Caucasus Business Week #309

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December 30, 2019 - www.cbw.ge

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And then we danced

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Doing Business Investments Levan Saginashvili

2 December 30, 2019 #309

Top Quotes from Georgian Marketers As the business world faces digital transformation, organizations start to think about changing their business models, which means to transform how they sell and deliver value to their customers. The way, how we market our products and services, also changes every day. During the year of 2019, we asked marketers from 34 different Georgian companies the exact same question. We wanted to know, what kind of changes they were expecting in the field of marketing in 5 years and how was their business model. Here are some of their answers.

Anna Shevchenko Regional Director at Noblet Media.

“Trust drives who we do business with, how we make important decisions and who we allow into our lives. This is challenging but it is compelling to find the way to provide well-trusted content to your audience”.

“We need to adapt our Mindset to Technological Advancements”

PSP Pharma’s Marketing Director, Tornike Guruli Marketing Managers must be communicative, and should always be ready to receive the news. Marketing in the organization is always a user’s voice. The user and its experience are important for each organization’s development. If we listen to the details, and provide an analysis of experience, it will help us in development.

"Almost Every Day, Standards change, and there are more Challenges to come in the Future"

"It takes more Profound and Detailed Study of a User to plan a Campaign Nowadays"

Tamuna Rostiashvili, Marketing Director of Altaokay Many things have changed over the last 5 years. First of all, it is worth mentioning the digital transformation. The source of traditional media has changed, and the internet, where a large amount of content is created and shared. Customers' behavior have also changed accordingly. The moves were efficient for customers and, in some cases, it may not be effective anymore. Marketing activities and planning campaigns requires more detailed study of the user, and more profound and intuitive insights.

Salome Gulordava, Head of Marketing Department of "Hotel Museum" Digital world develops at the speed of light, not only technologies, but also the consciousness of people in the last 5 years, the behavior of the user became digital, and soon there will probably not be web pages in the classic form, everything will become 100% mobile friendly, minimalistic, and user friendly.

"Small Marketing Activities can lead a Company towards a Larger Purpose"

Consequently, marketing activities are completely focused on companies and their needs. Products are constantly evolving, and are more suited to the customer. It is important for us to create a fair value for businesses, in order to achieve success both locally and on international markets.

"The Greatest Motivation is Competition, and that grows Daily in a World of Constant Changes" Meko Abramia, Marketing Projects Manager at the Insurance Company “Aldagi” A Marketing Manager is a creative person who comprehends people, and communication is like breathing for them. This person manages an innovative process, where trends are created based on analysing the user’s experience and emotions towards products/services.

"A Customer has the most Power Today"

"More Caution and Attention are required for Clients"

Nino Kusrashvili, Head of the Public Relations and Marketing Service of "European School" A coordinated and integrated approach with regards to our communication strategy is required. The main activity of marketing and public relations is to communicate effectively with external auditors, and plan and implement results-oriented campaigns. The right selection of a target audience in the field of education is very important.

Ekaterine Siprashvili, The Head of the Marketing Department at "Dio" LLC I think, especially in this era, watching the world from a marketing perspective is very interesting. This is an era of communications and commerce. Today, the customer has the most power.The best way to get information quickly on a social media network that allows marketers to plan effective campaigns, share news and information quickly to potential customers in different ways.

Keti Pirtskhalaishvili, Partner in the Marketing Agency “Gingers’’ Over the last five years, the efficiency and use of advertising channels have significantly changed. If earlier, television, radio and the press were the leading channels for advertising, now all efforts and attention are placed on digital channels. More caution and attention are required for clients, as communication between companies and consumers is bilateral and open.

“There is no Ready-made Formula in Marketing”

"Creating a Service for Selling a Product is One of the Important Preconditions"

Madlena Manusachyan, Head of Sales a nd Marketing Department of Hotel Chain “Mgzavrebi”

Lasha Barjadze, Marketing Manager of “Good Travel’’ and the training center “Tourism Organization’’ We always innovate in our companies, and then train our employees in these programs to deliver the results we have. For example, Facebook has added a messenger bot feature that automatically fills a customer's order and offers various options automatically, and do customer classification, demand analysis and customization. With this innovative tool, we have simplified our business and communication with our customers.

Natia Aspanidze, Marketing Manager at Decoline Construction- Interior Design Company Competition and constant updates; these are two key factors that are driving forces behind all companies in marketing. The fact that everyone agrees on, is that technological development is directly linked to changes in the marketing processes. Marketing goes through several stages: production concept, product concept, selling concept, marketing concept, societal concept, and embracing the digital age. Digital marketing is one of the biggest challenges in this field.

This field is changing so fast that there is no ready-made formula that is constantly working and everything we knew before is gradually useless. As for change, in Georgia and perhaps in the world, Digital marketing and social media have become more demanding and priority.

"Constant Development and Adaptation of Strategies to all Modern Challenges is a must in Order to succeed"

"Marketing Department must be able to combine Creativity and Analytics"

"The Future is in New and Digital Media" Marketing Director at "Business Partner," David Baghashvili We need to be curious, strategically creative, organized, and most importantly, brilliant communicators.

We need to be able to articulate the issues clearly and easily, and always have a strategy to move to a new stage.

We need to know how to bring any form of communication to a particular goal, and that we are moving to positive results.

Head of Marketing and Commercialization Departments of Tbilisi Mall (Rakeen Uptown Development), Nata Gogoladze Marketing plays a key role in any company, nowadays. Marketing comes up with the idea of the product/service, tests it on market through research, finds a targeted market for the product, determines prices, gives a recommendation as to how to present a product or service, promotes it, analyses sales and correlates it with money spent on COG and promotion, decides when it is no longer in demand, and when it should be removed from the market.

Salome Gelashvili, Marketing Manager of JSC International Insurance Company Kamara Today, the marketing department must be able to combine creativity, the ability to keep pace with technology innovation, and analytics.

Tamar Kalandarishvili, Head of Public Relations and Marketing at Insurance Company Euroins Georgia Our marketing team continually strives to deliver ideas and conceptions, constantly learning, researching the market, tracking technological changes, trends, understanding what the customer wants. Most importantly, we are never afraid to take risks; it is impossible to succeed without this,, we are not afraid of failure, difficulties,on the contrary, it aggravates our desire to move forward. A postponed case is not a case anymore, we need to start action today, if we want to make it work.

Nino Motskobili, the Sales and Marketing Director at "Georgia Palace and Spa Kobuleti" The future of hotel marketing is the merger of PR, sales, marketing and the revenue management service, as they are overly influenced by each-other’s results. Foreign experts have already come to the conclusion that the common goal is a priority, the specific discussion of the data of the particular department is secondary. If I follow this dictum, it will probably take us far, so I will stop here.

“Education is the Key to a Successful Future”

"We are trying to digitize Everything, along with Changes in Technology"

"As Technological Changes advance, Challenges increase"

"The Marketer’s approach to Project Planning has been Drastically changed"

BIA - Business Information Agency Marketing Manager Tamar Bezhashvili

Lana Bliadze, Head of PR and Marketing Department at "Didgori" and Organization Development Specialist at “Georgian Unique Wine’’ A competitive marketing manager should never be satisfied with a result, even if she achieves more than planned. One should always be oriented towards self and company development, keep up with the competition, and should be able to make correct predictions and well-planned decisions.

Nia Zotikishvili, Marketing Manager at Twins Wine Cellar Nowadays, it is important for marketers to find the accurate and necessary keywords in an SEO search engine for brand ranking. A rating is an image that shows trust, and trust is the same as a guaranteed customer.

Natalia Goderdzishvili, Caucasus Marketing Supervisor for Borusan Cat Georgia Let me start by saying that the Borusan Cat's slogan is "We create solutions", which clearly indicates that our customer is the core of our company. In addition to offering premium quality products and services, our goal is to help users succeed. We repeatedly point out to our customers that we represent not only their suppliers, but also valuable consultants who can get advice at any time.

Nata Tsereteli, Head of Marketing and PR Service of Supermarket Network "Goodwill" We consult with customers, focusing especially on and pay attention to dissatisfied customers, because their opinion is very important. Also, we are constantly looking for innovations, novelty. Goodwill was the first hypermarket on the Georgian market, and introduced the form to the Georgian market, and the fact that the customer has actually changed their consumer behavior. It still holds that the role of the standard bearer, and I am glad that I am contributing to this.

