CAUCASIAN BUSINESS WEEK #86 by Caucasian Business Week

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February 9, 2015 #86

February 9, 2015, Issue 86 GEORGIA

GEORGIAN ECONOMY TO GROW BY OVER 4%

eorgian Government expects more than four percent growth of economy in 2015, announced Finance Minister Nodar Khaduri. Pg. 2

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SILKNET INCREASES TARIFFS ON INTERNET AND TV SERVICES

CHANGES IN VISA POLICY SIMPLIFY ENTRANCE INTO GEORGIA

lterations to the country’s recently introduced visa law will make it easier for a select group of foreigners to enter Georgia. Pg. 2

DEVELOP BUSINESS – JOINT PROJECT BY ASSOCIATION OF YOUNG FINANCIERS AND BUSINESSMEN AND BEELINE

n February 3 Radisson BLU Iveria hotel hosted a presentation of the Develop Business project, a joint initiative of Beeline and the Association of Young Financiers and Businessmen. Pg. 11

DO NOT MAKE MY BEER MORE EXPENSIVE

n protest against a growth in excise tax on beer, Georgian breweries have launched a campaign “Do not make my beer more expensive.” In protest against a growth in excise tax on beer, Georgian breweries have launched a campaign “Do not make my beer more expensive.” Pg. 6

Research

Azim Sadikov: Georgian export would have more difficulties if GEL had not been devaluated Pg. 8 Kakha Chargeishvili: Georgian Bank System Follows Pawnshop Mathematics Pg. 4 Ortwin Hennig: I call Georgia the future of the European Union Pg. 8

George Kananashvili: Quality-oriented Silknet and Subscribers Discontent Tbilisi is One of Pg. 5 with Growth in Prices the Leaders in Europe by Hotel GEORGIAN MANUFACTURERS BLAME Occupancy Pg. 5 SOCAR FOR RAISING GAS RATES Pg. 4

Pg. 13

Pg. 12

Currency

EXCHANGE RATE MONITORING

TBILISITES’ ATTITUDE TOWARD LARI EPRECIATION

GEL in New Dimension?

GDP GROWTH PROMPTS DEMAND FOR REAL Pg. 8 ESTATE IN TBILISI

POSSIBLY YET ANOTHER EVENTFUL WEEK AHEAD IN THE FOREX MARKET

EDUCATED UNEMPLOYMENT IN GEORGIA:

51% OF JOB SEEKERS ARE YOUNG BA’S

Pg. 7

The 9th of February Special Issue, Georgia’s Investments Potential, Specially for the Wealth Pro Conference, Introduce Your Company to the World’s Wealthiest Investors. For Additional Information, please, contact the CBW editorial board.

2 MAIN EVENTS NATO TO ESTABLISH PERMANENT GROUPS IN GEORGIA

GOVERNMENT NEWS caucasian business week

IRAKLI GARIBASHVILI: NO NEEDED TO CREATE ARTIFICIAL BARRIERS FOR BUSINESS

rime Minister of Georgia Irakli Garibavshili demanded that the government agencies to make decisions in time and not create artificial barriers for business. According to him, a few days ago he met with big businessmen to discuss the situation in the country. “I asked - what problems they face, is there any interference in their activities. I was surprised at how they were all unanimous in saying that 2014 was the best for the last 5 years, both in terms of income and everything else. Everyone recognizes

ATO will establish the permanent groups of experts to promote the military reforms in Georgia, NATO Secretary General Jens Stoltenberg said following a meeting of the NATO-Georgia Commission at the level of defense ministers Feb. 5.

GEORGIA FORWARDS MATERIALS TO UKRAINE AGAINST INTERPOLWANTED EX-MINISTER

he Georgian side provided Ukraine with all documents on the case of former Justice Minister Zurab Adeishvili, Deputy Interior Minister Archil Talakvadze told reporters.

NATO COMMITTED TO STRENGTHENING RELATIONS WITH GEORGIA

ATO is committed to strengthening bilateral relations with Georgia, US Secretary of Defense Chuck Hagel said at a meeting with his Georgian counterpart Mindia Janelidze in Brussels.

LITHUANIAN, GEORGIAN MPS DISCUSS EU SUMMIT PREPARATIONS

delegation of Lithuania’s Seimas paid a three-day visit to Georgia. Lithuania’s representatives held the first meeting with members of the Parliamentary Committee on Foreign Relations of the Georgian parliament.

GEORGIA-ABKHAZIA NEGOTIATIONS FOR IDENTIFYING CONFLICT SACRIFICES CONTINUES

eorgian Ministry of Refugees officials and representatives of the de-facto Abkhazian government held a meeting under the auspices of the International Red Cross Commission today where they discussed issues relating to the searching and transferring of bodies of those missing since the Georgia-Abkhazian conflict in the early 1990s.

POLAND RATIFIES EU-GEORGIA ASSOCIATION AGREEMENT

oland is the latest country to ratify the Association Agreement (AA) between Georgia and the European Union (EU). The official ratification process took place today in the Polish Sejm - the lower house of the country’s Parliament.

