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BUSINESS WEEK February 15, 2016 #133

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February 15, 2016, Issue 133

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Mamuka Khazaradze about Anaklia Seaport, Shopping Mall and other Mega Projects

Pg. 4

LAUNCH OF NEW PHARMACEUTICAL PLANT WILL HALF DRUG COST Pg. 12

Online Loans Must Be Banned! Lithuania Forbids Vivus to Issue Credits Online loans must be banned! – a major part of the surveyed respondents provided this answer to the question: How should be online loans regulated? Public discontent towards the online credit organizations grows along with rising online credit borrowings. Experts stress that the Georgian government should regulate this ﬁeld in the near future. Pg. 7

GEORGIAN GOV’T PROPOSES AMENDMENTS TO SIMPLIFY TAX CODE

Pg. 2

COMMUNICATIONS MARKET TO SEE MAJOR DEAL Mobitel, the owner of Beeline company, plans to buy the Caucasus Online’s retail network. On February 9 the Georgian National Communications Commission (GNCC) held a meeting on the expected deal between Mobitel (Beeline) and Caucasus Online. At the meeting the information was unveiled that Caucasus Online may sell its retail segment because of its debts of 86 million USD (210 million GEL).

Bros Eyewear Production Line would Strip Our Eyeglasses of Fascination Pg. 9

GEL liabilities till 2032. Statements about Mobitel plans for purchasing Caucasus Online started several months ago. Currently, the issue is of only the retail segment and negotiations do not refer to the optical-ﬁber cable. This issue was actualized by politicians recently. Several opposition parties pointed to threats to the state security if this deal is really Pg. 5 implemented.

MIKHEIL CHKUASELI: GAMBLING BUSINESS IS OUT OF Pg. 8 MY INTEREST AREA

Gas Reserves! Frontera Speculations or Opportunity for Georgia’s Salvation Pg. 6

NEWSROOM

2 MAIN EVENTS PM MET WITH PRESIDENT OF EC, DONALD TUSK

iberalization of visa regime, progress attained by Georgia in terms of implementing reforms envisaged by the Association Agreement as well as partnership with the EU were the main topics of meeting of Prime Minister and President of the European Council. Visit of Giorgi Kvirikashvili to Brussels started with his meeting with Donald Tusk. The parties discussed prospects of successful ﬁnalization of visa liberalization process. Prime Minister thanked the President for his unremitting support to Georgia and expressed hope that Georgian citizens will enjoy visa-free regime with the EU countries in the near future.

GEORGIA MAKES SIGNIFICANT STEPS ENTER EU ENERGY UNION

iscussions concerning development of Georgian energy sector were continued at the meeting of Prime Minister of Georgia Giorgi Kvirikashvili and Vice-President of the European Commission and Commissioner for Energy Union Marosh Shevchovich. Prime Minister discussed ongoing energy sectorrelated investment projects with the Commissioner. The sides exchanges their visions regarding aspirations of Georgia to joining the Energy Union. During the meeting it was noted that Georgia is a reliable partner of the EU and has a potential to become a regional leader in terms of production of renewable energy.

BAKU-TBILISI-KARS RAILWAY WILL BE FULLY OPERATIONAL IN 2017

he Baku-Tbilisi-Kars project, which facilitates the transport of passengers and goods between Azerbaijan, Georgia and Turkey, will be fully commissioned at the beginning of 2017. At the trilateral session of the Coordination Council on the Baku-Tbilisi-Kars railway project, high ofﬁcials from the three countries conﬁrmed the Baku-Tbilisi-Kars railway “will become fully operational” next year. The seventh session was held in Georgia’s capital Tbilisi. Georgia has already built its section of the $775 million railway line and began testing passenger and cargo trains last year. Now Azerbaijan and Turkey must complete construction on their respective sections.

GEORGIA WILL LAUNCH VISA FREE TRAVEL WITH IRAN

eorgia will introduce visa-free travel for Iranian citizens by February 15. Iran’s Deputy Ambassador to Georgia Mohsen Kebriayi told local media plans were in place to cancel the of visa requirements for Iranians to enter Georgia by the beginning of next week. He believed this decision would boost relations between the two countries. Iranian media reported Iran’s President Hassan Rouhani welcomed the removal of visa requirements from the Georgian side.

DEFENCE MINISTER: ALL NATO MEMBERS OFFER TO EMPOWER GEORGIA’S DEFENCES

eorgia’s Defence Minister Tinatin Khidasheli says Georgia gained “very high assessments” from all North Atlantic Treaty Organisation (NATO) members and received concrete offers to better empower Georgia’s defences. At the Georgia-NATO Commission meeting in Brussels, Belgium, Khidasheli raised the issue of creating a Georgia-NATO Substantial Package trust fund, which would offer greater support to the package. She hoped this would be accepted by NATO shortly. The initiative has been applauded by all attendees of the Georgia-NATO Commission meeting,” Khidasheli said.

February 15, 2016 #133

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GEORGIAN GOV’T PROPOSES AMENDMENTS TO SIMPLIFY TAX CODE

he Georgian Finance Ministry said that it will have to cut about GEL 400 million from 2016 state budget as planned corporate income tax reform will reduce tax revenues this year. According to the proposal, which the government says is based on the Estonian model, corporate income tax (a regular rate is 15%) will only apply to distributed profit; undistributed profits, reinvested or retained, will not be subject to income taxation. The bill was endorsed by cabinet members at a meeting on February 12 and it will now be sent to the Parliament for consideration. The government hopes the reform will help to speed up economic growth. Proposed amendments to the tax code, if approved by the Parliament, will go into force from July 1, 2016, Finance Minister Nodar Khaduri said. The proposal, however, will not apply to banks, insurance companies and microfinance institutions, he said. A calendar year, which is now the tax period for corporate income tax, will be replaced by a month, according to the proposal. In another proposal, the Finance Ministry said, a company, using fixed assets in VAT taxable operations, will be exempted from VAT on importation of fixed assets. “These reforms – both income tax and VAT – will reduce this year’s targeted revenues by about 400 million lari,” the Finance Minister said, adding that the planned budget cut will come “mostly at expense of reducing administrative expenditures.” The 2016 state budget targets revenues from corporate income tax at GEL 980 million, accounting for over 11% of budget expenditures and 12.3% of total tax revenues of GEL 7.98 billion planned this year. Speaking at a meeting with business community in Tbilisi in late January, PM Giorgi Kvirikashvili said that the government was ready for the budget cut associated with the planned corporate income tax reform even though 2016 is election year in Georgia. “Hopefully in couple of months from now we will have a new tax code, where only distributed earnings will be taxed. Of course it will require respective budget adjustments and we are ready to make these adjustments despite the fact that we are

in an election year,” the PM said on January 28. Kvirikashvili ﬁrst voiced proposal to introduce so called Estonian model – zero corporate income tax on undistributed proﬁts – in March, 2015 when he was the Economy Minister. Although the government launched examining its

possible effects, the proposal did not appear to gain traction at the time; deputy ﬁnance minister sounded skeptical over the proposal, whencommenting on the issue in October, 2015. Kvirikashvili reﬂoated idea in January, two weeks after becoming the Prime Minister.

