Caucasus Business Week #158

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August 15, 2016 #158

August 15, 2016, Issue 158 - www.cbw.ge

Economy Price of Alcoholic Drinks and Tobacco Products Grows

Newsroom Silicon Valley Tbilisi New high tech centre opens in Georgia Pg. 8

Opinion Georgia: Doing Business By Unwritten Rules Pg. 9

Pg. 2

China Wants to Revive An Ancient Trading Route Between Asia and Europe China’s ambition to revive an ancient trading route stretching from Asia to Europe could leave an economic legacy bigger than the Marshall Plan or the European Union’s enlargement, according to a new analysis.

Dubbed ‘One Belt, One Road,’ the plan to build rail, highways and ports will embolden China’s soft power status by spreading economic prosperity during a time of heightened political uncertainty in both the U.S. and EU, according to Stephen L. Jen, the chief executive officer at Eurizon SLJ Capital Ltd., who estimates a value of $1.4 trillion for the project.

It will also boost trading links and help internationalize the yuan as banks open branches along the route, according to Jen. “This is a quintessential example of a geopolitical event that will likely be consequential for the global economy and the balance of political power in the long run,” said Jen, a former International Monetary Fund economist.

Pg. 15

Israel – Country, where Health Insurance is Mandatory for All Citizens

Taxi Companies Demand Licensing Jerry Waese

Georgia launched the universal health program in 2013. The program financing amount grows year by year, but representatives of opposition parties frequently criticize this program. They urge the government to change the program purpose and determine the list of services clearer. Most frequently, opponents suggest the ruling team to activate the medications component in the universal health program.

At this stage it is impossible to appraise efficiency of the universal health program, because certain time is required for this.

However, the second stage of reforms was planned and implemented at the Health Ministry.

Pg. 13

2 GOVERNMENT

NEWSROOM Georgia’s Bakuriani, Mitarbi ski resorts welcome major development Developing Georgia’s winter wonderlands into four-season mountain resorts is the focus of a 100 million GEL development project at one of Georgia’s main ski areas, Bakuriani and its neighbouring Mitarbi village..

Georgia launches electronic prescription system Georgia is taking a step into the future by launching an electronic prescription system that will enhance safety and quality of how medicines are prescribed by doctors.

ECONOMY

Georgia to Pay $ 1, 6 bln of its External Debt by the End of the Year

Bakuriani will Grow into Regional Conference Center like Davos

B

akuriani has met the summer season with a novelty – the mountain toboggan, the most popular amusement of ski resorts, has opened in Didveli. Georgian Prime Minister Giorgi Kvirikashvili has visited the amusement and examined it personally.

By the end of the year Georgia will have to pay another part of the external debt - $ 1, 6 billion.

This amount includes government and corporate debt for the 3rd and 4th quarter of 2016.

“There is serious boom of development in Bakuriani. We have developed partnership models with the private sector thanks to correct state intervention.

Georgia’s wine export up 42% in July Georgia is reaping the benefits of $92.3 million USD flowing into the economy from increasing wine and brandy exports to markets all over the world.

BANKING

Finca Introduces Special Conditions for 2-Year Loans The bank product’s interest rates starts from annual 10.49% (effective interest rate from 11.15%) and the loan’s top amount is 2 500 GEL. Loan without mortgage guarantees is issued for any purposes.

TBC Bank Remains Leader in Retail Deposits Portfolio TBC Bank remains a leader in terms of retail deposits portfolio with more than 32% ratio.

As of August 1 TBC Bank keeps 2.692 billion GEL retail deposits (2.509 billion GEL in H1/16; +7.3 month on month).

BUSINESS

Kindzmarauli is Exports Markets’ Leader among Georgian Wines According to the Georgian Agriculture Ministry, 3 210 280 bottles of Kindzmarauli, 1 230 522 bottles of Mukuzani red wine and 1 016 107 bottles of Tsinandali white dry wines were exported in January-July 2016.

Ajara Budget Collects 7.3 million GEL from Gambling Business Duties from gambling tables made up 51% in total revenues from casinos, 46% – in gambling machines duty and 3% – in all other gambling business duties.

COMPANY

Magti Offers Cheapest Internet Services in Georgia Magti company offers a new campaign for the Internet services. The monthly price of 20 megabyte package is 19 GEL and the tariff will be active up to the end of 2016.

The Kokhta-Mitarbi direction is being developed seriously. Rope-ways have been already installed on Kokh-

ta and the works will be finished in the direction of Mitarbi this season.

This one complex will be connected through rope-ways. Geuinely beautiful skiing tracks surrounded by picturesque nature landscapes are being arranged. This complex will be one of the most beautiful resorts in not only Georgia, but Europe.

This project has been implemented thanks to the correct partnership model that we have developed. The private sector is building new hotels there due to the development plan. Entertainment Centers are being constructed. Special buildings are being constructed for shopping.

Mountain toboggan has been also installed and it will function as both summer and winter amusement.

You have seen how much tourists are interested in this project. All these efforts are taken so as local guesthouses and small enterprises receive more revenues. This will be one of the important directions and will cover Borjomi hotels too, because free of charge Shuttle-busses will be appointed from Borjomi hotels to transport tourists here in both

summer and winter seasons, the Prime Minister told reporters.

A biathlon track will be also constructed and the design will be developed by French experts by the end of 2016, the Prime Minister said.

“To put simply, large-scale development projects are being implemented and this is only a part of the project.

Bakuriani will grow into a regional conference center like Davos and Bakuriani has all resources to attain this goal”. Mr. Kvirikashvili said.

The Toboggan was constructed by Slovak company Tatralift. The track is 960 meters in length. The track inclination is 28%. The project was financed by the Government by 3 million GEL.

Silicon Valley Tbilisi New high tech centre opens in Georgia

G

eorgia is embracing its growing role as a technology nation by developing a platform for local developers, software engineers and entrepreneurs to bring life to their bright business ideas.

Next month a new technological centre named Silicon Valley Tbilisi will open its doors on Chavchavadze Ave, in a central district of capital Tbilisi.

The large facility will be a learning place for children and tertiary students and will also be home to satellite offices of several of the world’s leading technology firms.

Silicon Valley Tbilisi will include an Information Technology (IT) Academy, Business and Technology University, a school, laboratory and research centres and a technological incubator.

There will also be student campuses, a summer school for children with outdoor play areas and swimming pools.

Staff trained and educated [at Silicon Valley Tbilisi] will be in demand and successful not only in Georgian businesses but in the international area as well,” said one of the project’s representative Mikheil Batiashvili.

Georgian specialists will no longer

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August 15, 2016 #158

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be forced to go abroad for training if they want to be employed in leading companies. Silicon Valley Tbilisi will give them a chance to get all the skills they need and start working in famous technological companies of different countries while still in Tbilisi,” he added.

Silicon Valley Tbilisi will offer three levels of education – bachelor, masters and doctoral degrees.

Professors from Israel are currently in Georgia to share their experiences and train local experts who will teach at the new facility.

It is a big honour for us to be in Georgia, in such a wonderful country. We want to share our experiences with Georgia and train local high technological specialists and software engineers. These are two of the most in demand professions in the world today,” said a representative from the Israel Science and Technology Centre.

Silicon Valley Tbilisi is named after Silicon Valley – a famous area in California, United States (US) that is home to hundreds of start-up and global technology companies, with Google, Apple and Facebook among the most prominent.

The word ‘valley’ refers to the Santa Clara Valley while the word ‘silicon’

originally referred to the large number of silicon chip innovators and manufacturers in the region. The term Silicon Valley eventually came to refer to all high tech businesses in the area, and is now generally used as a synecdoche for the American high-technology economic sector.

