Caucasus Business Week #177 by Caucasian Business Week

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January 23, 2017 #177

January 23, 2017, Issue 177 - www.cbw.ge

Interview Vladimer Magnaradze Understanding the real estate index Pg. 7

Real estate Foreign Investments in Development Sector Make up about 30-40%

Startup Tsezar Chocheli’s Suggestions for Beginner Businessmen

Pg. 6

Pg. 11

Georgian Perspectives of Estonian Model

Gazprom Checkmates Georgia

Key component of Estonian Model calls for exempting undivided profit from tax burden. After introduction of Estonian Model in Georgia, a major part of business entities will be partly exempted from profits tax. These bodies will be taxed if profits will be issued in the form of dividends or they will distribute profits in the way unrelated to the company’s business activities. Consequently, Estonian Model taxes profits not in the profits reception moment, but in the profits distribution process. Government of Georgia announced inauguration of preparatory works for Estonian Model establishment in 2015. Purpose of introduction of this model was to make positive eﬀect on various economic directions. According to Former Finance Minister Nodar Khaduri, Estonian Model will intensify economic growth, expand access to financial resources, increase liquidity of business assets and grow capital in business sector. Pg. 8

Government against Online Loans

Pg. 9

Pg. 6

2 GOVERNMENT

NEWSROOM Venice Commission supports Georgia reforms, recommends further changes President of the Venice Commission Gianni Buquicchio says he is well familiar with challenges currently facing the Georgian people.

About 10 Clinics may be Withdrawn from the Universal Healthcare Program The Minister focused on the deficiencies detected in a number of clinics. According to Sergeenko, the main directions of the new reforms will be implemented at the beginning of February.

ECONOMY

Every 7th Family in Georgia Buys Food with Borrowed Money 80% of Georgia’s population at the end of the month has nothing left of the revenue - except for food and basic necessities, expenses are mainly used to cover all sorts of debts and credits.

In 2016, Georgia’s Foreign Trade Turnover Amounted to $ 11.9 Bln In 2016, Georgia’s foreign trade turnover amounted to $ 11,9 billion, of which exports accounted for 2,1 billion, which is 4% less than in 2015, import - 9, 8 billion, which is 27% more than in 2015.

BANKING

Money Transfers from Abroad to Georgia up 16% In December 2016, a volume of money transfers from abroad amounted to $ 119.0 million (GEL 315.4 million), which is 16.7 percent ($ 17.0 million) more than in December 2015.

January 23, 2017 #177

Silk Road Brings Enormous Opportunities, but There are Certain Prerequisites To Leverage Existing Potential

he impact of political and infrastructural investments under the New Silk Road on economic growth and harmonization between Europe and Asia was the issue discussed today at the Silk Road Eﬀect Session of the World Economic Forum in Davos. The Prime Minister of Georgia addressed the participants of the session. Giorgi Kvirikashvili emphasized the importance of Georgia’s engagement in the One Belt-One Road project initiative by the President of China. The project, according to the Prime Minister, is a great opportunity for ensuring development in its participant states. “It is a network of diﬀerent alternatives, and each of them is important to growth healthy and have healthy economy in Eurasia. This is about competition and cooperation at the same time. It is more about cooperation, however. As mentioned by President Aliyev, the Silk Road brings enormous opportunities, but there are certain prerequisites in order to get the most of it in order to leverage on the existing potential. First of all, it is, of course, infrastructure. Second is

stability across countries. This is about cooperation, cross-border procedures, and unification of tariﬀ systems. Of course, this is about political cooperation and has multifold dimensions,” the Prime Minister stated. According to the Prime Minister, Georgia has already signed cooperation agreements with its partner states. The BakuTbilisi-Kars railroad project is nearing completion, being an important part of the Silk Road going through Georgia to Azerbaijan and Turkey. In his speech, Giorgi Kvirikashvili emphasized the importance of the Anaklia Deep Sea Port project. “We are launching the construction of one of the largest ports on the Black Sea, which is the Anaklia Seaport. We already have a winning consortium, a Georgian-American consortium, and they are looking for port operators in the region. We are modernizing our railway, increasing the speed of our railway. We are investing a lot in the road infrastructure. Of course, we are cooperating with other countries across the Silk Road. We already signed a cooperation agreement with China. We have completed

free trade negotiations with China, and we will sign the free trade agreement in the nearest future. In a nutshell, the Silk Road is about borderless cooperation. It is very important to mention that this economy is not only about transportation. This is about manufacturing cooperation and logistics,” the Prime Minister said. The session, which was dedicated to the opportunities oﬀered by the New Silk Road, was attended by Azerbaijani President Ilham Aliyev and Mongolian President Tsakhiagiin Elbegdorj. As usual, the Davos Forum hosts heads of states and governments, global business leaders, scientists, economists, and political scientists. The slogan of this year’s forum is Responsible Leadership. Global political leaders and almost 1,000 large companies and organizations are participating in the forum. The Georgian delegation led by Prime Minister Giorgi Kvirikashvili consists of Minister of Economy and Sustainable Development Giorgi Gakharia, Foreign Minister Mikheil Janelidze, and Head of Georgia’s Co-Investment Fund Giorgi Bachiashvili.

TBC Bank Appoints New Chief Risk Ofﬁcer David Chkonia David Chkonia which has 15 years of experience in the risk management will occupy the post depute of risk management director and general director in TBC.

BUSINESS

Egypt’s Investors to Produce Filter Manufacturing Machines in Kutaisi FIZ The new plant will operate in Hualing free industrial zone. According to the FIZ director, the plant will launch production in March 2017. Before, special equipment will be installed.

Contractor of ZARA and MANGO Holds Meeting in Guria According to Administration of Guria, businessmen has visited privatization objects in Ozurgeti and professional college “Horizonti”, where staﬀ for the plant will be trained in the case of implementation of the project.

COMPANY

KAMPA Asks Government to Free Georgian Entrepreneurs from Imports Tax Products imported from the CIS countries are not taxed by 12%, while entrepreneurs have to pay the tax in all other cases.

Georgia’s top trading partners in 2016

anada, Turkey and Russia were Georgia’s top trade partners in 2016, shows preliminary data from the National Statistics Oﬃce of Georgia (Geostat). Georgia’s top 10 trade partners in 2016 made for 68 percent of the country’s total trade turnover, with Canada ($1,832 million), Turkey ($1,525 million) and Russia ($881 million) filling the top three spots. Trade with EU countries Trade turnover with European Union (EU) countries increased by 14 percent year-on-year (y/y) and amounted to $3.60 billion, said Geostat. Exports were worth $571 million (12 percent lower), while imports reached $3.03 billion (20 percent higher). Trade with CIS countries The external trade turnover of Georgia with the Commonwealth of Independent States (CIS) countries totalled $2.72 billion in 2016 – a three percent

BUSINESS WEEK caucasus

The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Address: Aleksidze Street 3 Director: Levan Beglarishvili; Mob: +995 591 013936 Sales: Mob: +995 558 36 61 07 WWW.CBW.GE Email: caucasianbusiness@gmail.com

y/y reduction. Exports were worth $739 million (12 percent lower) while imports equalled $1.98 billion (one percent higher). What are Georgia’s main exports? Georgia’s top exported commodities in 2016 were: - Copper ores and concentrates (worth $312 million, or 15 percent of total exports) - Nuts (worth $179 million, or nine percent of total exports) - Ferro-alloys (worth $169 million, or eight percent of total exports) What are Georgia’s main imports? Georgia’s top imported commodities were: - Medicines (worth $2.89 billion or 29 percent of total imports) - Petroleum and petroleum oils (worth $619 million, or six percent of total imports) - Motor cars (worth $473 million, or five percent of total imports)

From the medicine imports, $2.61 billion worth of Hepatitis C treatment medication was imported for the country’s Hepatitis C Elimination Program. Georgia’s external trade in 2016 Georgia’s external trade grew by 20 percent in 2016 and totalled $11.96 billion, reported Geostat. Last year the value of Georgia’s exports dropped by four percent to $2.11 billion, while the value of imports increased 27 percent to $9.85 billion. Georgia’s trade deficit equalled $7.73 billion in 2016, which was a 65 percent share of the country’s total trade turnover. Trade deficit is an economic measure of the negative balance of trade in which a country’s imports exceed its exports. Imports excluding Hepatitis C medications were worth $7.23 billion – one percent less compared to 2015.