EUROPEAN COMMISSION TO FORMALLY PROPOSE EU MEMBERS TO LIFT VISAS FOR GEORGIA IN ‘COMING WEEKS’

he European Commission will put forward a legislative proposal on visa waiver for Georgia “in the coming weeks,” European Commissioner for Neighbourhood Policy Johannes Hahn said after meeting Georgian PM Giorgi Kvirikashvili in Brussels on February 9. After the formal proposal is made, it will be then up to the EU-member states and the European Parliament to approve it before short-term visa-free travel to the Schengen area becomes available for those Georgian citizens, who hold biometric passports. “On our side we [the European Commission] will act fast,” Hahn said at a joint news conference with PM Kvirikashvili and European Commissioner for Migration and Home Affairs Dimitris Avramopoulos after the meeting, which also involved European Commission President JeanClaude Juncker. PM Kvirikashvili said that “timely ﬁnalization of the visa liberalisation process is one of the top issues in our agenda” and “now we look for-

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ward to visa-free regime in the nearest future.” The European Commission said in December that Georgia fulfilled all the benchmarks of its visa liberalisation action plan and that it would propose in “early 2016” to the EU-member states to allow visa-free travel to the Schengen area. Commissioner for Migration and Home Affairs Dimitris Avramopoulos said: “Real hard work of the Georgian authorities over the past three years for achieving this important goal… has given positive results. The Commission is now preparing the legislative proposal to the EU member states and the European Parliament. The timing for actual visa free travel for the Georgia citizens will depend on when the final decision will be taken by the Council and the European Parliament.” Asked about specific timeframe and if the finalization of the process would be possible by summer, Avramopoulos responded: “Maybe earlier, maybe around summer.” Commissioner Hahn said that further steps to sustain “current good pace” of Georgia’s prog-

ress was also discussed. He said that the focus should be made on the justice reforms – “independence of judges and prosecutors.” Hahn said the EU acknowledges Georgia’s efforts in approximation of its legislation with the EU and the Commission is “pleased with the results of this work.” “I trust that Georgia will keep up its good performance,” Commissioner Hahn added. PM Kvirikashvili said that “importance of setting the highest standards in the election year” was also discussed. Also on February 9 the Georgian PM met President of the European Council Donald Tusk. On February 10 he plans meets with Commissioner for Climate Action and Energy Miguel Arias Cañete; European Commission Vice-President for the Energy Union Maroš Šefčovič, and EU’s special representative for South Caucasus Herbert Salber, who is also a co-chair of the Geneva international discussions.

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

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

PUBLICITY February 15, 2016 #133

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INTERVIEW caucasus business week

February 15, 2016 #133

MAMUKA KHAZARADZE ABOUT ANAKLIA SEAPORT, SHOPPING MALL AND OTHER MEGA PROJECTS Interview with Mamuka Khazaradze, the TBC Group Supervisory Board chairman same time, we plan to construct a big head ofﬁce. In the near future we will announce the place and the design that has been already prepared by the leading Dutch architectural company.

The project’s investment value is about 60 million USD. This project will be not only a TBC head ofﬁce, but also a serious infrastructure for the city. We have also developed several projects that will be introduced later.

- What factors have led American Conti Group to participating in the Anaklia Seaport project? What would you say about the importance of Anaklia Seaport? - I would make a small introduction: in 2013 my 80 fellow students visited me from the Harvard business school, including Kurt Conti, who is the fourth generation of the 100-year company that operates in the development sector and develops mega projects. During a weeklong visit, they loved Georgia and an idea was born to carry out some mega project that would be interesting and useful for the country. This idea was circulated in the Government in that period. We joined the project development process two years ago, established a consortium between TBC Holding and Conti Group. In the near future the Chinese party will also join the consortium. As a result of zealous and serious work and involvement of many international consultants, we have gained victory. This project is ready for implementation. - The Prime Minister has noted that the construction works will start in 2016. What specific works will be carried out this year and what is the project’s investment value? - According to our estimations, the project’s total investment value is 2.5 billion USD. A major part of this sum will be invested in the first stage. Investments of 700 million USD will be made in the first three years in only seaport project. We plan to construct a free industrial and economic zone on 600 hectares behind the seaport that is necessary to the seaport and production development. Even more so, Georgia has concluded a free trade agreement with the EU. Similar agreement is being developed with China and maybe analogical agreement will be signed even with the USA. These agreements enable Georgia, including Anaklia to implement all these projects. The construction works will start at the end of 2016 and we will wait for international conclusion on environment impact. All similar projects are preceded by environment impact documents and this process will take about 9 months. The full-scale construction works will start only after submission of this document. International organizations are expected to submit their conclusion by the end of 2016. - Several industrial zones have been already functioning in Georgia, but we could not call these projects successful. What will make the Anaklia FIZ special and attractive? - We have profoundly explored this issue in Georgia and worldwide. There was a certain boom of arranging FIZ zones worldwide, only several projects have justified. The approach should be different and we follow these different approaches. We have invited and are conducting negotiations with managers of the world’s successful free industrial zones. Valuable and correct management and correct planning are required.

The free industrial zone format implies not only tax exemption, but also full infrastructural complex and the interest of major players to start the first production. We have performed serious job on these issues. We will invite the operator that will give the best proposal. This operator may be invited from an Asian country or the Near East. I mean very influential names. The seaport operation will be also carried out by the world’s leading operators. The world’s 9 major operators have already expressed interest in the Anaklia seaport management. We have already announced tender to select the best one. This is one of the factors to valuably arrange the whole business. - What would you say about other mega projects of TBC Group? There were shopping mall and medical complex projects. How efficiently are being these projects implemented? - The American hospital project is being actively developed. We will introduce this project in the near future. We have performed serious job. Our idea is to invite American doctors from the USA to Georgia, as well as from Europe’s leading clinics. As to the shopping mall project, regretfully, we have a little frustration because of the GEL depreciation. Our South African partners asked us to take a little break in this project. At this stage this project is not developed. At the

- How is being the Mitarbi resort developed? - Mitarbi is one of the projects among our mega projects. We have already unveiled the first stage and this was the first project implemented jointly by the private sector and the government. The state finances ropeways, while our company finances all other works, infrastructure, hotels, buildings. The construction works will start in spring after the snow has melted. A French company is developing a general plan for the project. We have selected this company by competition. Kokhta with 700 meter longer track will be connected with the Mitarbi Inclination that is 4 kilometers in length.

This will be the ﬁrst “ski in ski out” concept project in Georgia with European-style ski resort, which will operate after winter season too. We will arrange yearlong recreational resort in Kokhta-Mitarbi and we will see results of this interesting project in the near future. - Have you already selected the hotel operator that will enter the Mitarbi resort? - We want to develop Georgian brands. Negotiations are underway with Rooms, because Rooms is one of the successful hotel operators. We have received offers from foreign operators too. - How successful is the Gurieli brand? - The Gurieli sales are growing, including in terms of exports. We have entered the Russian Federation, the Baltic countries. The Ukrainian direction has been already overloaded.

Tea is a very laborconsuming product. There is much competition, but we have managed to hold 27% ratio on the Georgian market. This result was achieved by replacement of imports and we hope to reach the same success on other markets too. We have also implemented a new project in the Imereti Region – greenhouses, jointly with Dutch partners. The project operates successfully. - What challenges should the business sector expect in 2016? - We should not expect any fundamental shocks. There is no fundamental problem in the economy. We should manage to attract as many investments as possible.

The New Prime Minister has put forward very important and valuable initiatives; because these initiatives are oriented on the business sector and only pro-business approaches will replenish the budget, create new job places. The New Prime Minister was appointed a month ago and we have already announced several new projects. We need similar fast and efﬁcient decisions. Some mistakes are not ruled out, but we should hesitate to step forward and support the business, all directions, the small, medium or major business sectors. We should realize that not only the legislation develops the business environment, the legislation may be good, but the business environment will be bad anyway. Therefore, besides legal improvements, we need new initiatives and constant conversation with the business sector. Sometimes elementary problems should be resolved to inspire mega projects. I hope the ice has broken up and this direction will be enhanced.

