Caucasian Business Week #79

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December 08, 2014 #79

December 08, 2014, Issue 79 GEORGIA WB TO WORK OUT NATIONAL TOURISM DEVELOPMENT PLAN

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eorgian government and World Bank have developed National Tourism Development Strategy 2025.

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BE INFORMED, DO BUSINESS

NEW YEAR’S DINNER FOR THE PRICE OF 240 GEL

KFW TO FINANCE SMALL AND MEDIUM-SIZED HPPS IN GEORGIA

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BUSINESS SECTOR BOOSTS EMPLOYMENT INDICATOR ccording to Geostat data, in the Q3 of 2014 total number of employees in the enterprises equaled to 520.2 thousand

persons.

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IN 2014, GEORGIA TO IMPORT ABOUT 90% OF WHEAT FROM RUSSIA

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nformation about limitation of wheat exports from Russia creates problems in the international market, Georgian importers speak about the possible dangers in this regard as well.

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NEIGHBORHOOD PASHA BANK’S ASSETS REACHED NEW HISTORICAL PEAK

CHRISTMAS GIFTS AND TAXES

GEORGIAN ECONOMY

Russia’s Impact Fully Absorbed by Lower Oil Prices

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he assets of PASHA Bank OJSC, one of the largest private credit institutions of Azerbaijan reached their historical peak.

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WORLD NEWS BRAZIL, URUGUAY MOVE AWAY FROM US DOLLAR IN TRADE

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razil and Uruguay have switched to settling bilateral trade with local currency to stimulate turnover, bypassing the US

dollar.

Currency

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EXCHANGE RATE MONITORING GEL Exchange Rate Sees 10 Years’ Bottom

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National Bank President Assures in Georgia’s Financial and Macroeconomic Stability

eorgian Energy Minister Kakha Kaladze, General Director of Bank of Georgia Irakli Gilauri and the director of the regional office of the KfW for the South Caucasus Lars Oermann held a joint event aimed at promoting the development of small and mediumsized hydroelectric power plants.

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Bidzina Ivanishvili: USD Strengthens Worldwide, including in Georgia

VTB BANK ENDS THE YEAR WITHOUT PROFITS

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GEORGIAN FILBERT ON GLOBAL MARKET – CHALLENGES AND THREATS Pg. 7

GEORGIA IMPROVES RANK IN GLOBAL CORRUPTION SURVEY

GOLD PRICES EXTENDED ITS DOWNTURN

LARI GOES DOWN WHO IS RESPONSIBLE?!

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SHAREHOLDER OF BANK OF GEORGIA BUYS PRIVATE BANK AND STAKES OF TBILISI WATER OWNER COMPANY Pg. 9

Giorgi Gakharia to Replace Economic Council Secretary Roman Chkhenkeli Pg. 2

Beeline Plans to Introduce 4G High-speed Wireless Internet GIORGI TKESHELASHVILI Pg. 4

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Research

BUSINESS SPHERE DOMINATES JOB VACANCIES IN GEORGIA

2 MAIN EVENTS PRESIDENT GIORGI MARGVELASHVILI LEAVES FOR POLAND

GOVERNMENT NEWS NATIONAL BANK PRESIDENT ASSURES IN GEORGIA’S FINANCIAL AND MACROECONOMIC STABILITY

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resident of Georgia Giorgi Margvelashvili has made his way to Poland to meet his Polish counterpart Mr Bronisław Komorowski.

DAVIT SUJISHVILI APPOINTED AS SECRETARY OF STATE SECURITY AND CRISIS MANAGEMENT COUNCIL

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he position has been vacant since former Secretary of State Security and Crisis Management Council Mindia Janeldize was appointed as the Defence Minister.

NODAR JAVAKHISHVILI APPOINTED AS DEPUTY MINISTRY OF REGIONAL DEVELOPMENT AND INFRASTRUCTURE

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ccording to the government’s press service, Deputy Minister Zurab Kopadze left his post. Cartu Bank President Nodar Javakhishvili will replace him.

ENACTMENT OF COMPULSORY AUTO INSURANCE LAW MAY BE POSTPONED

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he enactment of a compulsory automobile insurance law may be deferred until 20172018. According to President of the Georgian Insurance Association Devi Khechinashvili.

RAILWAY STRIKE ENDS: WORKERS AND ADMINISTRATION REACH AGREEMENT

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bout 60-70 percent of the 12,682 Georgian Railway employees have ended their sevenday strike after the railway trade union reached a partial agreement with railway bosses this week.

GEORGIAN NATIONAL MOVEMENT GOES INTO UKRAINIAN GOV’T

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ormer Georgian President Mikheil Saakashvili said that the former head of the Georgian Ministry of Internal Affairs Eka Zghuladze could become Deputy Minister of Internal Affairs of Ukraine.

GEORGIA-TURKMENISTAN WILL DEEPEN ECONOMIC TIES

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governmental delegation from Turkmenistan visited Georgia this week to discuss economic ties and bilateral cooperation in regards to the new Silk Road.

IN 2015, GOV’T PLANS TO TAKE DEBTS AGAIN

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t the same time the amount of taken debts will be lower than in 2014. Initially, it was planned to borrow GEL 930 million in 2015, but the final version of the budget envisages nearly GEL 1 billion.

GOVN’T ANNOUNCES TENDER FOR IDP HOUSING PROJECT

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he Georgian government has announced a tender for a development company to provide apartments for Georgia’s internally displaced persons (IDP’s). Decision was reached at the Economic Council led PM last week

MINISTER OF AGRICULTURE OTAR DANELIA OPENED AN IFAD SEMINAR

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tar Danelia opened an International Fund for Agricultural Development seminar this week where the prospectives of Georgian agriculture were discussed.

GEORGIA’S PRIME MINISTER MEETS PACE DELEGATION Prime Minister of Georgia Irakli Garibashvili has hosted a high level meeting with two Parliamentary Assembly of the Council of Europe (PACE) officials in Tbilisi today, and discussed the controversial Russia-breakaway Abkhazia alliance deal.

December 08, 2014 #79

caucasian business week

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oth external and internal factors have driven the GEL exchange rate devaluation, Giorgi Kadagidze, a president of the national bank of Georgia (NBG), told a news con-

ference on December 5. “The national currency devaluation has been driven by both internal and external factors. The upturn in USD exchange rate for the last 7 years has coincided with contraction in volume of main sources of currency inflows. At the same time, according to our estimations, this misbalance has been already eradicated and the recovery has been already reflected in the GEL exchange rate. As to the recent developments, they are mostly driven by an excessively agitated behavior of the market players and this is characteristic to the financial markets in similar situations”, Giorgi Kadagidze told the news conference. The market players and citizens who are taking impulsive decisions over currency exchange, as a rule, bear losses, he added.

Our main goal is to stabilize prices on products, the NBG president said. “As a rule, central banks provide no comments on short-term inflation processes, because we face considerably aggravated economic expectations”, Kadagidze noted. ”The exchange rate fluctuations affect a certain category of commodities, but we do not expect inflation pressure to exceed the plan. There are two reasons for this assertion: first of all, the global market is recording considerable downturn in prices on such products as oil, grains, sugar, and vegetable oil. On the other hand, monetary aggregates will not lead to further aggravation of inflation pressure, because the currency volume in the turnover has not increased year on year”, Kadagidze added.

STAFF RESHUFFLE IN GEORGIAN GOVERNMENT’S ECONOMIC TEAM

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fter change of ministers in the government team a few months ago, the changes have also affected the lower ranks of government.

Roman Chkhenkeli, former Secretary of the Economic Council, has been replaced by business ombudsman Giorgi Gakharia, the government’s administration reports.

“Changes continue in the government of Georgia.

A few ministers were replaced in the government

a few months ago. Changes are now being carried out at lower levels too. The changes are aimed at fulfilling objectives and achieving a more effective performance. Changes have been made in the Security and Crisis Management Council and in the Economic Council.

Business ombudsman Giorgi Gakharia will become Secretary of the Economic Council and he will also maintain the business ombudsman’s post. Roman Chkhenkeli, who has done a great

job and created an effective structure, had repeatedly asked to leave the post and the PM satisfied his request,’’- the press service says.

Nodar Javakhishvili, President of Cartu Bank, reportedly, will replace Deputy Minister of Regional Development and Infrastructure Zurab Kopadze. While Georgian Bacho Kobakhidze invited from abroad will supposedly replace Nodar Javakhishvili on the post of Cartu Bank President.

GIORGI GAKHARIA TO REPLACE ECONOMIC COUNCIL SECRETARY ROMAN CHKHENKELI

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ecretary of the Economic Council Roman Chkhenkeli to be replaced by Giorgi Gakharia Roman Chkhenkeli, former Secretary of the Economic Council, has been replaced by business ombudsman Giorgi Gakharia, the government’s administration reports.

“Changes continue in the government of Georgia.

A few ministers were replaced in the government a few months ago. Changes are now being carried out at lower levels too. The changes are aimed at fulfilling objectives and achieving a more effective performance. Changes have been made in the Security and Crisis Management Council and in the

Economic Council. Business ombudsman Giorgi Gakharia will become Secretary of the Economic Council and he will also maintain the business ombudsman’s post. Roman Chkhenkeli, who has done a great job and created an effective structure, had repeatedly asked to leave the post and the PM satisfied his request,’’- the press service says.

KFW TO FINANCE SMALL AND MEDIUM-SIZED HPPS IN GEORGIA

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eorgian Energy Minister Kakha Kaladze, General Director of Bank of Georgia Irakli Gilauri and the director of the regional office of the German Development Bank (KfW) for the South Caucasus Lars Oermann held a joint event aimed at promoting the development of small and medium-sized hydroelectric power plants. Investors and the invited guests got acquainted with the possibilities of financing offered to them by the Bank of Georgia for the construction of small and medium-sized hydro-

power plants. A loan agreement signed between the Bank of Georgia and KfW in the amount of 25 million euros allows interested investors to take advantage of long-term bankroll for projects implementation in the field of renewable energy, mainly for the construction and rehabilitation of small hydropower plants.

This funding also provides costly technical support absolutely for free. The world’s leading Austrian company Posch & Partners will provide the technical support.

The Bank of Georgia has extensive experience in

financing the energy sector. As of September 30, some 8.1 percent of the loan portfolio of corporate banking service falls on the energy sector.

As mentioned above contract of 25 million Euro signed by Bank of Georgia with KfW enables interested investors to utilize long-term financial resource.

The project considers construction of small hydro power plants and rehabilitation. The funding also includes an expensive technical support from Austrian company Posh & Partners, which will provide consulting to the borrower before and after the construction.