Editor: Nutsa Galumashvili. Mobile phone: 595 380382 Reporters: Medea Samkharadze; Mariam Kopaliani; Merab Janiashvili Designer illustrator: Ilia Chrelashvili. Technical Assistant: Giorgi Kheladze

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

January 23, 2017 #177

PUBLICITY

PASHA Bank sponsors hackathon “Smart City” as a supporter of Green Contest On January 28-29 Caucasus University will host hackathon “Smart City” where student teams will be competing in generation of innovative solutions for making our capital city a better place in regards with parking, ecology, queues and other related issues. The teams will be evaluated by the following criteria: whether the innovation is applicable in real life; and its originality. The winner in the contest of Green Project will be granted a prize from PASHA Bank. In December 2016 the Bank promised to dedicate its CSR activities to environmental projects throughout 2017. The Bank already planted 2017 Georgian Pine trees for rehabilitation of the damaged forest near Borjomi. “We consider that it is important to involve young generation in ecological issues and to hear their initiatives on how to care about the environment in a better and more eﬀective way. This hackathon will actually generate innovative ideas which we need so much. In 2017 we plan to get involved in several Green Projects and sponsorship of this contest is one of the steps we gladly took in this direction. We are even thinking that there is a chance for us to participate in realization of one of the ideas brought up at the hackathon,” commented Anano Korkia, the Head of Public Relations and Marketing Department at PASHA Bank. The hackathon is being held with the grant of Georgian Innovations and Technology Agency. The organizer is startup accelerator “C10” at Caucasus University. Co-organizer of the hackathon is management company for startup accelerators “Blender”. Sponsor of the hackathon as a supporter of the Green Project is PASHA Bank.

ECONO-MIX

Government against Online Loans

Archil Mestvirishvili Vice President of National Bank of Georgia

Merab Janiashvili Economic Analyst

Finally, it should be noted that the Authorities are trying to hide a considerable growth in taxes through populism steps. On the one hand, the Authorities announced prohibition of online loans, which is impossible to implement, in practice, but grows taxes, on the other hand

At the end of 2016 Georgian Prime Minister Giorgi Kvirikashvili announced plans for restricting online loans. Next day other members of the government introduced their interpretation of the mentioned statement and forecast introduction of new regulations. And shortly Government submitted a bill of amendments to the Parliament for protection of consumer rights. According to legislative amendments prepared by Finance Ministry and National Bank of Georgia (NBG), top margins will be set on loan interest rates – annual 100%. Objective of the initiative is to protect borrowers. The bill will come into force on July 1, 2017. «Under agreement between parties, besides loans determined by part 3 of this article, annual eﬀective interest rate of an issued loan must not exceed 100%, including in case of extension of a loan’s maturity period. For purposes of this part, extension of maturity period of the existing loan may be considered as an issuance of a new loan after loan coverage if the period between covering the old loan and taking a new one does not exceed 5 days», a package of amendments to Civil Code reads. As a result of amendments, top margin interest rate on fines was determined by 150%. This decision will, first of all, make problems to online loan companies. «According to Civil Code amendments, total maximum interest rate must not exceed annual 150% and this factor does not enable online loan companies to successfully continue operation», Dimitri Kumsishvili said. In some cases, annual interest rates on online loans reach 3 000%, even 4000% and this practice should be removed, NBG President Koba Gvenetadze noted. Explanatory card of the mentioned bill reads that in most cases borrowers cannot realize how much interest rates they have to pay for small loans. Sometimes, unbearable burden leads some of them to suicide, the document reads. «Today loans have become more attainable and people with low financial education have problems with planning financial management issues. As a result, excessive indebtedness and related problems generate sharpest diﬃculties in our society. Expenditures on interest rates are high and sometimes they are openly indicated on due websites. However, borrowers cannot perceive the mentioned expenditures in due manner, because loan amount is very small, as a rule. As a rule, the borrowed sums are not covered

‘‘

-When the Larization process will start? -Larization process will start on January 17, 2017 and will last 2 months. Our citizens are able to apply to due commercial banks under this program. Loans must have been issued before January 2, 2015 and must have been guaranteed by USD or real estate. The one-time program is jointly implemented by National Bank of Georgia (NBG) and Government of Georgia. Government will subsidize expenditures for Larization of loans under preferential exchange rate, while NBG will supply USD to commercial banks for Larization of loans and will ensure support through GEL liquidity. The program does not call for taking additional expenditures by commercial banks or borrowers, including no advance payment or refinancing commission fees will be applied to similar loans. Commercial banks are obliged to inform all potential beneficiaries about the program. The program also enables borrowers to carry out porting of their loans, i.e. take optional decision on in which bank to carry out loan Larization. Subsidies will not be applied to high-income bodies, whose annual revenues exceed 100 000 GEL or whose remaining amount of the loan exceeds 100 000. The program is applicable to about 27 000 physical bodies. Averaged amount of loans is 15 000 USD. -If NBG tightens monetary policy amid inflation expectations, what are government’s expectations and forecasts? Will our citizens take part in this program? -The program is optional and enables borrowers to enjoy preferential exchange rate for loan Larization. Borrowers will not pay advance payment commission fees. Moreover, the program participants’ revenues will not be dependent on exchange rate difference and they will serve loans by the currency in which they receive revenues. Difference between interest rates of GEL and USD makes expenditures that the borrowers pay for insuring currency risks. GEL-denominated loan enables to insure from currency risks. It also makes loan service costs foreseeable. The borrowers will be also exempted from paying conversion fees. -Is it possible to convert GEL-denominated loans to USD again? -Starting January 15, 2017 financial institutions are banned to issue foreign currency denominated loans under 100 000 GEL. As for higher amount loans, similar loans may be issued in USD. -Will this program be applicable to restructured loans? -Similar loans will be also included in the program based on other criteria. -Why the 1st of January of 2015? -Objective of the mentioned scheme is to alleviate loan service burden amid exchange rate change. Under existing calculations, this mechanism will most concern loans issued before January 1, 2015/ This initiative does not refer to those who have taken loans after considerable change in exchange rate. However, they are free to negotiate their loans with commercial banks and join the Larization process. -What interest rates will run for issuing GELconverted loans? -Commercial banks will issue GEL-converted loans under the existing market interest rates. -Conversion of USD-denomanted loans into GEL will shrink demand for USD. On the other hand, commercial banks will maintain demand for USD, because they have taken loans in foreign currency. Has Government taken into account this factor and how negatively will this moment affect GEL exchange rate? -Main objective of Larization process is to shift currency risks onto those instances that are able to manage them. As to physical bodies, this category has the least ability to do so. NBG will directly supply required amount of USD to commercial banks for Larization process. Consequently, this process cannot affect either exchange rate or currency positions of commercial banks. -Will Larization program increase money mass? -This program will not increase money mass.

Purpose of Introduction of Top Margin on Loans

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Larization Program will not Aﬀect either Exchange Rate or Currency Positions of Commercial Banks

January 23, 2017 #177

in the first maturity period and borrowers have to extend the maturity period several times, at the expense of additional commission fees. As a result, final expenditures grow very much and borrowers have to pay 34-60% of the loan a month. All expenditures are aggravated by fines for overdue payment – as a rule, this fine makes up 1% of the overdue amount a day. Finally, payments paid to creditors or current indebtedness in case of overdue loans may exceed initial loan amount several times. At a glance, we can appraise this product to be necessary, because it provides people with access to finances and it may seem a good opportunity to avoid awkwardness of borrowing money from friends, but in real life, this mechanism frequently becomes a ground of huge problems and tragedies. The problem is that amid partly non-transparent conditions and low financial education in target segment, the “kind” product is transformed against its nature and instead of quick, short-term loan we receive long-term loan with inappropriate high expenditures. Consequently, it became necessary to regulate crediting relations with the aim to protect consumer rights”, the bill’s explanatory card reads. It is worth noting that strict regulations will bring nothing positive for online loan companies. As a rule, annual effective interest rate on quick loans exceeded the annual 100% four times and more. Moreover, introduction of 150% top margin on fines will also make negative effect on online loan companies. Financial education level is very low in Georgia and financial institutions try to make a use of this factor, especially online loan companies. That’s why Government has taken the mentioned decision. On the other hand, there is much demand for quick loans because of heavy social background in the country. Therefore, population had to borrow similar loans mainly to cover the current expenditures. As a result of new regulations, number of online loan companies will decrease and they will tighten crediting conditions in quest of better clients. Therefore, the category that had to use online loans frequently will not be able to do the same in the future. It is worth noting that a majority of countries, where online loan companies operate, practice top margin on credits. Restrictions on loan interest rates differ due to countries. By the way, even Australia, the USA and Singapore with most liberal economies have introduced top margins on credits.