ECONO-MIX

February 15, 2016 #133

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COMMUNICATIONS MARKET TO SEE MAJOR DEAL T

HEADLINES

GEORGIAN POPULATION SPENDS 44% OF INCOMES ON FOOD he averaged bill amount at the trade networks are declining. This signiﬁes the GEL depreciation has made the consumers to cut daily expenses on essentials compared to the previous years. The averaged bill has shrunk by about 10% in 2015 compared to 2014. The quantity of consumers has not diminished at the network, but the population’s solvency has weakened and Georgian citizens have to spend less money on essentials, Irina Qosashvili, the head of the Goodwill trade network, noted.

MERAB JANIASHVILI Economic Analyst

Beeline to Buy Caucasus – About Russian Threats

RENOVATED SHERATON WILL OPEN AT THE END OF THIS YEAR

year. According to the hotel owner “RAK -Georgia,” large-scale investments made in the project have radically transformed the hotel. The hotel was closed in December of 2014 and was planned to resume operation in early 2016.

obitel, the owner of Beeline company, plans to buy the Caucasus Online’s retail network. On February 9 the Georgian National Communications Commission (GNCC) held a meeting on the expected deal between Mobitel (Beeline) and Caucasus Online. At the meeting the information was unveiled that Caucasus Online may sell its retail segment because of its debts of 86 million USD (210 million GEL).

According to the GNCC, Mobitel failed to submit valuable and perfect documentation. Consequently, the GNCC suspended taking a decision that would permit Mobitel to buy Caucasus Online’s retail network. The company must submit due documents to the GNCC in three weeks. Under the agreement, if the application for sales of the retail segment of Caucasus Online is satisfied, Russian Mobitel must cover the 210 million GEL liabilities till 2032. Statements about Mobitel plans for purchasing Caucasus Online started several months ago. Currently, the issue is of only the retail segment and negotiations do not refer to the optical-fiber cable. This issue was actualized by politicians recently. Several opposition parties pointed to threats to the state security if this deal is really implemented. “Maybe the cable deal is not negotiated at this stage, but this issue was agreed in practice. I can definitely tell you the specified information that Mobitel showed interest in the retail segment after it was offered to purcgase the main cable infrastructure.

Beeline launched operation in Georgia long ago, but now, besides cellular services, the company will also launch operation in the internet communications segment and users security will get vulnerable, - the Free Democrats party member Aleksi Petriashvili said. It is interesting that in autumn 2015 Magticom planned to buy Caucasus Online and the ongoing negotiations failed at the ﬁnal stage. “Magti has already received consent from the GNCC on purchase of Caucasus Online assets”, Magticom defense lawyer David Dzidziguri said. The nego-

fter a large-scale reconstruction, the 5-star hotel Sheraton Metechi Palace will open in Tbilisi by the end of the

GALLERY TBILISI SHOPPING MALL WILL OPEN IN 2017

new multi-functional center will open in place of the former “Tbilisi” store in September, 2017. Co-Investment Fund announced this on Thursday during the ofﬁcial presentation of the project. Giorgi Bachiashvili, executive director of the Fund notes, that the Fund makes 100% investment in the project and its total investment volume equals $77 million USD. Famous Israel-based company Moshe Tzur Architects is the designer of the project. Total area of the shopping mall “Gallery Tbilisi” will amount to 22,000 square m. tiations failed because of astronomic sums that Caucasus Online demanded for the transaction. It should be noted Magticom President David Lee was the ﬁrst how started talking about Russian threats in relation to the expected deal between Mobitel and Caucasus Online. Georgian citizens should be aware of the owner of the information source. Today the internet is a part of the national security, David Lee said.

„The internet is not only an instrument for economic and democratic progress, but it is also weapon. Therefore, the owner of the Internet connection in Geoirgia must be clear”. Zurab Kukuladze, an analyst for the Association of Young Financiers and Businessmen (AYFB), has analyzed the Magticom statement. Magticom is trying to politicize the issue and in this way to stage pressure on the Communications Commission, which is to permit Beeline to purchase the Caucasus Online’s retail network. Through these manipulations, Magticom is trying to maintain its dominating positions in the market, Zurab Kukuladze said. “Cellular communications gets maximally integrated into the internet communications and it is expedient to say that the modern technological development actualized the issue of sales of these services in a joint package. These challenges have regrouped the market players. We see that Magticom has become a provider of internet and digital television services, besides cellular communication services. Sales of these services in a joint package is a successful business decision for the company. Silknet and Geocell also plan to follow the similar policy. These companies have already introduced joint projects on the market. In this situation, when the market moves to new regulations, naturally, the third largest player on the cellular communications market is trying to protect its positions and diversify its services. Consequently, I believe that

Beeline’s interest in Caucasus Online’s retail network is an ordinary and healthy ambition that derives from the company’s business interests”, Zurab Kukuladze said. It should be noted that it is upon the Communications Commission to discuss and examine all applications for merger of companies on the communications market. If the deal does not restrict the competitive environment and meets the legislation requirements, the GNCC is authorized to let companies conclude a suitable deal. Consequently, it is less expected that the GNCC veto the relevant deal because of only Russian origins of Mobitel. “Our responsibility is to detect monopolistic threats and ensure the competitive environment on the market. The commission cannot take a decision on the issue that is beyond its competences. The State Security issues are not our competence. This is not a place where the Russian intervention is discussed”, the GNCC member Giorgi Pruidze said. It is interesting fact that the Caucasus Online supervisory board head is Khvicha Makatsaria, who is also a member of the Mobitel supervisory board.

Mamia Sanadiradze, the former owner of Caucasus Online, has applied to the court for return of the company. He asserts that high-ranking ofﬁcials of the previous Authorities have forcibly appropriated his company. It is not ruled out that the fact Caucasus Online is a disputable asset leads the current owners to seek out a new buyer as soon as possible.

ANOTHER BLUE: FIVE-STAR HOTEL TO OPEN AT FORMER POST OFFICE BUILDING

ilk Road Group plans to build a new hotel in the former building of the Central Post Ofﬁce. The Radisson BLU Telegraph arrangement works will start in summer 2016 and the works will last about 12 months. The project’s investment value makes up 30-35 million USD, the Silk Road Group management told the BusinessPressNews news agency. Carlson Rezidor Group will manage Radisson BLU Telegraph hotel like Radisson BLU Iveria hotel. The building will be fully rehabilitated to arrange a 5-star hotel with 170-180 suites”, the company managers said.

ONE MORE RUSSIAN COMPANY EXPRESSES AN INTEREST INVESTING IN GEORGIA

ussian company „Русские башни“ known as a volunteer of purchasing towers of “VimpelCom” is interested in Georgian market. According to the chief of the particular company, Alexander Chubi stated that further plans the company has is about to enter to International market, including Georgian one which is the most substantial fact.

TBILISI AIRPORT CLOSES DAYTIME FLIGHTS FOR FOUR MONTHS

bilisi international Airport closes for four months, starting from March 1, 2016, for runway upgrade. According to preliminary information, the airport will be closed: From March 1 to March 26, between 09:30am and 03:00pm. From March 27 to July 1, between 10:30am and 08:00pm. Airport management said the reason is maintenance work on the runaway and the airlines that normally ﬂew during daytime hours at Tbilisi International Airport would decide whether to reschedule or cancel their ﬂights.

GAS

caucasus business week

February 15, 2016 #133

HEADLINES GEORGIA GROWS QUOTA UP TO 210,4 MILLION IN MONETARY FUND

eorgia increases its quota by SDR 60,1 million (40%) in International Monetary Fund (IMF). However, Azerbaijan increases 2, 5 times, from SDR 161 million to 394,7 million and its share is 0,098% of its total injection. While Georgia is represented by 0,025share. Total quota of 188 member countries of the Fund is grown by SDR 239 up to SDR 477 ($659 billion). Christine Lagarde, Managing Director of the International Monetary Fund has already thanked to its member countries for ratiﬁcation of this agreement and noted, that a more representative, modern IMF will ensure that the institution is able to better meet the needs of its members in a rapidly changing global environment.