WB TO WORK OUT NATIONAL TOURISM DEVELOPMENT PLAN

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eorgian government and World Bank have developed National Tourism Development Strategy 2025. Ministry of Economy and Sustainable Development and National Tourism Administration have officially marked beginning of the work over the national tourism strategy under financial support of the World Bank. The consultations have been actively conducted for several months.

The conference at the Expo Georgia exhibition center was dedicated to this topic. The representatives of the public and private sectors, international organizations and NGOs attended the conference.

The First Deputy Economy Minister Dmitry Kumsishvili delivered speech at the conference.

He said that the tourism development is one of the priorities of the Georgian government. “The income obtained from tourism in the country’s trade turnover amounts to $1.700 billion,” Kum-

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sishvili said. “The work over the further document must be completed in March 2015.

We must have a clear vision of the tourism development in Georgia until 2025. Afterwards, we will prepare a five-year action plan to be reconsidered.”

On a conference, Head of National Tourism Administration, Giorgi Chogovadze talked about the reasons why it become necessary to work out the mentioned strategy: “Motivation behind creating this strategy is to stimulate the potential of georgian tourism,as well as infrastructure, and to make our tourist sites and resorts more accessible. therefore, the development of tourism in Georgia has been quite important.We are currently helding discussions with the all interested parties,for example we have already met with privete sector last week “- said Chogovadze.

A Solimar International representative delivered speech at the conference on behalf of the WB.

He spoke about global experience in the field of tourism and tourism development strategies.

“The WB and the International Finance Corporation focused on the entrepreneurship development, the availability of funds, improvement of the investment sphere and the development of the tourism development strategy in Georgia.”

“The World Bank and the International Finance Corporation’s joint effort is focused on the development of entrepreneurship, to have better access to finances,improving climate of foreign investment and the tourism development strategy.

The strategy is created to asses the development of tourism sector, the priority allocation and creation of job places” - said World Bank Regional Director for the South Caucasus Henry Kerali.

The final document, in the form of an action plan, will be prepared in the spring of 2015 and be approved by the georgian government.

The weekly is distributed to top companies, banks, embassies, state sector, Tbilisi and Batumi hotels, Tbilisi, Batumi and Kutaisi Airports, as well as in the town of Marneuli. The newspaper will also penetrate Azerbaijan in the near future

Editor-in-Chief: Evgeni Mikeladze Reporters: Nutsa Galumashvili; Nino Gojiashvili, Tamar Kakabadze

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

PUBLICITY December 08, 2014 #79

According to the GOEuro’s 2014 research, Georgia ranks second worldwide in terms of cheapest train tickets. Only South Africa is recorded ahead of Georgia.

GOEuro is one of the major multifunctional research companies in the travel sector. The company compares and calculates prices for travel by train, bus and airplanes.

GOEuro published the report in August 2014.

caucasian business week

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4 HEADLINES IN 2015, GOV’T PLANS TO TAKE DEBTS AGAIN

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INTERVIEW caucasian business week

BRITISH TECH-FUND SEARCHING FOR THE NEXT DANISH IT GEM

n 2015 the Government of Georgia will borrow more than planned in the budgeting. At the same time the amount of taken debts will be lower than in 2014. Initially, it was planned to borrow GEL 930 million in 2015, but the final version of the budget envisages nearly GEL 1 billion.

USD STRENGTHENS WORLDWIDE, INCLUDING IN GEORGIA - BIDZINA IVANISHVILI

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any statements have been made. The economy is steady; the GEL exchange rate is not stable. U.S. currency is becoming stable in many countries as well as in Georgia.

BUSINESS INVESTMENT IN FIXED ASSETS INCREASED BY 84% ANNUALLY

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ccording to official declaration, total turnover of enterprises and total production reached 12.1 and 6.4 bln,respectivly.

NOVEMBER RECORDS 0.6% CONTRACTION IN ANNUAL INFLATION RATE

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eorgia’s annual inflation rate dropped 0.6 percent last month as the price of food, nonalcoholic beverages, healthcare services and other basic needs increased. Latest data from state statistics office Geostat revealed Georgia’s annual inflation rate was 2.8 percent in November, down from 3.4 percent in October.

GEORGIAN BRANDY EXPORTS BRING 39 MILLION USD REVENUES

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his figure is 34 % higher than the same period of 2013.

SOCAR GEORGIA INVESTMENTS TO OPEN CARBAMIDE PLANT BY MID 2019

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new resolution of the government considers it, which approved different conditions to the company from the order of President of Georgia signed on March 30, 2012.

FINANCE-ANALYTICAL SERVICE OF MINISTRY OF FINANCE INTRODUCES ECLOUD TECHNOLOGY

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he new technology will enable organizations to place their own server infrastructure on the Financial Analytical Service,eCloud platform and avoid significant costs in terms of material and human resources , which is related to the creation of infrastructure , storage and management.

WORLD FAMOUS CASINO BRAND TO START OPERATING IN GEORGIA IN 2015

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ccording to her, at present active negotiations with one of the world’s major companies in the field of gambling are underway, but before signing the agreement the name of the brand is not specified.

ISRAELI INVESTORS TO IMPLEMENT TWO NEW PROJECTS IN GEORGIA

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fter the Georgia-Israel Business Forum, five Israeli business groups got interested in investing in the country.

GEORGIAN COMPANIES SHOT IN AEROFLOT AD EXPECT INCREASED NUMBER OF TOURISTS FROM RUSSIA

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eorgian companies participating in Aeroflot ad expect a growing number of tourists from Russia.

LADO GURGENIDZE NOT GOING TO JOIN NEW UKRAINE’S GOVERNMENT

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ado Gurgenidze responds to a statement spread in media about Ukrainian government’s offer to appoint him to a position in the government .

December 08, 2014 #79

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he British-based venture capital fund AppIdea is looking to invest about 19 million kroner into Danish tech-startups as part of a concept that makes use of Scandinavian in-

novation and eastern-European program development.

Mikheil Chkhartishvili, the managing partner and chairman of AppIdea, is attracted to Scandinavia because of the region’s creativity and critical approach to new ideas. ”If it can make it here, it can make it anywhere, so to speak,” Chkhartishvili told the Copenhagen Post. ”The region has already shown itself capable of breaking through with global concepts such as Skype, Instagram or Spotify, and that’s why we want to come in and make contact with the next Janus Friis or Kevin Systrom at an early stage.”

AppIdea is aiming to invest in apps concerning B2B2C (Business to Business to Consumer) concepts and sharing economies, and it is looking to invest between 1.5 and 2.5 million kroner into each prospective concept and make a total of about ten investments.

COPENHAGEN MEETING Appldea already enjoys a strong programmingdevelopment foothold in Georgia and the Caucasus region, and the company sees a prospective

co-operation between Danish innovation and Georgian technical capability as a winning combination. ”Eastern Europe is rapidly rising to become the next Silicon Valley for tech-production,” Chkhartishvili, who himself is of a Georgian background, said. ”It’s a thriving topic in tech circles these days and justly so due to two logical reasons: we are skilled as a people when it comes to mathematics and eastern Europe offers cheaper labour.”

It’s early days, but Chkhartishvili will be coming to Copenhagen in January to meet with potential development partners and has already short-listed three interesting projects that AppIdea has decided to move ahead with, although he hopes more Danish ideas will come ticking in.

AppIdea – which aims to have a five-million strong user database by the end of 2015 – has created a special submitting form on appidea. com that they urge Danish developers and ideamakers to use to comprehensively convey their ideas ahead of the company’s Copenhagen trip in January.

BEELINE PLANS TO INTRODUCE 4G HIGH-SPEED WIRELESS INTERNET The Georgian National Communications Commission (GNCC) has appointed an auction to sell a radio frequency spectrum license for introduction of the 4G broadband internet services. The deadline for submission of applications will end at 17 o’clock on December 19, 2014. The auction is scheduled for 13 o’clock on December 29, 2014.

The CBW has interviewed Beeline director general GIORGI TKESHELASHVILI on the issue.

- GNCC has already announced competition terms for the auction. Has Beeline prepared for this auction and what is the Beeline’s advantage compared to other cell operators?

-We have long waited for this moment and we have made much effort to this end. I believe this is a very important moment for development of our company, and, especially, for the whole country. We expect the auction to be held by the end of 2014. We find it important to timely launch this service for our subscribers and our citizens. As to the auction’s concrete details and regulations, we will explore and analyze everything. I believe we will satisfy all criteria so as we offer the highest standard and fastest wireless internet. This is very important for us and for the country, for the telecommunications market. Therefore, we are completely ready. As to our advantage compared to our competitors, we will offer innovations and additional competitive advantage to provide highspeed internet. Consequently, a combination of innovations and technological development will enable us to draw more subscribers.

- What would you say about the tariffs? How will be the tariffs determined for 4G internet services? Is there preliminary information about the price of this service?

-First of all, we should note what the 4G internet is. This is, in practice, wireless broadband internet connection.

THIS TECHNOLOGY IMPLIES A DATA EXCHANGE IN HUGE SCALES, THE TRANSFER OF THE SO-CALLED MEGABYTES AND GIGABYTES. HENCE, THE ADVANTAGE OF THE 4G INTERNET IS THAT IT IS AVAILABLE FOR EVERYONE AND NOT FOR ONLY A LIMITED CIRCLE OF OUR SOCIETY. 4G internet should be attainable for all citizens. I cannot name concrete figures at this stage, but I assure you tariffs will be affordable to everyone.

One of the GNCC terms calls for covering all settlements in Georgia and constituting a schedule for covering each settlement so as our citizens have an access to information sources and technologies in all regions, villages, cities and settlements of Georgia. Today various operators provide wired internet connection to Georgian citizens, but many villages have no internet connection. Therefore, the 4G broadband internet

technology will resolve this problem by covering all territory of Georgia. Today cell connection is accessible to everyone, and I believe, with Beeline’s much contribution and effort. I assure you, Beeline will make the 4G internet services accessible to all residents of Georgia.

-Do you think our society is informed about full potential of the 4G internet services?

-We have created certain expectations in the society. We have made special accents on this issue.

Anyway, I believe certain informational activity should be provided in this respect to make our citizens aware of these technologies. I understand it is difficult to say something about the innovation that has not been introduced yet.

AS SOON AS THE 4G INTERNET APPEARS IN THE NETWORK AND THE SUBSCRIBERS RECEIVE IT, THE PUBLIC AWARENESS WILL INCREASE. -What would you say about the SmartPhones that are sold at Beeline offices? What is their advantage?

- First of all, these SmartPhones support the 4G internet technology and owners of these devices will be able to use 4G internet services after its introduction. SmartPhones without a 4G internet support cannot be used for 4G internet services.