It also became a global synonym for leading high-tech research and enterprises, and thus inspired similar named locations, as well as research parks and technology centres with a comparable structure all around the world.

www.cbw.ge <<

There is a High Demand on Baku-Batumi Bus Route from Tourists

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10 Containers of Georgian Wine to be Shipped to China

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WizzAir to Perform Kutaisi-Larnaka Flights for 19 EUR

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Life Goes On – Additional Source of Income for Pensioners

Editor: Nutsa Galumashvili. Mobile phone: 595 380382 Reporters: Nino Kuparashvili, 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

August 15, 2016 #158

PUBLICITY

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AGL

August 15, 2016 #158

Ronny Solberg CEO of AGL(Adjaristsqali Georgia)

Our company defines success by how well we promote environmentally sustainable economic growth and development Adjaristsqali Georgia LLC is constructing the 187 MW Shuakhevi Hydro Power Plant (HPP) cascade in the Adjara region with a total investment of around USD 416 million. The project is backed by international energy and financial organizations, including Clean Energy Invest AS of Norway, The Tata Power Company Limited of India, and the International Financial Corporation (IFC) and is being financed by the Asian Development Bank (ADB), IFC, and the European Bank for Reconstruction and Development (EBRD). AGL CEO Ronny Solberg answers questions from Caucasus Business Week about his project’s progress and the Georgian business environment in general.

- Mr. Solberg, can you give us some background about the project and your company’s goals?

- We started construction in 2013 and plan to commission the completed plant in January 2017. At the moment, construction is about 80% complete. We have excavated 37 km of tunnels, and the hydro power station and dams are still under construction.

Our company defines success by how well we promote environmentally sustainable economic growth and development in the region. We represent one of Georgia’s largest and most technologically advanced energy projects. The Shuakhevi HPP is the first greenfield hydro project in Georgia that has been accredited

by UNFCCC as a CDM project, and it will reduce carbon emissions by approximately 500,000 tons per annum. Our project currently employs around 750 Georgians and contributes roughly USD 4 million in taxes to state and municipal governments annually.

- You said that the region’s long-term development is one of your company’s main priorities. What steps are you taking to accomplish this goal?

- From the very first day of con-

struction, our greatest challenge was how to play important role in the sustainable development of highland Adjara. We studied local needs and set out to create conditions that would empower residents of Khulo and Shuakhevi to change their lives for better.

We are implementing a variety of social projects in highland Adjara which aim to improve the living conditions of people living within the project area and to promote long-term development. These projects include road building, supplying villages with drinking water, community and small business financing and development, scholarships and education projects for local teachers and students, and road safety and health awareness training. All of our social projects are developed and implemented in collaboration with affected communities.

- I would like to ask you about your relationship to the Georgian government. Has working with the government been a challenge, or have they been supportive of your work?

- Close cooperation between the Georgian government and our company is a crucial factor in the success of the Shuakhevi HPP. We have received a great deal of sup-

port from the government on all stages of our work, especially from the economic teams at various ministries. As an energy project, our main partner is the Ministry of Energy of Georgia. Thanks to their constant support, our project managed to overcome many obstacles.

Our project is a good illustration of how the state and the private sector can jointly create opportunities for sustainable development. We’re not just building a hydro power project – we’re investing millions of laris in more than 70 social projects, each of which is planned and implemented with the direct involvement of local government and residents.

- How would you evaluate the business environment in Adjara in general?

- Both tourism and construction are in particularly strong positions in Adjara, and investment projects implemented within the past decade clearly demonstrate that Adjara is an attractive place for investors to invest. Based on 2015 investments, energy has also become one of the leading economic areas in region.

As a representative of the energy field, I find this particularly encouraging. Developing the energy sector will support Georgia’s effort to become energy-independent.

August 15, 2016 #158

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VAZHA BERIASHVILI TBC Bank’s Deputy Director of Retail Business

I

nfluential finance magazine Global Finance has named TBC Bank’s internet and mobile banks for individuals the best in Georgia for the fifth consecutive time, the internet and mobile banks for corporate segment gained this recognition for fourth consecutive time.

In addition, TBC Bank’s internet bank for legal entities was given the award for the best integrated web-page in Eastern and Central Europe.

How does TBC Bank achieve leadership in distance service development and what are the advantages of its internet and mobile banks compared to those of other banks – we talked about these topics with TBC Bank’s Deputy Director of Retail Business, Vazha Beriashvili.

- How important is the recognition of Global Finance and what are the criteria used to reveal the winners?

- Global Finance is one of the most influential publications in finance industry. In banking industry, receiving its award is recognition equal to receiving the most prestigious award in movie industry – Oscar. We are proud that Global Finance has named our internet and mobile banks the best service in Georgia for several consecutive times. We are also glad to have gained this recognition among such banks as City Bank, Barclays, Chase Bank and many more. Such international recognition gives us even stronger motivation to improve and develop our distance services.

As for the criteria used by Global Finance to reveal the winner banks, they are the following: the strength of the so-called “digital” strategy, number of internet and mobile bank users and dynamics of this number, security, functional diversity and what is the most important, design and user-friendliness of the internet and mobile banks.

Based on these criteria, TBC Bank’s internet and mobile banks meet international standards and it provides no less, and frequently even higher quality product than the analogue services of the world leader banks.

- What are the advantages that differentiate TBC Bank’s internet and mobile bank from the analogous services of other banks that operate in Georgia?

- The most important advantage that differentiates us from the analogous services of other banks is that it is very simple to use TBC Bank’s internet and mobile banks. Our distant servics are used by customers of different generations and it is equally easy to use our service for all of them.

For example, it takes only 1-2 seconds to login to our mobile bank – it is not necessary to enter the username and password, which many clients forget most of the time. It is sufficient to use fingerprint to log in to mobile bank. If mobile phone does not support this technology, it is sufficient to enter the 5-digit code, which is much easier to remember than the password.

In addition to simplicity, what differentiates us from the distant services of other banks is our exquisite design, which we created together with British agency.

It is notable, that before launching any new function together with this agency, we test it in a small group of customers.

After considering their comments and user experiences, the function becomes available to all customers. This process ensures the simplicity and equisite design oif our digital products.

Speaking of internet and mobile banks, I should also note that we regularly study

BANK

“ In the past five

August 15, 2016 #158

Today the number of customers who use TBC Bank’s internet or mobile banks has reached 250 000, whereas five years ago it was only 15 000

years, TBC Bank not only created the best internet and mobile banks in the region, but also managed to significantly increase the number of customers using distance services

”

the trends, new developments in this field, as well as research the best analogue products in this direction in the region and world.

Additionally, our distance services have fantastic feedback from our customers on Google and Apple internet stores, from where the TBC Mobile bank application can be downloaded.

- When and why did the distant services become a priority direction for TBC Bank and what is dynamics of customer growth?

- As early as in 2011 we set an objective to make digital services – internet and mobile banks – one of the advantages of TBC Bank. We believe that in the future more and more customers will switch to distance channels in their banking experience and we would like to make this process very comfortable and simple for them.

In the past five years, TBC Bank not only created the best internet and mobile banks in the region, but also managed to significantly increase the number of customers using distance services – five years ago the mere 15,000 clients used our internebank. Now the number of our clients who regularly use our internet and mobile banks is almost 250,000. A specially notable is the number of the customers whose major channel for banking is only mobile bank. This service is comfortable to such a great extent that the clients does not need anything other than mobile application and ATM for banking.

We are very glad that the number of such “mobile” users is already 50 000.

- What causes the increase of the number of these customers?

- In the first place, the increase is the result of the simplicity and convenience of these services. However, we invest significant resources to encourage usage and better understanding of our services.