AZERBAIJAN STARTS EXPORTING ELECTRICITY TO TURKEY VIA GEORGIA

zerbaijan has started exporting electricity to Turkey via Georgia since Feb. 7, Azerbaijan’s energy ministry told Trend news agency. “Starting from Feb. 7, Azerbaijan began to export nearly 80 megawatts of electricity per day to Turkey,” the ministry said. Previously, the Energy Market Regulatory Authority (EMRA) of Turkey issued Azerbaijani side a license for the sale of electricity in that country. Export of electricity is carried out by means of Azerbaijan-Georgia-Turkey energy bridge.

TURKISH AIRLINES HOLDS MAJOR RATIO ON GEORGIAN AVIATION MARKET

urkish Airlines is reported to be controlling the Georgian aviation market by holding 20% market ratio, based on the report of 2015. According to the Civil Aviation Agency, in 2015 the airline served 434 904 passengers at Georgian airports, but it should be noted that Turkish Airlines for the past year lost 2% of the market ratio, because the company was reportedly controlling 22% on the market in 2014. Meanwhile, Georgian Airways has increased its market ratio by 1%. The airline ranks second in terms of passenger turnover and controls 12% market ratio. In 20015 Georgian Airways (Airzena) transported 253 386 passengers.

GEORGIA’S FOREIGN DEBT IS DECLINED IN USD, WHILE INCREASED IN GEL

eorgia’s foreign debt is declined in USD, while increased in GEL. Georgia’s state debt has been 4,3 billion USD late January of 2016, which amounts to 10.631 billion GEL as of the exchange rate of January 31. The debt volume is declined by 14 million USD comparing to December, while the increase totals to over 300 million in GEL due to the rate drop. The debt is grown by 229 million through the last year i.e. 5,6%. It should be noted, that 4,281 billion is government’s debt, while 19,3 million – National Bank.

ANAKLIA SEAPORT CONSTRUCTION WORKS ARE STARTING THIS YEAR

nder the Georgian government’s decision, Anaklia Development Consortium will carry out the Anaklia deepwater seaport construction project. The Georgian Prime Minister introduced the company, which was announced a winner by the government commission, at the brieﬁng. Anaklia Development Consortium unites Georgia-founded TBC Holding and Conti International investment holding that carries out infrastructural and development projects. Moffatt & Nichol, a seaports designer company, and Maritime & Transport Business Solutions, a Dutch consulting company in seaport transaction issues, are contractor companies of Anaklia Development Consortium.

Frontera-spread information has caused various reactions in the Georgian society. Namely, the company announced about a discovery of 3.8 trillion cubic meter natural gas reserves in the Kakheti Region. This information was spread through the Trans-Atlantic Council’s report.

n the 3-5 period Georgia will launch natural gas exports to Turkey and eastern Europe”, Frontera head Steve Nickerson noted during his speech at the Atlantic Council in Washington, the USA. “We suppose this discovered field preserves about 5 trillion cubic meters of natural gas. The field is located in eastern Georgia. This volume will be supplied to the market for 10 years and it will change rules of game in terms of gas supply. Georgia will supply natural gas to Turkey and Eastern Europe. In 3-5 years Georgia will become a natural gas exporter country”, Steve Nickerson noted. The Banks & Finances newspaper has collected information about goals and purposes of Frontera Resources Corporation. The company launched operation in Georgia 20 years ago. It is an independent oil and gas company established in the state of Texas, the USA. The company is specialized in assessing the economic potential of the developing markets of Eastern European countries of the Black Sea basin and penetrating these markets. The company shares are placed at the London Stock Exchange (LSE) (the market symbol FRR). Part of experts and analysts does not take this information seriously and call this statement a new speculation. Another part asserts the availability of similar reserves is unimaginable and considers the named volumes unserious. Energy Minister Kakha Kaladze also finds this statement unrealistic. Frontera talks about huge reserves and investments of billions of USD are required to explore the field and prove this statement, Kakha Kaladze said.

“Similar volumes are not reported in even Turkmenistan and other oil and gas mining countries. We may have a ceratin volume of underground reserves, but investments of billions of USD are required to prove this information. If this information is true, then we should determine whether it will be appropriate and correct in terms of commerce, ﬁnances and business to extract these gas reserves”, Kakha Kaladze noted and added the agreement between the Georgian Government and Frontera company is updated every

year and no proposals were submitted for implementing these works as part of the last agreement and this factor creates additional questions. This statement serves to surge prices on Frontera shares at stock exchanges, Andria Gvidiani, an analyst of the association of young ﬁnanciers and businessmen (AYFB), said.

„For many years this company has spread similar statements on discovery of new natural gas reserves. We know that stock exchanges are very sensitive toward similar information and any statement and event related to the company makes much influence on the company shares. This case with Frontera shows interconnection between the company statements and change in stock exchange tendencies. In most cases, similar sensitive statements make positive influence on prices of shares. For example, after the recent statement by Frontera, the price of the company shares increased by 28% at the LSE. The company artificially increased the prices of its shares by 18% in December 2015 too, when the company announced progress in the mining works in the Kakheti field. There are many similar cases. Seemingly, similar manipulations have become a strategic leverage for the company to make profits at the stock exchanges. Moreover, many other dishonest companies apply the same mechanism for increasing prices of their shares at stock exchanges. Moreover, Frontera and the Georgian Oil and Gas Corporation (GOGC) had legal disputes too. Namely, the government requested that Frontera submit a report on gas reserves, but the company rejected submitting this document. Therefore, the government imposed a fine on the company. Thus, the doubts that Frontera applies unacceptable rules of game is grounded”, AYFB analyst Andria Gvidiani said. Frontera has released this unrealistic statement to draw investors, Economic Doctor Zurab Garakanidze noted. “Natural gas constitutes more than 20% of the global energy consumption! In summer 2015 Italian

ENI released sensational information on discovery of the world’s one of the biggest gas fields of Zohr near the Egypt coastline in the Mediterranean Sea. The field is located in about 0.5 km depth and according to preliminary estimations, the field preserves 860 billion cubic meters of natural gas (while Frontera talks about 3.8 trillion cubic meters). For comparison: in Siberia the Russia’s biggest natural gas field are located on Yamal. The Russian gas giant Gazprom processes the Yamal project. This is the biggest energy project in the world history. Natural gas reserves constitute 55 trillion cubic meters and are the world’s largest volume. Russia’s total natural gas reserves mark 47.58 trillion cubic meters, the USA reserves constitute 272.5 trillion cubic meters (the Marzelius shale gas field mining started several years ago), Saudi Arabia reserves make up 258.5 trillion cubic meters, Canada – 991.6 trillion cubic meters. China has also discovered shale gas reserves. China is said to have the largest reservoir of shale gas in the world! Iran’s natural gas field of South Farsi is the largest one worldwide with 28 trillion cubic meters, but officials often name 40 trillion cubic meters to draw investors! The field occupies 9 700 square meter space, including 3 700 square meters in Iran’s territorial waters – the Persian Gulf. The remaining 6 000 square meters is located in Qatari territorial waters. This field contains about 8% of the global gas reserves. Many foreign companies have showed interest in restoring business activities in Iran. Leading business delegation of Europe and Asia arrived in Iran for the past weeks. The Government of Iran asserts to have prepared about 50 gas and oil projects for implementing them by 2020 and the total value of all projects constitute 185 billion USD. On August 26, 2015 Iran put into exploitation a new gas pump station to increase gas exports to the South Caucasus and Anatolia. Previously Iran supplied 24 million cubic meters of natural gas to Turkey, Armenia and Azerbaijan a day, while the new facility will increase the volume of 56 million cubic meters a day. The output of Turkmen Galkinish field in 21 trillion cubic meters, but leading energy companies have criticized this conclusion and the Turkmen government had to “lower” the reserves to 14 trillion cubic meters. The Russia’s biggest gas field is Urengoi with 10.2 trillion cubic meter reserves. The second biggest field of Iamburgskaya comprises 5.2 trillion cubic metes and the Bovanenkovo field comprises 4.9 trillion cubic meters.

