positive effect on the GEL stabilization plans”, Gulbani said. The privatization issue is of vital importance, he added. “As reported, in 2015 the Authorities were initially planning to alienate 85 million GEL nonfinancial assets. To resolve the GEL depreciation problem, the government decided to intensify the privatization process. As a result of budget amendments, this part increased from 85 million

GEL to 235 million GEL. The privatization issue will be relevant in 2016 too. Under the bill, in 2016 the government plans to cut nonfinancial assets by 200 million GEL. To put simply, the government plans to sell assets worth 200 million GEL. The 2016 state budget will be less affected by debts. Namely, the Authorities will take 314 million GEL less debts in 2016. It is important that internal debts, that is, government debts before commercial banks, will increase by only 200 million GEL. This signifies the government will not use a considerable part of liquid sources at commercial banks. As reported, this was one of the important issues fueling a growth in the refinancing loans volume. Therefore, this factor will make positive influence on the GEL exchange rate”, Shota Gulbani noted. “I would like to also comment on the inaccurate indicators that were spread by our media agencies regarding the state budget. I mean inaccurate indicators regarding a prognosis of tax revenues. Namely, the information was circulated as if a 3% economic growth could not ensure a 5.14% upturn in revenues. In this case inappropriate variables are compared. In the economics, the nominal variable is compared to a nominal one and the real variable is compared to a real one. A growth in tax revenues is a nominal variable, while the economic growth is a real variable. In 2016 the economic real growth is planned at 3%, while the nominal indicator stands at 7.6%. Based on this indicator, paces of growth in tax revenues, total revenues and expenditures are quite logic and natural”, the AYFB vice president noted.

GEORGE KAKAURIDZE Deputy Minister of Finance Amid a difﬁcult economic situation in Georgia and the greater region, the government does not consider it appropriate to take on additional social obligations – Deputy Minister of Finance George Kakauridze stated. According to him, the state does not intend to abandon the already undertaken obligations, including pension provision, especially since the number of pensioners increased by 40,000 people. “It requires additional expenses the state cannot afford today,” he explained. The pension fund will increase by GEL 90 million in the 2016 budget though the pension itself will not grow. An increased funding will be used to fulﬁll commitments to increase pensions by 10 GEL from September this year. A total of GEL 1.480 billion will be spent on pensions in 2016, while in 2015 – GEL 1.390 billion.

“We should Direct Major Part of Expenditures to Education and Health Sectors Today to Acquire Healthy and Qualified Workforce Tomorrow” Nodar Chichinadze President of the Association of Young Financiers and Businessmen (AYFB) The 2016 state budget introduces no strategic changes and main directions and parameters remain the same, in practice. Nevertheless, the new budget bill almost thoroughly reflects the existing economic challenges. The recent changes in the state economy, particularly the GEL depreciation, should be reflected in an adequate budget. It is important that the budget deficit narrows and this tendency will alleviate the pressure on the GEL exchange rate. It is also of vital importance that the government will largely cut taking new debts. This signifies the government will return the scheduled part of the taken debts to commercial banks and take 2.5 times less loans. This factor will make positive influence on liquidity indicators of commercial banks and state securities interest rates will also decline. As to the priorities, healthcare, education and infrastructure – all three directions are of vital importance for long-term economic growth. The economy of modern developed countries is based on the human capital. This instrument is particularly important for Georgia, because our country is not rich of oil, natural gas and other natural resources. Consequently, we should direct a major part of expenditures to the healthcare and education sectors today to acquire healthy and qualified workforce tomorrow. In parallel regime, infrastructure should be also developed and advanced. We know many successful countries that boosted economic development through active policy in the infrastructure sector.

ISET ECONOMIST

October 12, 2015 #117

caucasus business week

GEORGIAN WINE

Plan for the Worst, Hope for the Best “You mean there’s a catch?” “Sure there’s a catch”, Doc Daneeka replied. “Catch-22. Anyone who [claims he is crazy because he] wants to get out of combat duty isn’t really crazy.” Joseph Heller, Catch 22

he Georgian wine industry had a couple of very good years in 2013 and 2014, following the opening of the Russian market. Exports skyrocketed, prices of grapes followed suit. For all the talk about diversiﬁcation, within just two years, Russia’s share in the total exports of Georgian wine shot up from 0 to almost 68%. The red grape varieties – providing the raw material for semi-sweet wines that are particularly popular on the Russian market – soared to hitherto unthinkable levels. For example, as exporters vied to place Stalin’s favourite Khvanchkara wine on the Russian supermarket shelf, the Alexandrouli grape variety, from which it is made, fetched a price of about 8 GEL per kg. Needless to say, higher wine and grape prices provided powerful stimuli for additional investment in vineyards and processing capacity, putting even more eggs into the Russian basket. In just three years, grape production more than doubled from 144,000 ton in 2012 to about 290,000 ton in 2015 (expected harvest of this year). With the Russian market sharply contracting in 2015, the amount of pain inﬂicted on the Georgian farmers and winemakers has been directly proportionate to the windfall gains they made in the previous two years. Grape prices fell to levels only slightly higher than prior to 2012. Saperavi, Georgia’s main red variety, is currently trading at roughly 82 tetri per kg, well less than half of the peak value (1.94GEL, on average) it achieved in 2014. Kakhetian farmers are once again taking it to the streets, protesting over the prices offered to them by the wineries, and lobbying for higher government subsidies. And given that Georgia is entering an election year, they are likely to be successful.

THE WAY FORWARD: CHINA AND CHURCHKHELAS?

nderstandably, all governments in Georgia’s recent history were eager to provide price support and subsidize smallholder farmers in order to prevent a social and political crisis. Such a policy is equivalent to spreading the risks that are specific to winemaking over all the other sectors of the economy. What the Georgian governments have failed to achieve thus far, however, is to properly insure the industry against extreme demand fluctuations which have been plaguing it since Gorbachev’s anti-alcohol campaign of 1985-1988. Such insurance can only be achieved through greater diversification of Georgian wine exports, on the one hand, and promotion of new and traditional products such as organic and kosher wines, Chacha, brandies, and even Churchkhelas, on the other. Risks could also be reduced by investing in locally branded products and agritourism through a Japanese-style “one village-one-product” policy. Finally, what about China? Almost a dozen small Chinese companies are currently trying to bring Georgian wine to China and the results are showing. Yet, the challenge these companies are facing can be summarized in one word: information. The average Chinese consumer is simply unaware of a country called Georgia, let along its being at the origin of the world’s wine history. As we have learned through interviews, one or two containers of Georgian wine may take a year to distribute (through friends and relatives) as large Chinese wholesalers would rarely take upon themselves the risk of placing a relatively unknown product. The Georgian government has recently established an office in Beijing to promote Georgia’s brand as a country. Such investment in international marketing is, of course, a great step forward, but many more (smart) steps would be needed.