Dimitri Shvelidze, Deputy Director of the Mira-Hotel Group Ltd (Hotel Riverside Tbilisi, Tiffany Bar and Terrace, Mira Travel).

As we know, marketing in the hospitality industry involves a number of activities in terms of sales, public relations, advertising, etc. This is a complex field. One sentence that describes marketing is: the process of establishing a productive relationship with a customer, and maintaining it. A marketing manager should think outside of the box, understand the product that he offers.

“A Rating is a Symbol that shows Trust, and Trust is the Same as a guaranteed Customer”

"Nowadays it is Impossible to have an Effective Business Model without the Use of Digital Technologies"

Dimitri Abuladze, Marketing Director of Development Company “Axis” In other ways, if we look at technological changes, we have brought many benefits to marketers in analytical terms.

Achieving a high level of accuracy in any campaign was always a big problem for marketers. Evaluation and counting using innovative technologies became much simpler, and more accurate, as in the case of external advertising in digital media.

This is one of the biggest internet pros.

“Constant Readiness and Adaptation to Novelties is the Key to Success’’

Today, the real estate market is quite saturated, and many companies operate here. In order for you to be outstanding, it is important to think of a different product that is competitive. We try to be an outstanding and user-oriented company.

Of course, we listen to customers, and take their tips, wishes and recommendations into consideration as best as we can in order to fit them in, and offer them an interesting product.

In addition, we try to offer customers a different product from others, which distinguishes us from our competitors.

"The User’s Behaviour became Digital"

"Attracting Customer’s Attention became much Harder, but Interesting’’

"Being Creative doesn’t mean Investing too much, Original Ideas are often Simple’’

Tiko Ratiani, Head of Marketing and Salesfor “Jikia House’’

Public Relations Manager of Infrastructure Construction Association Tata Kapianidze I think research skills are very important, and take the right choice after that. Actually, this decision defines everything: you choose a segment, a message, a way to disseminate information, content, medium, form, time…

“Technological Changes have brought many Benefits to Marketing in Analytical Terms”

Irakli Nizharadze, Head of Marketing at the Development Company "Orion Group"

“Marketing helps you make New Discoveries”

“The Best Source of Inspiration is a New Day with its New Challenges”

Tamar Jincharadze, Head of Marketing Department of Hotel Chain “Ambassadori” and Public Relations and Marketing Manager of the co-working spaces “Terminal” and Vere Loft The role of marketing in any organization is very important. Let’s say, the engine is very important for a car, but no matter how good the engine is, it wouldn’t be worth anything if it didn’t run, so no less important are the wheels. No company and business can achieve a result without proper marketing.

"Only a Drastically Innovative Advertising Campaigns will succeed in the Future’’

Noka Baindurashvili, Head of Marketing and Public Relations Department for "Georgian Post" In recent years, there have been big changes in the realms of marketing, advertising and PR. Digitalization has completely changed the processes, communication standards and customer requirements. Today, the number of customers has drastically increased, and therefore their requirements are much higher.

Almost every day, standards change, and there are more challenges to come in the future.

Salome Macharashvili, Head of Public Relations, Marketing and Communications at the Innovations and Technologies Agency The evolving development and diversity of digital resources has given us a good opportunity to communicate effectively with the public, and simplify the feedback process.

Technological development is a very lively process, hence the digitization of services, the creation of simple and flexible services, etc. is very important today.

“No Company or Business can achieve Results without Proper Marketing”

Head of PR and Marketing at Luca Polare Ani Tsitskishvili Luca Polare, as a brand, aims to make people happy. That’s why all of our moves, whether it’s in marketing or across the company, are planned considering the users’ wishes.

“Marketer represents User’s Voice in the Organization”

Product Marketing Manager at BDO in Georgia, audit & business advisory Along with technological advancements, we need to adapt our whole mindset.

Our future target audience will be media-savvy digital natives to whom you can’t really advertise. We need to find ways to engage at a deeper level. As technology become our everyday life, people crave a more personal touch, and we need to balance.

Lado Tsimakuridze, Master of Social Sciences, Head of the Marketing Department at “Khareba Winery” There are not many such free niches left, thus marketing has to create innovative, exciting and attractive brands, and then find and retain customers, win over loyal segments of the competitors, and also attract neutral, new consumer groups.

“ It takes Greater Effort to attract the Attention of a Target Audience compared to Previous Years”

"Trust is Becoming a New Currency for Business and Life"

"The Rise of Digital Resources has Given us a Good Opportunity for Effective Communication with the Public"

"Today's Marketing Approach has changed Completely"

"We are facing Really Big Challenges in Terms of Technology" Rusudan Muzashvili, PR and Marketing Head of Gurme Ltd In terms of technology, we are facing really big challenges. In light of limitless information, you should make it interesting for the customer, and provide the right information.

You need to define your segment and work on communicating with them properly.

In terms of technology, we are facing really big challenges. In light of limitless information, you should make it interesting for the customer, and provide the right information. You need to define your segment and work on communicating with them properly.

"The Environment is changing, that is, continuing Innovation is needed for Survival and Development" Tinatin Imnadze, Marketing and Sales Manager at Schuchmann Wines Georgia From personal experience, what helps me the most is the maximum involvement in the processes. Having gone through so much detail and so many steps, I have come to realize that superficial management and giving orders from the top office cannot be as effective as being on-site and dealing with staff. Competence and the ability to prioritize well are also essential.

EIB approves EUR 15 mln Loan to JSC Liberty Bank

The European Investment Bank (EIB) and JSC Liberty Bank, signed a Loan Agreement within the framework of the EU4Business Initiative. Funds under this facility will be used to finance Small and Medium Enterprises operating in Georgia.

Following the change of ownership in Liberty Bank in 2017, the new management have embarked on an aggressive business transformation strategy. Key pillars of Liberty Bank’s new targets include: • Investing in the training of people to provide the best possible client services; • Promoting a customer focused business model to improve retail, MSME and Corporate customer needs; • Building strong international partnerships to promote best business practices in Georgia.

The new management believes that Liberty Bank is well positioned to promote financial inclusion across the country, given its unparalleled coverage of Georgia that extends to even the most remote locations of the country.

EIB Loan should enable Liberty to continue lending to Georgian SME’s on significantly better terms by, among other things, transferring the financial advantage afforded to Liberty within

the framework of EIB facility. Liberty will also receive technical assistance to improve its SME lending practices and product offers under the Eastern Partnership Technical Assistance Trust Fund.

Levan Tkhelidze, Deputy General Director of Liberty Bank said: “We are delighted to have an opportunity of working with European Investment Bank. This is yet another major milestone in the development of Liberty Bank and a very strong incentive for the management team to deliver on our stated business objectives. Liberty Bank is uniquely qualified to promote SME lending and EIB loan will deepen our ties with entrepreneurs throughout the country.”

Irakli Rukhadze, Chairman of the Board of Liberty Bank said: “I would like to thank EIB for the confidence it has shown in Liberty Bank. I am confident that this partnership will help the Bank in achieving one its key stated business objective, which is to solidify its position in this very dynamic and important segment of the Georgian Economy” Lilyana Pavlova, EIB Vice-President commented: “Support to economic development and smart, sustainable and inclusive growth are a key priority of the EU’s work with Georgia, As the EU bank, we are committed to supporting small and medium-sized businesses – but we need the help of local partners to do so. I am therefore happy that we are extending our cooperation with a strong existing partner of the EIB and that we reach out to new institutions as well.

SMEs play a significant role in Georgia’s economy and our transactions will pave the way for better business prospects of those companies and the country in general.”

About JSC Liberty Bank: Liberty is one of the largest Banks in Georgia, with total Assets of over GEL 2 bln and Capital over GEL 200 mln.

The Bank operates the largest branch network comprised of over 360 branches and 550 ATMs. The Bank is the exclusive agent of the Government of Georgia for the distribution of pensions and social benefits. The Bank employs over 4 600 employees serving over 1.7 mln customers. For detailed information, please visit: www.libertybank.ge; Media Contact: pr@lb.ge About EIB: The European Investment Bank (EIB) is the European Union's bank. It is the long-term lending institution of the EU and is the only bank owned by and representing the interests of the European Union Member States.