I suppose this unrealistic statement was made to draw the investor interest and their ﬁnancial resources”, economic expert Zurab Garakanidze noted. bfm.ge

February 15, 2016 #133

ONLINE LOANS

caucasus business week

Lithuania Forbids Vivus to Issue Credits

HEADLINES ENERGETIC DRINK WITH WEED EXTRACT APPEARS ON GEORGIAN MARKET

n January 2016 Cannabis, the new energetic drink with weed extract, has appeared on the Georgian market. The product is manufactured in the Netherlands. The energetic drink is made of the extract of weed seeds. Cannabis is sold in almost all trade networks and its price ranges from 2.50 to 2.90 GEL. The MyRest.Ge has examined the volume of weed extract in the energetic drink and applied to the product distributor company owner about the issue.

TERRANOVA AND OVS REPRESENTATION NOT TO EXPAND ITS BUSINESS IN THE GEORGIAN MARKET

itex Group, which is a representative of well-known clothing, accessories and furniture brands in Georgia, has no plans to expand in the local market this year. The company’s Director Giorgi Basiladze told radio “Commersant” that currently “Gitex Group” is represented on the market by 8 brands and 22 outlets. He added that a series of development had been carried out in previous years, so this year it’s planned to further develop and improve the shops and the structure as a whole.

Online Loans Must Be Banned! Here we submit the annual interest rates of several online credit organizations for a 600 GEL loan with a 30-day maturity period:

nline loans must be banned! – a major part of the surveyed respondents provided this answer to the question: How should be online loans regulated? Public discontent towards the online credit organizations grows along with rising online credit borrowings. Experts stress that the Georgian government should regulate this field in the near future. The Banks&Finances has explored this problem and held an online survey on its own website – www.bfm.ge: How should be online loans regulated? The survey was conducted from January 28, 20016 to February 6, 2016 based on the principle: One Vote, One computer. A total of 2102 citizens took part in the survey. The answers to the question “How Should Be Online Loans Regulated?” was distributed in this way: 1. The field should not be regulated – 5% (95 votes); 2. The Field should be regulated by the National Bank - 26% (556 votes); 3. Online Loans Must Be Banned – 69% (1451 votes); The survey results prove that 69% of the respondents demand for forbidding the online crediting business. The online credit interest rates demonstrate reasons for extremely negative attitude in the society. The Banks&Finances has examined online credit conditions to determine the interest rates when taking a 600-GEL loan with a 30-day maturity period. The amount of the loan is limited for those who take online credits for the first time. Consequently, those wishing to take a 600-GEL loan must have already used online credits even once.

VIVUS.GE – 450%; NETCREDIT.GE - 734.97%; CCLOAN.GE - 734.97%; MONEYMAN.GE - 749.35%; CREDITON.GE - 872.84%; It is interesting that all these loan products are advertised as interest-free credit products. Other online credit organizations follow the same principles and sometimes the terms are worse. We have applied to Merab Janiashvili, the vicepresident for the Association of Young Financiers and Businessmen (AYFB), for assessing the survey results.

Extremely negative public attitude derives from the problems that online credit organizations have created to the Georgian society, because these organizations issue online loans with unaffordable and expensive terms. Even fines are inadequately expensive. I understand that there is heavy social situation in the country, but our citizens should avoid similar online credit products. I try to warn everybody around me not to use online loan services. Our legislation does not regulate the field of online credit organizations. Therefore, they have full freedom in their policy and operation. All of them are able to arbitrarily determine interest rates and these indicators sometimes record unreasonably expensive figures. Regretfully, we do

not have any statistics about revenues from online credits or/and turnover. The AYFB continues exploring this sector and in the near future our association will introduce its recommendations to our society.

This field should be regulated. Several variants may be discussed in this respect. We can also introduce one of the European schemes. The fact is this arbitrariness should be stopped”, the AYFB vice president Merab Janiashvili said. All developed countries have set strict regulations in this field, including in Lithuania and Latvia, where the national central banks scrupulously control online credit organizations. Recently, Lithuania banned the country’s major online credit organization “4finance”, which operates under the trademarks of SMSCredit and Vivus, to issue credits. “We have carried out the strictest measures in relation to “4finance” after the company violated the regulations and ignored instructions that the supervisory body had issued for removing the law-breakings. Similar violations undermine confidence in the finance systems and various segments of this systems. Therefore, SMSCredit and Vivus were not let continue operation. This situation will be maintained in the future too”, Vitautas Valvonis, the director for the supervisory service of the Lithuania Central Bank, said. In 2015 the Lithuania Central Bank imposed a 362 000 EUR fine on the 4finance head office. The same company was forfeited by 45 000 EUR in 2013. bfm.ge

UKRAINIAN NOVA POSHTA WANTS TO BECOME THE GEORGIAN MARKET LEADER

eorgian representation of the Ukrainian carrier Nova Poshta, which has been operating in Georgia since last year, has set an ambitious target to become the market leader. According to the company’s sales director, Nova Poshta is trying to occupy its niche in the market that is a great challenge, but the comapny still has great ambitions and expectations. In Sandro Sakandelidze’s words, the company has managed to attract more than 200 loyal customers in one year. Nova Poshta Georgia plans to open new service centers both in Tbilisi and regions.

SAPERAVI WINES OF TAMADA AND WINERIES OBTAIN TWIN GOLDEN MEDALS AT CWSA

or the past years, Georgia-based winemaking companies have intensiﬁed their activities in the Asian markets. The wine and alcoholic beverage international exhibitions and contests in China always raise special interest in the Georgian winemakers. Georgian wine varieties have been taking part in the China Wine and Spirits Awards (CWSA) contest since 2014, while the competition in itself was founded 5 years ago.

“LAURUS” PLANS THE PRODUCTION OF 200 TONS OF BAY LEAVES AND ITS EXPORT

aurus”reﬁnery enterprise of bay leaves established in Senaki plans the production of 200 tons of bay leaves and its export to international market. Zaza Jalaghonia, the founder of the enterprise says, that the bay leaf is one of the most demanded product in the international market. Accordingly, their future goal is the expansion of the process around 200 tons of bay leaves. The production is addressed to the export market and enters to Russian Federation as well.

EL AL TO LAUNCH REGULAR FLIGHTS TO TBILISI AND BATUMI STARTING THIS SUMMER

israel Katz, Minister of Transportation and Intelligence has issued an order designating El Al Israel Airlines the right to operate regular ﬂights to Tbilisi and Batumi, Georgia. El Al is the third Israeli airlines to operate on the route. In 2012 Georgia and Israel signed a new air service agreement. The agreement allows the two sides to operate 10 weekly ﬂights.

8 MIKHEIL CHKUASELI

OTHER SIDE OF BUSINESS caucasus business week

February 15, 2016 #133

GAMBLING BUSINESS IS OUT OF MY INTEREST AREA CEO of Geoplant, owner of Georgian brand of tea GURIELI I AM A MACROECONOMIST by education. I FOUND MY FIRST JOB AS A WORKER. I remember I was a ﬁrst-year student at the evening full-times studies. I used to work in the daytime and go to university in the evening. MY FIRST SALARY WAS 65 RUBLES. In that period, this was a quite plentiful amount, especially in my age. I did not have to support the family and this sum was sufﬁcient for me. In several month, my incomes rose to 250 Rubles. I WAS VERY YOUNG WHEN I STARTED MY FIRST BUSINESS WITH MY FRIENDS.