The government has 58 embassies (all of them in potential wine markets) across the globe. Mikho the wine-maker from Kakheti does not have a single embassy. It would therefore be highly beneﬁcial for the government to take some of the money wasted on subsidies and, instead, make use of its diplomatic infrastructure to promote Georgian wine-makers around the world. (Incidentally, this way, the government will also buy its own image insurance against regular farmer protests in Kakheti.) By Irakli Kochlamazashvili, Ia Katsia and Chase Johnson

Chart 1: Georgian wine exports by value (current USD)

THE WRITING WAS ON THE WALL!

he fact that overexposure to the CIS and Russian markets carried with it significant commercial risks for the Georgian wine industry was on everybody’s minds ever since the first shipment of Georgian wine crossed the Russian border in summer 2013. Initially, the main concern was that Georgia (and its wines) would once again fall out of favor with Russia, leading to the re-introduction of tariff and non-tariff restrictions on Georgian exports. But, even leaving politics aside, it was clear that having the entire industry depend on Russia subjected Georgia to the (uninsured) risk of a sudden downturn in that particular market. Yet, despite these well-justified concerns, a paradoxical Catch 22 situation was created with the opening of the Russian market since most private actors in the value chain lost any incentives to invest in marketing their wines (and Georgia!) outside Russia and CIS. With every bottle of wine sucked into the Eurasian vacuum, they were busy celebrating and investing in additional grape growing and processing capacity. And, let’s face it, private Georgian wineries would have been crazy doing anything else since, taken alone, none of them have sufficient size to engage in the kind of massive international campaigning that would be required to introduce the fabulous story of Georgia’s winemaking to new markets.

While it is difficult to blame private companies for re-capturing the Russian market, perhaps the worst mistake was committed by the Georgian government, which failed to seize on the opportunity to prepare for the rainy day (which came sooner than anybody expected). Thus, instead of engaging the private sector and coordinating a well-targeted marketing campaign (that could be financed by some of the windfall profits) to promote Georgian wines to new markets, the government spent tens of millions of lari on subsidizing the industry at a time when money was its least concern. As grape prices soared, the government slightly reduced the subsidy from 36 to 28 tetri per kg (on average). However, the total amount of taxpayers’ money thrown at wine producers and farmers (including, since 2013, not only smallholders but also large farmers cultivating more than 10ha) exceeded 30mln GEL in both 2013 and 2014. While not representing a very large share in Georgia’s total exports (or GDP), the wine sector is of key significance for the livelihoods of the vast majority of Georgian farmers. At the same time, given how long it takes to go from grape seed to placing a bottle in a grocery cart, it is a sector that is extremely sensitive to changes in demand. Hence, the need for some sort of insurance.What a waste!

*Data include only the first 8 months of 2015 (Jan-Aug).

Table 1: Grape Prices and Subsidies, 2013-2015

* Via ISET Economist Blog The article was produced with the assistance of the European Union through its European Neighbourhood Programme for Agriculture and Rural Development (ENPARD), Austrian Development Cooperation, CARE Austria and CARE International in the Caucasus. The contents are the sole responsibility of the authors and can in no way be taken to reflect the views of the European Union, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus.

EURO UNION

October 12, 2015 #117

caucasus business week

GEORGIA’S BENEFITS FROM FREE TRADE REGIME WITH EU ARE MISERABLE

eorgia’s exports to the EU market have grown by only 1% after the country signed the deep and comprehensive free trade agreement with the EU. The Authorities expected the agreement to boost Georgia’s exports and investments inﬂows, but the results are pitiful, the Rezonansi newspaper reads. According to GeoStat, the national statistic service of Georgia, in January to August 2015 Georgia’s foreign trade turnover with EU countries made up 1.982 billion USD, up 2% year on year, including the exports constituted 413 million USD, up 1% and the imports marked 1.569 billion USD, up 2% year on year. The ratio of

and GDP would also grow by 4%. At this stage, only Georgian nuts, greenery and bay leaves have penetrated the EU market. Alcoholic drinks and mineral waters are exported in small volume. For the last 13 months the DCFTA beneﬁts are conﬁned by only these indicators. Nevertheless, statistician Soso Archvadze positively appraises the trade relations with the EU and asserts the Georgia’s exports would be higher without the current global challenges. “Georgia has manifestly improved indicators. Naturally, we want the exports to increase by 21%, not by 1%, but everything is comparative. Strengthened USD has affected the EU market too. At the same time, the EU lost many orders after introduction of

“

Georgia has manifestly improved indicators. Naturally, we want the exports to increase by 21%, not by 1%, but everything is comparative. Strengthened USD has affected the EU market too. At the same time, the EU lost many orders after introduction of sanctions against Russia. EU’s direct losses exceed 100 billion EUR.

EU countries in Georgia’s total foreign trade turnover made up 31%, including the EU ratio in Georgia’s total exports increased by 7% to 28%, but this growth was driven by contraction in Georgia’s exports to the CIS countries, particularly, to the Russian Federation and Ukraine. More than one year has passed after the EU admitted the Georgian exports to its market. On September 1, 2014 a main part of the Georgia-EU Associated Membership Agreement was enacted, including the deep and comprehensive free trade area (DCFTA) component. This signifies Georgia additionally acquired a market of 28 countries with over 500 million residents. Georgian products satisfying food safety and product security standards (except for Garlic that is limited by tariff quotas) are admitted to the EU Market without customs duties. We should also remember that the DCFTA agreement implies liberalization of trade in goods and services and enables Georgia to freely use three components of the EU internal market’s four opportunities – goods, services and capital. “After the enactment of the agreement Georgia will become more attractive country for investors and investment inflows to the country will increase, new technologies will be introduced, competitive domestic production will be stimulated and new job places will be created” the Georgian government officials were saying and asserting that association and free trade agreements would increase Georgia’s exports by 12%

“

sanctions against Russia. EU’s direct losses exceed 100 billion EUR. A joint demand has declined. In this situation a 1% growth is a positive indicator”, Archvadze said and added open doors do not sufﬁce to penetrate the EU market and Georgian enterprisers have to activate their efforts.

“The EU market will not suffer if Georgian products fail to penetrate there. The Georgian business must be interested in entering the EU’s solvent and institutionally arranged market with 500 million consumers”, Soso Archvadze said and added the Economy Ministry and the Agriculture Ministry had initiated the Produce in Georgia project for training speciﬁc bodies in advertising Georgian products in foreign countries. We have received wider opportunities compared to our real potential and results. Georgian enterprisers turned out unready to enter the EU market, Academician Avto Silagadze pointed out.

“Compared to the CIS countries, Georgia’s foreign trade indicators with EU are growing. After conclusion of the association agreement we gained wider opportunity for penetrating this market. But we were not ready to make a full use of this opportunity. At this stage, Georgia cannot fully replenish the exports quotas on the EU market. This signiﬁes we have received wider opportunities compared to our real potential. Georgia still remains in the search regime. We should perform much job to timely use this opportunity”, Avto Silagadze said.