It makes long-term finance available for sound investments in order to contribute towards EU policy goals.

The EIB works closely with other EU institutions to implement EU policy.

As the largest multilateral borrower and lender by volume, the EIB provides finance and expertise for sound and sustainable investment projects which contribute to furthering EU policy objectives. More than 90% of EIB

3 December 30, 2019 #309 activity is focused on Europe but it also supports the EU's external and development policies.

The EIB Group has joined forces with the European Union under the Deep and Comprehensive Free Trade Agreement (DCFTA) Initiative East Programme aiming to strengthen economic development in the countries which have signed Association Agreements with the EU – namely Georgia, Moldova and Ukraine – by providing financial and technical support targeted at SMEs in these three countries.

About EU4Business: EU4Business is an EU initiative that helps SMEs in the six countries of the Eastern Partnership (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) to finance their development and boost economic growth. EU4Business support is delivered by the EIB together with other organisations outside the EU such as the European Bank for Reconstruction and Development. All EU activities that support SMEs in the Eastern Partnership countries are part of EU4Business.

The EIB has joined forces with the European Union to strengthen economic development in the countries that have signed Association Agreements with the EU – namely Georgia, Moldova and Ukraine – by providing financial and technical support targeted at SMEs in these three countries.

4 December 30, 2019 #309

Economic Developments in 2019 – Reality and Expectations The economic calendar has closed out 2019. Economic experts analyze which events have made the year 2019 an exceptional one, what benefits business sector has received and how government’s economic policy has affected the pocketbooks of our citizens.

(notably, net exports is much lower),and the negative balance declined by 10.3%, and exports were dwarfed by imports by 5.2% - from

Inflation and the GEL exchange rate were key challenges in 2019. The GEL exchange rate has seen new, historic lows, inflation has exceeded the target rate twice.

Foreign capital is hardly find the Georgian economy attractive.

The tourism sector could not easily heal wounds from the Russian embargo. Georgia hosted a record number of foreign tourists, but expectations were higher. The Anaklia seaport remains unimplemented, and the suspended project and its fate hang in the air, despite the authorities and the Anaklia Development Consortium, and both the ruling and opposition parties showing national consensus on the project’s importance.

GEL Exchange Rate The GEL exchange rate and the national currency’s devaluation have maintained their relevance for many years. A smaller-size economy, a high degree of import-dependence and political instability have depreciated the national currency by 65-70% since 2014. This factor directly affects the consumer market.

The solvency of our population is decreasing, and this factor negatively affects the revenues of Georgiabased companies. However, the GEL exchange rate has shown positive trends, too. In December, the national currency strengthened by 10 Tetri, up 3% month on month. Specialists assert that the GEL strengthened after the National Bank of Georgia (NBG) tightened the monetary policy rate, and lowered the reserve rate on foreign currency denominated financial resources.

GDP, Foreign Direct Investments, Foreign Trade, External Debts Economic growth in January-October 2019 was at 5.1%. Encouraging signs of a trend; specialists have appraised the Geostat indicators in this way. This is a good trend amid a slowdown of global economic growth, they noted, and added that several factors have brought about this success. Improved external trade has critically helped GDP growth. According to official indicators, in January-November, compared to January-November 2018, exports rose by 11.7%

In January-November 2019, Georgia hosted a record number of tourists – 8.7 million, up 7.2% compared to the same period of 2018. Despite the Russian flight ban and a downturn in tourist inflows from the Russian Federation, the indicator increased by 4.9% in January -November 2019, anyway. In the same period, Georgia’s revenues from international tourism exceeded 3 billion USD, up 0.9% year on year.

100 Investments Offers to Business The Ministry of Economy has launched a new project, “100 Investment Offers to Business”. The Ministry has put out more than 100 state-owned properties for auction. The Total value of all assets exceeds 150 million GEL. The privatization process is expected to create 2,500 new jobs. As for December 13, twenty-six (26) assets were sold and investors have paid 41 million GEL. Changes in Enterprise Georgia Program and Tax Preferences for Entrepreneurs in Highland Regions

Inflation According to Geostat, the national statistics service of Georgia, in November 2019, the inflation rate exceeded the target indicator 2.5 times, and the average level of prices rose by 7.21%. Similar hike in prices was recorded in 2017, too.

Prices on food and soft drinks rose by 13.4%; entertainment, recreation and culture field recorded a 7% hike in tariffs. Transport services increased by 3.1% in price. Tobacco and strong drinks sector registered a 15.4% upturn in prices.

Tobacco tariffs rose because of several reasons – initially, the AD Valorem on filter cigarettes tripled, the differentiated rate on filter and non-filter cigarettes were also equalized (1.7 GEL per pack). Starting in November 21, an excise rate was introduced on rollup tobacco. As a result, the price of roll-up tobacco changed so dramatically over the course of the year, that Geostat started calculating the inflation without roll-up tobacco prices.

Tourism

36.4% to 41.6%.

Moreover, the positive trend of export growth was enhanced by a 14% upturn in investment inflows in the third quarter: 417 million USD, that is, double the figure compared to the second quarter. Despite the improved indicator in the third quarter, the January-September inflows compared to the same period of 2018 have declined by 909 million USD to 1.094 billion USD. Georgia’s external liabilities also grew. As for December 1, 2019, the figure amounted to 5.392 billion USD, up 284 million USD year on year.

Based on the government’s resolution, entities with the status of a highland region enterprise are entitled to sell products in not only highland settlements, but also all over the country, and export them to foreign markets, and these activities will not deprive them of this status. Moreover, these activities are not grounds to grant this status to those who seek it.

At the end of 2019, the Government approved a revised program entitled Enterprise Georgia, in order to foster entrepreneurs in the field of ceramic construction materials, the fishing industry, balneology and adventure tourism sectors. The new program has not inspired much enthusiasm, because small entrepreneurs with no experience and financial resources deem that they have less of a chance to obtain financial support as part of the program.

High-profile Case of 2019

Trans-Anatolian Gas Pipeline (TANAP) – Higher Energy Security and Status of Strategic Partners On November 30, TANAP (Trans-Anatolian Natural Gas Pipeline) was officially inaugurated in Turkey.

Leaders of the project’s participant countries pressed the symbolic button, together, to begin importing a supply of natural gas from Azerbaijan to Europe.

TANAP’s inauguration is a historical fact. The facility comprises huge geopolitical context and it guarantees Georgia’s security. The economic effect of the gas pipeline is also very important, economic experts assert. Namely, thanks to Azerbaijani gas transit through its territory towards the TANAP pipeline, Georgia will receive 1.1 billion cubic meters of Azerbaijani natural gas by 2023, instead of the current 300 million cubic meters, and this volume is worth an estimated 300 million USD.

“We added.

Fraud successful future. removed

The VAT-related case may be considered as the top scandal of 2019.

At the end of November, the Finance Minister analyzed the results of a VATrelated case: legal proceedings against 102 bodies, 62 arrested and 11 wanted persons.

In whole, properties worth about 123 million GEL have been seized.

Ivane Machavariani has talked about false or misleading interpretations of the VAT-related case, as if the detainees are criminal businessmen.

It is also incorrect that neither the Revenue Service nor investigation department representatives have participated in the case, Machavariani noted. would be merciless in any case”, he schemes run in developed and countries, too. They will run in the Fraudulent VAT schemes may be through VAT system reformation to establish best European practices. As a result, the business sector will get back 620 million GEL in excess taxes.

Regaining Borrowers – Commercial Banks Wish on the 2020 Year The Georgian banking sector is meeting the year of 2020 with high hopes, as the government announced plans to remove the 200,000 GEL top margin on loans, and the National Bank of Georgia (NBG) promised to cut in half four (4) categories of income.

More Women in Banking Sector - 2019 “A commercial bank must staff the supervisory board to ensure a diversity of considerations by involving bodies with diverse skills, qualifications, and experiences on the board. At the same time, at least 20% (at least 1 member) of the supervisory board members must be women”. A new regulation by the National Bank of Georgia (NBG) obliges commercial banks to employ women on the supervisory board. The new regulation came into force at the end of 2019.

Not all women agree with this gender segregation, however, some men find similar approaches acceptable. A few thinks that artificial intervention in the staff policy and the introduction of gender quotas are unacceptable.