This was pullover business. We used to buy and sell pullovers. I remember it was quite successful.

through the mail box and then I have to eat at list one big frog.

TEA BUSINESS WHERE I AM WORKING NOW. Shareholders of Geoplant are my long time friends and I found project very interesting. Proud to be here.

THE GAMBLING BUSINESS IS THE FIELD, where I would never work in. I do not like this direction and I have no interest in it.

I LIKE TEA - THE HEALTHIEST PRODUCT OF MILLENNIUM. Naturally I drink GURIELI.

A PERSON SHOULD NOT BE READY TO DO ANYTHING TO CAREER PROMOTION. To put simply, people should preserve the conscience.

EVERY DAY I WAKE UP AT 7 A.M. USUALLY GO TO MY OFFICE FROM 8:30 TO 9 A.M. First of all I check my day agenda, looking

I LIKE AND EASILY COMMUNICATE WITH REPORTERS. I do this 24 hours per day. Why? Because my spouse is a reporter.

I LOVE TRAVELING. I love it to much. And I am travelling a lot, almost every month I have small business or leisure trips. I HAVE MANY FAVORITE DISHS AND CAN’T choose one or two most liked one. I like to cook myself. All my friends like to taste it. FOOTBALL is my favorite sport. I like football because of David Kipiani. JUVENTUS is my favorite football club, this is story of great love and love for ever, but Dinamo Tbilisi is like ﬁrst love which you never forget.

TBC BANK SIGNS THREE AGREEMENTS WITH THE ASIAN DEVELOPMENT BANK

BC Bank announces the signing of three agreements with the Asian Development Bank (ADB). As a result, the Bank received a 10-year subordinated loan in the amount of USD 50 million, which is the ﬁrst such agreement between TBC Bank and ADB. This transaction will further strengthen TBC Bank’s tier two capital, enabling the Bank to grow in accordance with its strategy. With the second agreement, ADB provided a 5-year USD 50 million senior loan facility which will be dedicated to extending credit to the underbanked small and medium businesses outside the capital city. The proceeds of the senior loan will fund the investment needs for the micro and small enterprises in the regions of the country. This is the second such partnership between TBC Bank and ADB to help further expand MSME lending and entrepreneurship activities in Georgia. The two loan facilities are available for TBC Bank either in Euro, Dollar or Georgian Lari. The third agreement between the parties is a technical assistance grant of USD 500,000 provided by the ADB in support of TBC’s ongoing SME Academy, the Bank’s ﬂagship project to provide training and advisory services to upgrade entrepreneurship skills and create business solutions for micro and small business across Georgia. “We are delighted to continue our successful partnership with the ADB. These two facilities and the SME technical assistance support

project will help the Bank to further strengthen its position in the MSME segment by expanding its portfolio in rural areas of Georgia, where credit availability is relatively limited at present. We are especially pleased to continue our very productive cooperation with the ADB. With the completion of these transactions, ADB’s total exposure to TBC Bank will amount USD 150 million,” commented Vakhtang Butskhrikidze, TBC Bank’s CEO.

“We a pleased to deepen our relationship with TBC Bank boosting economic development in Georgia’s regions by providing essential advisory and ﬁnancial services to MSMEs and helping improve income and employment through private investment”, says Rainer Hartel, ADB Director.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Paciﬁc through inclusive economic growth, environmentally sustainable growth, and regional integration. Es-

tablished in 1966, it is owned by 67 members - of which 48 are from within Asia and the Paciﬁc and 19 outside. Georgia has been a member country since 2007.

February 15, 2016 #133

BUSINESS caucasus business week

Bros Eyewear

PRODUCTION LINE WOULD STRIP OUR EYEGLASSES OF FASCINATION

“Bros Eyewear is an eyeglasses workshop that uses natural wood material in its production. We are brothers and one day we decided to establish a Georgian brand of fashionable and convenient wooden eyeglasses by use of Georgian raw materials. We plan to develop our potential and ideas to enable our clients to look special and elegant in any season. Our operation is a message to our society that high-standard production guarantees manufacturing of the best products”, Irakli Gamtenadze, one of the founders of Bros Eyewear company, noted. - Where are your products sold? Levani: In Georgia we generally sell our products from our workshop. Clients learn about us from social networks, friends and come to our workshop to make orders or buy ﬁnished products. Considerable ﬁnancial resources are required to open s tore. We plan to arrange a stand at one of the shopping malls. Irakli:

Our eyewear is sold on the Georgian market, in generally. In spring we plan to export our products to Spain. Wood eyewear is widely sold on the Spanish market. - What materials and technologies do you apply in your production? Levani: We make frames of various materials: nut, maple, boxwood, red tree. We also resort to combining various materials. Sometimes we prepare ears of one material and the front part of other materials. Irakli:

we make the eyeglasses of natural wood materials and put natural oil on it. We do not apply chemical treatment. We receive semi-processed materials. We have very good suppliers in Georgia. We use Georgian wood materials and Spanish materials too. - As to the design and forms of the eyeglasses… Irakli: At this stage, we make 5 models. We have mainly selected 2015-2016 trend colors. We also manufacture classic models that are not outdated and remain always in fashion. Levani: Clients either choose our ﬁnished works or make orders for their desirable eyeglasses. - Who is Bros Eyewear designated for? Which is your target segment? Levani: we make eyeglasses for ladies and gentlemen, over 15 age category.

Irakli: We make focus on the medium strata, in general, and over. Our prices start from 240 GEL. Prices depend on specific models. We can combine several materials or make engraving or make a special design for a specific customer. Prices grow due to all these factors. Levani: Another factor is complexity, how complex the specific model may be for treatment. We also pay attention to the time of treatment, how much we spend on creating this or that model. Besides wood materials, we also apply organic glass, which is famous for its high-quality characteristics. Lens is polarized or antireflective. Clients select desirable wood materials, lens and the prices are determined due to these factors. - Do you make only sunglasses or you also produce corrective glasses too? Irakli:

We mainly make sunglasses, but make corrective glasses too. The frames of corrective glasses are different and they need lens replacement. Levani: Corrective glasses require absolutely different treatment. We should determine size, the center of lens. Doctor’s prescriptions are required in this case.

We have recently received a wood eyewear made in Spain and I would like to note we produce high-quality eyewear. - Is this business proﬁtable? Irakli: Initially this undertaking was not proﬁtable. Only we wore our eyeglasses. Friends liked them very much and everybody suggested trying business. Finally, we arranged a workshop and make our favorite trade into this business. - What makes favorite trade a successful business? Irakli: you should love your trade and take

correct steps at all stages. We have passed several phases and gained due skills in this ﬁeld. We make focus on quality. - What makes Bros Eyewear special? Levani: Our products are fully made of wood materials. We make eyewear of natural wood materials without chemical supplements. They are covered by antiallergenic means. I believe we produce an innovative product. - Have you developed your own design for frames? Irakli: We plan to enrich our collection by eyewear made by our own design. We plan to mix small iron details into the wood material. -What are your future plans? - We want to increase the quantity of clients, to be wider represented on the market. We have not plans to become a production line. The quantity of products depends on how many items we can make by hand. The production line will strip our eyewear of its fascination. Levani:

Handmade models are individual and original. There are no identical samples among handmade frames. We may make a plenty number of the sameform eyewear, but all of them will be different and individual. marketer.ge