GOV’T ANNOUNCES PLANS TO DEVELOP GEORGIA’S AGRO SECTOR

eorgian Government expects more than four percent growth of economy in 2015, announced Finance Minister Nodar Khaduri at the Government’s Meeting. Yesterday the Government specified the current year’s economic growth forecast not only in Georgia but in the neighbouring countries and declared that all of them will have stagnation in their economies. “0 percent growth is fixed in the economies of Ar-

ithin the framework of the Good Governance Initiative in Georgia (GGI) the Government moves to the next stage of cooperation with United States Agency for International Development (USAID). Together with USAID Georgian Government will implement a five-year project which budget is $ nine million USD. The purpose of a project is to improve governance structure, transparency, accountability, efficiency and to strengthen the democratic institutions. GGI will help Georgian Government’s legislative and executive branches at the central and local levels, will strengthen the connection between the dif-

eorgian Government is working on ways to stop migration of population from Georgia’s mountain villages and to resolve their economic problems.

truck with a large batch of drugs from Azerbaijan did not enter the territory of Georgia, the head of the Investigation Department of the Azerbaijani State Customs Committee Ulvi Zulfuqarov told AzTv TV channel.

ferent branches of the governance. The Good Governance Initiative will provide technical assistance to its partner governance structures. At the same time GGI will help them to arrange the trainings. “It was very fruitful meeting with USAID’s representatives. $ nine million USD is the budget of five-year project which is very useful for Georgia. Though, we still do not know how this money will be distributed. However, Georgian Government starts working with different agencies in this direction. Then, the Government and USAID will make a joint presentation where they will announce how the money will be distributed,” said Deputy Head of Administration of Georgian Government Nina Kobakhidze.

lterations to the country’s recently introduced visa law will make it easier for a select group of foreigners to enter Georgia. Since the new visa law was implemented in September 2014, foreigners wishing to visit and work in Georgia faced challenges. However new amendments to the law will make this process easier and more simplified, said Georgia’s Minister of Economy and Sustainable Development Giorgi Kvirikashvili. Specifically, the regulations for investors and tourists entering Georgia will be simplified, he said. Amendments to the law concerning foreigners and those who do not hold Georgian citizenship

AZERBAIJANI CUSTOMS SERVICE ABOUT DRUGS SEIZURE IN GEORGIA

Currently the official rate is 1.9977 GEL to 1 USD while it was 1.9933 GEL yesterday. Because of Lari depreciation the National Bank of Georgia was going to tighten monetary policy to control the economy. However, Nodar Khaduri explains that Lari has been strengthening already and there is no need the National Bank of Georgia to involve in this process. He added that Lari is one of the most stable floating exchanges in the region. Khaduri expressed his hope that Lari will maintain its stability.

“Today it is a very exciting day. USAID is partnering with the Government of Georgia to advance some specific reforms that are important for Georgia’s democratic governance. We are working on civil service reform, healthcare reform, open government partnership and number of other areas. Over the years we will be partnering with Administration of the Government of Georgia, as well as the Ministry of Finance, the Ministry of Regional Development and Infrastructure, Ministry of Justice, Ministry of Health and few other institutions. The reason of this meeting is for us to ensure the agenda along with the Government’s priorities,” said Deputy Head of GGI David Stonehill.

CHANGES IN VISA POLICY SIMPLIFY ENTRANCE INTO GEORGIA

GOVERNMENT WORKS ON GEORGIA’S INTERNAL MIGRATION PROBLEMS

eorgian State Minister for Integration into European and Euro-Atlantic Structures David Bakradze will pay a two-day working visit to Ukraine February 4.

menia and Moldova. Russian economy will collapse this year as well. Belarus will experience 0 percent economic growth. Azerbaijani economy will grow by -1, 5 percent. As for Georgia, our economy will grow by more than four percent,” Khaduri said. This year it was forecasted that Georgian economy would experience five percent growth. The forecast was changed due to Georgian national currency Lari depreciation, which still continue tumbling after slight strengthen.

GEORGIAN GOV’T IMPLEMENTS FIVE-YEAR PROJECT WITH USAID

Georgian Government official says the country must work on seven things to boost the country’s agricultural sector.

that the business is absolutely free - the only problem is that government agencies are not working quickly enough. I appeal to all both the heads of central agencies, and representatives of local municipalities - to fulfill all the necessary procedures as quickly as possible and not to delay them in time. The main thing is a timely and effective decision-making. We should not create additional barriers to those who want to do more for the country. If someone disturb them artificially, it will be necessary to raise the question of their responsibility, “- said the head of government.

GEORGIAN ECONOMY TO GROW BY OVER 4%

GEORGIAN STATE MINISTER TO DISCUSS COOPERATION ISSUES IN UKRAINE

February 9, 2015 #86

was introduced at a Governmental meeting today. “The Government will establish a list of countries whose citizens will be able to easily enter Georgia,” the Minister said. The amendment noted that if a person owned real estate in Georgia, it will be far easier for him/her to receive a visa and a residence permit. Meanwhile, the Georgian Government is preparing to launch the country’s first electronic visa (e-visa) facility - a move officials say will give “a major boost” to the country’s tourism sector. Georgia’s Prime Minister Irakli Garibashvili announced the new e-visa facility would open in February 2015.