We teach on place how to use our internet and mobile banks to the clients who have come to TBC Bank and for certain reasons are not the users of our digital products yet. We want them to become sure that it is very easy to check the account balance, make mobile top-up, pay utilities or do any other bank operations via digital services. If the clients do any transaction via internet or mobile bank themselve, they will be convinced how simple it is and will not have a fear to do these operations independently.

- TBC Bank constantly renews the functions and visual of its internet and mobile banks. What factors are considered in the renewal in addition to international practice?

- When renewing the functions and visual of our internet and mobile banks,

we consider the demand and feedback of our customers – if a certain number of clients request some function or an existing function is inconvenient for them, we have to satisfy their demand. Client demand is the major criteria in determining the priorities, however, we never forget to monitor and improve such areas as security of the services, uninterrupted service and speed.

- When we speak about Global Finance, we should definitely note that together with TBC Bank’s internet and mobile banks for individuals, TBC Bank’s internet and mobile banks for legal entities were also named the best banks, this time for the fourth consecutive time. What advantages do TBC Bank’s internet and mobile bank deliver to corporate segment?

- There is even more to note, Global Finance named our corporate internet bank the best integrated internet offer in Eastern and Central Europe. This implies that we have the best digital offer in the region for our business clients.

We use the similar approach in case of internet and mobile banks for legal entities as for those for individuals – the service must be simple and convenient. To achieve this, we meet small, medium and large enterprises and research their demands, and then we try to satisfy these demands in timely manner.

We have launched modern technologies for corporate clients that simplify their everyday life. For example, we integrated the accounting program into the internet bank. As a result of this technology, the work to be performed by our clients is much less and simpler.

- In addition to internet and mobile banks, TBC Bank offers other distance services to the customers. For

example, just recently you launched an innovative product mobile terminal. Can you elaborate on this? What other distance services do you offer to customers and how does this service simplify clients banking experience?

- TBC Bank has diverse distance services and internet and mobile banks are the most used services among them. However, we have other services that are no less popular. For example SMS Service. Unlike other banks, we shifted SMS Service from Latin to Georgian Alphabet within the project #writeingeorgian, e.i. if the client has a smartphone, they will receive the message in Georgian Alphabet, which is a novelty on Georgian market.

Standing order is also a very popular service and it can be managed from internet bank. The client registers the standing order only once, the order could be a transfer of certain amount of funds from their account to their spouses’ account, or payment of utilities. After this no additional action is required from the client, the bank regularly performs this order and sends the information about it via SMS to the client.

Mobile terminal, which you mentioned in your question is also an innovation on Georgian market. If a store or a taxi triver would like to accept Visa or Mastercard payments, via TBC Bank’s mPOS application, seller’s or taxi driver’s the mobile phone will serve for a terminal. As a result, the small business can accept payments via mobile phones.

I would also like to mention TBC Bank’s new concept branches. The project was implemented together with an international company Allen International and it represents the synthesis of openness, comfort and modern technologies. TBC Bank introduced the most advanced

achievements in the field of service, as a result, the environment, that was created with the new concept, met all the demands that modern era puts on bank branches.

There are special tables in the branches, on which mobile phones and tablets are attached. Customers learn how to use mobile and internet bank with these electronic devices.

Three pilot branches created with the new concept are already open in Tbilisi.

Soon one more branch in Poti will be added to their list. In general, from now on, every new branch will have such a special environment. As for the rest, as their exploitation term comes to an end, they will be renovated according to the new concept.

- What is important for maintaining leadership on the market and what future plans does TBC Bank have with regards to distance services?

- In order to maintain the leadership, it is important to realize that the digital revolution has started in every field, incuding financial and nothing can stop it. The bank should be ready for these changes.

Offering one distance product to the customer and stopping on that is not a good decision. Digitalization should be a permanent process and significant resouces should be spent on it.

We have realized this very well and for this reason, we are constanty offering new projects and services to our customers for the past five years, as for the existing services, we constantly improve them.

In autumn, we will present one more new digital product to our customers. I will keep the details confidential for the moment, but this product is also related to mobile phone and I am sure it will also become an inseperable part of our customers’ everyday lives.

August 15, 2016 #158

Taxi Companies Demand Licensing MARIAM KOPALIANI

Taxi business remains out of control in Georgia.

This is one of the main challenges that bring many negative outcomes. For many years, discontent passengers have been protesting against unqualified taxi drivers, who are ignorant of routes and destinations, who do not care for hygienic norms. Taxi companies confirm these negative aspects and they demand for licensing taxi drivers.

By the way, even private taxi drivers back this idea.

Experienced drivers note that everybody is able to drive a taxi and ignorant drivers spoil the business to professional drivers.

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ECONO-MIX

O

n the other hand, Taxi Business is considered one of the most widespread activities in Georgia. People, who cannot find job places, take efforts in this business. There are ten thousands of taxis only in the capital city and their quantity grows in regions too.

They sustain many families and therefore, no government dares to set regulations against them.

Tbilisi City Hall started working on taxi business licensing issues at the beginning of 2016. However, there is no specific plan on how to control the field. This issue was developed by the Transport Company jointly with several services of Tbilisi City Hall. No additional details are unveiled yet.

The workgroup does not have a specific project yet and it is unclear when the issue development will be finished, the Transport Company representatives noted.

The current legislation does not regulate private passenger transportation field and this signifies that anybody is free to buy a taxi plate and start this business without licensing fees and taxes.

The Caucasus Business Week (CBW) has decided to explore the position of the market players whether they agree with the initiative of Tbilisi City Hall and whether they approve specific regulations offered by Tbilisi City Hall. How is the taxi business made in Georgia and what are main challenges in this business?

Taxi companies declare that additional regulations contain potential risks, because this may inspire disappearance of job places, the market may be extremely narrowed and the service tariffs may increase.

Omega Taxi Omega Taxi head Vano Todua says that it is an ideal variant to introduce regulations, but it is necessary

that Tbilisi City Hall properly form these regulations. The statement made by Tbilisi City Hall so far, does not match the existing standards in Georgia, he said.

It is unacceptable to set regulations due to the age of a vehicle. According to certain information, the city hall plans to introduce Euro3 standards for taxi companies (vehicles issued in 2000 and later) and this is not acceptable, Todua noted.

“Georgia is not a country, where Euro3 standard should be set and it is unclear why they demand this.

Our roads do not satisfy even Euro1 standards, while Euro3 standard vehicles will never drive on these roads. This specific regulation will, first of all, hit our population, because taxi services will become unattainable for them. Currently, taxi services are adjusted to public interests directly and this is a comfortable and cheap mechanism of transportation, like other developing countries. However, these regulations will only worsen the current situation”, Todua noted.

There is a part of regulations that should be introduced necessarily and the current taxi fleet should be renovated. Namely, regulations should cover a behavior of taxi drivers, knowledge of the city routes, technical examination, prices.

However, all these regulations will increase taxi service tariffs, Todua said.

Taxi Company 200-200 Nika Khoperia, founder of Taxi Company 200-200, says that a part of regulations are acceptable.

Technical examination is necessary, but impossible in current reality, he said.

Taxi business licensing system will lead the market to monopolization, violate the demand-supply balance and taxis will become deficient.

“If licenses will be issued to only

companies, in this case only 2-3 companies will remain and they will have only 100 taxis. This situation will create a deficit, while now the field is regulated by natural factors”, Khoperia said.

A major part of regulations will increase service tariffs and the market will die, because many citizens are not solvent to take such costs. Therefore, insurance system introduction is an only solution, Khoperia said.