We have created erroneous expectations for exports growth and many researches were suggesting the same, economic expert Giorgi Ghaghanidze said. According to more logic considerations, investors would enter Georgia and new exports

products would be created, but the government’s unclear economic policy has thwarted similar plans. “Exports will not increase in terms of domestic cooperation, while domestic trade volume is also low. Therefore, Georgia’s exports with EU could not increase so quickly. We have failed to employ this opportunity because of the Georgian government’s inconsecutive policy and the current developments in the world”, Giorgi Ghaghanidze said. The Georgian government has postponed expectations for growth in investments and exports for 2016. Parliamentary elections will be held in 2016 and breakthroughs in this direction are less expected. The Rezonansi

EU SUPPORTS GEORGIA’S PRIVATE SECTOR THROUGH DCFTA

he European Union (EU) is supporting Georgia’s small businesses to ensure they enjoy beneﬁts from the Deep and Comprehensive Free Trade Area (DCFTA) agreement. In this regard, the EU Delegation to Georgia and the country’s Ministry of Economy brought together local businesses and banks, business support organisations, Government ofﬁcials, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) for a roundtable discussion to learn about the support needs of small, local businesses.

The roundtable took place on October 2, where the participants learnt about the ﬁndings and recommendations of the recently completed study ‘EU Support to the Private Sector in the context of Association Agreements/DCFTAs’. The discussion provided an opportunity to address the opportunities and challenges constraining Small and Medium-sized Enterprises (SMEs), including business development costs and availability of ﬁnance. The EU stands together with Small and Medium Enterprises in Georgia, who will play a vital role in making the DCFTA a success. With time this

will bring about genuine changes for businesses and provide new opportunities to hundreds of thousands of Georgians,” said Ambassador of the EU to Georgia Janos Herman. It was believed the DCFTA agreement, which was part of the country’s Association Agreement (AA) with the EU, would help SMEs to seize new trade opportunities with the EU and improve access to ﬁnance, enabling SMEs to make necessary investments to increase their competitiveness and to comply with new standards. Georgia’s Minister of Economy and Sustainable Development, Dimitri Kumsishvili said: “We

highly value EU support in implementation of the DCFTA. We attach great importance to effective implementation of the DFCTA and follow our reform agenda. Support to business and especially SMEs development and enhancement of its competitiveness is very important especially in DCFTA context. We are working on SMEs Development Strategy, which will support further improvement of business environment and boost SMEs growth and competitiveness,” he said. Georgia signed its AA, which includes the DCFTA, on June 27, 2014.

HEALTHCARE caucasus business week

October 12, 2015 #117

SOSO SHATBERASHVILI: MEDICINE PRICES WERE GROWING IN GEORGIA CONTRARY TO GLOBAL MARKET TENDENCIES

GEORGIA – ONE YEAR ON PRESCRIPTION DRUGS

avid Sergeenko and the representatives of pharmaceutical companies summed up one year since prescription drugs policy came to force in Georgia. The Minister noted that the prescription system has decreased pharmaceutical addiction by 95%. Apart from some blemishes, the reform can be assessed as successful, Sergeenko noted. According to him, selling of psychotropic drugs without prescription can be brought to minimum. “We do not have absolute power to control every pharmacy’s sales. The most important is that the issue has become episodic, while it used to be systematic just a year ago,” Sergeenko said. According to the former head of National Agency of Drugs Tina Turdziladze, the system should be evaluated to see whether or not desired results have been achieved or not. The Minister believes that main problem today is the high proportion drugs occupy in the overall healthcare expenditures. “We need to reduce it with legal and transparent ways, not with mechanic restrictions,” Sergeenko added.

A CONTROL MECHANISM NEEDS TO BE IMPLEMENTED ON THE PHARMACEUTICAL MARKET

octor Maia Dokhturishvili is a gynecologist and a reproductologist. In an interview with CBW, she assesses the pharmacological field of Georgia: the doctor-patient dynamic in the country, as well as the pharmaceutical market and its shortcomings. “Patients often express concern that in spite of the different healthcare programs, most drugs are still very expensive. The financially vulnerable population does not have access to many drugs. This often leads to a protest against doctors and people stop seeing their doctors for preventive healthcare measures. When faced with financial hardship, preventive healthcare becomes luxury.” “As for the pharmaceutical market, it’s no secret that not every drug is equally effective. In many cases the doctors themselves do not know well the composition of the drugs. Therefore, they often don’t know how effective this or that drug really is. The effectiveness of some drugs should be put under question. Some control mechanism has to be put in place for this uncertainty to be eradicated for once and for all. It is up for the government to decide what type of a control mechanism they implement,” says Maia.

Soso Shatberashvili, one of the leaders of the Leftwing Alliance, overviews the current situation on the pharmaceutical market.

“Our Authorities have concluded the EU associated membership agreement that obliges our country to ensure quality control on medicines” - Mr. Soso, medicines have risen in price. How should the government regulate this issue and should the government subsidize this direction? - Naturally, the Authorities should intervene in resolving this challenge, but without subsidization instrument. In general, subsidies are applied to certain groups and a determination of these groups is a superﬁcial issue. People consider themselves in this or that group. Pretences arise that one group receives medicines through subsidies and another not. Therefore, we give the following recommendation to the Authorities that most-used medicines against ﬂu, pressure, analgesic drugs, as well as blood transfusion systems should be included in the universal healthcare program. No treatment is available without medicines and there are a lot of samples to this. There are many cases when patients cannot afford buying medicines and the patient’s visit to a doctor becomes useless. Therefore, the top margin price on essential medicines should be regulated by the universal health program, even more so, the budget grows to 10 billion GEL. - What factors fuel a growth in medicine prices? - The GEL exchange rate depreciation is one of the reasons for growth in medicine prices, but not the major and decisive one. Even amid the strong exchange rate, the global prices on medicines did not change, but the prices were increasing in Georgia anyway. We started fundamentally exploring the issue. No economic background is necessary to identify one of the reasons for growth in medicine prices. The reason is several monopolist pharmaceutical companies operate in Georgia and they control almost the whole market. These monopolists follow cartel collusion agreement not to let medicine prices decline, including there are companies that act as medicine importer companies, retailer

and wholesalers, distributors and own clinics and insurance companies. This signifies these companies control not only the pharmaceutical market, but also the healthcare system. Medicine prices grow because of this reason. Even more so we know in Europe pharmaceutical companies manufacture medicines at various prices, including at very cheap prices. - How do the monopolist companies hinder new players to enter the market? - For example, I am an ordinary citizen and I want to import a medicine from abroad. I have taken a license, but I cannot implement my plans because of pharmaceutical mafia that will hinder me to import this medicine. They apply various ways and instruments to this end. They have bribed the customs services that will immediately halt you as soon as you dare to import medicines to the country. They will park your truck under the sun, turn off refrigerator to spoil medicines. Only after that they will let me pass customs clearance to enter the country, but the drugs have been already spoiled. This is a widespread scheme. - There is the competition agency in the country that is immediately responsible for the markets control and dismissing monopolies… In 2012 the antitrust service abolished by Saakashvili was restored as the competition agency, but it remains an inefficient body. We have explored the performance of this body and identified that the agency since the restoration has examined the coffee market, when the pharmaceutical market must have been explored first of all to eradicate monopolies. We urge the Authorities to instruct the competition agency to dismiss monopolies