526 MLLION GEL SPENT ON GEORGIA’S ROAD INFRASTRUCTURE IN 2014

he Roads Department of Georgia has invested 526 million GEL for improving the road infrastructure in Georgia in 2014, says the report presented by the Deputy Chairman of the Roads Department of Georgia Vaja Panchulidze. The Department’s priority for 2014 was implementing the projects which were designed for constructions of highways in Georgia. Last year 40 km new section of main highway in the

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western part of the country was opened, which is 24.6 km more compared to 2013 and 38.5 km more compared to 2012. The constructions of the main highway were carried on seven different sections of the road, covering 131 km road section in total. 265 km section of road was rehabilitated including the roads to the churches. 42 bridges were rehabilitated and 11 new bridges were built up. All these projects have been implemented with

the financial assistance of donor organisations and the state budget. 36.7 million GEL was allocated from the state budget in 2014. Nine million 179 thousand GEL was spent on preventing and liquidating the natural disasters on 31 objects in 2014, says the report. Georgian Government and the World Bank signed an agreement in 2014 through which Georgia got loan worth of $93,75 million USD and obligation to rehabilitate more than 200 km road section.

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Editor-in-Chief: Nino Gojiashvili. Mobile phone: 595 050404 Reporters: Nutsa Galumashvili; Tamar Kakabadze, Lazare Gvimradze

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

February 9, 2015 #86

PUBLICITY

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MINICREDIT CAFÉ

iniCredit Café, a MiniCredit’s innovative service center, has opened at the hypermarket of Goodwill, Kavtaradze Street N1. MiniCredit offers services in entirely different environment. Starting December 29 clients are able to more conveniently use our credits. MiniCredit Café’s staff provides valuable services to the visitors, offers MiniCredit plastic cards with 50 GEL to 700 GEL credits, as well as various brands of coffee for having during the credit terms discussion period at the service center.

At the service center clients are able to: - Get registered at www.MiniCredit.ge; - Fill an application by indicating desirable maturity period and amount; - To get desirable design of the card free of ; - Cover or prolong credits by quick payment terminals. In 2011 MiniCredit introduced an entirely innovative product for the Georgian market: immediate internet credit. Since then the company pleases clients with various innovations. It is the third year MiniCredit maintains a leading position on the Georgian market. MiniCredit Café - working hours: 10:00 – 20:00 www.MiniCredit.ge – Fill Your Wallet!

4 HEADLINES WB, GEORGIAN STATE AUDIT SERVICE SIGN GRANT AGREEMENT

he World Bank and the Georgian State Audit Service signed a grant agreement worth $500,000 for the project entitled “Development of IT audit in the state audit service”. The agreement was signed by WB Regional Director for the South Caucasus Henry Kerali and Auditor General Lasha Tordia, the service said.

GEORGIAN INVESTIGATION SERVICE EXAMINES FUEL MARKET ACTIVITIES OF INTERMEDIARY COMPANIES

n investigation service of the Georgian Finance Ministry started examining the actions of the intermediary companies on the fuel market. The investigation is conducted in respect of several companies, the ministry said. “The activity of the companies is fully examined,” the investigation service said. “They represent an intermediary link between suppliers of oil products and retail market. These oil companies supplied the imported goods to the retail market.”

BTK PROJECT TO AFFECT REGIONAL ECONOMY - TURKISH MINISTER

GEORGIAN GOVERNMENT LOWERS FORECAST FOR 2015 ECONOMIC GROWTH

eorgian government has lowered the forecast for the country’s economic growth for 2015, Georgian Finance Minister Nodar Khaduri said at a government meeting on Feb.5. He said Georgia’s economic growth will be equal to 4 percent in 2015, while earlier the Georgian Finance Ministry forecasted the growth to be at 5 percent.

EU TO ALLOCATE 400 000 EUROS TO GEORGIA

INTERVIEW

February 9, 2015 #86

caucasian business week

“Georgian Banking system is based on “pawnshop mathematics” to the consumers’ detriment, and lacks key components that other developing economies have already adopted” KAKHA CHARGEISHVILI New York-based economic analyst About the respondent: Mr. Kakha Chargeishvili has 15 years of professional background in International Banking. Kakha spent career with Global Financial Companies: Citigroup, Bank of America, and Merrill Lynch. During his career, Mr. Chargeishvili also managed “BCS Global Investment Bank”, one of the largest European Financial Groups with more than 500 Billion USD annual turnover. He is frequent speaker at CNN and other international media. “Regulation of the banking sector is one of the major tools for any government to reinvigorate production growth. Today this ill-treated segment of Georgia’s Economy requires fundamental reshuffling,” – says Mr Kakha Chargeishvili, US-based Investment banker. Mr Chargeishvili has recently proposed a comprehensive strategic economic plan to the government, but his efforts were met with a surprising silence. The plan should have been known to the previous and current Prime Ministers. However, due to inertness and unprofessionalism of the country’s economic management, according to Mr Chargeishvili, discussions never occurred. During post soviet period, the last 25 years, political management could not advance Georgia’s economy from the pre-existing model. Subsequently, the current situation still entails socio-economic problems and income levels that are below to similar indicators from other developing nations. International economists agree, that nothing has been done to really improve Georgia’s economic infrastructure, excluding maybe some cosmetic changes that characterize reforms in third world