The 80/20% balance is determined by the Corporate Management Code, and it obliges all commercial banks to have at least one woman on their supervisory boards.

The system’s banks have already satisfied this obligation. Namely, TBC Bank has 2 women on its 6-member supervisory board – Tsira Kemularia and Luiza Chikoniani. The Bank of Georgia has employed 2 women on its 8-member supervisory board – Hanna Lokainen and Veronica McKerol.

Key Challenge of 2019 – GEL Devaluation “The latest devaluation of the GEL burdened us with inflation. The NBG is charged with controlling inflation, and we have taken the required steps, tightened monetary policy, and carried out interventions. For a further reduction of GEL depreciation pressure on inflation, and we have decided to lower foreign currency denominated reserve requirement by 5%. As a result, commercial banks will enjoy certain preferences in terms of foreign currency liquidity. This means that commercial banks will be able to issue 700 million USD foreign currency resources in the form of additional loans. This factor is meant to stabilize the exchange rate.

Consequently, the pressure on inflation will decline, in the course of time”, Koba

Resolution as New Regulation in 2019 The Parliament of Georgia has adopted the National Bank’s initiative on the resolution mechanism. “The resolution starts in the same way as the liquidation.

This is the authority of the National Bank to apply a resolution mechanism, instead of liquidation”.

The bill of amendments transmits a new instrument to the supervisory body, with the aim of healing commercial banks, not to fine them. The resolution mechanism enables creditors and depositors to take over a commercial bank. This mechanism has filled a legislative gap. A commercial bank is not regulated by the law on bankruptcy that calls for bank rehabilitation. The resolution mechanism allows us to replace the owner. Even the Finance Ministry is entitled to become a commercial bank owner, if it puts as much money in capital as the bank’s stakeholder is obligated to. 50 million GEL should be taken from the state budget – this bill introduces the possible usage of a temporary bank (when the Finance Ministry establishes a temporary bank prior to its sales), as well as the resolution fund’s institute.

A commercial bank with weakening financial indicators will be deprived of high-quality and healthy assets, and the bank will be directed for recovery through transmitting it to another commercial banks or the government, while bad assets will be directed towards liquidation.

This regime takes effect immediately, and suspends all other norms, so as not to frustrate the transmission process. It may take only 3 days. The maximum period is 1 year, with the right to the term for another year.

The National Bank’s promising explanation for the framework of resolution is that all commercial banks are healthy in the market, and the resolution mechanism is intended to protect the sector.

Gvenetadze noted.

Prior to alleviating the GEL depreciation’s burden on inflation, we should promote economic development. Dedollarization was to serve the same goal; Larization was to promote economic growth through reduction of risks, though Dollarization will replace it temporarily.

The National Bank will have to stimulate dollarization again. GEL devaluation and growing inflation remain key challenges in 2019-2020.

Crediting, as a function of banking, should also ensure economic growth, but the NBG’s regulations obliged commercial banks to increase capital with conservation, system and countercyclical buffers. System banks, like TBC Bank, Bank of Georgia and Liberty Bank, are obliged to increase capital through system buffer.

Commercial Bank

2017

2018

2019

2020

2021

JSC TBC Bank

0,0%

1,0%

1,5%

2,0%

2,5%

JSC Bank of Georgia

0,0%

1,0%

1,5%

2,0%

2,5%

JSC Liberty Bank

0,0%

0,6%

0,9%

1,2%

1,5%

The year 2019 – New Challenges for Borrowers with annulled Debts Aleksandre Dzneladze, president of the Association of Banks, suggests avoiding misleading expectations, as happened with the 600,000 borrowers with annulled debts. After disappointments in 2019, they will not be able to take new, healthy loans in 2020, either.

Their debts were written off, and their Black List records were removed on the condition that they cannot take loans for a period of 2 years. Even simple overdrafts are unattainable, and commercial banks have mentioned their low ratings.

Thus, borrowers with annulled loans have to pay much more from their net incomes to serve loans compared to other borrowers, so that commercial banks face no risks. The responsible credit framework regulation have not taken this factor into consideration.

However, financiers forecast that creditors would reinsure the risks, and the burden would fall on borrowers.

These forecasts turned out to be realistic.

Nevertheless, nothing has changed, and only Finance Minister Vano Machavriani has expressed regrets.

5 December 30, 2019 #309 I would not sacrifice Larization – Finance Minister Vano Machavariani

Vano Machavariani has divided regulations of the last 2 years in three blocks: 1) Larization/dedollarization; 2) responsible crediting – tightening of conditions; 3) security – requirement to commercials banks to increase capital, and ensure additional buffers.

“Microfinance organizations were also unhappy. Regulations hurt pawnshops, too, and they are also irritated. The regulations turned out to be excessive, but not tragic”, the Finance Minister noted, critically, the initiative that ex-Prime Minister Mamuka Bakhtadze proposed to introducing a 200,000 GEL top margin on foreign currency denominated loans.

The refusal to prioritize Larization was painful for the Central Bank, but it has to take steps towards dollarization, because inflation was caused by a depreciated GEL, and the stability of prices was threatened.

The Year 2019 – Commercial Banks Lose 1/3 of Borrowers

Tightening-alleviating Loan Regulations in 2019 “Naturally, more people will be able to take loans, but radical changes will not take place”, Aleksandre Dzneladze, President of the Association of Banks, noted, regarding plans for lowering retail loans coefficients in Spring 2020, and dividing them into 4 income categories. However, the alleviated conditions will not apply to everybody.

The 200,000 GEL top margin for taking foreign currency denominated loans will be removed for only those more than 4,000 GEL in income a month. The banking sector’s lobbyists agree that the process of alleviation of regulation with the NBG, and the NBG agreed on these issues with the government.

Dzneladze assures that loan security and profitability coefficients should be made even on certain condition (currency and GEL loans). Currency loan borrowers should have 15% higher income, and this makes it less attainability to finances.

Gakharia’s Letter – Secret of 2019 The real author of the letter, wherein Giorgi Gakharia allegedly threatens Mamuka Khazaradze, remains as of yet unknown.

“A strange set of circumstances are revealed in this case. The Prosecutor’s Office has not added the interrogation of Mamuka Khazaradze regarding the letter to the case.

The prosecutor’s office has not interrogated the institutions that, according to Mamuka Khazaradze, have transmitted Gakharia’s

The enforcement of the so-called regulation framework regarding responsible crediting has confused the entire sector in 2019. Georgian consumers, addicted to technological innovations, have lost the opportunity to say: - I Want to Buy Today, but will Pay Tomorrow. The primary mission of the credit product is to stay flexible, while strict regulations neutralize this flexibility. Drivers, nurses, recipients of money transfers from abroad, cannot take loans, because they are unable to submit sufficient incomes after the correlation between incomes and loans was determined by 80%-20% and 75%25%.

Up to 1000

20% / 25%

25%/ 35%

1000- 2000

25% /30%

35%/ 45%

2000-4000

25% / 30%

45% / 55%

Over 4000

30% / 35%

50% / 60%

Coefficient/with net incomes for unhedged and hedged borrowers.

Loan Security

85% (GEL)

70%($€£)

Restrictive signals were transmitted to trading outlets and developers, because mortgage loans and installment loans were limited. As a result, we managed to achieve financial stability at the expense of the impoverishment of our citizens.

The Georgian Prime Minister pledged that the coefficients will be halved in the Spring of 2020.

letter to him”, Zviad Kordzadze, a defense lawyer for TBC Bank founders Mamuka Khazaradze and Badri Japaridze noted.

The letter and accusations of illegal revenues legalization are related to a 16.66 million USD loan transaction, carried out 11 years ago.

In order to not damage the interest of borrowers and depositors, the bank’s stakeholders left management, as well as several major projects, including Anaklia Seaport.

6 December 30, 2019 #309

Resolution 520 = Healthcare 2019 The year of 2019 was an intense time for the Georgian healthcare sector. The field has adapted to the recently appointed Minister, when Ekaterine Tikaradze, who replaced the former health Minister David Sergeenko, offered clinics engaged in the Universal Health Program to equitable service tariffs.

Clinics rejected the Health Ministry’s regulations. Despite multiple meetings with the Minister, Prime Minister and Business Ombudsman, government has made no concessions yet. Consequently, resolution N520 is considered the scandal of the year.