on the pharmaceutical market. - What is your opinion on the quality of medicines? Are you content with the quality of the traded drugs? - My family members are doctors and I know the medical sector very well. Moreover, I often meet with doctors as a politician. Initially, I will start with the positive. The Hepatitis C Elimination Program ensures imports of highest-quality medicines to Georgia. As a result, many patients have been cured of this awful virus. But, in general, low-quality drugs are sold in Georgia, especially domestically manufactured preparations. I am talking about my own experience. I have taken antibiotics, but they were useless. Moreover, low-quality drugs are imported form even abroad, especially from Russia and Ukraine, partly from Bulgaria. High-quality medicines are imported from France, Germany and Hungary, but they are very expensive. As a result, our citizens have to buy low-quality medicines because of vulnerable social conditions. Our Authorities have concluded the EU associated membership agreement that obliges our country to ensure quality control on medicines. We have a legislative basis. Therefore, the Authorities must show the will and carry out control on medicine quality, because the medicine quality determines the level of life of our population. - According to our information, the Health Ministry plans to toughen quality control on medicines. How would you appraise this decision? -I positively appraise this idea and initiative in itself, but the idea must be implemented in life. The Ministry should take efﬁcient steps. The government should buy an appropriate lab. We have specialists to lead the lab. Similar labs should be arranged in Tbilisi, Kutaisi, Batumi, Zugdidi and Telavi. The Authorities should carry out a total control on the medicines quality.

ECONOMY

October 12, 2015 #117

caucasus business week

LAST WEEK - TOP 6 ECONOMIC NEWS IN GEORGIA

Fitch Rating Afﬁrmed Georgia’s Sovereign Rating

International rating agency Fitch Ratings has affirmed Georgia’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘BB-’ with Stable Outlooks. The issue ratings on Georgia’s senior unsecured foreign and local currency bonds have also been affirmed at ‘BB-’ by the influential agency. As the agency estimates, external finances remain a key credit weakness. GEL has depreciated by about 19% since the start of the year against the US dollar. While the floating of the exchange rate has been a shock absorber and somewhat mitigated the decline in reserves, the reserve cover of current external payments remains low. Fitch expects net external debt to rise as a result of the depreciation of the exchange rate to about 72% of GDP by the end of 2015 (53% at the end of 2014). At the same time, the agency expects the current account deficit to remain well above the ‘BB’ median. The agency forecasts it to be about 12% of GDP in 2015, compared with the ‘BB’ median of 2.7% of GDP. Since CIS countries account for nearly 40% of Georgia’s exports, Fitch expects exports to contract by about 17% this year. Although lower oil prices will also drive a significant decline in imports, on an overall basis, we expect the current account deficit to widen, albeit by less than our previous forecast. Fitch forecasts a widening of the fiscal deficit in 2015 and expects it to reach about 3.5% of GDP. However, Fitch believes the IMF programme, which is expected to remain until 2017, will provide an anchor for further progress on structural and economic reforms and should support fiscal finances.

Georgia Reduces Its International Debt, NBG Reveals

Georgia’s financial debts are decreasing and its international assets are increasing, says the National Bank of Georgia. Latest data from the Bank showed as of April-June 2015 – the second quarter of the year (Q2) – Georgia’s net international investment position (IIP) was -$17.5 billion USD (-39.3 billion GEL), which was -112.3 percent of the country’s Gross Domestic Product (GDP). This figure had increased by $607.6 million USD compared to Q2 of 2014 and by $356.7 million USD compared to Q1 of 2014. Transactions and other changes were negative during the quarter, while the exchange rate and price changes were positive, noted NBG. A country’s IIP was a financial statement that set out the value and composition of that country’s external financial assets and liabilities. A positive IIP value indicated a nation was a creditor nation, while a negative value indicated it was a debtor nation. NBG said Georgia’s international assets had increased by $305.5 million USD during the second quarter of this year and by $500.3 million USD compared to Q2 of 2014. The country’s total assets amounted to $6.4 billion USD (14.3 billion GEL) by the end of second quarter of this year, noted NBG. Meanwhile Georgia’s liabilities increased by $662.2 million USD compared to the previous quarter and by $1.1 billion USD compared to Q2 of 2014. The country’s total liabilities amounted to $23.8 billion USD (53.6 billion GEL).

Georgia Sends First Cargo Train to Azerbaijani’s Vale Station

Georgian Railway is launching a new cargo transit route to Vale railway station in Azerbaijan. Last week Azerbaijani’s Vale

railway station received its ﬁrst cargo train from Georgia. Wagons loaded with coal were emptied in the new truck terminals. In the near future it was planned to transit wheat and other products from Georgia to Azerbaijan, announced the Government of Georgia. The railways infrastructure that linked Georgia to Azerbaijan’s Vale railway station has not been functioning for several years.

Export from Georgia Continues to Decrease

The volume of export from Georgia significantly decreased in January-August period of this year. In the first eight months of 2015, the export volume from Georgia reduced by 24% and amounted to $1,459 million. In the same period, the foreign trade turnover amounted to $6,395 million. Export makes only 23% of foreign trade turnover. In January-August 2015, exports to the CIS countries decreased considerably. The figure totals $556 million and is 45% lower than the previous year’s data. Exports to the EU increased by 1%, constituting $413 million. CIS countries account for 38% of Georgia’s exports. In the same period of 2014 this figure was 52%. The share of the EU countries in Georgian exports is 28% and is seven percentage points higher than in the previous year. Azerbaijan still remains the country’s largest trading partner, but the volume of export from Georgia to this neighbor country has reduced significantly. In first eight months of 2015, export to Azerbaijan amounted to $172.6 million which is 54% less than in 2014. The main reason behind the decline in the volume of Georgian exports to Azerbaijan was Azerbaijan’s 2014 transition to Euro 4 Standard, which regulates the level of toxic emission from all vehicles. Export has also decreased to Georgia’s main trade partners – Russia (-47%), Armenia (-36%), Turkey (-16%). Bulgaria is a significant increase (+ 28%), China (+ 49%), Uzbekistan (74%) and Canada (55%).

According to the data for the ﬁrst eight months of 2015, copper ores and concentrates are in the top ten of the largest export commodity groups with $172 million (12% of total exports). However, compared to January-August, a 7% decline in exports in this commodity group is also observed. Exports of ferroalloys is on the second place with $149 million (10 % of total exports), a 26% decline compared to the previous year, followed by vehicle group with $125 million (9% of total exports), a 66% decline compared to the previous year.