countries. Plan that Mr Chargeishvili suggested in 2012 was comprehensive and required immediate action. His strategy included high-level vision as to what type of economy Georgia needed, as well as tactical steps that would entail improvement of the socioeconomic situation in the shortest period. Specifically, lower unemployment and real wage growth that would allow every Georgian family a decent quality of life. “Generally, change of political power is a positive event in a democratic society. After 2012 parliamentary elections, “Georgian Dream” gained a historic chance to revamp the country’s economy. I considered this period as a very important crossroad and laid out a rigorous plan that envisioned the economic future of the country to the government. Unfortunately, I was surprised by the indifference and lack of coordination in the governing team. Astronomical unemployment level and criminal banking system characterized year 2012, as the legacy from the previous government. Today, we have an analogous situation with even deepening stagnation signs. Thus immediate action is still very much needed.” Georgia lacks basic banking regulation, and therefore Georgian banking is similar to other handicapped economic systems, such as Russia. As a general observation, fifteen out of twenty banks in Georgia are foreign, and majority owners of the remaining five banks are not Georgian nationals. Besides the obvious problems associated with this paradigm, the following conclusion can be reached:

National Bank does not understand the basic premise of the country’s financial management and thus cannot facilitate to the economic growth. Kakha Chargeishvili’s plan, regarding which Mr. Ivanishvili and Mr. Garibashvili should have been notified by their advisors, was comprehensive and required a coordinated execution of macroeconomic policies. The plan included a list of reforms that would decrease unemployment level to 10% and substantially increase real wages and pensions. After executing these polisies, positive changes were predicted to take place within the first year. At this stage, according to Mr Chargeishvili, priority should be given to progressive taxation, functional banking system and consistent monetary policy. Macroeconomic tools should be deployed extensively to define real value of national currency and interest rates that in turn will support job creation and GDP growth. “Clearly, such policies are non-existent in Georgia!” – economic analyst comments. Among other problems Mr Chargeishvili also mentioned lack of intra-bank liquidity and currency hedging instruments that preclude creation of financial market and growth of foreign direct investments. During the last two decades, global capital markets changed fundamentally. In a globalizing economy, it is important to consider international trends to successfully plan the country’s economic growth. Many economists educated in the 90’s do not have comprehensive knowledge macroeconomic tools necessary to revitalize a developing economy. Mr Chargeishvili pointed out that the main reason behind existing economic problems is the lack of professionalism in Georgia’s Public Administration. Lack of competency and knowledge in some cases reaches levels where a case for criminal responsibility can be made as it relates to the consequences of existing policies. The implication drawn by the economic analyst – the government did not meet people’s expectations to achieve economic growth. “Georgia’s economy needs to move to a different orbit and considering the country’s potential, substantial economic growth can be achieved. Strong economy is a powerful tool that will support restoring territorial integrity and expedite Euro-Atlantic integration. Unfortunately, the current government did not amend previous economic model and tries to only maintain the status quo. It is an imperative priority to completely change governmental finance/economy teams and build a new system from scratch. Everything needs to be started from the clean page.” – says Mr. Chargeishvili.

he EU together with the Georgian government and the International Labour Organization (ILO) will finance the project entitled “Promoting social dialogue and labor relations in Georgia”.

FINANCE MINISTER OUTLINES JANUARY BUDGET ACHIEVEMENTS

bout 540 million GEL in taxes was expected to be collected in January however the actual tax revenue reached 570.5 million GEL, according to the Budget Performance Report submitted by Georgia’s Finance Minister to the Prime Minister.

GEORGIA BEGINS NEGOTIATIONS ON VISA-FREE COMMUNICATION WITH SEVERAL COUNTRIES

he government has issued several decrees, including the ones on holding talks by an exchange of notes, with a view to achieving agreements on exemption of holders of ordinary passports from the mandatory visa between the governments of Georgia and Suriname. The talks will also be held with Paraguay, Saint Kitts and Nevis, Saint Lucia, Trinidad and Tobago.

EU TO IMPLEMENT PROJECT IN GEORGIA TO SUPPORT LABOR RELATIONS

he project that has been financed by the European Union will be implemented by the ILO jointly with Georgian government, trade unions and employers’ organizations, Georgian Trade Unions Confederation said.

GEORGIA TO RECEIVE ADDITIONAL $3.1M FROM US

eorgia will receive $ 3.1 million more from the US. Most of the amount will be spent for the improvement of infrastructure for refugee children and children with disabilities.

- Recently, a study of hotel business in Georgia has been conducted. What are the results? - A research was commissioned by the Ministry of Economy and held in Tbilisi, Batumi and several tourist cities. I can say that by the hotel occupancy, Tbilisi is one of the leaders in Europe - in particular, the middle and higher class hotels are loaded by 75%, and this is a very good indicator. This means that in an active holiday season they are practically filled, as 75% is an average annual indicator - that is sometimes hotels are empty, and sometimes - filled. With regard to Tbilisi, seasonality of this indicator is not clearly visible, although it is present in any case. Dependence on a season is the most obvious at sea and mountain resorts. For example, after the summer average hotel occupancy in Batumi drops significantly - by about 54%. - Can a high hotel occupancy in Tbilisi be explained by a small number of hotels? - The flow of tourists into the country is growing. 2014 in this regard was a bad exception - the number of visitors grew by only 2%, whereas, for example in 2008 – by 23%. In general, the greater the number of hotels, the lower hotel occupancy and the price will be. For example, in Riga a room at the Radisson hotel costs 60 euros. We have very high prices - for example in highclass hotels a room costs $200, in the average - $125. It’s too expensive. One of the reasons for this is that the number of hotels is less than needed. For example, only 7 high class hotels operate in Tbilisi - “Sheraton”, which is currently closed for renovation, two “Marriott” hotels, “Radisson” and “Holiday Inn”. Potential of 3 -star hotels is not sufficiently used, respectively, we expect that hotel occupancy in the next 2-3 years will grow by 2-3% while in the long term – in 5-10 years - the situation will stabilize and occupancy will decrease to 70% that can also be