“Insurance mechanism are widely applied worldwide, while in Georgia no insurance company serves taxis because of high risks and expensive tariffs”, Khoperia noted.

Elite Taxi Technical examination and licensing are necessary, but to a certain degree, so as these regulations do not affect revenues of drivers, Elite Taxi founder Levan Gagunashvili said.

“All these regulations will increase taxi service tariffs. Everybody is able to provide taxi services. This is unacceptable. All drivers must keep their vehicles in order, but today our population has serious economic problems and everybody acts due to resources”, Gagunashvili noted.

Tbilisi Council member Shalva Ogbaidze says that absence of licensing system creates huge problems in the taxi business. This field must be brought into order necessarily, Ogbaidze noted.

This issue was one of the pledges made by Tbilisi City Hall, however, the municipal transport company has not introduced a clear vision around this issue. Nothing has changed in this direction. “The elections are coming and how they can activate this issue”, Ogbaidze said.

It should be noted that according to various estimations, 50-60 thousand taxis drive in Tbilisi every day.

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August 15, 2016 #158

KAZBEGI

TRAIL MARATHON 2016

ECONOMY

MERAB JANIASHVILI Economic Analyst

July Sees 1.5% Inflation Rate Price of Alcoholic Drinks and Tobacco Products Grows, Food and Transport Prices Decline

I

n July 2016 the inflation rate in Georgia rose by 0.2% compared to June and by 1.5% compared to July 2015 (annual inflation rate).

The consumer price index increased by 15.7% compared to the averaged indicator of 2010. As compared to June 2015, the July inflation rate formation was influenced mainly by price changes in the following groups: prices in the transport group increased by 1.3% and its ratio in total monthly inflation rate made up 0.16%. Prices increased in the group for a purchase of transport (7.0%) and transport services (3.4%).

Alcoholic beverages, tobacco products: prices increased by 1.3%. Consequently, the group’s ratio in the July total inflation rate made up 0.09%. Prices increased in the subgroup of alcoholic beverages (1.9%); 0.4% decline was registered in the group of food products and nonalcoholic beverages and narrowed the July inflation rate by -0.11%.

Prices considerably decreased in the group of vegetables and garden plants (-12.7%) and fruits and grapes (-9.2%).

As to the annual inflation (comparison of the common level of prices to the previous year indicators), its formation was mainly preconditioned by price changes in the following groups: In the group of alcoholic beverages and tobacco products, prices increased by 13.1%. The group’s ratio in total inflation rate made up 0.80%. Growth in prices was fixed in subgroups of both tobacco products (20.5%) and alcoholic beverages (7.1%); Residential house, water, electricity, gas and other means of heating: the group has recorded a 6.1% upturn. Consequently, the mentioned group’s ratio in total inflation rate made up 0.51%. Prices mainly increased in subgroups of electricity, gas and other means of heating (9.2%); Prices in healthcare group increased by 4.1% and this figure made up 0.40% in total inflation rate. Prices increased in subgroups of outpatient medical services (8.7%) and hotel services (2.0%).

Prices declined in the transports group by 8.6%, that was reflected by -1.04% point on annual inflation rate. Prices mainly declined for exploitation of personal transport means (-14.2%) and purchase of transports (-12%).

It should be noted that the annual inflation rate (5.6%), starting February 2016, showed slowdown tendency and the figure made up 1.1% in June. In July the annual inflation rose to 1.5%, but the National Bank has determined the 2016 target indicator at 5%. In the next 3 years it is planned to reduce the rate to 3%. Following the low inflation rate, the national bank has smoothed the monetary policy rate. At this stage, the refinancing loan interest rate is 6.75%, while the rate stood at 7.5% at the beginning of 2016. The low inflation rate enables the NBG to further lower the monetary policy rate.

K

azbegi Trail Marathon is the only first marathon held in the Great Caucasus, the highest Mountain Range in Europe. It takes place in Stepantsminda and its surroundings, between 1700m and 2200m above sea level.

On September 4th, 2016 it will be the 7th time already, that Kazbegi Marathon will host runners from all over the world. Organizer of the marathon is Tourist Agency Visit Georgia.

Marathon participants have the chance to run in the most amazing place in the Great Caucasus, on the foot of Mt. Kazbegi (5048m). Virgin nature, iced peaks, alpine slopes, stunning paths, spectacular valleys, ancient towers, remote villages and enchanting churches makes the distance unique and very exciting. Panoramic views of the breathtaking landscapes and huge mountains around are giving to the runners and their supporters an unforgettable pleasure.

The Marathon takes place on 5 distances:

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The slogan of Kazbegi Marathon is “Children Leaukemia Curable” and each of the registered people will automatically become part of this charity

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Full Marathon (42 km) Half Marathon (21 km) Fun Run (8 km) Relay Race (42 km) Kids Run (400m)

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Panoramic views of the breathtaking landscapes and huge mountains around are giving to the runners and their supporters an unforgettable pleasure

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The first 3 run are individualistic, while the Relay Race is for groups and organizations. As for Kids Run, this year, for the first time, we organize it for children 6-11 years.

The route for each distance has been designed in such way that runners will experience all kind of environments: uphills, downhills (altitude difference 500m.), meadows, asphalt and priming roads.

Dramatic scenery and indescribable grandeur of the Great Caucasus Mountains will accompany runners throughout the race. These distances would be a challenge for the runners as it gives possibility to get interesting experiences and various amazing feelings along the race. They will run through picturesque villages and be introduced to the local lifestyle.

The slogan of Kazbegi Marathon is “Children Leaukemia Curable” and each of the registered people will automatically become part of this charity. The part of the registration fee will be spent on children with leukemia. It implies to assist the Onco-Hematolog patients coming from the provinces of Georgia which get treatment in “Parents House”.

“Kazbegi Trail Marathon” aims to improve economic level of the locals, as well as to promote healthy lifestyle in Georgia.

Runners who wish to join the marathon should register online on www.kazbegi-marathon.com

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OPINION

August 15, 2016 #158

Dr. Andrei Maximov

Georgia: Doing Business By Unwritten Rules

Maximov&Partners LLC; am@maximov.com www.maximov.ge

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uccessful reforms, great institutional environment for business, large-scale support by the state—all these are real starting points that foreigners experience in Georgia.

Yet, if all of that is so rosy, where are the hordes of happy investors from all around the world? Why do so many leave the country only after a year or two, with a feeling of deep disappointment and feeling lucky if they can still get back some of their invested funds? This is especially true for small- and medium-scale business people who do not get enough attention from the state because it concentrates its attention on large strategic investors—which is, by the way, fully reasonable. In my opinion, the main reason for such a condition is the fact that doing business “by unwritten rules” is prevalent in Georgia’s traditional economy.

In Georgia, especially in rural and/or far-off touristic regions, an external investor is too often seen as a “money purse with feet”—as someone who must be immediately relieved of his heavy burden, whatever it takes… (Well, even in Tbilisi one can quite often encounter such a phenomenon.) An investor is, however, someone who has a lot of expertise, knows a lot about technology, management and marketing. Unfortunately, the goal of getting practical results together—maybe not tomorrow, but after a reasonable period of time for a given business project—is not always predominant.

A newcomer to Georgia is usually not ready to deal with an obvious contradiction: Georgians are phenomenal, fantastic friends and hosts and yet that goes together with a

www.cbw.ge <<

Silver Containing, Medical-Prophylactic Socks Appeared on Georgian Market

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Georgia to Collect Information on Manufacturers of Green Technologies

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Ajara Will try to Interest Iranian Investors

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Chokhatauri and Keda Produced Fruit Products to Be Sold in China

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Rating of Commercial Banks in terms of Crediting Industry Sector

low level of contractual and legal culture. There is too much here of doing business “by unwritten rules” of accepting business as a friendly gesture or a favor for a relative. If best friends or close relatives verbally agree on a joint deal without making clear all of its details, you can rest assured that they will become worst enemies in no time at all. Needless to say that this is even worse for someone who came along from far away bringing his money with him.