Georgia Plans to End Electricity Import

Georgia plans to completely turn its back to electricity import starting 2018, according to the outlook of Georgian Energy Ministry posted on its website. With electricity import totaling 0.75 billion kilowatt hours in 2015, by constructing new power plants, Georgia plans to reduce electricity import to 0.21 billion kilowatt hours in 2016, 0.23 billion kilowatt hours in 2017 and to completely cover the current shortage of electricity starting from 2018, said the outlook. The electricity generation in Georgia will increase from 10.96 billion kilowatt hours in 2015 to 12 billion kilowatt hours in 2016, 12.74 billion kilowatt hours – in 2017 and 2018, 13.71 billion kilowatt hours – in 2019 and 15.15 billion kilowatt hours – in 2020, according to the Energy Ministry’s plans. The forecasted volume of electricity generation in Georgia is 37.67 billion kilowatt hours in 2025 and 50.31 billion kilowatt hours in 2030. The major volume electricity is produced in hydropower plans in Georgia. According to the forecasts of the Georgian energy ministry, the country’s hydropower stations will generate 8.7 billion kilowatt / hours of electricity in 2015, 9.36 billion kilowatt hours in 2016, 10.03 billion kilowatt hours in 2017, 11.28 billion kilowatt hours in 2018, 12.3 billion kilowatt hours in 2019, 13.24 billion kilowatt hours in 2020. The electricity generation by Georgia’s hydropower stations is projected at 24.4 billion kilowatt hours

in 2025, 24.4 billion kilowatt hours in 2030. The demand for electricity on the domestic market of Georgia will also grow, but at a slower pace. In particular, it is predicted that the demand for electricity in Georgia will increase from 10.44 billion kilowatt hours in 2015 to 10.74 billion kilowatt / hours – in 2016, 11.08 billion kilowatt hours – in 2017. The demand is predicted at 9.67 billion kilowatt hours in 2018, 10.15 billion kilowatt hours in 2019, 10.66 billion kilowatt hours in 2020, 13.61 billion kilowatt hours in 2025, and 17.37 billion kilowatt hours in 2030. The surplus electricity is to be exported. The export of electricity from Georgia is expected to reach 0.57 billion kilowatt hours in 2015, 0.98 billion kilowatt hours in 2016, 1.37 billion kilowatt hours in 2017, 2.56 billion kilowatt hours in 2018, 3.01 billion kilowatt hours in 2019. The electricity export is to be increased up to 3.88 billion kilowatt hours in 2020, up to 22.57 billion kilowatt hours in 2025, up to 31.15 billion kilowatt hours in 2030.

Georgia Creates 18m GEL Recreation Zone in Poti

The Georgian Government is spending about 18.5 million GEL to improve tourism infrastructure and return the coastline of Poti’s Maltakva recreation zone into better shape. The 18,507,000 GEL Maltkava development project included creating all infrastructural conditions necessary to grow the sea resort’s touristic potential. Work to renew the Maltakva coastline began today. The ﬁrst stage of the project included building a 370m-long boulevard along the coastline; for which 4.18 million GEL was allocated. Poti Municipality City Hall announced Piramida FR construction company won the tender and was responsible for implementing the project. Beside arranging the boulevard, Piramida FR has already started building a 570m road leading to the beach. The road will also feature open parking spaces.

BUSINESS

caucasus business week

October 12, 2015 #117

SOFT DRINKS MANUFACTURERS WAITING FOR MEETING WITH PM

HARVEST 2015: 118,000 TONS OF GRAPES PROCESSED IN KAKHETI

s of last week, more than 118,000 tons of grapes were processed in Georgia’s Kakheti region. More than 80 million GEL has been generated as a result. 4,346 tons of grapes were processed in a single day on October 4, which indicates that the pro-

cessing of grapes has been successfully on-going in Kakheti. Racha-Lechkhumi region will soon join the harvest season as well. Up until now, 62,000 tons of Rka Tsiteli, 41,200 tons of Saperavi and 2,800 Kakhetian Mstvane and 12,300 other types of grapes have been processed in Georgia.

oft Drinks Producers Association appeals to the Prime Minister with another open letter. Members of the Association are against the labelling of non-alcohol drinks and believe that a meeting with the Prime Minister can solve the problem. The letter notes that the Minister of Finance did not take the business’ position into notice and adopted the decision independently. This action is against the PM’s promise that the government will not change regulations/or write new ones without consulting the business. Producers of non-alcoholic beverages believe that unreasonable budget expenditures will be made by introduction of labelling and hiring of a foreign company for this purpose. “Members of Soft Drinks Producers Association strongly condemn action held by Mr. Nodar Khaduri on the issue of labelling on September 29, 2015. We regard, that the Minister is trying to mislead the population by this kind of campaign. His motto, “labelling in favour of population” is absolutely cynical, especially

when it brings about unreasonable budget expenditure. Payments for foreign companies to make electronic labelling of non-alcohol products exceed their primary cost 100 times. We offer the government an accounting method without expenditures. We tried for several years to establish an effective communication with the population in order to gain their goodwill. Be assured that the feeling of social responsibility makes us act and protest the inadequately high prices set by the government for the electronic labelling service. This will damage the population as well as the business and the budget. While it should become a hard burden for the state and budget,” the letter reads. Hereby, the Association notes the will to meet the Prime Minister, in order to introduce completely their arguments and proposals linked to this issue, “we believe that electronic labelling is neither lawful nor affective”. Labelling of non-alcohol drinks is due to become compulsory starting November 2015.

GLOBAL DEFENSE GROUP MAKES AN INVESTMENT OF $0,3 MLN TO SET UP A SHOOTING RANGE IN TBILISI

ompany Global Defense Group will open a shooting range in Tbilisi by the end of 2016. Underground building and land plot of 543.33 square m, located on Ketevan Tsamebuli Ave should be delivered with direct purchase right to Global Defense Group.

Its value totals 350 thousand GEL. As the government decree notes, the investor is obliged to arrange a riﬂe range within 12 months after the signing of the corresponding agreement. According to the terms. The investor should make investment not less than 300 000 USD in order to arrange the riﬂe-range.

SID FORUM FOUNDATION WILL ASSIST GEORGIA WITH FORMATION OF IHUB

GEORGIA EXPECTS PLENTIFUL, HIGH QUALITY CITRUS HARVEST 2015

fter the last year’s poor citrus harvest, Georgia is expecting a rich and high quality ‘orange harvest’ this season. The typical citrus season runs from November to January and in this time it is expected more than 135,000 tonnes of citrus fruit will be harvested, of which 105,000 tonnes will be picked in the north-western Ajara region. Meanwhile Georgia’s western Guria region, which is rich with citrus plantations, was expected to generate about 25,000 tonnes of citrus this season. Of this 16,500 tonnes of mandarins are

expected to be picked, 880 tonnes oranges and 900 tonnes of lemon. The Agriculture Ministry of Autonomous Republic of Adjara announced this year’s harvest would be double the haul of last year and the quality of citrus will be better than in 2014, when only 80,000 tonnes of citrus was picked up. Adjara’s Agriculture Minister Zaur Putkaradze told local newspaper Resonance this year’s harvest would be “one of the best”. He said the citrus fruit, once picked, will be exported to the main markets in Russia, Ukraine and central Asian countries.