“Colliers International”: Tbilisi is One of the Leaders in Europe by Hotel Occupancy

GEORGE KANANASHVILI Representative of “Colliers International”

considered a high rate. In the coming years we are waiting for the growth of high class hotels by 3, 4 times while the average – by 1, 4 times. - Were there cases in Georgia when due to any problems, the construction of hotels was stopped or tightened? And whether this could have negative consequences in terms of the investment climate? - There were times when investors started to work, carried out the first costs, but then they did not have enough money. Then there was the crisis of 20082009, which further complicated the situation. Today, Tbilisi is one of three most attractive cities in Europe in terms of the development of the hotel business. If we consider the ratio of prices and occupancy, it is not surprising. Therefore, new hotels

“Rixos”, “Hilton”, etc are being built. - Are the results of your research available to representatives of the private sector, so that they could build their plans taking them into account? - The study was completed in December last year, and it was quite detailed and generally concerned not only the hotel business, but also all sectors of the real estate market - residential, office, retail, warehouse spaces, etc. The main part of the study results will be announced in the near future. Now we are negotiating with the Ministry of Economy about what part will be disclosed. On the other hand - it is a business-product, and we do not want to give away for free something we worked on for a long time. In any case, the business will be able to get an overview of the results of the study.

February 9, 2015 #86

ECONOMIX caucasian business week

SILKNET INCREASES TARIFFS ON INTERNET AND TV SERVICES

5 TOP STORY

Quality-oriented Silknet and Subscribers Discontent with Growth in Prices

tarting March 4 Silknet will increase service tariffs on both optical and DSL internet connection and TV services, as well as on consolidated TV and internet services. Tariffs will grow on services of all quality and price categories. Moreover, Region and Mini packages will be removed and the company will provide services under the Standard package terms. Prices on various packages of Internet and TV services will rise, consequently, by 6 GEL to 10 GEL. The price of the Silk Optic minimum package with 5 megabyte/second speed was 20 GEL. Starting March 4 the speed will be doubled and the price of 10 megabyte/second in a new package will be 26 GEL. As to prices of other packages, the price of 12-25 megabyte package will be 40 GEL instead of 27-30 GEL, while 4-megabyte package will cost 50 GEL instead of previous 40 GEL. Previously, the price of DSL internet with 1 and 2 megabyte connection speed was 18 GEL, but now the speed will increase to 3 megabytes and the price will rise to 24 GEL. Subscribers will pay 45 GEL for 6 megabyte connection, while previously the package offered 3-4 megabyte

connection for 37-45 GEL. The price of SilkTV package with Movie, Sports, Plus, Hobby and Children categories will rise by 5 GEL to 10 GEL. The price of HD and 18+ packages will increase by 10 GEL to 15 GEL. Increased tariffs are related to improved quality. The subscribers will receive higher-level services for higher tariffs, the company management says. “Internet connection speed will increase. HD content will be enhanced in SilkTV. Thus, price increased because of improved service quality”, Teona Tsereteli, Silknet PR Service head, said. Indeed, the improved quality is important, but the subscribers’ opinion should be also taken into account. The company decision would be supposedly acceptable if subscribers could choose between the old and new quality and tariffs. Even more so, tariffs rise on all services and the consumers cannot make choice. Subscribers have to either endure the new reality or move to other operator and this latter case is related to additional expenditures. Contrary to the subscribers, Silknet assures subscribers need improved quality and the service tariffs should equalize to the market prices. In reality, Silknet prices are 3 GEL to 5 GEL higher com-

pared to competitor Caucasus Online prices. In general, the current situation on the Georgian internet market is another issue for discussions. Only two major operators work on the market and instead of lowering prices, they permanently increase services. The Georgian national communications commission (GNCC) has introduced the same conclusion after research and analysis of the sub-segment of the market for accession to internet global resources. GNCC has named JSC Silknet and LLC Caucasus Online as major market players. According to the Georgian law on electronic communications, GNCC has imposed the following specific obligations: transparency of information, forbidding discrimination, tariff regulation (top margin per megabyte is 32 GEL) and separate registration of expenditures and revenues. But the market realities make these obligations and even the top margin nonworking and it would be better the regulator interfere more in the current situation. Anyway, starting March 4 Silknet subscribers will have to pay increased tariffs despite they want or not to receive improved quality at the expense of increased prices. The company decision has brought negative reaction from the subscribers. According to the information of GuriaNews news agency, the subscribers assert Silknet permanently violates the agreement terms and the internet connection speed is lower compared to the respective tariffs. Because of this factor in only Chokhatauri both private and corporate subscribers ceased contracts with Silknet. Similar cases were registered in other regions too. We should wait for the future developments to see whether increased tariffs are acceptable for Silknet subscribers and whether this decision has increased the number of Caucasus Online subscribers. Finally, we publish Silknet’s current and new tariffs that will come in force on March 4.