“Like the previous study, it showed that the population couldn’t solve economic problems. Citizens are most concerned about employment, rising prices and poverty. 66% consider themselves unemployed. Only a third of people believe that their economic situation has improved in 12 months. 82% say that situation in their families has not changed or even worsened since 2012 “

Laura Thornton NDI’s resident director in Georgia

DAVOS 2017

January 23, 2017 #177

GEORGIAN PM MEETS BP CEO ROBERT DUDLEY The Prime Minister of Georgia continues a series of meetings at the Davos World Economic Forum. Giorgi Kvirikashvili held a meeting with Robert Dudley, CEO of British Petroleum, one of the world’s energy giants. The parties discussed Georgia’s ongoing projects and prospects of cooperation. During the meeting, the importance of South Caucasus Pipeline expansion (SCPx) under the second phase of the Shah Deniz project was emphasized, which involves expanding the pipeline capacity to transport 16 billion cubic meters of additional gas to European countries every year. The parties commended the 20-year successful cooperation between BP and Georgia, with BP as one of the largest foreign investors in the country. The parties expressed hope that, given Georgia’s investment opportunities, more British investments will be made in the country. “We had a very good discussion about the progress of the status of the Baku-TbilisiCeyhan pipeline, as well as the new expansion of the South Caucasus gas pipeline not only through Georgia, but the status of construction through Turkey all the way to Europe. We had a very good discussion about that. We also spoke about some work BP is doing, and the Georgian Government is doing on microfinancing programs in the country and the region,” Robert Dudley stated after the meeting. The BP Headquarters is located in London, England. The company operates in many countries across the globe. BP has been operating in Georgia since 1996, with over 500 employees working presently at the pipeline operations phase. MICROSOFT VP: GEORGIA IS A REGIONAL LEADER IN DEVELOPMENT OF INNOVATIONS AND PROTECTION OF INTELLECTUAL RIGHTS Georgia is a success story, a regional leader in licensed program use, development of innovations, and protection of intellectual rights, multinational technology company Microsoft’s Vice President Toni Townes-Whitley stated during a meeting with Georgian Prime Minister Giorgi Kvirikashvili. According to her, Microsoft is considering diﬀerent directions for deeper cooperation with Georgia. Giorgi Kvirikashvili familiarized the Vice President of Microsoft with the Government’s four-point reform agenda, with the promotion of startups and use of modern technology and innovations in business development. According to the Head of Georgian Government, the cooperation between Microsoft and the Georgian Innovation and Technology Agency is very important in this regard. The Prime Minister thanked Microsoft for support in the fields of education and innovation, and expressed hope for deeper cooperation. LIMAK: GEORGIA IS AN ATTRACTIVE DESTINATION, AS EVIDENCED BY THE GROWING NUMBERS OF VISITORS Georgian Prime Minister Giorgi Kvirikashvili had a meeting with Ebru Ozdemir, the Chairperson of Limak, one of the larger Turkish companies. The discussion

World economic forum Davos 2017 involved Georgia’s investment potential, and the opportunities oﬀered by Georgia to investors were emphasized. One of the main topics of the meeting was tourism development in Georgia. It was stated that Georgia is an attractive destination, as evidenced by the growing numbers of visitors. In this context, the dialogue also touched on the importance of the implementation of planned projects. Tourism and energy are the main directions pursued by Limak. The company implements projects involving the construction and operation of airports and highways. The company also owns a chain of hotels in Turkish resorts. PETRO POROSHENKO: WE HOPE THAT GEORGIAN AND UKRAINIAN CITIZENS WILL ENJOY VISA-FREE TRAVEL IN THE EU IN 2017 During the World Economic Forum in Davos, Georgian Prime Minister Giorgi Kvirikashvili met with President of Ukraine Petro Poroshenko. The parties discussed strategic issues pertaining to the relations between the two countries. It was emphasized during the meeting that Georgia considers Ukraine its regional partner and is committed to deeper political, trade, economic, cultural, tourism, and other directions of cooperation. Giorgi Kvirikashvili and Petro Poroshenko discussed European integration and visa liberalization as top priority issues for Georgia and Ukraine, expressing hope that Georgian and Ukrainian citizens will enjoy short-term visa-free travel in the EU as early as 2017. It was emphasized at the meeting that 2017 marks the 25th anniversary of diplomatic relations between the two countries. The parties discussed a plan of diﬀerent events in this format. During the conversation, the leaders of the two countries reiterated their support of the territorial integrity and sovereignty of Georgia and Ukraine. The meeting in Davos was attended by Georgia’s Foreign Minister Mikheil Janelidze and Minister of Economy and Sustainable Development Giorgi Gakharia. SERBIA, AS AN EU-ASPIRANT COUNTRY, IS SUPPORTIVE OF GEORGIA’S EU INTEGRATION Georgian Prime Minister Giorgi Kvirikashvili held a meeting with Prime Minister

Aleksandar Vucic of Serbia. The parties discussed key issues pertaining to the relations between the two countries and emphasized the importance of furthering cooperation in diﬀerent directions. Special attention was paid the economic and tourism potential and prospects of deeper cooperation in the fields of innovation and technology. The Prime Ministers also discussed the process of European integration and emphasized Georgia’s progress on this path. According to Aleksandar Vucic, Serbia, as an EU-aspirant country, is supportive of Georgia’s EU integration, and is willing to cooperate with Georgia and share experience. The discussion at the meeting also involved the state of aﬀairs in the region and the grievous human rights situation in Georgia’s occupied territories. The meeting, held during the World Economic Forum in Davos, was attended by Georgia’s Foreign Minister Mikheil Janelidze and Minister of Economy and Sustainable Development Giorgi Gakharia. GEORGIA’S BIOTECHNOLOGY POTENTIAL AND PROSPECTS OF ENHANCING GINGKO BIOWORKS PRESENCE HAS BEEN DISCUSSED During the World Economic Forum in Davos, Georgian Prime Minister Giorgi Kvirikashvili had a meeting with Gingko Bioworks CEO Jason Kelly. The discussion involved Georgia’s biotechnology potential and prospects of enhancing Gingko Bioworks presence in Georgia. According to the Prime Minister, the Georgian Government’s reform agenda, among other directions, includes the development of innovative economy, which is expected to be a driving force of rapid economic development. During the meeting, the parties also discussed the importance of academic-private sector cooperation and issues related to commercializing innovative products. GEORGIAN-QATAR COLLABORATION TO DEEPEN IN ECONOMIC SECTOR In the frame of current Davos World Economic Forum 2017, the minister of Economy and Sustainable Development, Giorgi Gakharia met the minister of Economy and Commerce in Qatar,

Sheikh Tamim bin Hamad Al Thani During the meeting, Giorgi Gakharia focused on the improving of mutual collaboration between two countries in the recent years. Sheikh expressed his wish to contribute for the further improvement of the cooperation between countries. Giorgi Gakharia introduced to Sheikh current business environment and the investment potential of the county. They talked about Qatar investments. According to Georgian minister, Georgian government oﬀers investments programs to investors which are focused on the development of entrepreneurship by the financial and instrumental means. In Davot Forum 2017, which has a motto “Responsible Leadership”, 1000 big companies and organization of 50 diﬀerent countries are involved. In the Georgian delegation, there are the minister of Economy and Sustainable Development Giorgi Gakharia, the head of Co-investment Fund Giorgi Bachiashvili and the head of the delegation, Prime Minister Giorgi Kvirikashvili. DORIS LEUTHARD: WE SEE GEORGIA AS A STABILIZING FORCE IN THE REGION We see Georgia as a stabilizing force in the region, President Doris Leuthard of the Swiss Confederation stated during meeting with Georgian Prime Minister Giorgi Kvirikashvili. During the meeting held as part of the World Economic Forum in Davos, the parties discussed core issues of the friendly relations and partnership between Georgia and the Swiss Confederation. The discussion involved the growing cooperation potential in various directions, and the importance of the signing of the agreement between Georgia and EFTA was emphasized. Special attention was paid to the bilateral cooperation in the fields of trade and economy, tourism, and education, and the importance of sharing Swiss experience in developing mountainous regions. The President of the Swiss Confederation took great interest in the Georgian Government’s four-point reform agenda. The dialogue also involved Georgia’s education reform seeking to advance professional education. The Prime Min-

ister of Georgia expressed hope for Swiss support in reforming Georgia’s system of education. The parties also discussed Georgia-Russia relations and the situation in Georgia’s occupied territories. EBRD PRESIDENT: I AM HOPING THAT WE CAN GET NEARLY 300 MILLION EURO INTO GEORGIA THIS YEAR Increasing investments in Georgia, incentives for the private sector, and prospects of developing business environment were the key issues discussed at meeting between EBRD President Suma Chakrabarti and Georgian Prime Minister Giorgi Kvirikashvili. The meeting was held during the World Economic Forum in Davos. The parties discussed the role of EBRD in the development of Georgia’s economy and the ongoing EBRD investments in Georgia. It was emphasized that, in 2016, EBRD invested a record-breaking amount in Georgia, about 250 million euro. The Georgian Government’s reform agenda, and spatial planning as one of its components, was one of the main topics of the meeting. According to Suma Chakrabarti, EBRD supports Georgia’s ongoing reforms and plans to increase its investments and financial assistance. “The first thing the Prime Minister and I agreed was that the cooperation between EBRD and Georgia is in a very strong health. The plans for 2017 are even stronger. I am hoping that we can get nearly 300 million euro into Georgia this year, so this is a very good relationship, and it is not just about investments. It is also about trying to change policies, difficult things, which will make Georgia even more attractive for investors. The Investors Council, chaired by the Prime Minister, is doing very well. The work on PPPs is going well. The work to develop the Competition Agency is going well, and the energy efficiency action plan, so in all these areas the relationship between Georgia and EBRD is in extremely good health,” Suma Chakrabarti said commented the meeting. ADECCO GROUP IS WILLING TO ASSIST GEORGIA IN THE EDUCATION DEVELOPMENT PROCESS Georgian Prime Minister Giorgi Kvirikashvili had a meeting with Adecco Group’s Chairman Rolf Dorig and introduced him to Georgia’s investment environment. Special emphasis during the meeting was placed on Georgia’s strategically important location and liberal taxes, some of the lowest in Europe, which makes the country especially attractive for investors. The discussion also involved the Georgian Government’s reform agenda. According to Rolf Dorig, his international company is willing to assist Georgia in the development of its sector of education through sharing its experience and improving business capacities. Adecco Group is an international company specializing in business management and staffing, with 5,500 offices in 60 countries.