Finally, the parties have agreed to establish a universal health reform board.

Akaki Zoidze, the former chairman of the Parliament’s health committee, told Caucasus Business Week (CBW) that the interested parties have not competently engaged in the process, and this factor has caused many misunderstandings regarding resolution N520.

“The government sets tariffs, as a purchaser of these services, but more consultations were required when implementing such important reforms, and fewer questions would arise. This is the first phase of reforms, and the ultimate objective is to improve the quality of service, and increase the efficiency of state expenses. I welcome the Universal Health Reform Board, where all interested parties, including international organizations, researchers, representatives of associations, nongovernmental organizations or private clinics, will care for the implementation of the reform”, Akaki Zoidze said. He also noted his projection that the coming reforms will be painful. At the same time, he assures us that the tendencies that see patients receive excessive services should be dealt with.

“Excessive services are encouraged, instead of encouraging high-quality medical services”, Zoidze noted, and added that the process should be transparent, and interested parties should actively be engaged in the process.

“Patients, the government, doctors and clinics should get benefits”, Zoidze pointed out.

but were practically withdrawn in the second quarter. The year of 2018 has recorded better numbers, only 12.4 million USD in foreign capital. A smaller amount was registered in 2017: 5.9 million USD. The sector’s share of GDP remains low.

According to third quarter indicators, the ratio is about 4%. The year on year growth made up 8% and exceeded 498 thousand GEL in current prices.

The sector employs more than 71,000 people, and the average monthly salary does not exceed 1,107 GEL. It is noteworthy that the government grows health program funding on an annual bases.

Over the past few years, subsidization has tripled, and the figure amounted to 1.1 billion GEL in 2019. The government emerges as one of the major customers. This has attracted foreign investments in the sector; however, investments grow in quantity, not in quality, Akaki Zoidze said.

The high inflation rate and GEL exchange rate’s devaluation have affected both healthcare services and medicine prices, consumers and the universal health program.

According to Geostat, the national statistics service of Georgia, prices rose by 3%, including antibiotics, which rose by 5% in price, pain medications increased by 3%, anti-inflammatory drugs rose by 7%. These indicators reflect the year on year trend, while tariffs have almost doubled after the universal health program’s commitment.

The program for 1-GEL medications has also failed. Patients are not content, either, and recommendations were prepared for its revision.

In the digital epoch, the sector remains stuck in paperwork even in 2019.

Figures in Health Sector

Deals and Investments of the Year The decision by the Asian Development Bank (ADB) could be looked at as the investment of the year. ADB has invested 19.5 million GEL in bonds of Evex Hospitals, an affiliated company of the Georgia Healthcare Group (GHG), which is listed at the London Stock Exchange (LSE). Proceeds from the issuance and the company’s internal resources will refinance part of the debt. The company plans to achieve operational efficiency, improve service quality and management. The total value of the bonds is 50 million GEL. As for the deal in 2019, the Georgian Hospitals Group has purchased GPI Holding clinics. As a result, GPI Holding has withdrawn from the business of clinics, while th eGeorgian Hospitals Group has expanded its network, after it purchased a 100% stake of Geo Hospitals, and became the owner of 17 clinics.

The new management’s strategic development plan calls for the infrastructural renewal of Geo Hospitals, including requipping and the adaptation of new technologies. To this end, the Georgian Hospitals Group plans to make huge investments.

GPI Holding

Director General Paata that the current developments in the hospital sector of Georgia, and a capricious environment, shaped by hasty and frequently unanalyzed initiatives, has made the company withdraw from the market.

The health sector, like many other

fields, faces difficulties with attracting foreign direct investments. JanuarySeptember 2019 recorded an 11.2 million USD investment in the healthcare and social protection sector. An investments of 0.8 million USD was attracted in the first quarter,

besides healing patients, doctors have to also work as clerks and prepare thousands of various documents.

An excessive number of prescribed medications, errors in diagnosis, and low quality of services leave patients discontent.

Therefore, the current challenges will be there in 2020 too, but resolution N520 remains a key challenge, anyway.

This means that,

7 December 30, 2019 #309

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8 December 30, 2019 #309

Agro 2019 – Analysis by AGSO Despite multiple support programs and hundreds of millions of GEL invested in the field, yet the Georgian agriculture sector suffers from various problems. A significant number of Georgian citizens have engaged in agribusiness, and any moves and decisions in this sector affect our citizens, too. The Agro Solutions Consulting Company analyzes the most important developments of 2019 in the Georgian agriculture sector.

Law on Agriculture Land Ownership adopted A two-year moratorium on the sale of agricultural lands to foreign citizens has passed. The Parliament of Georgia has adopted an organic act on ownership of agriculture lands, under which foreign citizens are entitled to own agriculture lands if: • A foreign citizen has inherited this land plot; • The dominant partner of a Georgiaincorporated legal entity according to private law is a foreign citizen or/ and a legal entity registered abroad. In this case, this company is authorized to register the agricultural land ownership, if the government of Georgia passes the required resolution, based on an investment plan.

It is noteworthy that the new law does not restrict domestic and international financial institutions, whoever owns them, from holding agriculture lands.

Under the organic act, a private Georgiaincorporated legal entity, if its dominant partner is a Georgian citizen, is authorized to register agriculture land in legal ownership.

Changes to plant the Future Program Launched by the Agriculture Projects Management Agency (currently, the Agricultural and Rural Development Agency - ARDA) in 2015, the Plant the Future program offers financial support to farmers, such as arranging perennial gardens and seedling farms.

Under this project, the financial support increased in 2019 Changes to the program for arranging gardens: • Legal space has increased from 0.5 hectare to 50 hectares; • The Grant component has increased from 100,000 GEL to 250,000 GEL. Changes to the program for seedling farm: • The 50% co-funding has increased to 70%.

• A grant component has increased to 500,000 GEL from 150,000 GEL. Fighting Marmorated Stinkbug According to the world’s leading entomologists and plant protection specialists, Georgia has successfully implemented a program against the marmorated stinkbug, and the country has received real benefits.

Leading specialists from US universities, and European and Australian agriculture experts have arrived in Georgia, and appraised the measures that the Agriculture Ministry has carried out against marmorated stinkbugs. According to the experts, the effects that Georgia has achieved in 2 years cannot be attained by much more developed countries over a longer period, and Georgia’s experience is valuable for the whole world.

Strategy for 2021-2027 and Action Plan for 2021-2023 In 2019, the Georgian Ministry of Environment Protection and Agriculture prepared the 2021-2027 strategy and the 2021-2023 action plan for developing villages and agribusiness. These new documents have replaced the current agricultural strategy.

The new plan complies with the government’s long-term visions and budget parameters.

Key aspects of the new strategy: • Improving the competitive capacity of the agriculture sector.

• Improving the social condition of village residents ; • Reasonable employment of natural resources; • Adaptation to climate changes ; • Improving food, veterinary and plant protection systems.

Vintage 2019 The 2019 vintage was conducted in a wellorganized environment. The National Wine Agency has registered harvest volumes, and solved organizational issues.

For the first time, in 2019, the vintage passed by use of vineyards cadastre program. Namely, In Kvareli and Gurjaani municipalities, grapes were due to vineyard cadastres. At the same time, the harvest volume of the Saperavi grape on 1 hectare was determined to be 10 tons for the production of wines designated by the names Kindzmarauli, Akhasheni, Kvareli and Mukuzani. The higher volumes were admitted for production of other wines.

To protect the fidelity of grape varieties, ampelography specialists were involved in the vintage process.

More than 267,000 tons of grapes were processed in Kakheti in 2019 and this is a record figure over the past 30 years.

More than 20,000 winegrowers sold their products to winemaking companies in the Kakheti Region in 2019.

Land Registration Problems Unregistered lands dramatically frustrate the development of the agricultural field and the land market. Serious problems are seen in the agro insurance sector, too.

Land ownership registration is one of the key preconditions to implement various programs, with the support of state programs or foreign donor organizations.

To ensure the engagement of landowners in the agricultural development chain, their land plots must be officially registered.

Under the Government-approved legislative amendments, land registration is simplified until January 1, 2022.

Procedures are simplified, number of required documents for submission decreases and ordinary documents are issued free of charge.

It is noteworthy that the problem with unregistered land exists not only in the private sector. A lot of state-owned lands remain unregistered.