GEORGIAN MANUFACTURERS BLAME SOCAR FOR RAISING GAS RATES

eorgian goods producers blame SOCAR Georgia in artificially increasing the price of natural gas. Starting March 1st of this year acquiring natural gas in Georgia will cost 900 GEL per 1000 cubic meters to juridical persons, instead of 750 GEL. Paper manufacturer and CEO of NeoPrint Archil Tvaradze says that there was no 20% inflation observed in the country in the past couple of months, hence the gas supplier SOCAR would have no way of simply increasing the gas price by 20%. Tvaradze thinks that the company is aggravating the situation around GEL depreciation. In Tvaradze’s calculation the actual price increase

could only amount to 12-13% — that is, GEL’s depreciation. NeoPrint pays 25% of its production price for natural gas. Kula LTD general director Vano Goglidze says that gas companies, SOCAR in particular, should not have increased the natural gas prices at such a rate. Goglidze stresses that SOCAR’s price hike should not only depend on the cost of natural gas. SOCAR’s price rise should also reflect an increase in its workers’ wages, which did not take place. In his view, SOCAR should not raise the gas rates merely because of the GEL depreciation. A 3-5% price increase would have been adequate, says director of Kula LTD.

AUTO GAS PRICE RISES DUE TO GEL DEPRECIATION

nergy company ‘Eko Gaz” released a statement that auto gas price increase was directly connected to devaluation of the national currency Georgian Lari and was not in any way caused by the main supplier of natural gas in Georgia company “Socar.” In the middle of December the price of Compressed natural gas (CNG), at the auto gas stations increased by 5 tetris. This surprised the customers, especially followed by the drop of the Brent Crude Oil Price on the world market, and

of petroleum, respectively. Earlier representatives of the company “Eko Gaz” said that, after the appreciation of the US dollar towards Georgian Lari, they were forced to increase the price at gas stations by 5 tetris since, firstly the company holds bank credit in USD, secondly it buys natural gas from the supplier in USD, thirdly “Eco Gaz” buys spare parts of the gas compressor and other mechanisms in US dollars. “We buy gas in US Dollars since the early independence of Georgia. We had been buying gas from Russian sources from early 2000’s. Dealing in USD has been a regular procedure since then, when 1 USD dollar was 1.40 laris or 2.0 such as today, says “Eko Gaz” representative. The CEO of “Eko Gaz” Mr. Vladimer Pataridze announces: “The Company simply wouldn’t be too happy if the auto gas prices go up further, due to any causes. Since this type of fuel is used by only a small layer of population, and we are not anyhow interested in losing any more customers. This would be a big hit on the whole industry,

which would dismiss the small players on the market, such as we are.” “Eko Gaz” competitor and company “Gama” holds the same position on the subject. According to the “CEO” of the company David Chakhtauri: “This was a forced step to ascend the price, because the USD dollar sharply appreciated against national currency. The auto gas park in Georgia only consists of 10-15%, of the whole fuel industry, hence the market is very small. If the national currency keeps stable for few months the gas price would not increase any further.” “We didn’t increase the price at the gas stations when the price of petrol was at 2.20 laris, because the national currency was stable. Besides there were no prerequisites, for example, there was no rise in price by supplier “Socar” whatsoever,” Mr Chakhtauri said. At the moment, the price of one cubic meter of natural is 1.15 laris. In the middle of December the price rose by 5 tetris. Energy market players say the increase is purely connected to the devaluation of the national currency.

TBILISI CITY HALL TO DIRECT OVER 7 MILLION GEL TO HEALTHCARE 2015’s budget of the Health and Human Services Department was 76.5 million GEL. Compared to 214, more quantities of benefits and general resources will be directed towards poverty-stricken target segments in 2015, families that are registered in the Unified Database of Socially Defenseless Families. This year’s budget answers the main principle of social justice much better – to give help to those most in need of it. Tbilisi City Hall Municipal Department of Health and Human Services will carry out 29 programs in 2015, among which are number of new and important programs in both healthcare and social services fields. Socially vulnerable people living in Georgia’s capital city Tbilisi will benefit from special financial support to give them better access to healthcare and other support. The local government announced 7.5 million GEL (about $3.8 million USD) would be allocated to implement 29 social welfare programs. The money would be paid by the city government. The money was allocated from the budget of the Municipal Agency of Healthcare and Social Services. Within these funds, the local government will allocate 1.4 million GEL for a therapeutic approach for patients suffering Hepatitis C. Meanwhile, Tbilisi City Hall launched a new program which will see 20 patients with leukemia or other oncologic diseases offered financial assistance in 2015. Tbilisi City Hall has launched a new program which will see 20 patients with leukemia or other oncologic diseases get financed in 2015. Tbilisi Mayor Davit Narmania said the first patient had already received their funding and they would travel to Istanbul, Turkey to get a bone marrow transplant on February 9. “Tbilisi Mayor is fulfilling the promises it gave to its citizens and is implementing new health programs,” Narmania said. He noted the program beneficiaries would be selected based on the severity of the condition of their disease. On another note, one million GEL will be allocated to socially vulnerable families in support, Narmania said. The program will provide vulnerable families with 500 GEL financial aid for every newborn child in 2015. Furthermore large socially vulnerable families living in Tbilisi will receive assistance ranging from 800-1,500 GEL for their third, fourth and subsequent children. Meanwhile the new budget of Tbilisi City Hall gave special attention to people with disabilities. The city government allocated almost half a million GEL to fund a program that maintained community integration of people with disabilities. Through these efforts, people with significant disabilities under the age of 18 will receive 800 GEL financial assistance from Tbilisi City Hall.