Therefore, we have started preliminarily supply of similar devices to our subscribers. Our advantage consists in the best correlation of price and quality.

-What would you say about the visit of Rene Schuster? What was the importance of his visit to Georgia for your company in terms of introduction of 4G internet technologies?

- Our head office is located in Amsterdam and Rene Schuster is a chief operating officer for Vimpelcom. This is a top position and his visit to our country and our company is very important. First of all, he has met with our staff, shared ideas and experience, discussed relevant issues, the existing problems, further steps for development. Consequently, we have also talked about investments, what amount may be invested in Georgia, in our company. I am very content with the results. The rating of our country in terms of doing business is positive and this will make positive influence on investors’ attitude to investing money in Georgia. The auction will be held soon. I expect no problems in this respect. A new

network should be developed, tens of millions of investments should be made, and when the country provides due environment, it is far easier for investor to make a due decision. On the other hand, he has seen our market and was impressed by our country. Meetings were also held on the network level. There were healthy discussions. I am sure all this will affect final results.

I would like to note not only Beeline, but also the whole country has reached the verge of informational progress and this is very important for the economy development. I would like to stress in short-term and medium-term periods high-speed, wireless broadband internet will push forward the state economy and a wider part of our society will be involved in the economic activity.

This is also important for social issues. There were barriers that used to make internet unattainable in certain areas. For example, a very gifted boy lives somewhere in the region and in a different environment he could fully expose his potential.

THE 21ST CENTURY IS AN AGE OF INFORMATION TECHNOLOGIES AND INFORMATION EXCHANGE AND THEREFORE, CONDITIONS SHOULD BE EQUAL EVERYWHERE. THERE SHOULD NOT BE BARRIERS THAT WOULD CLOSE DOORS TO GIFTED INDIVIDUALS. We also add much importance to social issues and we have been taking part in activities that promote the state development. We are able to cover the whole territory of Georgia by 4G internet connection, because I do want to make this, I love my country and this is a good opportunity to make huge progress in our homeland.

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NEW YEAR December 08, 2014 #79

caucasian business week

NEW YEAR’S DINNER FOR THE PRICE OF 240 GEL The menu is based on the New Year’s “staple products” which are considered a standard in the Georgian society

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mid the preliminary holiday season and rapid depreciation of lari, CBW decided to calculate how much a traditional New Year’s supra will cost Tbilisi residents this year. For a more objective perspective we conducted a study for the convenience of our readers and compared the prices between the hypermarket Goodwill and the largest marketplace Deserter Market. In the future issue, we plan to compare the early December prices to those of the last quarter of December, in order to see how the prices on the market shift with the nearing of New Year’s and the volatile quality of lari.

CBW’s hypothetical supra consists of all the musthave’s on a Georgian New Year’s table: satsivi, roasted piglet and chicken, eggplant with walnuts and, of course, gozinakhi. Add to that all the wine and champagne needed to make a true celebration.

Piglet, chicken, and walnuts are three main New Year’s products in Georgia.

One can’t picture a Georgian New Year’s supra without the fried piglet with radish in its mouth as the centerpiece.

Piglets are available in plenty in the marketplace and cost around 70 laris each, with a 15 lari per kg price. Whole piglets have not yet arrived to Goodwill since the hypermarket only purchases this product in the period right before the holiday, but one can buy a kg of pork barbecue or mtsvadi for the price of 18 laris per kg.

Chicken on the Georgian market can be found in its many different variants. Cooked chicken at Goodwill will cost 14,47 laris to the Georgian consumer. However, raw countryside chicken will cost 9,49 in Goodwill and 8 laris on the “Deserter market.”

Walnuts are a defining ingredient of many Georgian dishes, such as satsivi, bazhe, and gozinakhi.

Summer drought damaged this year’s walnuts extensively. So, the price of walnuts this year is quite striking: 25 laris per kg on average. Walnuts in Goodwill will cost Georgian shoppers 30,50 laris, but these more pricey walnuts are well sorted and exclude the walnuts blemished by drought.

A large amount of walnuts is needed to make quality satsivi, a traditional Georgian dish the sauce of which is a mix of Turkey stock and

walnuts. Turkey this year will cost 60 laris to Georgian tradition-oriented families. Just like piglet, turkey also hasn’t entered Goodwill’s stock.

Khachapuri is a Georgian pastry that is a staple dish at any supra. There are many different types of khachapuri, but the most widespread one is imeruli khachapuri made with Imerian cheese.

This cheese can be found in both supermarkets as well as the marketplace and will cost 17,95 lari per kg at Goodwill and 10,50 at the Deserter Market.

Apart from khachapuri, a supra requires a plate of cheese. Most beloved cheese in Georgia is sulguni, the cost of which fluctuates between 21 laris per kg at Goodwill and 15 laris at the local marketplace.

Traditional flat and crispy Georgian bread shotis puri will cost 1,05 laris and 80 tetris at the hypermarket and the marketplace respectively. One needs three to five pieces of bread to make a full-fledged supra.

Gozinaki, the defining dessert of Georgian New Year’s celebration consists of slightly roasted walnuts caramelized in honey. This signature dish made with 1 kg of walnuts and 0,8 kg of honey will cost around 37 laris this year.

Of course a highly volatile factor in our New Year’s supra is wine, as its amount on a Georgian celebration is up to each family’s desire.

However, at least one bottle of champagne should be present to make that brand New Year clinking sound, which will cost minimum 11 laris this year.

CHRISTMAS GIFTS AND TAXES

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aker Tilly Georgia LLC, an independent member of Baker Tilly International, is an audit firm with over 18 years of experience in Georgia. Baker Tilly International is a network of high quality, independent accountancy and business services firms, all of whom are committed to providing the best possible service to their clients, in their own marketplaces, and across the world, wherever the client needs help. It is the 8th largest network in the world by fee income and is represented by 161 firms in 137 countries (738 offices), with a global aggregate fee income of $3.4 billion and more

than 27,000 staff worldwide.

As a firm, we offer the full range of professional services: audit and assurance, corporate finance, taxation, accounting and other, tailored to individual client professional accounting services.

This brief article represents the beginning of a series of publications aimed to provide overview of audit, accounting and tax matters that concern businesses in Georgia today.

The theme of this article is the fast approaching holiday season and certain tax issues associated with it that majority of businesses in the country will be or are already facing.

With the Christmas season at the doorstep we are all getting ready to

give and receive gifts. The business community is no exception and the etiquette calls for demonstrating appreciation to clients and partners – by means of greeting cards and in some cases – quite valuable gifts.

As with everything else, this seasonal activity is also subject to taxation rules. How does Georgian legislation treat this seemingly simple gift exchange? We have prepared a very brief overview of tax legislation concerning the matter.

Let’s start with an example: A company intends to reach out to its existing and potential customer base with branded Christmas gifts comprising a plastic bag containing a pen, a bottle of red wine and a greeting card.

Of these four items, the plastic bag, the pen and the bottle of wine bear “independent consumer specifications” (a term used in the Tax Code). (a) If the person (legal or private) receiving the gift is identified and there is an evidence that the gift had been actually received the legislation requires for “independent consumer specifications”: i. The value added tax (VAT) applies to the market value of items bearing “independent consumer characteristic” and it is a deductible expense for profit tax purposes

if no VAT invoice is written out; ii. The market value of these items are included in gross revenues for profit tax purposes; iii. The cost of the items are deductible for profit tax purposes in line with the Revenue Services’ established practice; iv. In addition, if a private person is receiving a gift with the market value exceeding 1,000 Georgian lari, it is subjected to the personal income tax.

Note that delivery of gifts will also require filling out the official distribution waybill (consignment note). (b) If private persons or entities receiving the gifts are not identifiable, it is recommended to seek an advice from your tax consultants as taxation schemes for items bearing “independent consumer characteristic” have certain peculiarities associated with them and cannot be easily formulated in this article. (c) Remember the forth item in our gift package – branded greeting card? For the greeting card and any other item that does not have “independent consumer characteristic” – the distribution of these items is not subject to profit and value added taxes, the cost is directly deductible for profit tax purposes, and any VAT paid on their acquisition may not be claimed.

TOP STORY

GEORGIA IMPROVES POSITION N GLOBAL CORRUPTION SURVEY

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eorgia’s efforts to stamp out corruption has been recognised and applauded after it improved its position in a global corruption survey.

Transparency International today released results of its 2014 global corruption survey, which analysed the perceived level of corruption in 175 countries.

Georgia scored 52 points out of 100 in the survey’s Corruption Perceptions Index (CPI), which gave it an overall rank of 50th. – up five places from 2013. The higher the CPI score the lower the corruption, survey organisers said.

Georgia’s 2014 ranking was higher than the previous year when it ranked 55th (score of 49) and in 2012 when it ranked 51st (score of 52).

Despite the positive change, those behind the survey said according to the CPI methodology, only an increase or decrease of the CPI score by four points or more indicated a significant change in the perceived level of corruption in a country. So in actual fact, Georgia’s latest results showed the perceived level of corruption in the country remained stable over the past three years and there had been no significant progress or regression over time.

Meanwhile, Georgia’s score of 52 saw it rank the highest among the 19 countries of Eastern Europe and Central Asia.

Georgia also scored higher than a number of EU member states: the Czech Republic, Slovakia, Croatia, Bulgaria, Greece, Italy and Romania.

Among the post-Communist countries, Georgia ranked lower than Estonia, Poland, Lithuania, Slovenia, Latvia and Hungary.

Countries with the lowest level of perceived corruption were Denmark (score of 92), New Zealand, (91) and Finland (89), while North Korea and Somalia had the highest and scored only eight points in the survey.

TI listed some of the reasons why Georgia had improved in the global corruption survey. The country’s efforts to improve its anti-corruption policies included greater transparency of political party and electoral campaign financing, introduction of legal requirements and standards for proactive publication of information, effective operation of the State Audit Office and a transparent system of electronic public procurement, were some of these reasons.

In addition, TI underlined a number of important issues need to be addressed by the Georgia Government in order to achieve further progress and establish an effective system for prevention of corruption.

These included: • Establishment of an independent anti-corruption body that will have the necessary powers and resources for the prevention of complex types of corruption (including corruption-related crimes committed by high ranking officials); • Establishment of the mechanisms for the enforcement of legal provisions designed for the prevention of conflict of interest and corruption, including a mechanism for the verification of the content of public officials’ asset declarations; • Establishment of an independent and professional civil service that will be free of political influence. Establishment of an effective and transparent system for recruitment and dismissal in the civil service that will exclude the possibility of politically motivated decisions and nepotism in this area; • Establishment of an independent investigatory mechanism for the investigation of crimes committed by law enforcement officers; • Safeguarding of institutional independence of the supervisory and regulatory institutions (e.g. the State Audit Office, the State Procurement Agency, the Competition Agency, the Georgian National Communications Commission and Civil Service Bureau) and prevention of political interference in their operations; and • Reduction of the excessively big share of simplified procurement in public procurement.