INVESTMENTS

January 23, 2017 #177

Foreign Investments in Development Sector Make up about 30-40%

DEVELOPMENT SECTOR Over the past period the scales of construction works have particularly increased in the country, especially in Tbilisi. It should be noted that the Georgian construction market becomes more and more attractive for foreign investors. The Caucasus Business Week (CBW) has inquired how successful the development business is in Georgia and whether this sector is attractive for investors.

As to important factors that inspire foreign investors to put money in this country, Abuladze said that amid global confrontation, Georgia may be characterized in terms of statehood strengthening, development, progress, safety and security, social provision, democracy, public welfare improvement, investments attractiveness and growth in global image and perception.

FOREIGN INVESTMENTS

DAVID BAGHASHVILI

Georgian development market is very attractive, especially in terms of simplicity for taking construction permits, Tornike Abuladze, representative of Developers Association, noted. Estonian partners of ARCI development company have unveiled plans to sell their development business in Ukraine and to move to Georgia. “There is much demand for real estate in Post-Soviet space and that’s why this sector is attractive. On the other hand, Georgia is an exception thanks to its simplified licensing system”, Abuladze said. Foreign investors show growing interest in Georgia’s development market. Currently, ratio of foreign investments in Georgian development sector is 30-40%, Abuladze pointed out. “Before 2007, any person, being a doctor or a designer, could apply to commercial bank for loans and launch a construction project through others’ money. This was an incorrect model. There was a boom of construction projects in that period, but under incorrect model. A major part of developers were Georgians. There is nothing to say about the crisis period. Starting 2014-2015 the market started reviving. Today, Georgian development sector has drawn a great number of foreign investments”, Abuladze noted. The years of 2014-2015 recorded a slowdown in residential buildings category, while quantity of transactions increased in 2016, Irakli Kilauridze, managing partner for Colliers International Georgia, noted. However, results of GEL devaluation will appear at the beginning of 2017. Positive tendencies are recorded on hotels market, Kilauridze pointed out. “Hotels of various international brands are being constructed. Number of tourists is also growing and the demand will be huge in the future”, Kilauridze said. Georgia is a tourism country and a direct market for hotels business. Consequently, this segment is very interesting and attractive for investors, he added. As to development of residential buildings segment, the demand is huge and transactions are recorded for economy class real estate in suburb zones. Over the past years residential buildings segment developments was intensified thanks to improved social-economic conditions of our citizens, aspiration for improving residential conditions, growth in welfare of families, increasing attractiveness of business environment and growth in investment inflows. Developers operate under various economic mechanisms based on normative standards, market requirements, economic policy and so on. Moreover, attractiveness of development business in the country is conditioned by: • Low market competition (market is not saturated yet); • growth in market potential; • unemployed segments (in regions); • business support policy in the country; • the existing pricing policy (that is more favorable for business sector compared to population) and so on. Apartments construction is the most productive segment of development business because of many factors, Abuladze said. 1) state budget and government programs for 2017 represent one of the key priorities of regional development, infrastructure arrangement and space arrangement. These factors foster sustainable develop-

ment of the country, improve living conditions and promote development business. Moreover, it is theoretically recognized that 10% contraction in social expenditures grows number of shelter applications by 0.83% per 1000 families (emc.org.ge). There is a different situation in our country. Over the past years, social expenditures are growing every year, as well as socially-oriented budget amount. “It is also impressive that Georgian Authorities provide residential spaces for internally displaced persons. To this end, residential houses are constructed and moreover, apartments are bought from developers (residential spaces have been already transmitted to more than 24 000 IDPs). In whole, government is interested to build new residential spaces for IDPs through partnership with investors. As a result, investment attractiveness of this field will further increase. It should be also noted that growth in social-economic inequality in Georgia and in the world, labor market competition, volatility on political and capital market, global and local threats make influence on space changes and pricing policy. However, these factors cannot diminish importance and revenues of apartments segment in development business”, Abuladze said. As to important factors that inspire foreign investors to put money in this country, Abuladze said that amid global confrontation, Georgia may be characterized in terms of statehood strengthening, development, progress, safety and security, social provision, democracy, public welfare improvement, investments attractiveness and growth in global image and perception. It should be also noted that Georgia’s macroeconomic environment is improved year to year (statistically); the whole national revenues show growing tendency (30884.8 million GEL in 20115), average monthly incomes of population (1039.9 million GEL in 2015) and average monthly incomes per households (1022.3 GEL in 2015) also grow, Abuladze noted. It is worth noting that last period attractiveness of the development sector has considerably increased and investors are also demonstrating adequate “reaction”. According to Geostat, foreign direct investments in development sector made up 49 847.5 thousand GEL in 2013, 316 588.1 thousand GEL in 2014, 110 678.4 thousand GEL in 2015. The figure made up 106 183.5 thousand GEL in January-September 2016 (total amount 15%). “It is worth noting that along with growing attractiveness of development sector, the sector’s output also grows (5.562.1 million GEL), as well as space of finished facilities, number of construction permits and number of employees (69.970 persons). At the same time, crediting volume issued to development sector by commercial banks also grow year to year (816.071 thousand GEL, 2016)”, Abuladze noted. Quantity of weddings has considerably increased over the past years (coefficient of weddings 7.8 (per 1000 make) and consequently, quantity of those wishing new apartments has also increased. Volume of money transfers to the country annually positively affects the apartment construction sector too (1 032 275 thousand USD in 2016), he said. Global developments have raised serious challenges before national economies and violated balance of investment activities, however, Georgia’s business space remains an attractive target for international business interests thanks to correct political direction, stable and safe environment, protected and stable business interests in the country. Consequently, investors also pay attention to attractiveness of Georgian development sector”, Abuladze noted.

January 23, 2017 #177

REAL ESTATE

Understanding the real estate index Real Estate Market Lab (REM Lab) is a joint project of TBC Bank, ISET Research Institute and JumpStart. The goal of the project is to research and analyze the Georgian Real Estate Market on a regular basis. Three publications have already been published as part of the project three publications. The reports describe in detail the real estate index of Tbilisi districts and review the Tbilisi real estate market according to residential and commercial property. The research includes property for sale as well as for rent and lease. Head of TBC Bank’s Collateral Management and Evaluation Department Vladimer Magnaradze provides a detailed overview of the Tbilisi real estate market in the following interview.

- What are the latest trends in Tbilisi real estate market according to the latest research? - The latest publication describes the conditions in the commercial and residential real estate market conditions as of October 2016. I will elaborate on the main trends: In October 2016, 3199 transactions were made on real estate market, a drop of 4% compared to the previous month. Despite the small reduction in market activity, the number of real estate transactions increased by 43.5% compared to the same period last year. Tbilisi’s share in country-wide property sales decreased insignificantly (by 0.2%). In the capital, most transactions were made in Saburtalo (675 transactions, 21.1% of Tbilisi sales). Vake (559 transactions, 17.5%) and Samgori (352 transactions, 11%) come in second and third respectively, based on the volume of sales. In January-October of this year, the volume of new real estate listings (number and volume of finished constructions) significantly increased in the Tbilisi real estate market. In a 10-month period the number of the new buildings increased by 53.6% compared to the same period last year, reaching 605 units (480 residential and 125 commercial property listings). In the same period, the number of new buildings increased by 74.2% compared to last year, equaling 1 202 828 m (990 129 m of residential property, 212 699 m of commercial real estate). In October sales and rentals in the residential real estate market decreased by 3.3% and 4.9% respectively compared to the same period last year. In addition, the average purchase price for 1 m in the residential real estate market was 877 USD, the average rental price was 7.41 USD per m . In the same month, the number of sales and rentals in the commercial property market decreased compared to last year (11.1% and 13.7% respectively). The sale price of 1 m of commercial real estate was USD 1 133, and the rental price was 10.22 USD per m . - Where are the highest and lowest real estate prices in Tbilisi? Did the price levels during 2016? - We only study the average sales price in Tbilisi districts in the residential real estate sector. The price of residential property is the highest in Mtatsminda district (1 m 1034 USD, 10 month average), during 2016 prices in this district varied from USD 991 to USD 1069. The price on residential property is the lowest in Samgori District (1 m - 547 USD, 10 month average). The prices in this districted varied from 520 USD to 573 USD. During the year Mtatsminda re-