Hothouse Cluster in Imereti The government of Georgia plans to arrange a hothouse cluster on a 125 hectare space in the Imereti AgroZone, in the village of Maghlaki, Tskaltubo Municipality. The project calls for arranging communication channels,

a logistics center, storehouses and refrigerator complexes. Products from this complex will satisfy international quality standards, and increase Georgia’s exports potential.

Agro Insurance The aAgro-insurance business still suffers from various obstacles. The program was launched several years ago, but farmers’ awareness of this remains very low.

The role of insurance companies also matters. There are problems with the description-calculation of losses. We have very few specialists in this respect, and their level of knowledge is very low.

Raw Milk Problem Raw milk production is related to some problems in this country. The Agricultural and Rural Development Agency (ARDA) launched “The State Program for the Promotion of Milk Production Agriculture Cooperatives”. However, this program enables us to purchase milk-processing machines, and this program cannot assist farmers in raw milk primary production.

The country remains essentially dependent on milk powder imports.

Beef Deficit The price of beef has increased by several GEL in 2019. A lack of meat cattle farms remains Georgia’s key problem. Prices grow because of the beef deficit and there are two reasons: • Lack of cattle-breeding farms.

• Cattle is exported to foreign markets, mainly to Azerbaijan and Iraq.

Wine Exports The country has recorded dramatic progress in wine exports. 2019 will close with new, record indicators. In JanuaryNovember 2019, Georgia exported about 86 million bottles of wine to 53 countries, up 10% compared to January-November 2018. The total value of wine exports constituted 220 million USD, up 20% compared to the same period of 2018.

Wine exports have risen in strategic markets: Poland – up 24% (3,746,092 bottles), China - 2% (6,323,463), USA - 48% (660,874 bottles) and Great Britain - 22% (126 493).

Export growth was recorded to the following countries: Lithuania - 48% (653,322 bottles), Germany - 40% (615,723), Belarus - 68% (2,505,617), Israel - 81% (287,023), Estonia - 27% (648,884), Russia - 11% (53,964,172), Moldova - 8551% (612 524), The Netherlands - 22% (88,114), Czech Republic - 17% (67,584), Sweden - 562% (78,390), Bulgaria- 23% (32,934), Mongolia - 5% (224,652) and so on.

According to the January-November indicators, Georgian wines were exported by 323 companies.

Food Products Labeling New technical regulations came into effect on January 1, 2019 – The Rules on the Supply of Information on Food Products to Consumers – Labeling of Food Products.

The new regulations have introduced additional requirements for labeling food products, with the aim of increasing the awareness of consumers. the new regulations: • Expand the list of mandatory information on labels.

• Determine the sizes of letters on labels; • Oblige the producer to provide accurate, clear, easily visible information on food products and it must not be misleading.

• Determine the Rules for placing information on some substances or products with ramifications for those who might be allergic or suffer from excessive sensitivity.

• Change product validity standards; • Oblige the producer to indicate the gross weight of food products on the label (excluding packing weight); • And other requirements;’ New Tests on Honey Safety The Agriculture Ministry’s laboratory has introduced tests on all qualitative and quantitative indicators of honey, based on technical regulations. It should be noted that, so far, beekeepers have had to hold laboratory tests abroad. At this stage, honey samples are tested for chlororganic and sulphur organic pesticides, various groups of antibiotics, heavy metals and so on.

Tests are held only at the Tbilisi Laboratory, but those interested are able to submit honey samples to 10 various, regional laboratories. The transportation of samples to Tbilisi is free of charge, and applicants are able to receive the test results without problems locally.

Logistics Centers Significant investments are made in the primary production of agriculture sector. The space of perennial gardens are expanded every year. However, considerable loops must be hopped through, should it pass to deliver products to the final consumer. Without these stages, the field cannot be developed.

It is noteworthy that logistics chains remain a poorly developed sector in Georgia. The chain is to give the form of a commodity to primary products. There are only several enterprises in Georgia that sort, standardize and pack fruits and vegetables. This means that the country still lacks refrigerator complexes and primary processing plants.

Quality of Products There are products in Georgia that are exportable to the European market, but we cannot do this, because we cannot confirm the quality of these products.

The introduction of international quality standards at gardens or fields has proceeded at a low pacs. State-run programs provide certain financial support to our farmers in this respect.

Nevertheless, we face problems here, because big investments are required to introduce these standards on smallscale farms. Therefore, we should think of enhancing the role of cooperatives, to introduce these standards through united efforts.

Vocational Education It is impossible to develop agribusiness without the required knowledge and specialists. Neither an amount of investment, nor a space in the gardens matters – no results and benefits are available without knowledge. Vocational education, dual programs, practical knowledge remain undeveloped in Georgia. All segments of the agriculture sector lack the needed specialists.

Development and Real Estate Sector in 2019 “Bank regulations, construction regulations, complicated licensing – this is how we can briefly characterize challenges that the development sector has faced in 2019. These very regulations have “spoilt loans”, more than 6000 job places disappeared, investment inflows shrank and apartments prices hiked”, Irakli Rostomashvili, head of the Georgian Developers Association noted.

The year of 2019 may be appraised as the year of heavy strikes to development sector, suspended sales and lost investments. There are no preconditions for positive expectations in 2020, Irakli Rostomashvili noted.

“Foreign partners that have agreed to invest money in Georgia after the hardworking process for many years, started investing several millions of USD, but they noticed that sales declined, new regulations were introduced, project approval was protracted. In the end, they decided to withdraw from the Georgian market and redirect the investments to Ukraine. Eighteen months ago businessmen were mocking each other at investing in Ukraine. And when investments from Georgia are directed to Ukraine, this signifies we have grave environment in our country.

None of the Infrastructure Ministers have expressed interest to meet with development sector”, Rostomashvili noted.

He welcomes all regulations enforced before 2017, while he asserts that regulations for labor safety and residents protection were to be enforced stage by stage and the Government was to give enough time to the sector to meet new regulations prepared.

“Forecasts are very important for the development sector, because investments made today will bring effect in 4-5 years. When something changes in this period, this signifies that rules of the game change during the game. And these rules were changed frequently and suddenly in 2019. The National Bank introduced its regulations unexpectedly. Many things change for people engaged in this field.

I do not say that these regulations are not required, but the time matters very much. The national bank’s regulations have badly affected this sector and I cannot understand this. It is unclear why the National Bank demonstrates

so hostile attitude. This year the development sector was punched so heavily that all sales were suspended”, Irakli Rostomashvili noted.

According to Geostat, the national statistics service of Georgia, FDI inflows to Georgia in the second quarter made up 187 million USD, down 53.7% year on year. Slowdown in investment inflows was recorded in all important sectors of Georgian economy, including, the development sector recorded 91% contraction to 4.2 million USD. Starting January 1, 2019 the National Bank of Georgia (NBG) tightened retail crediting regulations. Developers forecast that the new regulations would badly hit the development business and essentially narrow sales.

As to real estate, Gedevanishvili and Company founder Nino Gedevanishvili explains: “Supply of apartments to the center of Tbilisi will decline in 2020 and the demand will increase. Therefore, we expect apartment prices to raise in 2020. The country will also hold parliamentary elections in 2020 and this factor may a little narrow the demand for apartments and clients may redirect plans for 2021”.

Tightened regulations on mortgage loans have essentially affected real estate sales, as well as construction regulations and GEL exchange rate volatility. The development business associates the year of 2019 with sales contraction.

“In 2018, the announced plans for revising loan regulations enlarged crediting volume and apartment sales.

This volume shrank by 10%-20% in 2019. However, this year records growing demand for land plots, mainly for development projects. All useful locations in the center of Tbilisi have been already employed for residential buildings. Therefore, development projects are moving to Tbilisi outskirts.

We have many demands for purchasing land plots in outskirts. The year of 2019 has showed that development business is leaving the city center”, Nino Gedevanishvili said.

As to income forecasts, the part of real estate agencies suppose that apartment prices in the center of Tbilisi will increase in 2020 amid lower supplies and growing demand. On the other hand, the 2020 parliamentary elections may change consumer plans and they

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may decide to wait for more convenient times.

Zurab Lachashvili, director of SIGMA real estate agency believes that the current reality on real estate market may change if the Government carries out correct and valuable financial policy.