It is understandable from where such a phenomenon evolved. On one side, most of private business in the Soviet Union (including that in Georgia) could function only outside of the regimented Soviet legal framework. So, any business disputes which always arise among partners were invariably resolved by “people of authority”, that it “top dogs”. In the 2000s the successful process of driving organized crime (“mob bosses”) out of Georgia was a great achievement of the state on its path to building democratic society and creating successful market economy. At the same time, this has brought about a vacuum in the resolution of existing business conflicts. Both judicial and legal system remained ineffective and sluggish, and it could not respond adequately to the challenges and needs of the new times.

On top of that, business “by unwritten rules” was enhanced by prevalent lack of or disregard for business planning and marketing. Not only in Georgia, but in all post-Soviet realm that is a real heritage of the Soviet model since the main issue for the economy of overall shortages was to produce

Investor must go with the existing contractual and legal norms of the Georgian legislation, run his business in a transparent manner, always stay within the legal boundaries rather than to sell. Producers, especially those in Georgia, were never concerned with the issue of selling their goods: Georgia had, in practical terms, a monopoly for citrus cultures and other fruits that were universally craved for in the USSR. Besides, there existed guaranteed mass market for tourism and medical services in the huge Soviet trade-union sanatoriums built in Georgia. Older-generation Georgians can still relate with a lot of nostalgia how closer to New Year’s Eve a truckful of tangerines could be sold in any larger Russian city in no time at all, so that one could bring back to Georgia a coveted Volga automobile and thus only within a few weeks get the top item in the Soviet consumption model.

In the market economy, however, everything works in quite the opposite way—which is great for consumers and very unfortunate for producers. After tangerines from Georgia had made their way back to the Russian market in 2013 they found there tangerines from China, Morocco, Israel, Spain and many more countries plus featur-

ing better prices, better packaging, larger volumes and an option for an impressive payment delay. Same was true for other items of Georgian agricultural products.

Now try to imagine just what would happen to any business project if it existed is not only outside of the legal environment, in the sphere of business “done per unwritten rules”, but also was never calculated, had no business plan, nor any idea re how and where to sell its product or service. Do not even start guessing: partners will go fiercely against each other trying to save at least some of the invested capital. As the Russian saying goes, “there’s more joy in anticipation than in realization”…

In most cases, by the way, there is no ill will involved. Dishonest entrepreneurs or even crooks exist in any country, and Georgia is not an exception in this respect. On the contrary, my own experience in my recent business activities tells me that the possibilities of encountering indubitable fraud when doing business in some neighboring countries are much higher than in Georgia.

Still, uncalculated business ventures result in ubiquitous payment defaults or considerable payment delays as compared with deadlines that were agreed upon when the covenants of the parties had been made verbally. The result is this: it is not customary in Georgia to settle on schedule! It is not considered shameful to default on an obligation to pay for delivered goods or provided services… As a result, the acute problem for the Georgian economy is the issue of payment arrearage which negatively affects, first of all, the real, non-financial sec-

tor of the economy plus construction and logistics. But no only these latter ones. Payment default gets distributed as blood clots throughout the country’s whole economic system actively slowing down both entrepreneurial effort and economic growth.

You may ask just what should be done? In theory, things should straighten out with time: free market and competition should force out of the field dishonest and/or ineffective business people.

Well, if one condition is certainly met: there can be no competitive advantage to those who default on or delay payments, who breach the terms of agreement. Any contractual delinquency, any dishonest or fraudulent action should be quickly, effectively and inevitably punished within the framework of the legal environment, i.e. via the existing judicial and legal system.

Only in that case will the situation immediately change for the better.

In other words, the state must assure the inevitability of punishment.

In his turn, outside (foreign) investors should not take the bait and agree to doing business “by unwritten rules”: he must go with the existing contractual and legal norms of the Georgian legislation, run his business in a transparent manner, always stay within the legal boundaries, accurately pay taxes and, finally, try not saving money on lawyers and auditors if he wants to be able to defend his interests in due course. It will be late calling for help if the foreigner did already position himself outside the law and legal protection while trespassing against Georgia’s laws.

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BUSINESS

August 15, 2016 #158

SPAR Georgia Offered Zugdidi Traders to Unite under their Brand The first regional franchise of SPAR Georgia will be opened in Zugdidi. Holder of the brand license, SPAR Georgia offers all retail local traders, stores and shop-chains to gain the license and unite under their brand.

Union under SPAR brand offers retail traders to apply those advantages, which “SPAR” has. LTD “Eurofood” was formed on the basis of the mentioned project. The LTD has become the first franchiser.

The company declares, that they plan to develop the project in other regions as well.

To note, SPAR International is in 42 countries of 4 continents, holds more than 12,000 shops and employees over 200 thousand persons.

DESIGN GREENS

Why Georgian Greens Succeeded in Entering the Russian Market?

B

eing highly interested I started reading an article “Why Georgian Greens Fail to Succeed on Russian Market” published in the CBW previous issue. But soon my interest turned into bewilderment. The author, referring to a few Georgian producers negative experience, made categorical conclusions on complete closeness of the Russian market, no access for new suppliers, universal bribes. Surprisingly the article was finished with information about “bloody clashes between the Black Greengrocers”, where 100 people have allegedly died.

Have no idea about clashes, I haven’t participated and never heard of them. Heard, of course, about bribes, but our companies don’t give them. We do business without bribes. It’s a principle.

Regarding all other points I’m eager to correct the author.

Agreed with her that Russia is a complicated market. But necessary to add that there are no easy export markets for the Georgian agricultural products. Because the Georgian farmer loses “price – quality” ratio to its competitors.

If we speak about greens, he loses to suppliers from Uzbekistan and Iran. No bribes or total market control are responsible for Georgian farmers failure. Responsible are inadequately high export prices and unfavorable terms of payment (no payment deferral).

Russian Federal Service for Veterinary and Phytosanitary Surveillance permitted Georgian greens exports in Autumn of 2015. We looked forward to this moment, but in 2015 Kolkhida Trade LLC (responsible for Georgian agricultural exports in our Maximov&Partners group of companies) succeeded to export only one truck (12,5 tons of greens) to Russia. Purchase prices were too high. But in February-April 2016 it delivered to Russia already 235 tons of greens.

There are two main reasons for such a positive dynamics. First, farmers and peasants, being afraid not to sell the harvest, have significantly lowered purchase prices. Second, we are not producers and don’t risk growing greens ourselves. We are exporters. But our companies in Georgia and Georgia offer the full range of

NEWS

COMPANY

Hegemon- New Online Store of Georgian Brand

Georgian Savse The Fastest Growing Smoothie Company in the UK

Hegemon – is a new online store brand, which is produced in Georgia. Each product includes high quality and professionalism. “Our goal is to create such a variation in clothes, which will give more choice and opportunity to people to look individual and special”.

2481 Construction Licenses Issued in Tbilisi in 2016 In January-June 2016, a total of 1334 new buildings were constructed in Georgia, including 416 ones are located in Tbilisi. According to Geostat, the national statistics service of Georgia, residential buildings rank first in total quantity of new facilities, i.e. 708 ones.