mained the most expensive district, while Gldani was occasionally less expensive than Samgori. - As we know, this is the only study of its kind in the Tbilisi real estate market. Where did the idea come from? - As you know, there was no regular research and analysis of the real estate market in the country. TBC Bank needed detailed statistical date about this market to eﬀectively determine and implement its collateral management policy. For this reason the bank (as well as other banks) used to hire various companies to occasionally prepare real estate market studies. It is absolutely necessary to feel the pulse of the market to make fast and correct business decisions, however, this needs to be done on a regular basis rather than occasionally. This was the main reason REM Lab project was initiated. The project is based on a memorandum of cooperation between TBC Bank and ISET and focuses on regularly researching and analyzing the real estate market. In addition, TBC Bank decided that the implementation of the project could benefit not only the bank, but also anyone interested in the news and trends of Georgia real estate market. - How important is the regular study of the real estate market for business,

and in general, the economy of the country? - The goal of the project is to increase the eﬀectiveness of the banking sector and strengthen collateral management. However, the regular study of the real estate market serves a wider, more global objective as well. Georgian businesses and foreign investors (developers and others) require an accurate picture of the market to make business decisions. Investment in a market for which there is no statistical data or the date is scarce, creates significant business risks and can even hamper business ventures. Research, analysis and the availability of accurate data is necessary for the development of business and economy of the country in general; it also serves to encourage further growth. Accordingly, REM Lab contributes to the development of the real estate market. In this way, this is beneficial to not only business, but also to the state and any interested citizen. - What does the real estate index mean and how is it calculated? To what ex-

tent do you use international research practices in your research of the real estate market and what sources of data do you use? - As you are aware, the real estate market index accurately reflects changes in real estate prices. The average price (price per m2) does not show the net price change. For example, the average price increases if more expensive properties (in the best locations, with renovation) are sold in a particular month than in the previous month. However, this does not imply that real estate prices have increased in general. The real estate index measures the increased in the net price compared to the base period (April 2015), excluding the variable of the property quality. Real estate indices include sale index and rent/lease index. To determine these indices we observe only typical real estate property in Tbilisi. The study processes the transactions for the sale, rent and lease of commercial and residential property. Internationally, for the observation of real estate market prices, the Laspeyres, Paasche and Fisher indices are used. Our project follows this practice, and uses the Fisher index - a geometric average of Laspeyres and Paasche indices - to calculate the real estate index. More detailed infor-

7 mation about the research methodology is included in our reports, which is available for any user. As for the data source, data for the real estate index (about 10 000 announcements) is received monthly from one of the largest real estate web pages in the country and processed. Additional data is taken from the National Agency of Public Registry and Architecture and Supervision Department of Tbilisi City Hall. - Are there any new developments planned for the real estate market study in the near future? - Currently we produce a real estate market index for Tbilisi districts based on the sale and rental of residential and commercial spaces. We publish the sales and supply statistics on real estate. However, this data is only available for the capital. In the nearest future, we plan to expand the geographical scope of our research and analysis, and add real estate market indicators that will provide a comprehensive picture of market trends.

As you know, there was no regular research and analysis of the real estate market in the country. TBC Bank needed detailed statistical date about this market to effectively determine and implement its collateral management policy. For this reason the bank used to hire various companies to occasionally prepare real estate market studies.

EUGEORGIA.INFO

Georgian Perspectives of Estonian Model Key component of Estonian Model calls for exempting undivided profit from tax burden. After introduction of Estonian Model in Georgia, a major part of business entities will be partly exempted from profits tax. MIRIAN EJIBIA ISET MA

hese bodies will be taxed if profits will be issued in the form of dividends or they will distribute profits in the way unrelated to the company’s business activities. Consequently, Estonian Model taxes profits not in the profits reception moment, but in the profits distribution process. Government of Georgia announced inauguration of preparatory works for Estonian Model establishment in 2015. Purpose of introduction of this model was to make positive effect on various economic directions. According to Former Finance Minister Nodar Khaduri, Estonian Model will intensify economic growth, expand access to financial resources, increase liquidity of business assets and grow capital in business sector; Moreover, business sector is expected to become more resistant to crisis periods; foreign investments inflow will increase and tax registration-administration will be simplified; To put simply, Georgian Government expects Estonia’s successful reforms to stimulate economic growth in Georgia too. However, it is clear that Estonia’s success cannot guarantee the same model will be efficient in Georgia too. Success of the Estonian model was driven by consecutive and long-term preparations for major changes. Estonian officials had carried out other reforms for preparing the mentioned reform and these efforts continued for many years, almost 10 years, in practice. Naturally, gradual injection of similar reforms in the economy was entirely reshaping tax environment that was also effecting the state economy stage by stage. Estonia launched important tax reforms in 1995, while profits tax system was reformed in 2000 (corporate tax on profits). As a result, undivided profits were not taxed by profits tax. Before the reforms, for example, in 1999, profits tax ratio in total tax revenues was 6% in Estonia and the interest rate constituted 21%. Profits tax is an important source of budget revenues in Georgia and worldwide. Consequently, it is painful process for the Authorities to partly restrict these budget revenues, but international experience suggests that in short-term period profits tax burden alleviation results in slowdown of budget revenues, while in long-term period this fiscal policy is expected to grow tax revenues. These expectations justified in case of Estonian

Model. In 2000 Estonia’s total profits tax revenues sharply declined and its ratio in total tax revenues fell to 2.3% from 6%. However, economists and financiers express suppositions that reduction of this type of tax revenues was caused by slowdown in economic growth paces. Starting 2001, after implementation of the reform, ratio of profits tax revenues has been growing. The main thing is that ratio of revenues from profits tax preconditions Estonia’s GDP growth trend (ratio of profits tax revenues in total tax revenues). At this stage, there are a great number of research works that appraise results of Estonia’s tax reforms. Results of Estonian tax model reformation are compared to contemporary economic indicators of neighboring Lithuania and Latvia. A major part of research works prove advantage of alleviated tax burden. For example, according to one of the reports, profits tax reduction improved financial conditions of companies operating in Estonia, namely, liquidity of their capital rose, money assets in floating capital and on bank accounts have increased, which, compared to Lithuanian and Latvian companies, enabled Estonian companies to overcome the 2008 financial crisis less painfully. International Tax Competitiveness Index also proves advantage of Estonian Model that measures eﬃcacy of taxation system of countries of Organization for Economic Cooperation and Development (OECD) in terms of business doing. Estonia has been demonstrating highest scores in this component over the past years. In Georgia, which practices liberal tax system, we should expect less benefits from Estonian Model introduction compared to Estonia, where 21% tax was abolished on undivided profits, while Georgia plans to abolish 15% tax on reinvested or collected profits. Research works conducted by Aleksandre Lungvist (New York University) and Mikhail Smolinski (Federal Reserve System) strengthen opinion that profits tax reduction brings significant positive results only if such a fiscal policy is carried out amid economic recession. Researchers also suppose that only large-scale profits tax reduction can bring real economic-social benefits. Perspectives of Estonian Model should be highlighted from other aspects too. When access to financial resources is complicated for small and

medium business sectors in Georgia, free undivided profits that accumulate more resources for reinvestments acquire special importance. «Research and Development» are necessary for many Georgian companies. Estonian Model stimulates similar reinvestments. It is unimaginable for Georgian companies to penetrate EU market without additional financial costs. Untaxed undivided profits of potential exporters may be directed for expanding the mentioned exports potential on EU market. Introduction of Estonian Model will be profitable in terms of tax administration too, because the problem with calculation of profits tax is not novelty for Georgian financial sector. Estonian model will alleviate financial reporting. This model will also grow efficacy of operation of Georgian taxation structures. For example, Estonian model implies that some expenditures that are not related to company’s business activities will be taxed by profits tax rate to avoid shady distribution of profits in the form of expenditures, because, on the one hand, companies will face difficulties with shady distribution of profits tax and, on the other hand, taxation structures will more accurately carry out their activities. As a result of introduction of this model, we will receive a taxation environment necessary for more efficient and faster economic development. According to certain considerations, profits tax is an fiscal instrument that enables to allocate resources from developed business organizations to beginner companies, thanks to state interference. This signifies taxes collected from developed business sector may be directed for support of beginner businesses in various forms thanks to efforts of state structure, including through tax preferences. It should be noted that profits tax ranks third in Georgia’s state budget in terms of tax revenues over the past 4 years, following VAT and incomes tax. In 2012 its ratio in total tax revenues made up 12.76%; in 2013 — 12.11%; in 2014 — 13.78% and in 2015 — 12.8%. arithmetical average of these indicators are twice higher compared to the 1999 same indicator of Estonia. This signifies that introduction of Estonian model in Georgia may be more painful for state budget. However, when discussing allocation of financial resources between beginner and established business bodies, we should rely on experience that demonstrates that financial resources may be found in the country in order to finance or support one segment of business sector without growth in tax burden on another segment. Estonian Model would not succeed in Estonia without stable macroeconomic environment. Only profits tax reduction cannot stimulate growth in foreign investments inflow and cannot ensure strong signal to business bodies for reinvestments if domestic business sector representatives or foreign investors are alarmed by national currency volatility, overwhelming political cycles or protectionist tendencies. Therefore, we should not be confident that Estonian Model is able to independently incentivize significant economic growth. Success of this taxation model depends on creating conditions and environment that are naturally required for attaining economic development.