“New bank regulations have also influenced the situation, as well as GEL exchange rate. Certain regulations were imposed on developers. As a result, prices increased and the sales declined by about 10-15% compared to 2018.

In Tbilisi suburb, Dighomi Massive and Gldani District apartments are cheaper and development projects are implemented more actively. Pricing in real estate field depends on financial policy and domestic stability in 2020”, Zurab Lachashvili noted.

According to TBC Capital research, construction licenses were issued for 550 000 square meters of space in 2018, down 47% compared to 2017, when 1 044 000 licenses were issued. Licensed project are finished in 3 years on average and the apartments supply is expected to decline by 2021.

Wider access to mortgage loans allowed many citizens in previous years to buy real estate. The portfolio of mortgage loans in 2016-2018 rose by 31%, according to TBC Capital research.

However, new banking regulations came into effect on January 1, 2019 and commercial banks were restricted to issue mortgage loans without detailed analysis of incomes of clients.

Moreover, the new regulations determined groups of revenues and the loan service top margin coefficient for each group. Moreover, the mortgage loan maturity was determined by 15 years.

According to TBC Capital estimations, a citizen’s monthly income should be at least 4 800 GEL to fit the requirements of the mentioned regulations and successfully cover the 127 000 Gel mortgage loan that suffice to buy only a 65 square meter apartment.

According to TBC Capital research, supply of apartments to Tbilisi real estate market will decline in 2021 as Tbilisi City Hall has tightened licensing regulations.

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Innovations made in Georgia: Highlights from Georgian Startup Scene 2019 Georgia’s capital Tbilisi is becoming more creative, vibrant, open-minded, and international; some even call it a regional startup hub, which makes it a great place for innovations. We want to look back at 2019, which was a productive and successful year for the Georgian startup scene, in diverse fields. And here’s our list of the highlights of the year to prove it: TapText Tap-Text is a project by Wave Tech that will bring the blind one step closer to the digital social world. Our device consists of two electronic gloves; a person puts the gloves on, and by tapping their fingers on any surface he or she sends messages, e-mails to anyone, writes posts on social networks. The text written in the braille alphabet will be converted into any desired language.

As a result, the blind become more involved in our daily lives.

To paraphrase the American astronaut Neil Armstrong to describe our project. "It's a small step for a man, and a giant leap for the blind." - Archil Sharashenidze.

Product research and development gave us an opportunity to create the first eco-friendly, green cable made of recycled plastic and polyethylene waste. Such production will help us to fight environmental degradation and climate change, as well as create a value for our customers by providing high quality, environmentally friendly product.

Wely We just started last year and now we are the best innovative solutions company in Georgia, which sounds good, and feels great, but we are still in the process of working hard to create the most innovate solutions, not only for Georgia. We would like to thank all those who supports the business to make us what we are today.

We are happy that we were winners in the TBC Business Awards, in the category "Best Innovation of 2019". It's important for our future plans.

Plastic Watcher

BioChimPharm 2019 has been a year full of challenges and surprises for BioChimPharm (BCP). During the year, the company has launched several innovative products, won a matching grant provided by the World Bank and Georgia’s Innovation and Technology Agency (GITA), with a total budget of 1.3 million GEL, and received the Seal of Excellence from the European Commission for a Breakthrough Technology. It is also worth noting that the company’s partner and the general manager, Rati Golijashvili has had a chance to present at the world renown TEDTalks’ platform, and to talk about the emerging threat of antibiotic resistance and its viable alternative – Bacteriophages.

Optio.ai - Giorgi Mirzikashvili Optio.Ai is a fintech startup, with AI products enabling banks to precisely categorize their customers’ transactions, and create a conversational banking experiences that help people to manage their personal finances.

Last year, we covered several important milestones from the company’s development roadmap, and have notable achievements. First of all, the partnership with one of the biggest banks on the Georgian market - Liberty Bank. This is the second bank in the local market that is partnering with our startup, and using AI fintech products.

Another big success was the recognition of our startup with a 100,000 GEL grant from The World Bank and the Georgian Innovation and Technology Agency. The grant allowed our company to acquire new talent, and to continue research and development activities in the field of machine learning.

Also, a very important deliverable was the launch of an innovative and fully automated banking chatbot, in partnership with Terabank. Since its launch in mid-July, the chatbot has offered an absolutely unique opportunity for Terabank’s customers. Users of the chatbot can access the same financial services which had previously been provided only in-branch or through conventional digital channels.

LiveCaller 2019 Year was incredible for LiveCaller. From 0, we managed to launch the product, got first clients, our team was increased from 2 to 10, and already working on scaling up.

We have also won a GITA grant worth 100,000 Gel, the QITCOM 2019 Startup Competition in Qatar, second place at a Touch startup summit, and received many other awards.

Influence Georgia 2019 was an extraordinary year for Influence Georgia.

The startup achieved tremendous growth, doubling its revenue, and securing leading local as well as international companies operating in Georgia as clients. More importantly, Influence Georgia was one of the first Georgian startups to secure venture capital financing from foreign investors. The company raised over 1 million GELi, which will be used to build a fully automated influencer marketing platform - echolize.com, to be launched in March, 2020. Next year, apart from the platform’s launch, we will focus on expanding our business internationally, and further bolstering our success on the local market.

Tene In 2016, Ginventor decided to introduce the first Georgian branded USB cable to the Georgian market, and sell it. The product soon gained wide popularity, resulting in increased sales. Inspired by this development, we made a decision to launch the cable production in Georgia and keep production associated costs and money outflow within the country. This would facilitate business development in Georgia, contribute to the development of the economy, and create employment opportunities for the local population. While contemplating on the matter, we saw one more benefit that we could implement....

An eco-friendly solution to the production of the cable.

Plasticwatcher.ge is about personal initiative and protest and activism, and respecting social enterprise is the core principle. Its mission is to reduce plastic waste and pollution, to inspire people to follow a zero waste lifestyle. Plasticwatcher.ge knows that nearly all trash can be recycled and upcycled. By collecting household plastic waste and expired advertising banners, as well as rolled up materials from our partner organization, with whom we create sustainable fashion items.

We make handmade recycled plastic bags, raincoats and other sustainable fashion accessories, which offer an important solution to reduce plastic pollution by up cycling for further use. We advocate for the reduced use of new plastic bags by creating sturdy and trendy bags from upcycled plastic waste. In case your item get damaged, you can easily mend them, using only brown paper and an iron. The core idea is to not throw out, but repair items. Mend your sustainable fashion Items by yourself, and use it, till it is truly worn out. We seek future partnerships to help scaling up our circular economic activity.

The core principle is to fight plastic pollution by reducing, reusing and upcycling plastic and other material into sustainable fashion products. To work with people on changing pollution behavior pattern, and to inspire them to work towards better days.

Shelf Network Shelf is an arbitrage network for cross-border vehicle trades. By providing infrastructure where sellers can remarket and run the same vehicle auctions, synchronized across different online marketplaces.

The available inventory for remarketing in our network expanded to up to 500,000 vehicles every month, and that was achieved by contracting with leading international companies such as: BNP Paribas, Arval, IAAI, CARFAX. The company opened an asian office, and with our Japanese partners we established the ShelfAP (Asia, Pacific,) which is responsible for building the Shelf trade infrastructure for Japanese car exports in South East Asia. Our first client marketplace is coming to New Zealand in January 2020.

Lingwing

The company had 250% growth this year compared to the previous year. We have 80,000 new users. We won the following contests Seedstars, TechSummit, YTILI. We have found partners who will export Lingwing to the Bangladesh market. Also, we have almost completed a Georgian language course, and also a B1 level in English language.

Basement BASEMENT is the first bilingual digital archive of Georgian independent music aimed at researching, preserving and sharing contemporary Georgian music. The web platform functions as an archive, music label, and online store, and combines information about independent music from the 60s to the present in one space. The creators of the platform are Elene Margvelashvili, Tamar Chincharauli, Nino Imerlishvili, Elene Zhorzholiani- all members of the GPB's 'Communicator' team. An Alpha version of the platform was created in 2019, winning the Social Impact Award and the main prize of the British Council Creative Ideas Competition.