DAVOS 2015

February 9, 2015 #86

caucasian business week

DO NOT MAKE MY BEER MORE EXPENSIVE

n protest against a growth in excise tax on beer, Georgian breweries have launched a campaign “Do not make my beer more expensive.” Representatives of Natakhtari, Zedazeni and Castel- Georgia companies talk about the problems coming from the increased excise tax on beer. According to them, a 50% upturn in excise tax on March 1 will create a lot of problems and make a negative impact on their production. “This decision has no relation with Georgia’s EU association agreement. According to the EU instructions, the excise tax on 100 liter beer must not be under 8.5 EUR, while in Georgia the figure amounts to 18.5 EUR. This price is much higher compared to 12 countries of the European Union, including Germany and Czech Republic “, beer manufacturers noted and added the fiscal effect will be minimal and the move cannot compensate the negative processes from increased excise tax. “We are talking about negative consequences such as increased prices, downturn in production, growth in unemployment, contrac-

LEVAN KALANDADZE Economic Analyst, Chairman of Georgian Infrastructure Projects Initiative

eer is a very flexible product and any amendments to the tax code immediately affect beer consumption. Growth in excise tax on beer contains great risks and will bring negative impact on beer consumption and production. Change in conduct and culture among beer consumers will inflict losses to beer manu-

facturers too. A recent study demonstrates that amendments to the Administrative Code have shrunk beer sales by 22%-23% for the last two months. In 2015, especially during the beer season, increased excise tax may negatively affect beer production and the output will shrink. This adversely affects not only the companies, but also the financial performance of the fiscal indicators and budget revenues. The current trends and unstable production volume, in the mid-term period, will result in firing employees and, on the other hand, failing planned investments in this field. Falling production capacity directly affects the rate of investments in the field. This decision has nothing common with the European Free Trade Agreement. There is much higher beer excise tax in Georgia compared to the EU requirements and this practice objects to the European standard. This agreement does not provide for such an imperative requirement. That’s why the government has stopped discussions over this issue. Another issue is related to reasonable schedules. Companies were not given a reasonable period, while in Europe beer manufacturers are given a certain period to re-adjust their strategies in case

tion in budget revenues in the form of VAT, incomes tax, profits tax. The sector’s investment attractiveness is also expected to fall as well as the overall business climate may be deteriorated”, the businessmen said. According to Levan Zautashvili, a Castel – Georgia director, the short time given for new excise tax introduction will also bring negative impact for the brewing industry. “The parliament and the government informed us about the growth of excise taxes after we had already planned budget for 2015. Meetings with businessmen began only after the bill had already been sent to Parliament,”- he notes. According to the businessmen, the best solution to the problem would be a growth in excise tax adequately to the inflation processes. “On the one hand, this will enable companies to gradually increase the amount of taxes received from the sector, and on the other hand, businesses would minimize the negative effects from the sharp rise in taxes and continue development”, brewers assert and request for a special meeting with the Prime Minister to introduce their arguments and considerations.

of growth in excise taxes. Under the European standard, the tax rate was to change at the end of the 2015 season. As a result, the 2015 planned sales of breweries will considerably shrink. Georgia’s beer production market may lose investment attractiveness. This field will be no longer interesting and attractive in terms of investments and we should not to expect significant investments to be made in this sector. Today, Georgian beer dominates on the domestic market and foreign beer occupies only a little ratio. This decision will increased beer imports and reduce exports. This decision will damage us, damage the government, damage the state budget, the business, which is successful currently. In the long-term period, the sector’s budget remittances may shrink and damaged breweries may fire many employees too. NIKOLOZ KHUNDZAKISHVLI, A director for Natakhtari Department for Corporate Affairs We learnt about amendments to the Tax Code in early November, after the budget bill was submitted to the parliament. From this moment we started the post-facto communication with the Ministry of Finances and we have introduced our

arguments. This increase was disproportionate, because there is one of the highest taxes in Georgia compared to the EU countries. The excise tax in Georgia is much higher than in 12 European countries about 18 EUR per 100 liters. This decision was not taken on the ground of consultations with breweries. We were not given a reasonable period for readjusting. This decision is clearly inadequate and it will lead to increased prices, a drop in production and employment.