January 23, 2017 #177

Estonian Model would not succeed in Estonia without stable macroeconomic environment. Only proﬁts tax reduction cannot stimulate growth in foreign investments inﬂow and cannot ensure strong signal to business bodies for reinvestments if domestic business sector representatives or foreign investors are alarmed by national currency volatility, overwhelming political cycles or protectionist tendencies.

January 23, 2017 #177

“An agreement concluded with “Gazprom” is a trade secret, however, if it is possible, I will do everything to make it public. The agreement had concluded for many years, under Saakashvili and Shevardnadze, and was not public. Recently I heard false statements is if the agreement is “classified. “Classified” in relation to a commercial secret of another quality. As for the president, it has the luxury and opportunity to require the details of the agreement, it has access and do not need the statements lacking arguments that we hear, unfortunately, in the last days. As for the secrecy. You know that all of this type agreements are a trade secret in any country“. KAKHA KALADZE Deputy Prime Minister, Minister of Energy of Georgia

AGREEMENT

Gazprom Checkmates Georgia “ A

greement that Georgian Government has signed with Gazprom still remains relevant and sharp. As reported, under this agreement, Georgia will receive money remuneration in exchange for Russian natural gas transit to Armenia, instead of previous practice of payment by raw material. For many years, Gazprom used to pay natural gas transit fee by means of natural gas. Namely, Georgia and Gazprom concluded a due agreement in 2003 and the payment principle was not subjected to revision till today. Naturally, Gazprom always aspired for revising the mentioned agreement details in order to replace the existing payment mechanism by money payment method. It is worth noting that, based on current geopolitical and other aspects, it is impossible to supply natural gas to Armenia without Georgia, in practice. To be precise, alternative route comes from Iran, but current technical conditions of the Iranian pipeline do not enable Armenia to receive natural gas from the alternative route. Maximum capacity of the Iranian pipeline is 1.1 billion cubic meters, while Armenia consumes 2 billion cubic meters a year. Consequently, North-South gas pipeline that transports Russian natural gas to Armenia via Georgia has no alternative. This factor was Georgia’s key leverage for many years in the process of negotiations with Russia and naturally, the mentioned geopolitical factor always enabled our country to firmly defend its own positions. It should be also noted that Gazprom controls 100% of Armenia’s natural gas market, in practice. This signifies that continuous supply of natural gas to Armenia is of strategic importance for Gazprom. Government has named potential legal disputes as one of the arguments for justifying the new agreement with Gazprom. According to Government statements, these disputes would be activated if Georgia had not signed a new agreement with the Russian gas giant. The mentioned legal dispute would damage Georgia’s reputation, they assert. Naturally, this argument is ungrounded and unreal, because legal and civil disputes cannot damage either reputation or specific interests. This argument could be applied by only embarrassed state officials trying to justify their decisions, who have no clear idea how to explain real state of affairs to the population and how to interpret the factors that have made them sign such a self-defeating agreement. The agreement details are classified and this factor raises many questions. Government of Georgia has classified the agreement with Gazprom and made this process absolutely nontransparent. Naturally, this fact strengthens doubts that Georgian Authorities have signed a losing agreement and conceded their own business interests, in practice. Even government officials cannot refuse this consideration. This time Georgia did not have as winning positions as previously for many years, they assert. The negotiating process is a very important issue too. It is necessary to conduct similar high-level negotiations under institutionally valuable regulations. Naturally, these high-

level negotiations were not to be conducted by Ministry of Energy and various branches of state structures were to have taken active part in the negotiating process. We know that Gazprom is not only a commercial organization. Naturally, Russian Authorities always employ this company as a political leverage in the negotiation process with other countries. Consequently, negotiations with Russian Gazprom were to be considered in political light and therefore, the negotiation process was to involve Ministry of Foreign Affairs and all state structures responsible for state security issues. Increased natural gas consumption is another argument named by Government officials. According to them, increased gas consumption has necessitated to seek additional natural gas supply sources. It should be noted that Azerbaijan is a stable source of natural gas supply for Georgia. Therefore, arguments as if Georgia needs Russian natural gas are absolutely unreal. To be precise, last year, during Georgia-Gazprom negotiating process, Azerbaijan increased natural gas supply to Georgia by 500 million cubic meters. Therefore, even this argument is ungrounded and unreal. One significant detail around the new agreement is the fact that in November 2016 one of the influential editions “Natural Gas World” published an article: “Armenia Reduces Natural Gas Price again”. According to the article, natural gas price for Armenia decreased after Gazprom agreed with Georgia to revise natural gas transit fee payment method, namely, 10% of transited natural gas will be replaced by money payment mechanism. The fundamental moment in this article is that decision on the mentioned changes were taken far earlier and this factor raises doubts that the 2016 “achievement” on maintaining the existing conditions was related to the 2016 parliamentary elections and Russian Authorities preferred not to worsen political positions of the ruling Authorities. Therefore, the 2016 agreement “achievement” could not be preconditioned by efficient negotiations of Georgian delegation. Thus, Georgia-Gazprom agreement may be appraised as a concession of positions and decision taken against the interests of our country.

Maximum capacity of the Iranian pipeline is 1.1 billion cubic meters, while Armenia consumes 2 billion cubic meters a year. Consequently, North-South gas pipeline that transports Russian natural gas to Armenia via Georgia has no alternative.

“

The agreement details are classified and this factor raises many questions. Government of Georgia has classified the agreement with Gazprom and made this process absolutely nontransparent. Naturally, this fact strengthens doubts that Georgian Authorities have signed a losing agreement and conceded their own business interests, in practice.

“

Increased natural gas consumption is another argument named by Government oﬃcials. According to them, increased gas consumption has necessitated to seek additional natural gas supply sources. It should be noted that Azerbaijan is a stable source of natural gas supply for Georgia. Therefore, arguments as if Georgia needs Russian natural gas are absolutely unreal.

BUSINESS

January 23, 2017 #177

Socar Georgia Petroleum Appoints New General Director Levan Giorgadze Socar Georgia Petroleum appointed Levan Giorgadze as a new general director of the company. Giorgadze replaced former General director Davit Zubitashvili who by this time is appointed as a chair of a council. SOCAR Georgia Petroleum, Ltd is the largest importer of petrol and diesel in Georgia. It imports up to 35,000 tons of oil products from Azerbaijan each month. The company is expanding rapidly by increasing its network of petrol stations around the country. SGP’s strategic development plan includes construction of petroleum storage depots using modern technologies and develop its network of petrol stations up to 120. read more

INVENTOR

TECHNOLOGY

Georgian Company not to Pay VAT for Advertising Services Made Abroad via Google System Contract. “The case with our company has proved that revenues from Google is exempted from VAT if there is foreign traﬃc”, the company representatives noted. Google has not introduced its own advertising service in Georgia, however, this is a widespread method abroad, because on behalf of customers the company generates interesting advertisement schemes and this is more eﬃcient compared to traditional advertisement. “Georgia has much potential for developing social advertisement. Customers realize that real results are received from digital marketing too and this is far cheaper compared to television.

Georgian company will not pay VAT for advertising services made abroad via Google system. Namely, the issue is of Alter Way company, which has applied to due instances for exemption from VAT payment. A part of websites created by them are designated for only foreign consumers, where Google AD system is applied that acts as a certain

mediator between the AD customer and the company. “We had considerations that services were performed abroad and we were to pay only profits tax, not VAT tax. Today many physical bodies are engaged in this business. The topic was very complicated and it took much time to resolve it”, Giorgi Romanadze, business development director of the company told the Business

NEWS

WINE

Heineken Gets Georgia Boost with New Brewery for Licensed Production

For the First time Georgia Has a Tourism Guide that Links all Venues with Google Maps

Global Beer Georgia has secured a near-US$20m loan to build a brewery in the country that will produce Heineken brands under licence. The company, which is owned by Georgian wine producer Teliani Valley, confirmed late last week that it has qualified for an EUR18.6m (US$19.7m) syndicated loan arranged by the European Bank for Reconstruction & Development. The funds will go towards a facility that will produce the Heineken and Amstel brands for the Georgian market.