REAL ESTATE caucasus business week

February 15, 2016 #133

REAL ESTATE

February 15, 2016 #133

caucasus business week

ABOUT PLUNGE IN REAL ESTATE MARKET PRICES

VAKHTANG CHARAIA TSU Analysis and Prognosis Center

According to the Ministry of Economy and Sustainable Development of Georgia, total supply of ofﬁce spaces in Tbilisi will increase by 18% as of 2017, while the supply of modern commercial spaces will increase by 50% as of 2017 after the construction of several major shopping malls will be completed. The Tbilisi real estate market prices have declined by about 25%-35% in terms of rental or leasing at the beginning of 2016 compared to the same period of 2015. It should be noted essential contraction in prices started in September 2015. The different situation is reported concerning the purchase of real estate. In this case, prices have slightly decreased or are conﬁned by only the New Year discount campaigns. The problem consists in decreased demand rather than in increased supply.

n the one hand, those who have accumulated capital abroad and, on the other hand, those, who have taken mortgage loans in foreign currency, cannot afford to satisfy their demands through their current incomes. The number of people, who have enough ﬁnancial resources for purchasing real estate, is very unimportant. As a result, we have received the situation, when solvency falls in relation to the real estate sector and the real estate prices will also inevitably decline. Reduction in apartment prices (as well as rental and leasing fees) is directly related to the GEL depreciation, because the prices are mainly determined in USD and the consumers fail to serve the liabilities amid the volatile exchange rates. For example, the borrower had to pay 87.5

000 GEL for a 50 00 USD apartment before the GEL depreciation ($1=1.75 GEL), while today the same apartment’s price constitutes 125 000 GEL. The apartment price has increased by 37.5 thousand GEL. In case of a 100 000 USD apartment, the price has increased by about 80 000 GEL and this factor considerably aggravates the consumer burden, who receive incomes in not USD, but in any other currencies. Despite heavy situation we do not expect the 2008 crisis to be repeated in the developing sector, along with economic growth negative tendencies. Price contraction tendencies will continue, however, the situation will be improved along with the economic recovery. It is worth noting the interest in real estate market and the housing sector in terms of foreign

direct investments (FDI) has decreased to 17.3% from 31.4% as a result of increased indicators of investments in the ﬁnance sector and the decreased interest in the real estate sector (because of contraction in prices). Valuable operation of the housing sector in the country is one of the indicators of the current economic activity. According to Geostat, the national statistics service of Georgia, as of September 1, 2015, the quantity of employees in the development sector decreased to 61 000 from 68 000 year on year. Moreover the value added generation in the development sector decreased to 1.44 billion GEL from 1.66 billion GEL for the past 3 years. The further contraction of this sector will damage the state budget. On the other hand, the averaged salaries of employees in the sector have considerably increased. Namely, the salaries have increased from 947 GEL to 1422 GEL on average, according to the 3Q15 report. It should be noted, along with the GEL depreciation, real estate prices were slightly decreasing, while a major part of developers applies products of domestic production (50/50 in case of reinforcements), not of foreign production. To put simply, their production expenditures have

not increased by 40% for the past 18 months. Consequently, developers have the resources to lower prices without bearing losses, Moreover, they have resources to launch new construction projects, because the decreased prices will enable them to draw new clients. As to the bank sector, it is interesting that the ratio of loans that commercial banks have issued to the development and real estate sector (1.2 billion GEL) in the bank sector’s total loans portfolio (15.2 billion GEL) accounts for 7.7%. Consequently, stagnation in the development sector cannot inflict much loss to commercial banks, even more so if the bank sector takes preventive measures. Finally, despite prices on apartments and office and commercial spaces, including rental and leasing fees, are declining in relation to foreign currency, the same indicators in the national currency show growth tendencies and this may become a good ground for implementing similar operations in GEL. This process would restore confidence in the national currency and lower the dollarization coefficient in the country. This is one of the important components for long-term and stable economic development of the country.

HEALTHCARE

February 15, 2016 #133

caucasus business week

LEO MCKENNA: TBILISI CLINICS REHABILITATION PROJECT ACCOUNTS FOR 250 MILLION

lphaMedic plans to invest about 250 mln GEL in rehabilitating three clinics in Tbilisi, namely, Tbilisi Children’s Infectious Clinic Hospital, the former Republican Hospital and the Universal Medical Center (the former Oncology Center). Under the medical clinics development project, three companies had submitted proposals for the government-announced tender. However, only AlphaMedic Consortium had developed a valuable and interesting tender proposal. Georgian Minister of Labor, Health and Social Protection David Sergeenko and the Partnership Fund executive director David Saganelidze attended the presentation of the medical clinics development project. The mentioned three clinics will be rehabilitated as part of the Private and Public Partnership format (PPP) and the project will also create new job places for local residents, AlphaMedic Bid Develoment Lead Leo McKenna noted and added the project accounts for 0.5 billion:

This signiﬁes improved health system for patients in Tbilisi and on the territory of Tbilisi. Moreover, various modern healthcare facilities will be arranged in Tbilisi. Local companies will increase their commercial potential, new job places will be created for

local population. This investment will inspire this regeneration in the country. Moreover, many non-profile benefits will be also reaped as part of the project. As to investments and the project’s cost-efficiency, Leo McKenna explains: Part of the investments will be attracted by the project partners. Two shareholder partners are AlphaMedic and the Partnership Fund and their financial participation will constitute 40% of total investments, while the remaining 60% will be mobilized from creditors. In practice, these financial resources will be attracted in the form of loans. We have started exploring the market to identify the local readiness for the project implementation. We have received positive results. Local residents back this project. This signifies the financial support will be guaranteed. The component of hospitals account for 250 million GEL, while the whole PPP program that calls for arranging 247 various primary assistance centers will need about 0.5 billion financial resources. The PPP format is financially returnable format.

The UK government introduced this format in 1980s to improve the component of purchases. Traditional projects

frequently delay and require more finances. The statistics proves that this kind of projects ensures a timely supply of products and is properly calculated funds compared to the traditional purchases. The PPP format always returns investments through tenders to find the most optimal suppliers. This component is the most complicated stage in tenders, when the winner company really tries to implement the project under the most profitable schemes”, Leo McKenna said. The project will be implemented in 36 months and the first stage calls for rehabilitating the oncology clinic, Leo McKenna said. The first phase will be supplied in about 18 months. The project must be finished in three years after the contract conclusion. We are pleased to have been selected for the Ministry and the Partnership Fund. AlphaMedic is pleased to enter Georgia with its investments and to develop the sector. We hope for further continuation of our partnership to make this project attractive and successful for Tbilisi residents and patients. We believe our consortium holds the potential to successfully implement this project”, Leo McKenna said. Finally, the AlphaMedic head also talked about the company experience: Our consortium provides a supply of health services and other options in the infrastructure field. It implements PPP Projects on the global level. Al-

phaMedic was founded in Vienna, Austria. The company will supply both medications and equipment to patients and various facilities in the ﬁeld. Our consortium is also able to develop ﬁnically valuable projects.

Other companies frequently submit their projects, but those projects are not valuable and balanced and therefore,

LAUNCH OF NEW PHARMACEUTICAL PLANT WILL HALF DRUG COST To remind, the matter concerns to the new joint project of Austrian company Humanity Holding GmbH and the Fund. High technology pharmaceutical plant, in line of international standards, should be built in nearby area of Orkhevi in Tbilisi within the frame of the project.

xecutive director of Partnership Fund regards that launch of new pharmaceutical plant will half drug cost. David Saganelidze has declared during the submission of development project of medical clinics by AlphaMedic Consortium.

“The fund has successfully started a project, which envisages medical price

reduction. The population has already noticed that drugs are reduced in prices. We consider that prices will be declined at least by 30%, while the new plant will be launched it will half drugs’ costs”,Saganelidze noted.