The quantity of commercial facilities is 201, industrial and storehouse facilities account for 85. Food outlets account for 40 ones and 34 administrative buildings were also constructed. As to Tbilisi, 416 new buildings were completed in 6 months and 338 are residential houses.

services necessary for successful and effective exports. The management of greens-purchase program, technologically right packaging for greens transportation, logistics, the correct and accurate document flows both in Georgia and Russia. Our buyers had no headache at all, receiving the ordered greens in the warehouse in Moscow, St. Petersburg or Rostov. They pay by bank transfer in rubles including VAT to our Russian company banking account.

Absolutely legal business with no any clashes and human victims.

And what is the most important – active marketing in Russia. We know the market, research the competitors, define the target audience, promote the Georgian greens in Internet and use other marketing tools.

It’s not only greens matter. In the same way we work with any agricultural (and not only agricultural) product with an export potential.

Kolkhida Trade deals with greens for 10 months only, but exports Georgian dried bay leaf (daphna) for two years. In 2015 daphna exports made up 290 tons, and in the first half of 2016 already 562

Guka Tavberidze Founder and the chief executive of the company In just 3 years this company’s turned into a $13m dollar turnover. Savse has seen a 600% increase in sales in just the last 12 months.

The word Savse is a Georgian word and it actually means “crammed full”, and the smoothies are crammed with goodness.

“Using my mum’s recipes, and with investment from my uncle, I launched the business in 2013”, – said Guka Tavberidze, who is the founder and the chief executive of the company Savse smoothies.

Thus, the idea came out from his mom. When she was pregnant, the doctors found she was suffering from an iron deficiency and she had to eat spinach and apples to increase her iron levels. So she started experimenting with fruit and veg. “She made them for me and my sisters, Sophia and Salli, and we always enjoyed them without really knowing what was in them”, – Guka said. Initially Guka literally had no idea how to start. “I had no FMCG experience and no degree, just a normal guy with the dream of wanted to do something of my own.”

It was very challenging for him but very exciting at the same time. He just wanted to start something with the right values and something spectacular. The healthy drinks business with Georgian roots has expanded into stores including Boots and Whole Foods.

A lot of smoothie-type drinks use heat pasteurisation to make the product last longer and kill bacteria.The ingredients are boiled at 78 degrees, which strips out the goodness. Savse smoothies are different as they’re cold pressed and 100% natural.Thus, they use a method called high pressure processing (HPP) to make Savse smoothies.

The fruit and veg ingredients are packaged in plastic containers and put in a high-pressure chamber filled with water. “Everything is completely fresh and the process gets rid of bacteria and gives the product a longer shelf life. There weren’t any factories offering HPP in the UK, but I found one in Holland, which we still use”, – Guka Tavberidze noted.

tons. With such big volumes we found reasonable to be involved in production and bought necessary equipment for bay leaf processing and sorting. Until the end of the year minimum 500 tons of dried daphna are planned to be exported to Russia.

This summer season we tried the same with potato, peaches, nectarines and tomatoes, but failed. At the beginning purchase prices level made exports a loss-making exercise. Later they became extremely low, but it was late – the market had been saturated. Apart of prices our competitors from Israel, Egypt, Syria, Morocco and other countries have a strong competitive advantage comparing to Georgia – a payment deferral. In Bolnisi or Gurdzhaani it’s necessary to pay immediately - when a truck has been loaded.

But nothing terrible: we will study further the market to prepare ourselves for the next season. And now it’s time to start preparations for citruses season.

Vladimer Skhulukhia CEO, Kolkhida Trade LLC

Georgian Designer’s “Bazar” Laundry Bag Costs $2,500 Select pieces from Demna Gvasalia’s debut at Balenciaga are starting to roll out now, first of which is the “Bazar” bags and wallets, which are basically luxe versions of the cheap laundry bags you’ll find in Asian markets all over the globe.

Unsurprisingly, Balenciaga’s version of the shopping bag is a little bit more expensive: it’s $1,495 for a small version, $1,645 for a size medium, and the largest model is set to retail for $2,525.

You can also get purses and wallets in the same pattern, costing $565 and $545 respectively.

Gvasalia’s not the first designer to glamorize humble shopping bags. Danish homeware label Hay redesigned IKEA’s iconic blue “Frakta” bag, as did Virgil Abloh’s OFF-WHITE imprint.

Jil Sander, meanwhile, luxed out a paper grocery bagin leather and suede, a move which Stampd mimicked some years later.

The bags are available exclusively at Balenciaga flagship stores — head over to the house’s web shop for further info.

August 15, 2016 #158

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SALES

Archi Batumi Apartment Sales Started - Project to end in late 2017

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ales for Archi Batumi project started. The project is located on Gorgasali Street, in the central part of Batumi, which is a strategically important location for both tourists and local residents.

The residential house is located on a 800 meter distance from the seaside. The famous Dolphinarium of Batumi is also nearby, as well as the Nuri Lake and the Park of May 6.

Archi Group has recently started the construction works of Archi Batumi and the building process

is planned to be completed at the end of 2017.

The total construction space of Archi Batumi is 6,000 square meters.

The project is planned for building a 12 floor house. Higher floors will have a beautiful view to the sea.

The price of one square meter of a complete white frame starts from 570 USD. The smallest living space in the project makes up 33.9 square meters. Buying an apartment in Archi Batumi is possible by internal interest-free installment terms.

Moreover, the company also of-

fers 10-year installment payment scheme.

Archi Batumi is the first project in Batumi for Archi Group and the second one in Ajara Region. In 2013, the company finished construction of hotel-style residential complex in Kvariati. Sunset Kvariati is differentiated with its remarkable location immediately by the seaside. The project includes 85 hotel/residential suites.

As to the future, Archi group plans to implement many other largescale projects. Details will be an-

nounced in the near future.

The company considers Ajara Region, especially Batumi, to have a growing potential for tourism. The amount of Georgian and foreign tourists is increasing from year to year, including the ones who desire to buy apartments in Batumi.

The current tendencies show that many vacationers prefer to buy apartments than to stay at a hotel and rent a suite. Consequently, today Batumi is very interesting in terms of construction projects, as compared to other resort cities.

September 22 - October 8 INTERNATIONAL PROGRAM INTERNATIONAL PROGRAM NEW GEORGIAN SHOWCASE

International Program Fomenko Workshop Theatre

A RUSSIAN ON A RENDEZVOUS After Ivan Turgenev’s novella “Spring Freshets” Production Supervisor ; Yevgeny Kamenkovich

With Elegant Touch of Reality…

Theater history: The Fomenko Workshop Theatre was officially created in 1993. But the «Fomenkis» trace their history back to July 1988 when Pyotr Fomenko selected his first group of students at the Russian Theatre Academy (GITIS).

Every new group of students at GITIS is considered a «workshop», and since Fomenko’s students remained together after graduating, the school name became the theatre name. Some student productions gave rise to the Fomenko Workshop Theatre. One of them remains in repertory today (Wolves and Sheep) and it is still a great favorite with audiences. Having premiered in May 1992, it is now well over 20 years old!

The company regularly takes on new students. For many of its early years, the theatre lacked a home. In 2000 it finally moved into a renovated space that formerly housed a cinema. A few years later, a new building for the Fomenko Workshop Theatre was constructed.

It included all the modern technical capabilities. Now the company performances are played on four stages in two buildings. There are thirty eight performances in the theatre repertory now. You can find perfomances based on Russian and foreign classical literature staged in accordance to the best and oldest traditions of Russian drama theatre, as well as productions found on modern literature that absorb new trends of international culture. The Fomenko Workshop Theatre’s productions have repeatedly been winners of prestigious theatre awards. The theatre has toured extensively not only in Russia, but Europe, Latin America, the USA and Japan. www.tbilisiinternational.com www.facebook.com/ TbilisiInternational

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PUBLICITY

August 15, 2016 #158

G

eorgia launched the universal health program in 2013.