Tea Gurieli to Export Production to Germany “Tea Gurieli” will export its production to Germany in April. As the founder of the company, Mikheil Chkuaseli declared, they are waiting for the agreement to be signed. He said that the company already gained ISO standard last year. The company has negotiations with American Market as well, where the production was exported 4 years ago. Chkuaseli says that there are experiment works taking place concerning producing of the new production.

Where to find THE places in Georgia to enjoy Georgian wine (and cuisine) – this is a frustrating mystery to many even as Georgia’s fame for both grows internationally. All around the world travel and wine writers are now talking about Georgia as the place for sybaritic holidays but nothing has been published to share Georgia’s secrets of where to enjoy the best. We are very happy to present the solution – a new Wine Tourist Guide which is a first-mover for a travel book in that it comes complete with QR codes. Scan the QR bar code that is against every one of the listed venues with your smart phone and you will be able to see its location pinpointed on Google Maps. The country’s wealth of historic sites, the wild-life and nature reserves and regional cuisine are also described. Plus, there is practical information about Georgia that tourists need, Our hope is that around the world, those planning their holidays will find by reading this book just how accessible the delights of Georgia are. The plan is to make it available internationally and in all the languages that are key for Georgia’s tourist industry. The detailed presentation of the book will take place on January 20 th in the conference room of the Georgian Wine Association, at the address 12, Mtazminda str. 0108 Tbilisi, at 11:00 am. We would kindly ask you to confirm your attendance before Thursday 19 th .

When we undertook this business, companies were afraid of putting money. Now the situation has changed. Digital marketing enables to spend money on people who create certain segments”, Giorgi Romanadze said. “We use Google system for Advertising. It was disputable whether our service was an advertising service, because, as a rule, advertising services performed abroad are exempted from VAT. IT was confirmed that we provide advertising activities and we are not to pay VAT”, the company representatives said. Meanwhile, the company will become the second partner of Google in Georgia in about a month.

Government Shows Interest in Business Idea of Famous Georgian Designer Zviad Tsikolia Famous Georgian designer Zviad Tsikolia may unveil an enterprise as part of Produce in Georgia government program. The issue was negotiated by Zviad Tsikolia and Minister of Economy Giorgi Gakharia. The Georgian designer plans to arrange a plastics production plant. In the future, Tsikolia plans to employ persons with disabilities. For the first 2 years, the interest rate will be co-financed by LEPL Entrepreneurship Development Agency of Ministry of Economy. Produce in Georgia state program is implemented by initiative of Government of Georgia. The program has already supported 214 new domestic enterprises. The program is coordinated by Ministry of Economy and its LEPLs. Zviad Tsikolia is a famous Georgian designer with a great number of projects. His works were published by Carstyling, Auto&Design, Auto Bild, Auto review, Super cars, GQ, Le, Style, Really Good Packaging, Big Book of Packaging, Design and Design and other magazines.

STARTUP

January 23, 2017 #177

«If all of you are so smart, why am I so rich?» Warren Buffett, the world’s one of the richest and famous investors, said once. Not only brain and zealousness suffice to earn much money and succeed in business. Smartness is also required, you should determine priorities, be self-confident and be ready to dispute various issues. Even more so, it is not easy to manage business in Georgia. In our country a success is frequently perceived as «justification», while failure is also justified by various arguments. The Caucasus Business Week (CBW) introduces a new column for inquiry of businessmen about undertaking business activities and mechanism for attaining success. Several suggestions for becoming a successful businessman.

Tsezar Chocheli’s Suggestions for Beginner Businessmen

Tsezar Chocheli, guest of the column: Specification of business details – first of all, you should clarify and specify the core and nature of business you plan to undertake. It is impossible to take into account everything, but, you should try. Business Plan – business is an accurate science and you should make accurate calculations. In any case, a short outline and design should be prepared in the form of a business plan that will better show what results the business will bring in a certain period, in one, two or three years. Education – a person should have an initial education to cope with all the mentioned factors. I graduated from an university in 1991, when planned economy was still practiced. Today, attitude towards business and production has changed in practice. Therefore, due literature is more attainable today. Previously, it took several months to search required information, while today any information may be specified in 15-20 minutes. Communication – communication is a necessary factor to achieve success in business. It is very diﬃcult to keep due communication without knowledge of foreign languages. I think ignorance of a foreign language is my huge minus. Foreign languages alleviate to find due partners, sales market and in general, you become an entirely new person when you speak the language of your business partners. Capital – This is a ground and foundation of everything. Even small capital is a capital. Today I would like to tell young people that Startup Georgia is a very good program. I have assisted several groups of young people to join this program. If the business idea is properly developed, the issue of initial capital may be resolved. Naturally, there are some limitations, but this program enables beginner

businessmen to implement their business ideas. Initiatives – over the past 2-3 years I keep close communication with young people and exchange considerations with them. A very good generation is growing and I am sure that they will succeed much more than my generation. They have more initiatives, more visions and better attitude to business sector. How I Launched Business – I graduated from Tbilisi Ivane Javakhishvili State University faculty of economics. In the same year, I started working at a state structure, where I stayed for about 2 weeks. I quited the job because of the then bureaucratic and corruption conditions. I was 22, when I launched business. Lomisoba Fest is marked in my highland region. Once I went to this fest jointly with my friends. Traditionally, beer is made at this Fest. Beer is considered a divine drink in highland regions and this belief is maintained even today. At the festival we decided to make the same drink in household conditions. Having returned from the Fest, we established an enterprise, bought ordinary spirit distilling boilers and undertook business in this way. Business launched by 2000 USD – Today there are much better conditions for undertaking business. This is not exaggeration. Previously, there was very bad and heavy situation when we were starting our business - unrests, burglaries and theft. Today it is possible to obtain financial resources for only a good business idea. Today people are able to draw money through ideas and implement business ideas in this way. In that period Russian money was in turnover, but that amount was about 2 000 USD and I started my business by this capital. It is possible to launch business by this amount today too. Everything has its inception. Every business, whoever may stand behind it, starts from a startup, from zero. In the same way, today it is possible to launch business in any direction. The main thing is that you should do your best and love your business. It is impossible to achieve success without hardworking and devotion to your business. Everything justifies and works, when you take tireless eﬀorts, show zealousness, hardworking and devotion.

A New Georgian Brand, GOGOWINE to Export to the US In spite of some myths that only men can be wine-makers, the reality shows that women can do it too. A young wine-maker woman, Ketevan Berishvili, continued the wine-making tradition of the family and created a wine brandGOGOWINE. -When did you start winemaking and how did you come up with this idea? - It is a family business. My father has been involved in organic wine-making for a long time; therefore I’m familiar with it for years. In 2016, I tried to make my first brand wine and I got involved in it full time. Until that, I was only helping my family. Little by little, I started to enjoy wine-making and it made me refuse my normal life

and moved to the village where I feel happier. – What was your job before you started wine-making? - I studied French philosophy. I studied in France too. I hold my MA degree of GIPA in PR management; however, I didn’t work in this field. I worked for 4 years as a director assistant, but I left because it was not interesting field for me. – Do you have your own vineyard? - Yes, we do. My father has been taking care of vineyards for 15 years in the village of Artana and has been selling it on the market for a very long time. I decided to start wine-making after my father’s example and I created my brand GOGOWINE. Currently,

we have only two kinds of wine: Rkatsiteli and Saferavi. -What are your future plans? - I have bought an extra vineyard recently and we hope thieves won’t steal our crops like they did in 2016. If everything goes according to the plan, we will have more kinds of wine this year. We will export a lot of amount of GOGOWINE abroad. We will participate in diﬀerent exhibitions. We sell our production on Startup Market, Bulbuli Market and we had our own stand at Tbilisoba street market. We exported 60 bottles of wine to the US and we are going to expand our production this year. I think GOGOWINE has already been successful and will gain more success in the future.