GOVERNMENT SURPRISED AT KAZTRANSGAS CLAIMS

here has never been a conversation that KazTransGas may request a refund of investments the company made,” the Minister of Economy of Georgia Dimitri Kumsishvili said. Kumsishvili’s comment followed in response to the Kazakh side’s unexpected statement about a compensation for damages if the parties fail to agree on the company’s return to the Kazakh management. The refund is said to be no less than the amount of investments made by the company. “Of course, the parties have the right to have different positions, but all this must be resolved

through negotiations. We have never spoken about the recovery of the investment. The issue was never raised at all,” the Minister noted. The Kazakh side’s claims were also unexpected for Minister of Energy Kakha Kaladze. “I am sincerely surprised by these claims against us because we are currently in talks. I have repeatedly said that the Department of Energy is not against the return of KazTransGas-Tbilisi to the Kazakh management, but there were some problems with the Ministry of Finance. We are holding negotiations on this issue,” the Minister explained.

ID Forum Foundation discusses implementation of investment projects in Georgia. The company’s founder Dmitry Podoliev is visiting Georgia. He held a meeting with the minister of Economy. According to Ministry of Economy, the sides have discussed the issue of investment implementation by funding of the Norwegian State via SID Forum Foundation in Georgia. The aim of SID Forum Foundation is to support

development of innovations and entrepreneurship in Georgia. The basic components include formation of innovative hub (iHub), which will promote formation of the so-called “Georgian Sicyon Valley”. The project term is deﬁned by 2 years. Innovation and Technology Agency, legal entity of public law, should be engaged in the project from Georgia’s side. The Agency’s priority is to attract investments in this direction and support innovative entrepreneurship.

RESORT “GODERDZI” TO RECEIVE TOURISTS SOON

s Ministry of Finance and Economy of Adjara declares, the resort should be opened by the winter season 2015-2016. Construction works of 6 hoteltype cottages are being ﬁnished by that time, which will receive a total of 72 visitors. The near-by area of cottages and rope way is actively arranged. Necessary inventory is being purchased. Construction of the residential intended for the staff is already completed and works on the cen-

tral water and sewage system are under the procession. To remind, construction of ski-resort on Goderdzi Pass started in 2011, while the construction – in 2012. The government spent 0,5 million GEL on project works of the ski-resort in 2011, while investment of 13 million GEL has been invested in the resort construction in 2012. As for the devices for the rope way and infrastructure, the government has attracted preferential loan of 10,93 million EUR from Austrian Bank UniCredit Bank Austria AG.

SECOND-HAND CLOTHES BUSINESS LOSES CUSTOMERS IN GEORGIA

epresentatives of the second-hand clothes business talk about a sharp decline in demand for the products. In particular, the founder of the chain of stores notes that the number of buyers has been reducing in recent years due to the general economic situation in the country. “State of our business is getting worse every year. This year the number of customers de-

creased compared to last year,”- he explains. Most second-hand shops in Tbilisi buy products from importers. According to Director of the importing company, sales have fallen sharply recently due to the general situation in the country. “Now everyone is thinking about the survival and people have no extra money to buy the clothes. People cannot afford new clothes and wear old, “- the importer explains.

October 12, 2015 #117

COMPANY NEWS caucasus business week

TBC RENOVATES MORTGAGE CENTER ON CHAVCHAVADZE AVENUE

n October 9 TBC Bank’s ofﬁce on Chavchavadze Avenue presented to its guests the renovated Mortgage Center, offering a more comfortable environment for its customers. The quantity of the construction projects represented at the Center has signiﬁcantly increased. Overall there are 51 construction projects, with 1575 apartments on sale currently. Purchasing apartments through TBC Bank’s Mortgage Center has become simpler and more convenient. At the Mortgage Center, customers

can simplify the process of buying an apartment. It is also a free space to get information on current construction projects in Tbilisi, beneﬁt from the advice, and select the desired project according to the mortgage loan conditions. The sale of apartments in Tbilisi has increased by 5% in the past year, TBC representatives say. “We are happy to greet customers at the renovated Mortgage Center. Buying an apartment is a very serious step and we are here to assist you in making the best decision,” said TBC Mortgage Center representative.

FLYUIA STARTS REGULAR FLIGHTS FROM KUTAISI TO KHARKOV

tarting December 18, the Ukrainian international airlines FlyUIA will launch regular flights from Kharkov to Kutaisi. FlyUIA will have direct flights from Kutaisi to Kharkov twice a week: on Tuesdays and Fridays. Boeing-737 and Embraer-190 will conduct flights in this direction. The flights from the Kharkov airport will take place at 9:30 pm local time, landing in Kutaisi at

2:10 am local time. In turn, flights from Kutaisi will take place at 3:10 am local time, landing in Kharkov’s International Airport at 4:00 am local time. The price of the one-way ticket will start at 103 USD; two-way tickets will cost 183 USD. The prices include VAT. As of today, FlyUIA conducts regular ﬂights from Kutaisi International Airport to Kiev.

LIBERTY BANK AWARDS TEACHERS OF CHILDREN WITH SPECIAL NEEDS

o celebrate the Teachers International Day, Georgia’s Ministry of Education and Science and the Teachers National Center held a celebratory evening on October 5. Georgia’s PM Irakli Garibashvili, Education and Science Minister Tamar Sanikidze, Liberty Bank director Armen Matevosian and the Teachers National Center head Giorgi Machabeli greeted the gathered teachers. Tamar Sanikidze gave an honorary prize to the select few teachers. The Ministry’s honorary prize is designed to celebrate the teachers who have made a great contribution into bringing up the future generation.

Teachers National Center head Giorgi Machabeli also awarded the Center’s member teachers. The selected 12 teachers received a certificate and a prize from the Teachers National Center. Liberty Bank also awarded eight teachers who educate students with special needs. “Liberty Bank, which serves 80% of the country’s educational institutions, wants to make its little contribution and give a financial prize to the eight teachers who work with students with special needs,” Liberty Bank Director said. “It is a very difficult and important job. It is important that every citizen of our country, regardless of their health constraints, becomes a full member of the society.”

DANISH SAXO BANK EYEING THE GEORGIAN MARKET

he Danish investment bank Saxo Bank is interested in entering the Georgian market. As the Bank representatives told CBW, the Bank is not planning to open an office in Georgia yet. However, Saxo has many private clients in the country and will announce its new partner on the Georgian market in November. Saxo Bank is an online multi-asset trading and investment specialist, offering private investors and institutional clients a complete set of tools for their trading and investment strategies. Its financial community portal, TradingFloor.com, is the first multi-asset social trading platform. A fully licensed bank in Europe under supervision of Danish FSA, Saxo Bank enables clients to trade FX, CFDs, ETFs, Stocks, Futures, Options and other derivatives on our award-winning SaxoTrader platform, accessible on PCs, tablets or

smartphones through a single account and available in more than 20 languages. The platform is white-labelled by more than 100 major ﬁnancial institutions worldwide. Saxo Bank also offers professional portfolio and fund management as well as traditional banking services through Saxo Privatbank. Founded in 1992, Saxo Bank is headquartered in Copenhagen and has ofﬁces in 26 countries throughout Europe, Asia, the Middle East, Latin America, Africa and Australia.