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OPINION caucasian business week

December 08, 2014 #79

LARI GOES DOWN - WHO IS RESPONSIBLE?!

Georgian national currency continues to depreciate – a process began in mid-November and continues today - the rate of the national currency against the US dollar was set at 1.89.

In particular, in January-October 2014 Georgia’s foreign trade turnover amounted to USD 9.4 billion, which is 10% more than in the same period of 2013 - exports accounted for USD 2.4 billion (a 5% growth ), the import - 7 billion (+ 11%).

A volume of investments has also reduced - for two quarters of 2014 it amounted to USD 415, 8 million, which is 10% less than in the same period of 2013.

During 10 months of 2014, remittances from abroad amounted to USD 1.2 billion, which is 1, 9% more than in the same period of 2013.

Apart from that, he notes that the strengthening of the USD rate led to a weakening of the national currencies of Georgia’s trading partners - Russia, Ukraine, Turkey, which led to a rise in

LEVAN KALANDADZE Economic Analyst, Chairman of Georgian Infrastructure Projects Initiative

T

he GEL exchange rate is driven by many factors and no concrete state office determines this issue. The national ccurrency devaluation is a logical result of the economic policy the country is carrying out throughout the year. Several important factors affect the GEL exchange rate: the balance between the volumes of USD and GEL, that is how much USD inflows and outflows from the country. This balance has been greatly violated by the end of this year because of several circumstances. The GEL exchange rate was nega-

tively influenced by external factors - foreign direct investments (FDD) as a main source of USD inflows to Georgia have significantly shrunk.

Another factor is driven by contraction in foreign direct transfers from abroad, especially from the Russian Federation amid the Russia-Ukraine conflict.

The third factor is related to the balance between exports and imports. We often welcome exports growth and this is very good. Certainly, exports growth is very good tendency, but the problem arises when the imports growth rate turns out higher compared to the exports growth rate. As a result of the high ratio of imports in the balance of exports and imports, the volume of USD outflows surpasses USD inflows during the imports and exports operations. Georgia is imports-oriented country with a 70% ratio of imports in the consumer basket and this one of the main factors stimulating growth in demand for USD in Georgia. As result, the situation gets aggravated amid contraction in USD inflows.

Moreover, the so-called spending policy is also very important in the country. As reported, we have breached the budget in both revenues and expenditures parts throughout the year. The state budget suffers from a serious lack of credits as one of the sources of foreign currency inflows. These gaps have brought logical results and in November to December 2014 the Finance Ministry had to spend 3 billion GEL, while a monthly plan for the spending part constitutes about 700 million GEL. This signifies the Finance Ministry had to inject additional 1.6 billion GEL in the turnover. Today, this signifies the Finance Ministry has to spend 1.5 billion GEL. Consequently, we have to spend twice more, that

price of GEL against the currencies of these countries, which to some extent reduced the competitiveness of the country. Minister of Economy and Sustainable Development Giorgi Kvirikashvili has called on citizens not to panic with regard to the GEL exchange rate.

According to Kvirikashvili, there is no reason for panic with regard to the GEL exchange rate.

About GEL depreciation made first comment former PM Bidzina Ivanishvili. He addressed a journalist who asked the question and noted that there was nothing to panic about.

“A lot of statements have been made during this week. There is nothing to panic about, the economy is solid, exchange rate varies, the US dollar is getting stronger in many countries, as well as in Georgia. Finance Minister and others have made statements. Everything is normal, the government is working well “, - said Mr. Ivanishvili.

But it is fact that LARI goes down and someone should be responsible for the process. is we have to supply twice more volume of GEL to the market in November to December. Excessive supply of GEL, however, results in an upturn in demand for USD, while increased demand for USD negatively affects the GEL exchange rate. All the above-mentioned factors condition the GEL exchange rate devaluation.

The economic team of the government bears responsibility for contraction in investments inflows. Under the state constitutional order, the Georgian government, as a collective governing body, is responsible for all economic developments and consequences. Naturally, it is nonsense to request answers from the Culture Ministry for investments inflows, but the Ministries that have to directly manage the improvement of investments environment, GDP growth, fiscal policy and so on, must bear responsibility for the negative macroeconomic results at the end of 2013 and 2014.

A

Nodar Khaduri: ccording to Finance Minister Nodar Khaduri, the fulfillment of the 2014 budget is not in danger.

The Finance Minister announced while presenting a report about the Finance Ministry’s two-year activities at the Old Tbilisi hotel today.

In the words of Finance Minister Nodar Khaduri, questions about the GEL fluctuations are beyond his competence.

“I can tell you one thing; I cannot go beyond the competence of the Ministry of Finance. The budget has zero impact on the exchange rate,” - the Minister told

FINANCE MINISTER INTRODUCES FINAL REPORT ON 2-YEAR PERFORMANCE

G

eorgian Finance Minister Nodar Khaduri has introduced a final report on 2-year performance as part of the Georgian Government for Open Governance project. Thanks to correctly balanced state budget and cut administrative expenditures, the 2013-2014 state budgets have radically changed with a focus on social issues. Budget funds have been fully directed to financing the Georgian Dream coalition priority programs and government projects.

For the last two years pensions have increased to all categories of pensioners. Age pensioners and the disabled will receive about 150 GEL a month, while all other categories will receive about 100 GEL. Bodies fired from law enforcement structures before 2005 will receive pensions due to service years and ranks.

Allowances for socially vulnerable category have doubled. Allowances for IDPs have grown to 45 GEL; medical services have become accessible to everyone – financing has increased by over 300 million GEL. Salaries have increased to teachers and the state budget will finance construction and rehabilitation of tens of secondary schools by tens of millions of GEL. Additional resources will finance educational, vocational and scientific programs. The Produce in Georgia program will be financed by 20 million GEL to foster small and medium sized business sectors. The government has also increased financial support to the agriculture sector.

The Finance Minster has also talked about the 2015 budget bill submitted to the parliament. The fiscal and macroeconomic parameters of the bill have been determined through active cooperation with the International Monetary Fund (IMF).

Our government will deliver detailed information to the society and the parliament on growth in budget efficiency, transparency and management of state finances in relation to the Budget Part of Other Expenditures.

The budget fulfillment report also includes information on the volume and purpose of funds allotted from the governmental and presidential reserve funds.

To increase efficiency of management of public finances, starting January 1, 2015 operations of all budget-financed organizations will be united into joint reporting system of the treasury. The process of planning and fulfilling of all levels of the budget will be united in the joint system for management of state fi-

nances, Nodar Khaduri noted.

As to state debts, the government has maintained stability of state debts, while the debts payment peak coincides with the period of 2013 to 2015. This is mainly related to serving IMF loans. As to the future planned events, Nodar Khaduri said in 2015 the European Bank for Reconstruction and Development (EBRD) and the Black Sea Trade and Development Bank (BSTDB) will hold annual meetings.

As to management of state debts and relations with international donor organizations, thanks to financial support from international financial institutions/development partners about 45 projects are being implemented in the form of preferential financial resources and grants. These projects will be implemented for 3 to 5 years and their total value makes up 2.85 billion USD. Since November 2012 agreements on about 1.47 billion USD financial resources have been signed with the aim to finance various priority projects for the state development and promote planned reforms. Ongoing projects refer to roads, urban and municipal, water and sewage infrastructure, power system, agriculture, education, environment protection, IDPs assistance and other issues.

In 2014 EBRD issued GEL-denominated bonds. The International Finance Corporation (IFC) and the Asian Development Bank (ADB) also plan to take the same step, Nodar Khaduri added.

From October 1, 2012 to December 1, 2014 the Finance Ministry Board of Appeals has fully or partly satisfied 44% of taxpayers’ appeals and did not satisfy 40% of the appeals. The board has not discussed 16% of the appeals because of breach of various procedural requirements or cessation of disputes (At this stage the board of appeals unites representatives of the Association of Young Economists and the Business Ombudsman Office).

In the reporting period a total of 2157 officials were appointed by competition. A total of 1138 individuals have passed probation period and 1005 young people have passed practical trainings at the Finance Ministry. Over 3300 individuals, including personnel of the Finance Ministry, budget-financed organizations, business sector representatives, students were retrained as part of various projects and modules at the Finance Ministry Academy. The Academy has carried out competition and attestation for 2269 individuals.

NODAR KHADURI Minister of Finance of Georgia reporters after presenting a report about his Ministry’s two-year activities.

When asked whether this means that he can’t claim responsibility for the exchange rate fluctuations, the Minister advised journalists to read the legislation. In addition, the Minister did not specify whether he thinks that the national bank made a mistake or not.

“The Ministry of Finance does not have a competence to assess activities of other agencies,” - said Nodar Khaduri and refrained from answering additional questions.

EVENTS

ROMANIAN EMBASSY MARKS GREAT UNION DAY AT RADISSON BLU IVERIA HOTEL

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n December 1 the Romanian Embassy in Georgia held a solemn reception in relation to the 96th anniversary of unification of the Romanian people and state. Representatives of accredited diplomatic corps, Georgian officials and representatives of the Georgian orthodox church attended the solemn ceremony.

Romanian Ambassador in Georgia Mr. Dumitru Badea talked about the importance of this celebration, as well as about Georgia-Romanian relations and future perspectives.

The Great Union Day (Romanian: Ziua Marii Uniri, also called Unification Day) is the national holiday of Romania. It commemorates the assembly of 1 228 elected representatives of the Romanians in Transylvania, Banat, Crişana and Maramureş in Alba Iulia, where they declared “the unification of those Romanians and of all the territories inhabited by them with Romania”.

ANALYTICS December 08, 2014 #79

caucasian business week

GEORGIAN FILBERT ON GLOBAL MARKET – CHALLENGES AND THREATS

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On November 28 the Assembly of Young Analysts and Scientists held a forum “Georgian Filbert on the Global Market – Challenges and Threats”. The forum was held at Tbilisi Marriot Hotel (Sh. Rustaveli Avenue 13) in Tbilisi. The forum introduced the most modern research providing a comparative analysis of Georgian filbert and nuts exports (price, volume, revenues) in relation to immediate competitors. The research determines the place of Georgian filbert and nut on the global market, as well as Georgia’s competitor countries.

FILBERT MARKET IN GEORGIA Production (Growing) Filbert and nut are widely grown in Georgia. According to the official statistics, the ratio of filbert and nut in Georgia-grown fruits makes up 20% for the last 8 years.