The program financing amount grows year by year, but representatives of opposition parties frequently criticize this program. They urge the government to change the program purpose and determine the list of services clearer. Most frequently, opponents suggest the ruling team to activate the medications component in the universal health program.

At this stage it is impossible to appraise efficiency of the universal health program, because certain time is required for this. However, the second stage of reforms was planned and implemented at the Health Ministry. The second phase calls for modifying the universal health system and growing its efficiency. We invited a group of international experts and the company that have developed a further strategy and action plan jointly with the Health Ministry. Currently, this issue remains in the phase of implementation. Documents have not been published yet and the model submitted

by Global Alliance consulting company to the Health Ministry remains unknown at this stage.

It would not be expedient to separately discuss which way the universal health program will follow in Georgia and what its fate will be. We can only make suppositions based on reforms implemented in the world in the last period.

It is interesting what mechanisms the developed and advanced economies have applied to improve the existing

13

HEALTHCARE

August 15, 2016 #158

Israel Country, where Health Insurance is Mandatory for All Citizens gaps in the healthcare system, what kind of insurance system the world’s successful countries prefer. We will refer to the Israeli experience.

ISRAEL According to the Israeli legislation, all citizens are insured. Each citizen, having turned 18, is obliged to transfer health insurance payments to the national insurance service. Housewives, citizens, who are not employed and their revenues do not exceed 5% of the averaged income norm determined by the legislation, prisoners, who serve the term for 12

months, repatriates - for 12 months after obtaining the due status, citizens having turned 18, who do not pass obligatory military service, are considered an exception, on condition they will pass military service before they turn 21.

Israeli citizens, who have not turned 18, are free of mandatory insurance payments. The Government insures this category in automatic regime.

Servicemen, who receive medical services at the Israeli armed forces, are also exempted from the insurance payments.

All citizens having reached pension age are

July Records Slight Contraction in Price of Medications of Cardiology Group The Healthcare Platform continues monitoring of medications of cardiology group as part of the Pharma Monitoring project. Jointly with the Association of Young Financiers and Businessmen (AYFB), the Healthcare Platform has explored 19 medications and identified that in July, as compared to June, the price of medications of cardiology group has declined by 0.51% (-0.13 points).

The monitoring has showed that the price of 17 medications of cardiology groups has not changed month on month. The price of one medication has increased, while price of 3 medications has declined.

Prices of the following medications have changed: 1. Indapamide / Arifon Retard (1.5mg, 30 pills)-15.9 GEL 2. Perindopril Arginine + Indapamide / Noliprel Forte Arginin 5 mg+1.25mg-27.37 GEL. The Healthcare Platform and AYFB continue monitoring of prices of medications of various groups and exploring upturn-downturn tendencies of medication prices on the pharmaceutical market.

As reported, based on high public interest and the existing social background in the country, the Healthcare Platform and AYFB started monitoring of medication prices on the pharmaceutical market in August 2015. To measure the pharmaceutical market prices, the group has developed the Panaskerteli Index to make monthly dynamics of medication prices in specific groups of most in-demand medications transparent and public.

exempted from mandatory insurance payments, as well as widows without a breadwinner, people who receive allowances because of family members died in industrial accidents, disabled bodies, who receive allowances for temporary or continuous invalidity, are also exempted from the insurance payment.

According to the applicable legislation in Israel, all insured citizens must be assigned to a certain health insurance foundation, chosen by own will.

The insurance foundation must provide medical services for the patient.

Membership of the health

insurance foundation enables patients to buy medications at affordable prices. Under the applicable law, patients pay only a certain of the medication price.

The health insurance foundation provides such services as: Diagnosis, prevention of diseases and outpatient treatment, general hospitalization, consulting, visits to therapist, pediatrician services, laboratory analysis and examination, services by otolaryngologist, urologist, orthopedist, provision with medications, provision of required medical equipment, medical and psychological assis-

tance to former drunkards and drug addicts.

The amount of insurance payments depends on the status of the insured.

Namely, whether they are employees, private entrepreneurs or the unemployed.

If the beneficiary is an employed worker, the employer deducts the insurance payment from the employee’s salary. If the beneficiary’s revenue makes up about 60% of the average incomes determined by the legislation, they pay 3.50% of their revenues to the national insurance service. If the employed worker’s revenues exceed 60% of the law-determined average incomes, the top payment is determined by 12% of this revenue.

The employee is obliged to pay 3.45% of the revenue in the first case and 7.50% of the revenue, in the second case.

As to private entrepreneurs, the bottom payment to the national insurance foundation is 9.82% (if the entrepreneur’s revenues is about 60% of the lawdetermined averaged revenues), while the top amount is 16.23% of the revenues (if the entrepreneur’s revenues exceed 60% of the lawdetermined average revenues).

Citizens, who do not work and do not have a source of incomes, pay insurance payment of 168 Shekel. Those who do not work but have revenues, pay the insurance payment in the following way: 1. Those, whose revenues make up about 60% of the averaged revenues, pay 9.61%.

2. Those, whose revenues exceed 60% of the averaged revenues, pay 5%.

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PUBLICITY

August 15, 2016 #158

WORLD NEWS

August 15, 2016 #158

15

Quotes

“ Education is the TANAP project, worth $9.2 billion, envisages transportation of gas from Azerbaijan’s Shah Deniz field to the western borders of Turkey

most powerful weapon which you can use to change the world

”

WHO held two meetings in Turkmenistan, a country Reporters Without Borders ranked as the third worst in the world for respecting press freedom

Nelson Mandela

Difficulties of Connection Ankara offers to conTurkish Stream, TANAP nect Turkish Pipelines

I

t is not worth to expect a quick decision regarding Turkey’s proposal to connect the Turkish Stream pipeline, which envisages Russian gas supplies to Europe, to the Trans Anatolian Natural Gas Pipeline (TANAP), which will start delivering Azerbaijani gas to Europe in 2020, said the senior expert of Russia’s Finam Management company Dmirtry Baranov.

“Currently, it is hard to say whether they will make this decision or not, since it determines the fate of many energy projects,” Baranov told Trend Aug. 11.

Earlier, Turkish Foreign Minister Mevlut Cavusoglu proposed to connect the Russia-developed Turkish Stream pipeline to the TANAP. Cavusoglu said Ankara will buy only 16 billion cubic meters of Russian gas per year via the Turkish Stream. The remaining volume of Russian gas can be exported through Turkey via TANAP by connecting it to the Turkish Stream, he added.

Firstly, the reaction of TANAP project participants to the proposal is unknown, said Baranov adding that the participants have their own plans to develop and use the pipeline, and none of them said that these plans have changed.

Earlier, TANAP Consortium told Trend that they are familiar with Turkish foreign minister’s statement, but don’t have precise information. Secondly, the Russian expert noted that TANAP has to

compete with Russian gas supplies to a certain extent, and Cavusoglu’s proposal, if it is accepted, will change many things.

Finally, all parties have to take into consideration Europe’s opinion in this issue, because a number of states are the final recipients of gas, said Baranov.

He went on to add that the political component and the state of the global economy must also be taken into consideration in the issue of connection of the Turkish Stream and TANAP pipelines.

TANAP project, worth $9.2 billion, envisages transportation of gas from Azerbaijan’s Shah Deniz field to the western borders of Turkey. The gas will be delivered to Turkey in 2018, and after completion of the Trans Adriatic Pipeline’s construction, the gas will be delivered to Europe in early 2020. TANAP shareholders are Azerbaijan’s state oil company SOCAR (58 percent), BOTAS (30 percent) and BP (12 percent).