Anano.e: Accessories That Are Never Enough A young designer, Anano Eziashvili started his current job as a hobby. She sold her first handmade accessories in Rustavi shops and recently she created her own brand Anano.e Never Enough. Anano is marketer by her profession but she creates handmade accessories with clay, thread and other sewing materials. Anano talks about her job more in the interview. - Tell us,when you did you start producing handmade accessories and when did you turn it into business? - When I was 13-14, It was my hobby to work all day with clay but I understood later that working with clay was more than just a hobby for me. For the first time, I decided to do something which made me happy. Of course, I still was not professional but i never stopped trying to improve my work. I had to

quit some of my other hobbies but I don’t regret it. - What products do you to customers and who helps you to create your work? - I am working the most actively to produce brosha , I do the form, colours, every little details myself. I create the design for clothes and diﬀerent accessories. During the working process, my little niece helps me which provides me with unique ideas. However, I create the product all by myself. - Is there a big demand for your handmade accessories and what makes you diﬀerent and unique from other brands? - Each piece is created by love and care. The most distinctive feature of my accessories is a style, colors and quality of the product. The demand for the product

is quite big. They often note the sophistication of my work, however m constantly trying to develop myself. Fortunately, I have not had a significant obstacle, however, im always read for challenges. - What are your future plans? - I’m going to develop my brand. I want to try to succeed on international market. If I really work for it, I can do it. I have already stated working on the wood, which will make my works more diverse

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January 23, 2017 #177

WORLD NEWS

January 23, 2017 #177

Quotes

“ Far and away the “It makes sense for Starbucks to get back to its roots by focusing on coﬀee in all but a smaller number of locations”.

best prize that life offers is the chance to work hard at work worth doing

”

MIUC also has a few other strings to its bow, it oﬀers students the opportunity to earn a double accreditation — from its UK partner institution and from Bologna

Theodore Roosevelt

Starbucks to Stop Serving Wine and Beer

f you enjoy sipping a glass of wine or beer while relaxing at a local Starbucks, it’s about to become a little more diﬃcult. Starbucks has decided to stop sell wine or Beer anymore at most of its locations, with only certain exclusive stores continuing to sell alcoholic beverages such. “Starbucks Evenings” Will Fizzle Out Into the Sunset The company has had an initiative called “Starbucks Evenings,” and that has included the sale in stores of alcoholic beverages like wine and beer as well as additional food selections. This has taken place not just in the United States, but also in various overseas locations. But that strategy will soon be retired in most locations throughout the country. The only stores that will sell wine will be high-end cafe-type spots. Make Way for Upscale Starbucks Just as “Starbucks Evenings” bids farewell, wine sales will continue to occur at the company’s high-end Roastery and Reserve shops. Those are located not just in the United States, as a Roastery location is expected to open in Shanghai in 2017. That will be followed up by locations in New York and Tokyo next year. By 2021, Starbucks anticipates that 20% of its locations will include Reserve coﬀee bars. Perhaps this will be a good strategy for Starbucks to mainly focus on selling wine at the upscale spots, which are expected to expand in number down the road. Impact on the Wine Industry As Starbucks is such a prominent company with many locations all over the

country, the impact on the wine industry of Starbucks not selling wine at as many locations is sure to be significant. The industry will not be able to count on that significant customer to keep sales flowing. However, perhaps things will even out and wine sales will improve again as Starbucks revamps and begins selling more wine at the upscale locations. Background and History Starbucks began its venture into the sale of alcoholic beverages in its locations when it started staying open later and selling wine and beer at a few locations in the Seattle area in 2009. That eventually expanded to hundreds of the company’s locations. The company has been historically known as one that owns and manages coffee shops, and the brand has never really been associated with the sale of any other products. But several years ago, it wanted to operate more like a true coffeehouse by selling alcoholic beverages. Having sales continue later in the day than when customers typically buy and drink coffee was likely another reason for trying that business approach. It makes sense for Starbucks to get back to its roots by focusing on coffee in all but a smaller number of locations. It will be interesting to see how the changing product selections will affect customer attitudes toward the coffee shop company. The company clearly believes that these recent decisions are best for the bottom line, and time will tell whether that is the best focus for the iconic coffee shop company. CLIFF PETERSON

SOCAR uses 220M euros of KEXIM loan to build carbamide plant

zerbaijan’s state oil company SOCAR has already used 220 million euros of a 500 million euros loan, allocated by the Export-Import Bank of South Korea (KEXIM), SOCAR vice president on economic issues, Suleyman Gasimov told reporters in Baku. SOCAR used these funds for construction of a carbamide plant in the Sumgait city, said Gasimov. He noted that the agreement on the 500 million euros loan has been signed by SOCAR and sent to the Korean side in order to be approved. KEXIM plans to give 249 million euros of the 500 million euros loan by raising funds from Germany’s Deutsche Bank, Italy’s UniCredit and France’s Societe General, and will

give the remaining 251 million euros directly from its own funds, added Gasimov. He said the loan is allocated for a period of 15 years at an extremely low annual interest rate. The project to construct the carbamide plant in Sumgait costs about 700-750 million euros. The plant is expected to start production in 1Q18. The main contractor of the plant’s construction is South Korea’s Samsung Engineering, while the licensors are Stamicarbon B.V. of the Netherlands and Haldor Topsoe of Denmark. The consultant on project management is Neste Jacobs Oy of Finland. The SOCAR plant is expected to produce 2,000 tons of carbamide and 1,200 tons of ammonia per day.

BitFury Launches ‘Global Blockchain Business Council’ in Davos The Bitfury Group, prominently known as a developer of bitcoin mining hardware and operator of mining farms, has launched the Global Blockchain Business Council (GBBC). The forum’s aim is to bring together leading businesses, executives & government authorities and figures to collaborate and push for the adoption of blockchain technology around the world. Calling itself “the leading global full-service Blockchain technology company”, the Bitfury Group has, in collaboration with international law firm Covington, launched the inaugural council at a hotel in Davos. The event was planned to be held alongside the World Economic Forum’s Annual meeting at Davos this week. First announced earlier this month, the GBBC was described by group CEO Valery Vavilov as “a much-needed forum for businesses, innovators and technologists” to unite under a common roof toward the development and advancement of blockchain technology. The GBBC was aimed to fulfill the role of a resource center and an educational forum, which fostered collaboration and partnerships across industries from around the world toward blockchain innovation.

Turkey’s Pegasus Culls Boeings for Leaner Neo as Demand Ebbs Turkey’s Pegasus Airlines is accelerating a shift to more fuel-eﬃcient A320neo planes ordered from Airbus Group SE as a spate of terrorist attacks in the country hurts demand and curbs revenue. The low-cost carrier, owned by Istanbul-based private equity firm Esas Holding AS, will start selling older Boeing Co. 737 jets following Turkey’s worst year for tourism in a decade, Chief Executive Oﬃcer Mehmet Nane said in an interview. Pegasus, which currently operates 62 737-800s and a mix of 20 originalgeneration A320s and re-engined Neos, plans to add at least 18 aircraft over the next three years while eliminating the Boeing planes and reducing the average age of its fleet to 5.2 years from 5.6. “Our plan to roll out our fleet to Airbus from Boeing by 2020 still holds,” Nane said. “We are aiming to have 100-plus aircraft, the final number depending on the pace of the fleet phase-out.”

Marbella International University Centre Welcomes Students from Georgia

arbella International University Centre, a newcomer in the private educational landscape in Spain, is oﬀering world-class undergraduate and post graduate degrees to students from over 40 countries around the globe including from the republic of Georgia. The college, located on Spain’s Costa del Sol, is a private university in the country with teaching and learning through the English language. Not only that but it also grants United Kingdom-accredited degrees in international business, marketing and advertising, international relations, media and journalism, luxury tourism, psychology and computer science through its partnership with the University of West London. MIUC also has a few other strings to its bow, it oﬀers students the opportunity to earn a double accreditation — from its UK partner institution (UWL) and from Bologna – with yet a third option on select courses in partnership with the prestigious Moscow State Institute of International Relations (MGIMO). Georgian students, coming from a small, independent country located on the Black Sea and on the route of the Silk Road, will get to experience living at first hand in one of Europe’s top tourist destinations, Spain. The republic, named by the World Bank in 2007 as the world’s number one economic reformer, has consistently been ranked at the top of the Bank’s ease of doing business index ever since. This makes a new life in Spain easier to adapt to for MIUC students coming from Georgia. Georgia has been part of the European Union‘s Free Trade Area (EUFTA) since 2014. The EU continues to be the country’s largest trading partner – accounting for over a quar-

ter of Georgia’s total trade turnover. A university education in Spain in the areas MIUC offers – from International Business & International Relations to Marketing & Advertising to Computer Science and Psychology at Undergraduate and Post Graduate level – can only help with the ever-increasing bilateral trade that has been a marked feature of the Georgian economy since 2015. A Georgian student will find that the international blend of MIUC, plus the international community in the Marbella area as a whole, complements the melting pot of peoples and cultures on campus. Apart from completing the degree through English the university also offers elective courses in a range of languages including Spanish, French, Russian, Chinese and Arabic that promotes the international communications flow. With small class sizes, a proven emphasis on personalised learning and mentorship, MIUC has a strong focus on global aspects of knowledge, skills and competences tailored for the 21st century workplace. A student-centred approach at MIUC combines small study groups with bespoke production facilities, ensuring our students are provided with the specific skill sets required to advance in today’s global world of international affairs, business and media. The development and implementation of practical analytical thinking is given special prominence, with students being prepared for future placements within international multicultural industries. As for the professors, courses are taught by successful academics and industry professionals who divide their time between vigorous research and innovative business practice.

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January 23, 2017 #177

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 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

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

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,

LIMELIGHTTRAVELINFOCENTER Address: 13 Sioni Street, 0105, Tbilisi (at the end of Shardeni Street) Phone: +995 322 999 123 E-mail: info@limelight.ge Web-page: www.limelight.ge Facebook page: www.facebook.com/limelight.ge

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

January 23, 2017 #177