According to the National Statistics Office of Georgia (GeoStat), Georgia has recorded the highest yield of filberts and nuts in 2013, when the figure marked 50.5 thousand tons, up 71.2% compared to 2012. The figure is the highest for the last 8 years. According to the 2013 declared reports, the ratio of filbert in total yield marked 78.6% in 2013.

According to the declared reports to GeoStat, in 2013 the Samegrelo-Zemo Svaneti Region has recorded 51.6% of total filbert crops, the Guria Region – 22.7%, the Imereti Region – 14.1% and all other Regions – 11.6%.

An about half part of Georgia-grown nut is recorded in three regions: Imereti with 20.4%, Kakheti – 13.9% and Shida Kartli – 13.9%. Another half part is recorded in all other regions.

PROCESSING Information on Georgia’s filbert processing is also important to characterize the filbert market.

According to the GeoStat statistics, in 2013 Georgia processed 28.9 thousand tons of filberts worth 269.6million GEL, up 85.2% in volume and up 91.5% in value compared to the 2012 indicators.

Foreign Trade (Exports/Imports) The last period has recorded growth in nut and filbert exports from Georgia. The lowest volume of 6.8 million USD was registered in 2002, while the highest volume of 166.7 million USD was marked in 2013. Serious downturn was fixed in 2008 and 2012, when filbert and nut exports considerably shrank compared to previous years. The 2008 exports shrank twice and more compared to 2007, while the 2012 exports dropped by 36% compared to 2011.

It should be also noted filbert and nut exports in January to September 2014 surpasses the 2012 indicator by 28.1%.

In 2013 Georgia exported 30 285 tons of filbert and nuts worth 166.7 million USD, up about twice in value and up 93.1% in volume compared to 2012.

An analysis for the last 14 years shows filbert and nut exports are in the ten top exports items of Georgia every year.

Moreover, filbert and nut exports have entered Georgia’s five top exports items for 8 years.

In 2013 filbert and nuts ranked third in Georgia’s exports with a 5.7% ratio in total exports and 9% ratio in net exports rating. In 2012 the products ranked 5th with 3.5% ratio in total exports and 5.2% ratio in net exports.

It is worth noting for the last 14 years filbert and nut exports marked about 4.6% in Georgia’s total exports, while the ratio is up 1.5 times in net exports compared to the total exports.

In 2013 Georgia exported nut and filbert to about 40 countries, including, Germany ranks first among exports markets with 28.4% ratio, Kazakhstan is second with 17.8% ratio and Italy is third with a 42.4% ratio.

The table below shows the rating of exports markets for Georgia’s filbert and nut:

It should be also noted in 2013 Georgia imported 756.9 tons of filbert and nut worth 2.2 million USD from 20 countries, up 8.9% in value and up 6.3% in volume compared to the 2012 indicators. Ukraine ranks first in Georgia’s imports markets for filbert and nut with a 23% ratio, Azerbaijan is second with 18.5% and Turkey is third with 15.2% ratio.

The table below represents ten top imports markets:

The above tables show Georgia’s filbert and nut exports surpasses the imports 76 times. Hence, Georgia has got positive foreign trade balance for nuts and filberts.

NET EXPORTS To outline a real picture of Georgia’s nut and filbert exports, we should determine net exports, that is exports without re-exports.

According to the report, for the last 14 years Georgia carried out filbert and nut re-exports only in 2010, 2012, 2013 and 2014 in small volumes.

INTERNATIONAL COMPARISONS Germany As reported, Germany is Georgia’s main foreign trade partner for nut and filbert exports with a 28.4% ratio in the 2013 exports.

Germany imported nut and filbert from about 55 countries throughout 2013.

The USA ranks first in Germany’s nut and filbert imports with 40.2% ratio. Turkey is second with 9.7%, Spain is third with 9.3%, the Netherlands is fourth with 7.7%, Italy is fifth with 6.7%, Belgium is sixth with 5.2%, France is seventh with 3.5% and Georgia is eight with 3.3%.

Compared to competitor countries, Georgia maintains low prices on filbert and nut exported to Germany (6.1 USD).

At the same time, the price of filbert and nut exported from France is lower by 40%. The highest price is registered in the Netherlands among the above countries (9 USD).

Kazakhstan According to the 2013 declared reports, Kazakhstan emerges second among Georgia’s filbert and nut exports markets with a 17.8% ratio. It is worth noting Georgia is Kazakhstan’s major importer of nut and filbert. The ratio of Georgian imports of filbert and nut in Kazakhstan’s total imports makes up 70%.

In 2013 about 13 countries exported nut and filbert to Kazakhstan. Georgia ranked first in this respect. Azerbaijan came second with 20.6%. The USA ranked third with 4.7%, Turkey emerged fourth with 1.5% and Germany ranked fifth with 1.3%.

An average price for exports of nut and filbert from Georgia to Kazakhstan is 5.3 USD. Azerbaijan and Kyrgyzstan offer competitive prices too.

Italy According to the 2013 declared reports, Italy ranks third among Georgian exports markets with an 11.4% ratio.

About 50 countries exported filbert and nut to Italy in 2013, including Turkey ranked first with 32.7% ratio, the USA – 22.2%, Spain – 11.5%, Germany – 6.4% and Chile – 5.6%. Georgia ranks ninth in the rating with 1.6% ratio.

As to average prices for exports of nut and filbert to Italy in 2013, Georgia maintained the standard price of 6.2 USD. Some countries of the EU offer lower prices: Spain – 5.3USD and France 4.8 USD. The highest price is offered by Germany (14.2 USD).

The USA is considered to be the world’s major exporter of filbert and nut with 52% ratio. Turkey and Italy share the second and third places with 9.3% and 4.4% respectively.

Georgia ranks 15th in the rating with a 1.2% ratio.

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EXPORTSIMPORTS caucasian business week

IN 2014, GEORGIA TO IMPORT ABOUT 90% OF WHEAT FROM RUSSIA

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nformation about limitation of wheat exports from Russia creates problems in the international market, Georgian importers speak about the possible dangers in this regard as well.

According to the head of the Grain Growers Association Levan Silagava, the risk of rising prices for bread is associated not only with the decision of the Russian government, but the new system of payment of VAT which was introduced on July 1, 2014.

Georgia is one of the regular buyers of Russian grain.

In the words of Silagava, grain prices hike will affect Georgia, but there are other reasons to raise the price of bread - in particular, the devaluation of the GEL, crop damage in Russia and the political crisis in Ukraine. Accordingly, on the Chicago grain exchange price of wheat has increased from $ 250 to 280 per ton.

“All this is reflected in the price of flour, but it will not happen quickly and directly. We are talking about the period of about 1 month. The blow can be softened by the stocks of wheat, which was bought at a cheaper price, “- he notes.

At the same time, in his words, a new system of payment of VAT prevents the creation of stocks if before the major importing companies with a

turnover of GEL 200 000 per year could enjoy a delay in the payment of the VAT, from 1 July privileges were abolished.

Given these circumstances, the Association asks the government to return preferential treatment for the companies operating in this sector, as an exception.

“The purpose of the changes was the improvement of the provisions of importers and local producers, but the country is dependent on imports of cereals. The Committee on Sector Economy promised that law would not apply to our industry because of its strategic importance, but the law is valid. We intend to submit a request to the Parliament. Preferential taxation allows importers to create certain stocks, which allows not to raise prices in the case of a sharp rise in grain prices on international markets. Because of the new VAT regime, our reserves decreased by 20%, “- said the head of the Association Levan Silagava.

According to him, it is very important in an environment when grain prices are expected to rise in the future.

“In order to keep prices as much as possible, we must have great reserves, but to have more reserves, we need a delay in the payment of VAT,” - he stresses.

GEORGIAN WINES PRICE TO RISE IN RUSSIA

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hether the ruble’s depreciation will cause a hike in prices of Georgian wine on the Russian market? What risks are the Georgian winemakers talking about and what are the Russian side’s requirements? At this stage exporting companies have already received the first messages from the Russian partners.

Georgian wine will rise in price on the Russian market - the Georgian winemakers forecast in the backdrop of the Russian ruble’s devaluation.

Exporting companies say they have already received the first messages from the Russian partners.

Georgian winemakers name several reasons for wine price increase. The main is record increased prices registered during a vintage.

A price for Saperavi grapes was GEL 2.5 per kg in 2014 which is about 50% higher than the

2013 price. It is also important that this year up to 90 companies have purchased an unprecedented number of overall crop amounted to 119 052 tons, so a drop in prices of exported wine will be unsuccessful for Georgian businessmen.

The Sommelier Association states that the ruble’s devaluation does not affect sales at this point.

However, the Georgian businessmen will have to hike prices and revise a volume of export products in the future.

According to the National Wine Agency, before the Russian embargo, Georgian exports to thenorthern neighbor’s market accounted for 87% of the total exports. Last year when trade relations with Russia were restored, wine exports reached 60%. This means that every company will have to revise prices or volume of sales due to the Russian ruble’s devaluation. The government can only helpwine producers in mastering alternative European market and promoting Georgian wine there.

The National Wine Agency says that Georgian wine exports have grown dramatically in the Chinese, Polish and American markets this year.

According to the Agency, the government is not focused on the Russian market and is actively working on alternative markets. Exporting companies trading on theRussian market should determine the risk factors themselves.

EXPORTS OF TRADITIONAL GEORGIAN GIANT WINE JUGS INCREASE

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fter a traditional Georgian giant jugs for the production and storage of wine - “kvevri” were recognized as a cultural monument by UNESCO, winemakers are seeing an increase in popularity not only wine produced in this way, but also kvevri abroad.

Furthermore, their shortage is even being observed. Georgian pitchers received a monument status in 2013.

The then Deputy Minister of Culture of Georgia Marina Mizandari stated that such status obliges the country not only to protect kvevri, but also to promote this method of wine production.

“The status of a monument of culture is very important in terms of marketing, because finding kvevri in the list of UNESCO cultural heritage makes it more recognizable globally,” - she said.

House of Wine company claims that the wine produced in kvevri has several advantages, although

the status by UNESCO did not affect their work.

According to the company’s manager Maya Nodia, kvevriis more interesting to a narrow circle of people interested in winemaking.

Director of Shalauri Wine Cellar David Buadze, on the contrary, says that after getting kvevri tocultural heritage list, interest in wine produced by this technology has grown.

“Our wine is sold not only in the shopping sites, but also in restaurants, and now we are negotiating to enter the export markets- the United States, some European countries and China. However due to the fact that the kvevri wine is specific and is designed for high-end consumer, the Chinese trend is not a priority for us. Wine from kvevri is very promising, as demand for organic wine is growing worldwide. In the current situation, we have a deficit of kvevri jugs that are now exported to France, Croatia and other wine countries,”- he notes.