The Flight Ban as Georgia’s Key Challenge in 2019; Putin’s Expectations thwarted The Russian flight ban generated serious challenges for Georgian aviation in 2019. Sanctions set

by Russian President Vladimir Putin came into force on July 8th, intended to create economic problems for Georgia. As a result, direct air flights between Russia and Georgia ceased, and the aviation business was critically damaged. Both Russian and Georgian airlines complain about losses. Let the Russian airlines blame Putin for their losses, but the financial conditions of Georgian airlines also worsened.

The Georgian authorities also joined the commonunal breastbeating in Georgia, and made very pessimistic forecasts. They even announced plans for subsidizing the aviation sector; however, these plans were not, or could not, be implemented, and this is related to the replacement of the Prime Minister, directly or indirectly.

Passenger turnover at airports declined after the suspension of direct flights, and the tourism sector also lost tourists. However, this year the country managed not to fall behind 2018 indicators, anyway. In May 2019, Levan Karanadze, head of the LEPL Civil Aviation Agency of Ministry of Economy forecast about 6 million passengers. Indeed, Karanadze could not forecast the Russian embargo in May, however, passenger turnover at Georgian airports genuinely exceeded 6 million.

In 2018, Georgian airports handled 5,033,323 passengers. In JanuaryNovember 2019, the figure made up 4,877,963 passengers, up 4% compared to January-November 2018, while growth forecast for this period was at 16%. Moreover, the Civil Aviation Agency expects the passenger turnover to grow by 2-3% at the end of 2019. Both the government and business sectors have realized that the country has pretty good indicators, despite the Russian embargo. “According to these indicators, despite the current challenges, passenger turnover at Georgian airports will not be lower compared to 2018”, Minister of Economy Natia Turnava noted in early December.

The Russian flight ban has affected the GEL exchange rate, too, as noted by the President of the National Bank of Georgia (NBG), and he added that the tourism sector lost 300 million GEL revenues because of the Russian

flight ban.

“We know that in July, the Russian flight ban and information on other available official or unofficial trade sanctions generated expectations for the GEL exchange rate’s depreciation. Consequently, prior to the actual slowdown in currency inflows, foreign currency supply to the market shrank, and demand increased. As a result, the national currency’s exchange rate immediately plunged, much earlier than the tourism sector’s revenues started declining. The situation was aggravated by political tensions that gave additional ground for the exchange rate’s devaluation”, Koba Gvenetadze pointed out.

Over the last period, the Hungarian low-cost airline Wizz Air ranks first in terms of passenger turnover at Georgian airports. This airline views Georgia as a prospective air market, and plans to add new flights from Europe to Georgia.

As for another key event in the aviation sector, the Irish lowcost airline Ryanair entered the Georgian market, and began operations at the Tbilisi and Kutaisi airports. Ryanair began flights to Georgia at the end of 2019. If the airline had appeared earlier, the passenger turnover would be higher.

“Over the past 3 years, about 25 new airlines entered the Georgian market and brought new opportunities, and increased tourist inflows. At the same time, this is an additional headache for aviators, because the demand for satisfying international standards on land and in the skies has grown”, Georgia’s chief economist noted.

In 2019, announcements were made that a very important project would be implemented, in order to develop internal flights. As a result, new capabilities will open in the tourism and aviation sectors. The project was prepared in 2019, and the document will be submitted to the government for analysis in 2020. Helipads will be arranged in the country to help develop internal flights. More than 300 locations have been selected for arranging helipads, and the best of them will be chosen to begin infrastructure construction works.

At this stage, it is unclear whether the government will arrange the helipads itself, or announce an interest in investment. To improve flight safety and the quality of supervision, two new regulations were introduced in 2019, based on

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EU requirements. The objective of the regulations such as Aviation Medical Center, Aviation Medical Expert and Medical Certification of Aviation Specialist is to determine and control the health condition of aviation specialists based on European standards. Under these regulations, the agency issued the first certificates of an aviation medical expert in 2019. The next year, the agency will certify the aviation medical center.

On April 1, 2020, the Regulation on Certification of Air Navigation Service Provider will come into force. The regulation calls for the certification of a provider of complex and non-complex air navigation services in Georgian air space and civil airports and helipads, in compliance with European standards. Based on the regulation’s requirements, the agency will certify SakAeroNavigatsia in 2020, and this will upgrade air navigation services and quality supervision; Furthermore, to improve the supervision process regarding Georgian airlines, the agency has tightened requirements for leasing airplanes through wet leasing to airlines registered in other countries. Moreover, Georgian Airlines was restricted from employing the airplanes operated by foreign airlines with questionable aviation security standards (airlines included in the EU Black List). Furthermore, the agency has tightened conditions for recognizing aviation specialist diplomas issued by other countries, and the certification requirements were harmonized with European standards.

On January 1, 2019 the regulation on the use of aviation radio communication and standard phraseology came into force, with the aim to improve flight safety and minimize misunderstandings during radio communication in the Georgian skies.

In 2019, for the first time, a civil aircraft fueling enterprise was registered in the tourism zone. In the village of Achkhoti, Kazbegi Municipality, JET A-1 fuel operations are provided for small aircrafts based on international standards in firefighting. This service has dramatically increased the flexibility of operators.

The Civil Aviation Agency has taken important steps regarding the regulation of so-called light aviation and improving

legislation. It has approved rules for the ultralight aircraft operators certification with the aim to ensure security , of flying ultralight aircraft in Georgian skies, and to protect passenger rights through determining the requirements for mandatory insurance of operators.

The agency has determined standards for the crew of ultralight aircraft (Regulation on the Ultralight Aircraft Personnel Licensing”) to ensure the security of flights. Amendments were adopted to Georgian regulations on performing flights in the skies of Georgia in order to improve paragliders. Operating requirements and restrictions were drawn up 2019 was an exceptional period to strengthen Georgia’s reputation in the aviation sector, and deepening international cooperation. The Civil Aviation Agency obtained special certificates from the ICAO Council’s President to carry out important reforms in terms of flight security, aviation safety supervision, and high standards.

The Civil Aviation Agency signed new agreements with the European Union’s Aviation Safety Agency (EASA) and European Organization for the Safety of Air Navigation (EUROCONTROL). Cooperation memorandums were signed with the Single European Sky ATM Research (SESAR), International Air Transport Association (IATA), Federal Supervisory Authority of Air Navigation Services of Germany (BAF), as well as the aviation authorities of Ukraine and Armenia.

For the first time, a representative of Georgia was elected as a Vice President of the ICAO Assembly and the EUROCONTROL managing board. The Civil Aviation Agency Director was also elected Vice-Chairman of the ICAO EURNAT-DGCA Meeting and the European Aviation System Planning Group.

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Sairme Resort to grow into New Year Resort from December 25 to January 15

Sairme Resort will reproduce Christmas Wonder Story this year. From December 25 to January 15 Sairme will offer various events to visitors to gain the status of the longest New Year resort.

Santa Claus and elves at various locations will create the New Year mood and entertain the visitors constantly.

Special programs will be showed to children at the Santa Claus residency.

“We have arranged the room of nurses too, where visitors are able to leave their children for several hours and go for entertainment”, Nonika Vashakmadze, head of Sairme Resort PR and Marketing Department noted.

Every day the resort will offer various concerts, karaoke evenings and numerous other entertainments, including Khokhma

Show and so on.

“The idea of conducting a long-term New Year and Christmas Wonder Story arose among the management members.

There are all conditions for this project here, including extreme zipline that has delivered our Santa Claus. The status of Ne year resort was the only thing that our resort lacked before. In general, Georgia lacks for New Year resorts. There is no location in the country, where New Year celebrations last after December 31. Therefore, we offer New Year mood and celebrations every day”, Nonika Vashakmadze noted.

This year Sairme has arranged an ideal solemn environment for families, friends, young couples. The Sairme resort administration explains that the New Year events are tailored to visitors of any age

category and segment. This is the place, where New Year mood fills visitors upon arrival to spend unforgettable time in magnificent environment.

For three days, visitors will be able to relax in magnificent environment. At night of December 31, the band Rezo and Children and DJ will lead the New Year performance, while presenters will demonstrate joyful programs to visitors.

Many interesting prizes will be raffled; including, visitors will have the chance to win a grand prize – Tour to Greece. On January 7, David Archvadze and Alilo Group will lead the event.

As to prices, holidaymaking prices in Sairme start from 220 GEL (accommodation and three meals a day).