Russia abandoned the South Stream project in favor of Turkish Stream in December 2014, which involves the construction of the gas pipeline from Russia to Turkey through the Black Sea. However, the project was frozen after the relations between Moscow and Ankara deteriorated in November 2015. During the meeting on Aug. 9, Vladimir Putin and Recep Tayyip Erdogan agreed to resume the implementation of the Turkish Stream project.

China Wants to Revive An Ancient Trading Route Between Asia and Europe

C

hina’s ambition to revive an ancient trading route stretching from Asia to Europe could leave an economic legacy bigger than the Marshall Plan or the European Union’s enlargement, according to a new analysis.

Dubbed ‘One Belt, One Road,’ the plan to build rail, highways and ports will embolden China’s soft power status by spreading economic prosperity during a time of heightened political uncertainty in both the U.S. and EU, according to Stephen L. Jen, the chief executive officer at Eurizon SLJ Capital Ltd., who estimates a value of $1.4 trillion for the project.

It will also boost trading links and help internationalize the yuan as banks open branches along the route, according to Jen. “This is a quintessential example of a geopolitical event that will likely be consequential for the global economy and the balance of political power in the long run,” said Jen, a former International Monetary Fund economist.

Reaching from east to west, the Silk Road Economic Belt will extend to Europe through Central Asia and the Maritime Silk Road will link sea lanes to Southeast Asia, the Middle East and Africa.

While China’s authorities aren’t call-

ing their Silk Road a new Marshall Plan, that’s not stopping comparisons with the U.S. effort to rebuild Western Europe after World War II. With the potential to touch on 64 countries, 4.4 billion people and around 40 percent of the global economy, Jen estimates that the One Belt One Road project will be 12 times bigger in absolute dollar terms than the Marshall Plan. China may spend as much as 9 percent of gross domestic product — about double the U.S.’s boost to post-war Europe in those terms.

“The One Belt One Road Project, in terms of its size, could be multiple times larger and more ambitious than the Marshall Plan or the European enlargement,” said Jen. It’s not all upside. Undertaking an expansive plan like this one will inevitably run the risk of corruption, project delays and local opposition. Chinese backed projects have frequently run into trouble before, especially in Africa, and there’s no guarantee that potential recipient nations will put their hand up for the aid.

In addition, resurrecting the trading route will need funding during a time of slowing growth and rising bad loans in the nation’s banks. Sending money abroad when it’s needed at home may not have an enduring appeal.

India Expected to be Ground Zero for the UN’s Next Assault on Press Freedom

Stream, TANAP Turkey’s Foreign Minister Mevlut Cavusoglu has offered to connect the Turkish Stream pipeline, which is being developed by Russia, to the Trans-Anatolian Natural Gas Pipeline (TANAP), via which Azerbaijani gas will be delivered to Europe in 2020, TRT Haber news channel reported Aug. 10.

Cavusoglu said Ankara will buy only 16 billion cubic meters of Russian gas per year via the Turkish Stream. The remaining volume of Russian gas can be exported through Turkey via TANAP by connecting it to the Turkish Stream.

“TANAP is a priority project for Turkey,” noted the minister.

TANAP project, worth $9.2 billion, envisages transportation of gas of Azerbaijan’s Shah Deniz field from Georgian-Turkish border to the western borders of Turkey.

Azerbaijan’s SOCAR commissions new well at oldest field in Caspian Sea Azerbaijan’s state oil company SOCAR will produce over 7,660 tons of oil annually through commissioning a new well at the offshore Oil Rocks field, SOCAR said in a message Aug. 9.

Oil is extracted from a wellbore within the range of 1,205-1,187 meters, according to the message.

SOCAR is implementing a program to stabilize and increase oil output.

The company produced 3.78 million tons of oil at offshore and onshore fields in 1H2016 as compared to 4.14 million tons in January-June 2015.

SOCAR produced 8.16 million tons of oil in 2015 compared to 8.32 million tons in 2014. In total, 41.59 million tons of oil was produced in Azerbaijan in 2015, compared to 42.02 million tons in 2014, according to SOCAR.

T

he United Nations (UN) is supposed to protect freedom of the press across the globe. Instead, the organization has become one of the greatest threats to press freedom in the world. The UN regularly silences journalists and bans members of the media from covering its events.

The UN’s next attack on press freedom and transparency will likely take place this November in India, where the press is expected to be banned from the proceedings of a tobacco control conference.

Every other year the UN’s public health arm, the World Health Organization (WHO), holds a convention in an effort to reduce global tobacco use. The meeting, the WHOFramework Convention on Tobacco ControlConference of the Parties, acts as a parliament of 180 countries that meet to discuss and ratify tobacco control measures including global tobacco taxes, rules on cigarette packaging and advertising, and regulations that impact vaping and e-cigarettes.

This year’s version of the event will occur at the Expo Centre & Mart in Noida, just outside of Delhi.

The meeting brings together health ministers and other government officials at a cost to global taxpayers of more than $20 million. Unfortunately, the public will likely never learn how their money is spent, or find out how leaders from their country vote on issues that impact tax revenues, health policy and intellectual property rights in almost every county in the world.

That’s because after the conference begins, a vote to kick out the public and bar the press from the event will likely take place. It happened two years ago when the meeting was in Moscow. And two years before that in Seoul.

I know. I’ve seen it firsthand.

In Moscow, moments before ratifying a controversial global tobacco tax, journalists – including me – were threatened and physically removed from a meeting room so we could not report on the vote. The next day, the WHO banned journalists from the conference completely. Discussions and decisions took place in secret, behind closed doors, with no oversight and no accountability.

The UN’s assault on transparency, accountability and freedom of the press doesn’t stop at the biennial tobacco control meetings.

In September 2014, Herve Ladsous, the UN’s head of Peacekeeping Operations, attempted to prevent reporters from filming a public press conference in Sudan by holding

up folders to obstruct the view of cameras.

When his immature effort to block the cameras proved ineffective, he cancelled the briefing altogether. Instead of apologizing for this chilling abuse of press freedom, UN officials made things worse by attempting to coerce a number of websites to remove videos taken of the incident.

During the height of the Ebola outbreak in West Africa, the UN blacklisted a reporter who criticized the WHO’s response to the crisis. The UN blocked the journalist from receiving email updates about the WHO’s Ebola efforts and refused to respond to her questions and interview requests.

More recently, during this year’s World Health Assembly, the WHO Director-General, Margaret Chan, refused to hold press conferences and ignored reporters even though the WHO event is considered the most important health meeting in the world.

In addition to banning, threatening and blacklisting reporters who attempt to cover UN events, the organization regularly awards prestigious meetings and conferences to countries with little or no regard for freedom of the press.

Over the past year, the WHO held two meetings in Turkmenistan, a country Reporters Without Borders ranked as the third worst in the world for respecting press freedom.

According to the watchdog group, journalism in Turkmenistan “can only be practiced clandestinely and when independent journalists are identified, they are liable to be jailed and tortured.”

The most absurd aspect of the UN’s disregard for freedom of the press is that each May, the UN hosts World Press Freedom Day – an event that celebrates the media’s critical role in a free society and encourages a free press in countries where that right is under attack. It’s amazing that anyone takes World Press Freedom Day seriously when the UN acts so shamefully insincere towards protecting freedom of the press.

The UN shouldn’t be allowed to prevent the media from reporting on decisions made by government officials who use taxpayers’ money to make decisions that impact the lives of billions of people. If the media is banned from the UN meetings in Noida this November, it will be up to India’s citizens and journalists to sound the alarm and let the world know that freedom of the press is under attack. Hopefully if India speaks loudly enough, the rest of the world will listen, and we can finally put an end to the UN’s despicable assault on press freedom.

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August 15, 2016 #158