December 08, 2014 #79

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BANKING & STATISTICS December 08, 2014 #79

caucasian business week

BUSINESS SECTOR BOOSTS EMPLOYMENT INDICATOR

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ccording to Geostat data, in the Q3 of 2014 total number of employees in the enterprises equaled to 520.2 thousand persons. 507,4 thousand jobs existed in the business sector

in the same period of 2013.

38,9% of the employees are female, 61.1% are male.

Besides, 63,7% is employed in the large business, 1.2% - in the medium business, 20.1% - in the small business.

Besides, compared to last year, total number of employees in the enterprises increased by 14 300 persons, to 504 thousand.

As for average monthly salary, in the business sector salary equaled to 887.5 GEL (815.1 GEL in 2013), among them 667.4 GEL for women (596 GEL in 2013).

Among then in the large business average salary equals to 1030.6 GEL, in the medium business - 743.1 GEL, in the small business - 498.7 GEL.

OCTOBER REGISTERS NEW RECORD IN BANK SECTOR’S TOTAL OUTPUT

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eostat informs that in October VATpayers turnover equaled to 4,3 billion GEL, which is 9,1% more than in October 2013. It’s noteworthy that in January of the current year annual growth of turnover of such enterprises

equaled to 16,1%, 12,4% - in February, 19,6% - in March, 5% - in April, 12,25 - in May, 12,5% - in June, 15,4% - in July, 7,2% - in August, 13,3% in September. According to official statistic, 3 955 new enterprises registered in Georgia, which is 6,5% more than in the same period of 2013.

JANUARY TO OCTOBER PASSENGER TRANSPORTATION HITS 5 YEARS’ MAXIMUM

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uring 1 year number of passengers taken by transports increased by 2.6%.

According to data of Ministry of Economy, in 10 months 298,2 million passengers were transported by various means, which is the highest data during last 5 years.

Auto transport is a leader in the passenger transportation, which served to 98,6% of the passen-

gers. Number of such passengers equaled to 294,1 million GEL. It’s noteworthy that this direction has been growing.

Aviation served to 1,7 million passengers (1,6 million in 10 months 2013). Trend is growing in this direction and reached to 5 years maximum.

As for railway, number of passengers reduced there. In 10 months 2,5 million persons used railway. The data equaled to 2,6 persons in the same period of last year.

FREIGHT SHIPMENTS REDUCED FOR RAILWAY

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n 10 months Georgian Railway shipped 1,3 million tons less freight.

Ministry of Economy and Sustainable Development informs that by 10 months data, Georgian Railway shipped 13,8 million tons of freight.

In the same period of 2013 shipped freights equaled to 15,1 million tons. It’s noteworthy that company’s management relates reduction of freights to the reduced oil shipments from Azerbaijan. Opposite situation is in the car and

aviation shipments. Amount of the car shipments equaled to 23,8 million tons, which is maximal for 5 years.

Amount of the civil aviation shipments is also to 5 years maximum and equals to 13,8 million tons. Total amount of the freight shipped according to transportation sector equals to 37,6 million tons, which is minimum for 5 years. Besides, compared to the same period of last year, freights shipped by transportation sector have reduced by 1 million ton.

Q314 RECORDS 84% GROWTH IN INVESTMENTS IN BUSINESS SECTOR’S FIXED ASSETS

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n a year turnover of business sector increased by 13%.

According to officially declared data, in the Q3 2013 overall turnover of the enterprises equaled to 12.1 billion GEL, overall output of the products - 6.4 billion GEL. In the same period of 2013 turnover of business sector equaled to 10.7 billion, output of the products 5.5 billion GEL. According to Geostat data, major part of the turnover *82,3%) comes on large business. Compared to last year, share of such companies in the turnover has reduced by 0,2%. Share of small and medium sized business in the total turnover has changed. In particular, share of medium-sized business increased by 1,6%, to 9,5%. Share of small business reduced by 1.4%, to 8.2%.

Slightly different situation is in the case of overall

output of the products. In the Q3 of the current year 80% of the products came on the large business, 11,6% on medium, .4% on mall business.

Over half of the total turnover - 51.3% comes on trade and repair of various items, 14,6% - on processing industry, 11.3% - transport and communication, 8.1% - construction, 4.4% - real estate operations.

It’s noteworthy that compared to the same period of last year investments in the fixed actives increased for business. In particular, in the Q3 investment of 597.8 million GEL was made, which is 272.9 million more than in the same period of last year (Q3 2013 - 324.9 million), the growth is 84%.

Major part of the investments - 59% was made by medium-sized business/ 38.7% comes on large business, 2.3% - on the small business.

GEL DEVALUATION MAKES NO AFFECT ON BANK LOANS

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he GEL depreciation has not yet been reflected in the interest rates of bank loans. Last year due to the depreciation of the GEL, loans issued in the national currency rose in price by several lari but this year the banks interviewed by “Commersant” say that rates have not been revised. According to VTB Bank, the rates of the loans issued in GEL remain unchanged and the demand for loans in GEL is still high. They say the demand has not increased for loans issued in USD. BasisBank says that the interest rates on loans did not change, because in their assessment, the rate depreciation is a short-term process and will not have an impact on loans.

Georgian national currency continues to depreciate – a process began in mid-November and continues today - the rate of the national currency against the US dollar was set at 1.84.

The country’s authorities explain the decline in GEL by a decrease in remittances from abroad, a decrease in exports, and some other factors.

In particular, in January-October 2014 Georgia’s foreign trade turnover amounted to USD 9.4 billion, which is 10% more than in the same period of 2013 - exports accounted for USD 2.4 billion (a 5% growth ), the import - 7 billion (+ 11%).

A volume of investments has also reduced - for two quarters of 2014 it amounted to USD 415, 8 million, which is 10% less than in the same period of 2013. During 10 months of 2014, remittances from abroad amounted to USD 1.2 billion, which is 1, 9% more than in the same period of 2013.

According to the former Vice-President of the National Bank of Georgia Merab Kakulia, imports significantly exceed exports and for this reason the negative balance of trade increased by 15% in 2014.

Apart from that, he notes that the strengthening of the USD rate led to a weakening of the national currencies of Georgia’s trading partners - Russia, Ukraine, Turkey, which led to a rise in price of GEL against the currencies of these countries,

which to some extent reduced the competitiveness of the country.

“The lack of inflow of foreign currency upset the balance of the financial market that under a floating exchange rate led to a devaluation of GEL. In addition, expectations associated with excessive public spending in the period remaining until the end of the year have a negative impact on the exchange rate - as it was last year. In particular, in November- December 2014 about GEL 2 billion are to be spent and this could have a significant pressure on the national currency. However, I hope that this will not happen – primary, because it is technically very difficult to do in such a short period, “- Merab Kakulia explains.

According to him, the national currency has not yet reached the new equilibrium point, but close to it, respectively, the process will not last long.

“The country has a floating exchange rate, and accordingly, the National Bank will not be able to keep the rate artificially, as this could lead to a sharp reduction in foreign exchange reserves of the country. Of course, this does not mean that the National Bank should not undertake anything.

The National Bank’s interventions may facilitate GEL in finding a new equilibrium. In this regard, the National Bank has already taken a number of steps, “- Merab Kakulia adds.

In November-December, GEL 2 billion in expenses are to be allocated from a budget, however, Kakulia suggests that only a small part of this amount will remain in the domestic foreign exchange market: first of all, because it’s technically unable to allocate some of the costs; secondly, a significant amount of the costs are used to cover the country’s foreign liabilities and are converted bypassing the market; thirdly, a large part of the costs return in the budget in a form of taxes and non-tax revenues. In the light of negative expectations, he notes, agiotage mood is created which obviously has a negative impact on the market situation.

IN OCTOBER TOTAL OUTPUT OF THE BANKING SECTOR REACHED A NEW RECORD

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ccording to Geostat data, output of the sector equaled to 106,2 million GEL. Previous record was in July and equaled to 99,1 million GEL. In October output of the commer-

cial bank equaled to 102,2 million GEL, which is 12,7 million GEL more then in September.

As for output of the National Bank, it has reduced from 4,4 million in September to 4 million in October.

VTB SIGNED SPONSORSHIP AGREEMENT WITH WATERPOLO FEDERATION

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n the framework of 1-year partnership agreement VTB will sponsor national team. Support of VTB considers funding for preparation of the sportsmen, their equipment and participation in the international tournaments. VTB was general sponsor of the team on 2014 European championship.

With support of the bank the team appeared among the 12 best teams. The championship is

in fact equal to world championship - European teams are the greatest grandees of waterpolo.

Waterpolo developed in the 1930s in Georgia.

Georgians have obtained over 20 awards on the European and world competitions and various medals on the Olympics (12).

VTB actively supports sport. Its projects include general sponsorship of National Rugby Team, gymnastics, horse riding, auto sport, football.

BANK OF GEORGIA STAKEHOLDER PURCHASES PRIVATBANK AND STAKE IN TBILISI WATER COMPANY

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ank of Georgia Holding (BGH), which is owner of Bank of Georgia, buys Private Bank and stakes of the owner company of Tbilisi Water and will issue 3,59 million new stocks of BGH. BGH will pay $51 million in Private bank, $52 million - for 49,9% of Georgian Global Utilities Limited (owner company of Tbilisi Water).

On the first stage they will purchase 25% of the company and in the next 10 months will increase

share to 19,9%.

It’s noteworthy that till summer 2015 separation process of non-financial and financial actives will be completed.

The holding also plans IPO of the health insurance and hospital sectors management company GHG, which will be made in 2015.

It’s noteworthy that in June 2015 current executive director of GHG Murtaz Kikoria will replace Irakli Gilauri on the position of executive director of Bank of Georgia.

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ECONOMY caucasian business week

December 08, 2014 #79

GEORGIAN ECONOMY Russia’s Impact Fully Absorbed by Lower Oil Prices

See Pg. 11

11

EVENTS December 08, 2014 #79

caucasian business week

GEORGIAN CHANTING CHOIRS FROM SEVEN EUROPEAN CITIES HOLD SOLEMN CONCERT IN ROME Georgian polyphony to the European audience as a genuine treasure of the world spirituality and culture, as well as to spiritually and culturally collect and reconnect Georgian expatriates abroad.

The Georgian Chanting Foundation was founded by blessings of Georgian Catholicos-Patriarch Ilia Second and by the initiative of Georgian businessman Ivane Chkhartishvili in 2012 with the aim to promote Georgian culture, particularly, Georgian folk songs and chants worldwide.