GEORGIAN WINEMAKERS NOT EXPECT A QUICK REPLACEMENT OF THE RUSSIAN AND UKRAINIAN MARKETS

WORLD’S LARGEST WENDY’S TO OPEN IN TBILISI

in Georgia, signed a license agreement with Wendy’s in 2012 to develop the restaurant chain in Georgia. and from 2013 it has already opened six Restaurants, for Georgian and not only Georgian costumers. Wendy’s is an American international fast food restaurant chain founded by Dave Thomas on November 15, 1969, in Columbus, Ohio, United States.

mid a continuous decline in exports of Georgian wine to Russia, how is it realistic to replace the traditional post-Soviet markets by other countries, what should be done, and how much time will it take? According to the Executive Director of “Wine Armazi” Beka Khergiani, market diversiﬁcation is possible, but the companies will not be able to sell as much wine in alternative markets as in Russia and Ukraine. “To replace the post-Soviet markets by any other is a very distant prospect, as in other countries Georgian wine’s awareness is very low. Sales in these countries can’t be compared with a volume of sales in Russia and Ukraine and they will not increase for a very long time. It will take a lot of time to make our wine in America as popular as in Russia, “- Khergiani beleives. In his words, the state and business have to work jointly to increase the popularity and recognition,

although the role of the state in this case is more signiﬁcant - the state should take part in various exhibitions, conduct marketing campaigns, days of Georgian wine, etc. Director of “Shuhman Wines” Nutsa Abramishvili says that alternative markets are promising for Georgian wines but it will take at least 3-5 years. “It will take at least 3-5 years to create the image of Georgia as a wine country, to increase awareness of Georgian wine and make it more popular in the non-traditional markets. The more developed and geographically distant market is, the less demand for Georgian wine. Accordingly, it is necessary to work actively especially in those countries where our wine is not well known, “she points out. In her words, the state is working on increasing awareness of Georgian wine in Asia, America. Europe. “Shuhman Wines” is also actively working to promote wine on alternative markets.

EVENT

caucasus business week

October 12, 2015 #117

GEORGIAN RAILWAY WORKERS’ TRADE UNION MARKS 110TH ANNIVERSARY JOINTLY WITH FOREIGN PARTNERS

he Georgian Railway Workers’ Trade Union has solemnly marked its 110th anniversary at the Art Hall. Ofﬁcial delegations from various countries attended the event, where several railway workers were conferred a title of the trade union’s award laureate. The nominees also received money awards, while 24 workers received an honorable diploma of the trade union. We are proud the history of the Georgian Railway Workers’ Trade Union accounts for over 100 years. This signiﬁes Georgia steps side by side with the developed countries in terms of democratic values and human rights protection. This pathos had saturated the whole event that was attended by Ystein Aslaksen, a rail section head of the International Trans-

port Workers’ Federation (ITF); Janina Malinovskaya, an ITF assistant secretary for the aboveground transportation section; Gennady Kossolapov, a secretary-general of the International Confederation of Railway &Transport Construction Workers; Riza Aliler, a head of the Association of Transport Trade Unions of Turkey; Ishak Kossabik, a secretary general, as well as heads of railway workers’ trade unions of Lithuania, Estonia, Hungary, Kazakhstan, Kirgizstan, Russia, Azerbaijan and Armenia. It should be noted the ﬁrst railway line in Georgia was unveiled in 1871 from Poti to Zestaponi, while the railway network connected Tbilisi with Poti Seaport in 1872. The railway connection was established with Azerbaijan In 1883 and with Armenia in 1899. In parallel

regime the country was constructing internal networks in all regions. All these works were carried out by exploiting hired workers. The workdays used to last 16 hours, while workers used to receive the lowest wages. The existing unbearable conditions fueled creating a workers’ trade union with the aim to protect railway workers interests and rights. In 1906 the first laws on legalization of trade unions were issued, but in 1905 distinct fields set up the first trade unions on the ground of striking booking-offices, including the Georgian Railway Workers’ Trade Union was established that time and since then the organization that has been guarding the railway workers rights. The Georgian Railway Workers went on the first strike in autumn 1908 after the railway management decided to extend the working hours. Zurab Nassaria, a head of the Georgian Railway Workers’ Trade Union, congratulated the workers on the anniversary and pointed out that the trade union will always protect their interest to improve the working conditions. Our objective is to persuade the Georgian Railway management to assume additional obligations as part of the collective agreement for improving social and working conditions, Nassaria said. “Today a commission of labor disputes operates at the Georgian Railway, besides the trade union. We hope the operation of this commission and its decisions will be taken into account by the company management”, Zurab Nassaria added. The Georgian Railway director general Mamuka Bakhtadze said education is of vital importance in terms of social and healthcare as-

pects and Georgian Railway finances BA and MA studies to children of the company employees. The program will be further enlarged in the future, he added. “I congratulate all railway workers on the 110th anniversary. Many delegations from various countries have arrived in Georgia to celebrate this date. The Georgian Railway management is sure these relations should be enhanced and deepened”, Mamuka Bakhtadze said. Gennady Kossolapov, a secretary-general of the International Confederation of Railway &Transport Construction Workers, noted the Georgian Railway Workers’ Trade Union has overcome many challenges and today the organization is strong and self-confident. “Since the very inauguration of our confederation we have been tightly cooperating with Georgian Railway workers. There were serious problems in Georgia five years ago and the railway workers’ trade union could have been closed, but this threat has passed and now we are celebrating the jubilee. Our goal is to assist each other and share our experience to each other”, Gennady Kossolapov said. “Our organization unites many members and the Georgian organization is among them and it is one of the oldest bodies. Today we have arrived in this country to celebrate the 110th anniversary of the Georgian Railway Workers’ Trade Union. We have visited several depots and saw the working conditions. Georgian Railway is facing serious challenges and I wish success in all efforts”, Ystein Aslaksen, a rail section head of the International Transport Workers’ Federation (ITF), said. The Georgian Railway Workers’ Trade Union unites over 8 000 railway workers.

October 12, 2015 #117

WORLD CUP caucasus business week

#RugbyIsOurGame Guardian Titles Mamuka Gorgodze World Cup Superman Georgia faces Namibia in a Rugby World Cup game today. Winning this game will gain Georgia automatic Rugby World Cup qualiﬁcation for the 2019 tournament. After losing to the All Blacks of New Zealand, the Lelos are looking to play an exciting, dominant match. A win against Namibia will ensure Georgia receives a spot at the 2019 Rugby World Cup among the world’s top 12 national teams. The Guardian writes: “Two World Cup supermen, Jacques Burger and Mamuka Gorgodze, will hurtle into seismic collision as Namibia and Georgia take another tournament turn – both bat-

tered, but unbowed and ﬁercely proud.” Gorgodze was named the Man of the Match despite Georgia losing out 43-10 to New Zealand at Cardiff’s Millennium Stadium on Friday. The 31-year-old’s humble look of surprise and honour on learning of his award lit up still further a dogged and commendable performance from Georgia against the defending champions. Georgia have made wholesale changes to face Namibia, but Gorgodze is retained in the backrow. Haig called on his players to show heart and courage against the All Blacks, and will repeat the demand one more time.