Total value of the project amounts to 130 million USD. Drug manufacturing pharmaceutical plant with European standards will be equipped with the latest technologies, modern laboratory of quality checking, warehouse spaces and other necessary infrastructure. The plant will produce at least 800 naming drugs for local consumers as well as for import. However, the company will make import of several amount of drugs, realization of which is planned in Georgia with preferential prices.

those projects are destined to failure. AlphaMedic does its best to make these projects vivid and direct these ﬁnances into the correct bed to implement realistic processes.

World Famous Companies with A Huge Experience and Financial Potential Represent AlphaMedic

he Georgian Health Ministry positively appraised the medical clinics development project submitted by AlphaMedic. “The high-level investors are interested in this project. In Georgia the consortium is represented by the world’s distinguished companies with tens of years of huge experience and stable financial resources. They will combine and integrate the west’s best practices into this project. We will receive the best unity of clinics that will become the region’s leading complex”, the Health Ministry representatives told the news conference. This 21st century project absolutely differs from all other previous projects, they said. „This signifies improved health system for patients in Tbilisi and on the territory of Tbilisi. Moreover, various modern healthcare facilities will be arranged in Tbilisi. Local companies will increase their commercial potential, new job places will be created for local population. This investment will inspire this regeneration in the country. Moreover, many non-profile benefits will be also reaped as part of the project”.

WORLD NEWS

February 15, 2016 #133

caucasus business week

EUROZONE ECONOMY GROWS 1.5% IN 2015

he economies of the 19 countries that use the euro expanded by 1.5% in 2015. In the last three months of the year, they grew 0.3%, compared with the previous three months, according to the statistics agency Eurostat. The 28 countries of the EU also grew 0.3% in the fourth quarter, to a GDP growth rate of 1.8% for the full year. Growth slowed during 2015, suggesting that more action may be needed to stimulate economies from the European Central Bank (ECB). “We continue to think that further monetary easing is required, with further policy rate cuts on the cards from March onwards,” said Nick Kounis, economist at ABN Amro. Eurostat also announced on Friday that industrial production had fallen 1% in December compared with the previous month, both for the eurozone and the EU.

Year on year, it fell 1.3% in the eurozone and 0.8% in the EU. Second quarter of Greek contraction The biggest contraction in GDP came in Greece, where the economy shrank 0.6% in the fourth quarter, which was better than had been expected. But the contraction in the third quarter turned out to have been bigger than previously thought, being revised from 0.9% to 1.4%. Several eurozone governments following austerity policies have faced protests on the streets and at the ballot box. But could it have been a little easier? That is where Germany comes in. There certainly is a view that Germany has in effect made it harder than it need have been. How so? Germany surely is the seat of eurozone ﬁnancial prudence and virtue? Well, there is a case that those features of Germany are a problem for the others.

SOCAR Inks Another Deal on Oil Reﬁnery Modernization

Google’s Sundar Pichai Becomes highest-paid CEO in US

Armenia-Georgia Overhead Power line Construction to Begin in 2017

zerbaijan’s state oil company SOCAR and Italian KT-Kinetics Technology SpA signed a contract on licensing the construction of a sulphur production facility as part of modernization of the Heydar Aliyev Baku Oil Refinery, SOCAR said in a statement posted on its website Feb. 11. While delivering speech at the contract signing ceremony, Rovnag Abdullayev, SOCAR’s president, said that the Heydar Aliyev refinery reconstruction project is currently one of the most important for SOCAR, the statement said. “As a result of the project implementation, the existing technological units are planned to be modernized and new units are planned to be constructed,” he said. “The processing capacity of the refinery is planned to be increased from six million tons to 7.5 million tons per year.” “The catalytic cracking unit capacity is planned to be increased from two million tons to 2.5 million tons per year,” he said. “The production of oil products meeting the Euro 5 standards will be established.” SOCAR has chosen KT-Kinetics Technology S.p.A as a licensor of the construction of the sulphur production facility, the statement said. The contract was signed by Elman Ismayilov, the director of the Heydar Aliyev refinery, and Michele Colozzi, the business development manager at Italian KT-Kinetics Technology S.p.A.

he boss of Google has become America’s highest paid chief executive after being handed $US199 million ($A281.11 million) in shares. Sundar Pichai was awarded 273,328 shares in Google’s parent company Alphabet on February 3, according to a regulatory ﬁling with the US Securities and Exchange Commission. It is reported that Pichai’s total stock value now sits at about $US650 million. The payout will make him the top-earning chief executive in the US when compared to the Forbes list of the top 10 highest-paid bosses. However, Pichai’s fortunes are dwarfed by those of Google founders Larry Page and Sergey Brin, who have reportedly made $US34.6 billion and $US33.9 billion respectively. Pichai snagged the top job at Google last year when the tech business reorganised itself under new parent company Alphabet. Google holds lucrative businesses such as digital advertising sales, search engine and YouTube. Last week Alphabet knocked fellow US tech giant Apple off the top spot to become the world’s most valuable public company, with a market value of $US555 billion, compared with Apple’s $US533 billion valuation.

n international tender will be announced to select the contractor organization for the project of constructing the Armenia-Georgia overhead electric power transmission line. The Ministry of Energy and Natural Resources of Armenia informed Armenian News-NEWS. am that at present, the project consultant, Fichtner GmbH & Co. KG, is preparing the respective tender package. The project aims to join the Armenian and Georgian energy systems. According to the preliminary estimation by the Fichtner consultancy services, the project cost is €326.9 million, whose 10 percent is the share of Georgia. The project is planned to be implemented in several phases. The overhead power line construction will begin early next year, and it is expected to be completed by late 2018. The project is carried out with assistance by the German government-owned KfW Development Bank.

Survey: 1 in 5 Turkish Firms Had to Revise 2016 Plans Due to Russia

s many as 20.7 percent of 8,000 Turkish businesses interviewed by a local survey ﬁrm said they had to revise company strategies for 2016 due to lingering political and economic problems with Russia, a poll released over the weekend has shown. Relations between Moscow and Ankara soured in November after a Turkish jet shot down a Russian aircraft near the Syrian-Turkish border. Russia denied it had violated Turkish airspace. Following the incident, Russia introduced economic sanctions against Turkey including banning the import of Turkish fruits and vegetables, poultry and salt, and the sale of charter ﬂights and tourist visits to Turkey, from Jan. 1. Earlier separate market reports put Turkey’s estimated annual loss at as much as $11 billion due to the tension with Russia, while textile, construction and tourism were to be the worst affected Turkish industries. But according to a poll conducted by Eleman. net, a Turkish human resources website, relatively fewer local companies than earlier estimated have cited losses due to the Russian crisis.

PLAYBILL

caucasus business week

February 15 and 16, 2016

Pirosmani â&#x20AC;&#x201C; Imagination Directed by Beso Kupreishvili

Beginning time: 20:00 Running time: 60 minutes, without intermission Performance with English subtitles on February 16! A PERFORMANCE WITH CHILDREN WITH DISABILITIES, DRAMA ARTISTS AND PUPPETEERS Niko Pirosmani simply referred to as Nikala is a famous self educated Georgian artist. Georgian national treasure, founder of new direction in art and one of the outstanding primitivism painters in the World.

Nikala - where the legend comes from!

Nothing is impossible! Theatre has no limits ! Talent has no borders! The creative team behind production is diverse and devoted. Dedicated team of people wants to show you what theatre can be, and who can make miracle on the stage.

February 15, 2016 #133

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 Ave., Tbilisi Tel: 225-20-72/73/74/76 embassy.tbilisi@mfa.gov.tr Consulate General in Batumi 9 Ninoshvili Street, Batumi Tel: 422 25 58 00 consulate.batumi@mfa.gov.tr 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.esRomania 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

PUBLICITY caucasus business week

February 15, 2016 #133