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n December 7 the Georgian Chanting Foundation held a solemn concert Georgian Polyphony – Humankind Treasure at the Seraphicum concert hall in Rome, Italy. Chanting choirs of Georgian expatriates from Brussels, Florence, Barcelona, Düsseldorf, Munich, Paris and Rome have taken part in the event.

The main goal of the concert was to introduce the

FIRST BUST OF JOSE RIZAL ESTABLISHED IN GEORGIA

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n November 28, the first bust of Dr. Jose Rizal, the National Hero of the Philippines, was established in Tbilisi, Georgia. This is the first statue of Rizal in the country and in the Caucasus region. In a special ceremony, Honorary Consul of Georgia in the Philippines Thelmo “Buddy” Cunanan Jr. turned over the bust, which he personally donated, to Philippine Honorary Consul General Teimuraz Chichinadze at the Philippine Consulate in Tbilisi.

The bust of Rizal will be a permanent fixture at the Philippine Consulate. “It has been my dream for many years to bring a bust of Jose Rizal to Georgia. Today, this is a reality,” said Cunanan. “It is a symbol of our national pride, history, and heritage.” Consul General Chihinadze also expressed his elation. “We are very grateful to Consul Cunanan for this donation. This statue of Rizal, who was the first Global Filipino, will occupy a special place of honor in our consular area and will be a symbol of Philippine – Georgian friendship.”

Consul Cunanan is in Georgia to hold a special

art exhibition of Filipino artist Pancho Piano at the Museum of Fine Arts of the Georgian National Museum in Tbilisi. The exhibition will run from November 27 – December 4, 2014.

Mr. Piano is the first Filipino artist to exhibit his work in Georgia and the Caucasus Region. Qatar Airways was the delegation’s official carrier and generously provided the extra cargo allowance for the Rizal bust and the paintings and sculptures of Mr. Piano.

NATAKHTARI FUND REPORT 2014 – GEL 420,000 AND 164 BENEFICIARIES The Fourth Wave of Social Project - Take Care of Future has already started

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nnual Report of Natakhtari Fund ‘s Project - Take Care of Future was presented to the public at Rooms Hotel Tbilisi on November 27.

Representatives of Natakhtari Fund and Association Our Home Georgia addressed activities performed during 2014 in detail. According to them more than GEL 420,000 got accumulated in the Fund during three years. Currently 164 beneficiaries are using psychological consultations. Children deprived of parental care are being trained in school subjects, some of them are being assisted in acquiring vocational education and driving license and in purchasing tools/materials needed for acquiring an occupation. Natakhtari

Fund provides beneficiaries with scholarship, rent, food and transport costs. It should be noted that the amount for each beneficiary is being allocated on an individual needs basis.

On November 25, the fourth wave of the Project Take Care of Future was launched that will end on February 25, 2015. Natakhtari Fund was established in 2010 with support and blessings of the Patriarch of All Georgia Ilya II. The Project Take Care of Future helps the children deprived of parental care in self-assertion. This Project supports inhabitants of small family-type homes to be prepared for independent lives. Various assistance programs for 15-18 year old adolescents are being implemented by Our Home –Georgia

and a team of qualified psychologists.

Activities of Natakhtari Fund implies extensive involvement of Georgian population in the charity. Every year, from November through February certain amount from each sold bottle of Natakhtari lemonade will be transferred to the charity fund: if you buy 0.33L Natakhtari Lemonade Tetri 1 will get transferred to the fund, while in case of purchasing 0.50L bottle, 3 Tetri, and in case of 1 and 2 L bottles – 5 Tetri will be transferred.

As Tornike Nikolaishvili, Marketing Director of the Company stated, the Project Take Care of Future had been conducted for three years. In 2014 GEL 420,000 were accumulated in the Fund and the number of beneficiaries reached 164. Tornike Nikolaishvili noted that the project was continuous, since it was helping adolescents deprived of parental care to start independent lives. Initially, the eligible age of beneficiaries was from 16 to 18, but later, the age threshold got reduced and now 15-18 year old children can take part in the project. The year 2014 has been distinguished by the fact that various nongovernmental organizations are discussing youth employment problems. Relations between business sector and adolescents are very important.

Ten psychologists with support of Natakhtari Fund

and Association Our Home Georgia are rendering services to 29 small family-type homes across Georgia. According to official statistics: in 2012, 72 beneficiaries got engaged in the Project Take Care of Future, in 2013 – 152 and in 2014 - 164 beneficiaries. This year out of 164 adolescents deprived of parental care 10 are already students of universities, 44 got employed, 49 beneficiaries are college students, 25 of them are acquiring various skills and 25 are receiving scholarship from the Fund.

The most important achievement of Natakhtari Fund’s Project – Take Care of Future is the title of the best social project of the year. On October 25, Tbilisi hosted the biggest business awards - Marketing Brilliance Awards 2014, aiming at revealing the most innovative projects and selecting the best ones. The event was organized by British Company BOC – Global Events Group. In 2014, Natakhtari Fund won the nomination – the best social project of the year. It is noteworthy that organizers of _ Marketing Brilliance Awards 2014 nominated Natakhtari Fund on their own. The Jury and experts recognized the project as the best, based on fund’s activities and outcome. A new video ad with participation of adolescent actors was made to mark launch of a new wave of fundraising.

GEORGIAN ECONOMY Russia’s Impact Fully Absorbed by Lower Oil Prices From Pg. 10

12

CURRENCY caucasian business week

December 08, 2014 #79

EXCHANGE RATE MONITORING 01.12.2014-05.12.2014

GEL Exchange Rate Sees 10 Years’ Bottom

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he reporting period from December 1 to December 5 has recorded a 3.3% downturn in GEL exchange rate against USD from 1.8368 point to 1.8984 point, a 2.2% contraction against EUR from 2.2872 point to 2.3383 point.

Moreover, GEL exchange rate shrank against GBP to 2.9780 point to 2.8825 point. At the same time, the GEL exchange rate strengthened by 3.2% against Rubles to 3.6027 from 3.7241 point.

The Georgian national currency has depreciated by 9.3% against USD, strengthened by 2.2% against EUR, fell by 4% against GBP and strengthened by 32% against Ruble YTD. As to the past, that is the same reporting periods for the last 10 years, the highest GEL exchange rate against USD was recorded at 1.6160 point on December 5, 2007 and the lowest rate of 1.8359 emerged on December 5, 2004. The highest GEL exchange rate against EUR was registered at 2.0811 point on December 5, 2008 and the lowest rate of 2.5180 was reported in December 2009.

The weakest GEL exchange rate against GBP was marked at 3.5282 on December 5, 2004 and the strongest rate of 2.4075 was recorded on December 5, 2008.

The GEL exchange rate changes against various currencies YTD are as follows:

EUR/GEL

GBP/GEL

USD/GEL

GOLD PRICES EXTENDED ITS DOWNTURN

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old prices tested the four-year low during last week and reversed a bit during the weekend, due to the offbeat US labor market numbers, are again trading down during the current week. The precious metal prices, trading near $1160 at present, have liquidated nearly 1% since the start of the month and are under the impression of registering consecutive annual decline.

Gold which is generally considered as a safe haven asset continued its decline since September as the improvement in US economic numbers strengthened the US Dollar, which generally provides a negative move to the yellow metal. Moreover, surge in global equity markets also provided a reason for the investors to shift their funds out of such metal and extend the decline in gold prices.

US, the world’s largest economy, have started gaining improvements in its labor market numbers offlate and the same caused the FOMC, in its recent monetary policy meeting to shun its monthly asset purchase program by final tapering of $15 billion, which in-turn fuelled speculations that the Federal Reserve can adopt an interest rate hike sooner. However, some of the FOMC members, including

the Fed Chair, are also of the view that they still look for sustained improvement in job numbers and the inflation scenario before hiking the bench-mark interest rate. Recently, the plunge in the US NFP below its yearly average of 226K triggered a pullback into the gold prices towards a weekly high and an intraday gain of nearly 3.0%. However, broader optimism for the US Dollar remained intact as the FOMC member, Charles Plosser, signaled an urgency to hike the benchmark interest rate by the Federal Reserve. Hence, current speculations concerning the interest rate hike, backed by improvement in US economics, continues to support an extended downtrend of the yellow metal prices.

Geo-political crisis, that have once supported the up-move of gold prices seems not making their mark to the gold as the crisis at Israel seems already settled down while the Ukraine is still to get the peace moments as reports continue supporting presence of Russian soldiers into the rebel acquired regions.

Looking at the demand side, the recently released Q3 2014 demand trends report by World Gold Council signaled the plunge in overall demand to the lowest level in five years by trimming 2.0% to 929 tons. The details signaled a drop in jewelry demand by 4.0% mainly due to the 60% year-on-year drop in Chinese demand to 183 tons while the India snatched the crown of world’s largest bullion consumer from China with the 225 tons of gold buying. Moreover, the investment demand increased by 6.0% to 204 tons and central banks bought 93 tons of gold during Q3 by registering fifteenth consecutive quarter of net purchases. The ETF outflows continued to prevail for the seventh consecutive quarter by dropping the 41 tons of gold holdings. Gold holdings by SPDR Gold Trust, world’s largest goldbacked exchange-traded fund, declined by 0.25% to 722.67 tons on Wednesday by registering seventh consecutive daily decline and testing the lowest level in six years.

Even though, the US Dollar witnessed a bit of correction into its strong rally on Friday, due to the labor market numbers, it is early to say that the greenback is weaker as the labor market numbers remained well in the line of earlier releases and weren’t disclosing anything negative. Further, the discussions at the Federal Reserve continue supporting near-term rate hike and should the Fed adhere to such activity, during early next year, the US Dollar can rally considerably which in-turn can provide strong negative for the gold prices. Moreover, deflationary pressure continues to hurt rest of the global economies and hence becomes supportive to the US Dollar strength which seems stronger compared to the rest of the global currencies.

However, it should also be considered that the recent economic improvement in India, the world’s largest consumer, can become supportive to the gold prices together with the higher interest of central bankers, more like Russia, to acquire yellow metal. Also, should the Prelim GDP number of the US, scheduled for the later this month, drags below its previous release of 3.5%, speculations concerning near-term rate hike can be put on hold and the gold can again witness an uptick.

From the technical perspective, even though the gold prices have plunged too much, it has still to break the psychological magnet of $1000 before testing $800; however, a pullback above $1200 in yellow metal prices can cause the jump to near $1280 levels.

ANIL PANCHAL Market Analyst Admiral Markets

13

RESEARCH December 08, 2014 #79

A

caucasian business week

BUSINESS SPHERE DOMINATES JOB VACANCIES IN GEORGIA

ccording to the surveys conducted during past years, unemployment remains one of the key problems for Georgian population. The demand for jobs is characterized by a growing tendency. ARC has shown interest in what the labor market offers job seekers under current conditions.