THE HEALTH BENEFITS OF BEER: 12 REASONS WHY YOU SHOULD DRINK IT!

The 12 benefits of drinking beer: 1. Beer keeps your kidneys healthy A Finnish study singled out beer among other alcoholic beverages, finding that it was better for your kidneys. In fact, each bottle of beer you drink reduces the risk of developing kidney stones by 40%. 2. Beer for better digestion Beer, and especially dark beer, contains up to one gram of soluble fibre* in each 30 cl glass - unlike wine, which doesn’t contain any fibre at all. Fibre plays an im-

portant role in intestinal transit (a ﬁbre deﬁciency can cause gastric and intestinal disorders such as constipation or diarrhoea). 3. Beer to lower your bad cholesterol The fibre in beer can also help reduce your levels of LDL cholesterol, i.e. the “bad” type of cholesterol. 4. Beer can increase your vitamin B levels Beer contains several B vitamins (B1, B2, B6 and B12). A Dutch study found that beer drinkers had

30 percent higher levels of vitamin B6 than their non-drinking counterparts, and levels that were twice as high as those of wine drinkers. Beer is also a generous source of vitamin B12, an antianaemic factor not found in many foods. 5. Beer for stronger bones! A 2009 study concluded that the elevated levels of silicon in beer can contribute to higher bone density. 6. Beer as a cure for insomnia Lactoﬂavin and nicotinic acid, which are both present in beer, can promote sleep! 7. Beer reduces your risk of a heart attack Beer drinkers have a 40 to 60 percent reduced risk of suffering a heart attack compared with non-beer drinkers. 8. Beer helps prevent blood clots The ingredients in beer help prevent blood clots from forming. 9. Beer boosts your memory According to studies, beer drinkers are less likely to suffer from Alzheimer’s disease and dementia than non-beer drinkers. 10. Beer helps combat stress Researchers at the University of Montreal found that two glasses

of beer a day can reduce work-related stress or anxiety. 11. Beer as a cold remedy Drinking warm beer is an excellent cold remedy! When barley is warmed up it improves blood circulation and helps you breathe when you feel congested. It also provides relief for joint pain and boosts your immunity. So, how do you prepare it? Heat a bottle of beer in a double boiler and then add four small teaspoons of honey. 12. Beer makes skin more beautiful Good news for women! Certain vitamins in beer can regenerate the skin and have a positive impact on pigmentation. Your skin becomes smoother and suppler. Convinced? Then let’s go! Two beers for memory, two for better digestion, another for better bone density, one for your kidneys and the rest as a cold remedy… Normally this should guarantee good health, right? (smiley). Of course, Doctor “GoodFood” is joking. The idea is not to get drunk every night, but instead to enjoy a nice refreshing beer now and then, without any excess!

PUBLICITY caucasus business week

October 12, 2015 #117

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

caucasus business week

7 Kushitashvili St., Tbilisi Tel: 38-53-10; 25-00-98/97 E-mail: ambasada@caucasus.net Republic of Poland Embassy 19 Brothers Zubalashvili St., Tbilisi Tel: 292-03-98 Email:tbilisi.amb.sekretariat@msz.gov.pl Web-site: www.tbilisi.polemb.net Republic of Iraq Embassy Kobuleti str. 16, Tbilisi Tel: 291 35 96; 229 07 93 E-mail: iraqiageoemb@yahoo.com Federative Republic of Brazil Embassy Chanturia street 6/2, Tbilisi Tel.: +995-32-293-2419 Fax.: +995-32-293-2416 Islamic Republic of Iran Embassy 80, I.Chavchavadze St. Tbilisi, Tel: 291-36-56, 291-36-58, 291-36-59, 291-36-60; Fax: 291-36-28 E-mail: iranemb@geo.net.ge United Nations Ofﬁce Address: 9 Eristavi St. Tbilisi Tel: 225-11-26/28, 225-11-29/31 Fax: 225-02-71/72 E-mail: registry.geo@undp.org Web-site: www.undp.org International Monetary Fund Ofﬁce Address : 4 Freedom Sq., GMT Plaza, Tbilisi Tel: 292-04-32/33/34 E-mail: kdanelia@imf.org Web-site: www.imf.ge Asian Development Bank Georgian Resident Mission Address: 1, G. Tabidze Street

Freedom Square 0114 Tbilisi, Georgia Tel: +995 32 225 06 19 E-mail: adbgrm@adb.org; Web-site: www.adb.org World Bank Office Address : 5a Chavchavadze Av., lane-I, Tbilisi, Georgia ; Tel: 291-30-96, 291-26-89/59 Web-site: www.worldbank.org.ge Regional Office of European Bank for Reconstruction and Development Address: 6 Marjanishvili St. Tbilisi Tel: 244 74 00, 292 05 13, 292 05 14 Web-site: www.ebrd.com Representation of the Council of Europe in Georgia Address : 26 Br. Kakabadze, Tbilisi Tel: 995 32 291 38 70/71/72/73 Fax: 995 32 291 38 74 Web-site: www.coe.ge Embassy of the Slovak Republic Address: Chancery: 85 Irakli Abashidze St. Tbilisi, 0162 Georgia Consular Office: 38 Nino Chkheidze St. Tbilisi, 0102 Georgia Phone: 2 222 4437, 2 296 1913 e-mail: emb.tbilisi@mzv.sk

Hotels in Georgia TBILISI MARRIOTT Tbilisi , 13 Rustaveli Ave. Tel: 77 92 00, www.marriott.com COURTYARD MARRIOTT Tbilisi , 4 Freedom Sq. Tel: 77 91 00 www.marriott.com RADISSON BLU HOTEL, TBILISI Rose Revolution Square 1 0108, Tbilisi Tel: +995 32 402200 radissonblu.com/hotel-tbilisi RADISSON BLU HOTEL, BATUMI Ninoshvili Str. 1, 6000 Bat’umi, Georgia Tel: 8 422255555 http://radissonblu.com/hotel-batumi SHERATON METECHI PALACE Tbilisi , 20 Telavi St. Tel: 77 20 20, www.starwoodhotels.com SHERATON BATUMI 28 Rustaveli Street • Batumi Tel: (995)(422) 229000 www.sheratonbatumi.com HOLIDAY INN TBILISI Business hotel Addr: 1, 26 May Square Tel: +995 32 230 00 99 E-mail: info@hi-tbilisi.com Website: http://www.hi-tbilisi.com BETSY’S HOTEL With Marvellous Tbilisi Views Addr: 32/34 Makashvili St. Tbilisi Tel: +995 32 293 14 04; +995 32 292 39 96 Fax: +995 32 99 93 11 E-mail: info@betsyshotel.com Website: http://www.betsyshotel.com

Restaurants 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

caucasus business week

October 12, 2015 #117

Hilton Batumi Rustaveli st 40 6010 Batumi 0422 22 22 99 Facebook.com/pelionrestaurant