The analysis of vacancies posted on the Internet during two months (March, April) of spring 2014 has shown that business companies are major employers as the majority of vacancies have been posted just by them.

NEIGHBORHOOD Turkish inflation surges to 9.15 pct in November

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urkish consumer prices rose in November as food prices continued to climb, data showed on Wednesday. Turkish annualized inflation increased to 9.15 percent in November from 8.86 percent in September, data from the Turkish Statistics Institute (TurkStat) showed on Wednesday. Economists had expected the August rates to be at 9.25 percent.

On a monthly basis, consumer prices rose 0.18 percent, below a market expectation of 0.55 percent decline. Producer prices reached 8.36 percent in November from 10.10 percent in the preceding month,TurkStat said.

Russia Is Falling Into A Recession

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Traditionally, the companies operating in the sphere of trade (wholesale, retail) are leading among those business companies that are posting the vacancies. The second and third places are shared by the vacancies in the spheres of banking, crediting and insurance, as well as healthcare, pharmacy and social services, respectively.

ussia’s Economy Ministry has downgraded its GDP forecast for the country in 2015 from 1.2% growth to a 0.8% contraction. In other words, the country is falling into a recession. The net amount of foreign capital expected to flow out of the country in 2014 has been revised sharply upward to $125 billion (up from $100 billion), while the projection of net outflows for next year has also been increased, to $90 billion from $50 billion.

The independent Russian news agency Interfax reports Deputy Economic Development Minister Alexei Vedev as saying that the downgrade reflects the decrease in the forecast average price of Urals crude next year from $100 a barrel to $80 a barrel. Russia relies on the oil and gas sector for 10% of its GDP and about 50% of its government budget. However, since June global oil prices have been in free fall, with Brent falling from a June high of about $115 a barrel to just over $72 a barrel on Tuesday. The majority of forecasters now suggest that it will remain under $100 a barrel through 2016.

E-agriculture system presented in Azerbaijan

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he e-agriculture system has been presented in Baku within the framework of exhibition & conference Bakutel 2014.

The Ministry of Agriculture of Azerbaijan informs that presentation of e-agriculture information system was carried out within the framework of international forum Internet of Things.

The presentation of info system E-Agriculture within the panel “Revolutionary Catalyst in Agriculture” was conducted by Ilham Bayramov, the head of the Agriculture Ministry’s Administration Office,” the Ministry said.

PASHA Bank’s assets reached new historical peak There is the highest demand for professional specialists and their assisting personnel and frequently vacancies are announced just to fill these positions. Managers take the third place, according to the demand for them. Although the government has set agricultural development as one of its priorities, the demand for skilled agricultural and fishery workers still remains at its lowest level.

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he assets of PASHA Bank OJSC, one of the largest private credit institutions of Azerbaijan reached their historical peak.

The Bank reports that by the end of October 2014 return on equity (ROE) of PASHA Bank made up 10 % against 10.3% in September, 11% in July and August, 12% in May and June, 15% in March, 18% in February of 2014 and 15% by the end of 2013. By the end of 2012 ROE was 18%.

Return on assets (RoA) made up 1.7% against 2% in July and August, 3% in May and June, 4% in March, 5% in February, and 4% by the end of 2013 and 2012.

This October Bank’s assets increased from AZN 1.031 bn up to 1.074 bn, exceeding previous historical peak (AZN 1.034 in April). By the end of 2013 the figure was AZN 697.393 million and by the end of 2012 - AZN 742.142 million.

This October Bank’s capital increased from AZN 341.028 million up to AZN 341.676 million, while its share capital remained at the level of AZN 333 million. By the end of 2013 the capital reached AZN 227.945 million with the share capital at the level of 228 million.

PASHA Bank’s profit before taxation as of 1 November 2014 reached AZN 21.944 million against AZN 28.35 million in 2013, AZN 26.658 million in 2012 and AZN 19.329 million in 2011.

In October the index was equal to AZN 2.892 million versus AZN 2.105 million, AZN 2.718 million in August, AZN 2.6 million in July.

WORLD NEWS Google Just Made It Much Easier To Prove You’re Not A Robot

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oogle just made it easier to prove you’re not a robot.

If you’ve every signed up for an online account or bought something online, you’ve probably encountered a CAPTCHA prompt, where you’ve been asked to type a portion of distorted text to prove you’re not a spambot.

Turns out, Google’s research recently showed that today’s artificial intelligence (read: robots) can solve those CAPTCHA prompts with 99.8% accuracy. So, Google is introducing “No CAPTCHA reCAPTCHA,” which allows users to just check a box to prove they’re not a robot.

How? Google developed an “Advanced Risk Analysis” algorithm which considers a user’s interaction with the CAPTCHA before, during, and after the time that they click it.

Websites can now start using Google’s new system on their own sites.

Brazil, Uruguay move away from US dollar in trade

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razil and Uruguay have switched to settling bilateral trade with local currency to stimulate turnover, bypassing the US dollar. Payments in the Brazilian real and Uruguayan peso started on Monday. The agreement was signed on November 2 by the head of Brazilian Central Bank Alexandro Tombini and his Uruguayan counterpart Alberto Grana. Both countries believe such a move would strengthen trade across Latin America.

“The agreement was the result of long negotiations between the countries belonging to Mercosur [the common market of South American countries - Ed.], as well as the global strategies of BRICS,” RIA quotes Carlos Francisco Teixeira da Silva, Professor of International Relations at the Federal University of Rio de Janeiro.

VTB Ends the Year without Profits

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n his interview with German edition of Handelsblatt, VTB Head Andrei Kostin has talked about sanctions against the Bank, his own revenues, Ukrainian crisis and cooperation with China.

Mr. Kostin assures VTB depositors have nothing to fear and sanctions are affecting only international financing. Anyway, negative impact of sanctions is, indeed, wider and comprehensive, he added.

“VTB Group profits sharply fell in the last quarter by 98%. After the 105 million profits in the previous year, the bank is expected to be left without profits in 2014”, the German edition writes. Mr. Kostin confirmed these expectations and noted the bank will be left without profits, but no losses will be recorded. This is not the end and the bank has got huge reserves, the VTB head said.

“We have to form reserves of about 1.3billion USD in 2014. Sanctions and economic problems will be removed in the end. Our mistake is we have not collected funds for credit operations on the Ukrainian market in Ukraine. To this end we used to transfer funds from Russia and therefore we have received additional problems because of currency exchange rate fluctuations. I expect VTB to lose a half part of Ukrainian credits”, Kostin noted.

Saudi Arabia expects oil price to stabilize at $60

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audi Arabia, OPEC’s biggest oil producer, has reportedly said the oil price should stabilize at about $60 per barrel, a level that other cartel members would also sustain.

The Gulf states “don’t have a price target, and if prices drop further below $60, it won’t be for long,” the Wall Street Journal quotes people familiar with the situation.

Thus, Saudi Arabia will not advocate an oil output reduction even if prices continue to decline, the source says.

The country’s position is likely to keep prices subdued in the coming months and impede the chances of a strong recovery, analysts say.

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PUBLICITY December 08, 2014 #79

caucasian business week

APARTMENT

18

Every Saturday At 21:00

On GDS TV Full of humor Anchors – Temo Mzhavia, Levan Gogoreliani will offier refined humor, provide good mood and invite interesting guests for the program audience.

The program consists of three parts: the first block offers humor and apolitical monologue with funny video clips, pictures and so on. The second and third blocks are dedicated to famous public figures that will be invited as guests.

The show will start Wednesdays at 21 o’clock and it will cover all interesting issues excluding politics to guarantee good mood for the audience.

15

TBILISI GUIDE December 08, 2014 #79

Embassy United States of America Embassy 11 Balanchivadze S St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 5353-23-34 -23-34 tbilisivisa@state.gov; E-mail: tbilisivisa@ @state.gov; askconsultbilisi@state.gov askconsultbilisi@st tate.gov United Kingdom of o Great Britain and Northern Ireland Embassy E Tbilisi, 51 Krtsanisi Str., Tb bilisi, Tel: 227-47-47 british.embassy.tbilisi@fco.gov.uk E-mail: british.emb bassy.tbilisi@fco.gov.uk Republic of France Francce Embassy 49, Krtsanisi Str. Tbilisi, T Tel: 272 14 90 ambafrance@access.sanet.ge E-mail: ambafrance e@access.sanet.ge www.ambafrance-ge.org Web-site: www.amb bafrance-ge.org Federal Republic of o Germany Embassy 20 Telavi St. Tbilisii Tel: 44 73 00, Fax: 44 73 64 RepublicEmbassy Italian RepublicEm mbassy Tbilisi, 3a Chitadze St, Tbi ilisi, 292-14-62, Tel: 299-64-18, 29 2-14-62, 292-18-54 embassy.tbilisi@esteri.it E-mail: embassy.tb ilisi@esteri.it Estonia Republic of Estoni ia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 16 Akhmeta Str., Avlabari, 0144 Tbilisi.

E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi ;Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: +995 32 2 75 21 11, Fax: +995 32 2 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 15 Gorgasali Exit, 0105 Tbilisi, Georgia Tel: +995 32 291 01 94; +995 32 291 01 95 Fax: +99 532 291 02 70 Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08; E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze Av., Tbilisi Tel: 225-20-72/73/74/76 E-mail: turkemb.tbilisi@mfa.gov.tr Address: 8, M. Abashidze str.

Batumi, Georgia; tel: (8-88-222) 7 47 90 Republic of Azerbaijan Embassy Kipshidze II-bl . N1., Tbilisi Tel: 225-26-39, 225-35-26/27/28 E-mail: tbilisi@mission.mfa.gov.az Address: Dumbadze str. 14, Batumi Tel: 222-7-67-00 Fax: 222-7-34-43 Republic of Armenia Embassy 4 Tetelashvili St. Tbilisi Tel: 95-94-43, 95-17-23, 95-44-08 E-mail: armemb@caucasus.net Web: www.armenianembassy.ge Consulate General, Batumi Address: Batumi, Gogebashvili str. 32, Apt. 16 Kingdom of Spain Embassy Rustaveli Ave. 24, I floor, Tbilisi Tel: 230-54-64 E-mail: emb.tiflis@maec.es Romania Embassy

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

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

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

Restaurants 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 PICASSO Tbilisi , 4 Miminoshvili St. , Tel: 98 90 86 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 THEATRE OF PANTOMIME Tbilisi. 37 Rustaveli Ave. Tel: 99 63 14, (77) 41 41 50 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

Akhvledianis Khevi N13, Tbilisi, GE. +995322958377; +995599265432

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,

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

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PUBLICITY caucasian business week

December 08, 2014 #79