GEORGIA IS ABOUT TO SHRINK BEER PRODUCTION, BUT, IN BELGIUM… BELGIAN CITY PLANS TO BUILD AN UNDERGROUND BEER PIPELINE

alk about important infrastructure: As an effort to cut down on beer truckrelated traffic, the town of Bruges, Belgium has decided to install an underground, three-kilometer pipeline to

transport beer. The brew will conveniently flow directly between a bottling plant outside town to the renowned Brouwerij De Halve Maam beerhouse. Approximately 85% of the town’s truck traffic is currently caused by beer trucks, so the city actually

has a pretty good excuse for its underground alcohol river. In fact, the brewery is calling the plan a “win-win.” With the new pipeline, the beer’s journey from the plant to the tap will take just 10 to 15 minutes. Residents are already plotting to si-

phon beer off the pipeline (because who wouldn’t want to secretly tap into a beer pipeline?!), but the brewery is ready for any and all beer burglars. “If there’s any leak or tapping, we’ll be able to detect it anyway,” explained the brewery’s CEO.

FOOD ORIGINS: TOP 10 FOOD MYTHCONCEPTIONS

here are many dishes have confused its origins over the years. Interestingly, the French are the usual suspects. However, dishes’ names and their origins are not necessarily related. It’s like the origins of names: in some cases (and mostly in myths and tales) they may had something to do with certain qualities of a person, but most of the times they just random picks. The online food ordering marketplace foodpanda (www.foodpanda.ge) selected the top ten common fallacies in regards to the origin of foods. FRENCH FRIES Misconception: French Fries originate in France Americans call them fries, British call them

chips, everybody loves them, but Belgians were the ones who did it first. A folk tale says that the Belgians often fried small fish, and when they didn’t have any, they would cut potatoes in fishshapes instead. FRENCH TOAST Misconception: French toast is French Either the French certainly enjoy taking credit for some culinary masterpieces or the marketing world just thinks adding the word ‘French’ on a dish will make it sound more delicious. Even though they are popular in France, French toast was around long before the French were French. Some point to a fourth-century Roman cookbook as evidence that French toast may, in fact, be Italian. NACHOS Misconception: Mexicans eat nachos all the time While a Mexican originally invented nachos, foodpanda found out that they were made to satisfy the appetites of tourists from the USA, out of spare ingredients that were lying around. The man who invented them was known by the name “Ignacio”, after which the name nacho takes its name. A man named Frank Liberto eventually starting selling them at stadiums and the rest is history. SPAGHETTI AND MEATBALLS Misconception: Spaghetti and Meatballs are Italian This is the famous meal the Lady and the Tramp are having in an Italian restaurant. Similarly, many

people believe that this is a dish that comes from Italy – they were actually immigrants in North America. But more to the point, in Italy Spaghetti and Meatballs is never seen on a menu. CROISSANT Misconception: Croissants come from France Again, not French. Everyone thinks and pronounces it in French. However, the croissant is believed to have actually come from something called the kipferl. While there are many conflicting stories about how the croissant came to be, most believe that it was by an Austrian man. SANDWICHES Misconception: Sandwiches come from England John Montagu, aka the Fourth Earl of Sandwich keeps getting the credit for putting cheese and meat inside some bread. A widely circulated myth, but the dish was actually eaten in the Western world for at least 1,000 years before the earl was born. SUSHI ROLLS Misconception: Sushi rolls are all they eat in Japan Most westerners think of sushi rolls whenever asked about Japanese food, however, the truth is that sushi is not nearly as popular in Japan as it is among those who are trying to emulate Japanese culture. More importantly, however, sushi is rarely eaten in Japan and it is not the kind of rolls Westerners

are used to having. Less than a quarter of Japanese surveyed even ate sushi a couple of times a month or more, sushi is simply a meal usually had on an important event. DANISH PASTRIES Misconception: Danish pastries are Danish Even though their name suggests its origin, the first Danish pastries were actually invented by Viennese chefs. However, despite their Austrian heritage, pastries today are a staple in Denmark. PASTA Misconception: Pasta was first made in Italy A synonym for Italy, as well as the 65% of an Italian menu. Nevertheless, the historical record says differently. Although the evidence points toward a variety of ancient cultures, pasta wasn’t invented in Italy. Some argue that the Chinese first ate spaghetti-style pasta as long as 7,000 years ago. Other evidence suggests that the Libyans were responsible for inventing the pasta that would become known as macaroni. FORTUNE COOKIES Misconception: Fortune cookies are Chinese prophecies Those delicious, sugary treats that appear at the end of a meal at the local Chinese restaurant weren’t born in China. Research suggests that the Japanese first cracked open these prophetic treats. Despite Japanese heritage, Chinese restaurants all over the planet give guests fortune cookies at the close of the meal.

February 9, 2015 #86

RESEARCH

caucasian business week

BUSINESS REPORT EDUCATED UNEMPLOYMENT IN GEORGIA:

51% OF JOB SEEKERS ARE YOUNG BA’S Educated Unemployment – Term Coined to Represent Unemployment of Population With a College Degree INTRODUCTION

Finding a job after college has become a common obstacle for recent graduates. In the modern world, there are numerous reasons attributed to causes of job shortage, but still none of them explain how most of college graduates with diplomas in their hands find themselves jobless. Situation on Georgian job market According to CRRC report, out of people looking for jobs, the 18-35 age group occupies highest share (51% of respondents seeking employment). Considering modern accreditation of Georgian universities, newly selected faculty and wealth of educational resources, it’s surprising still how hard it is for new graduates to get job offers. These days, an average Georgian with no personal connections has hard time finding employment. Results of our online survey confirm this hypothesis. Total of 78 recent graduates respondents to survey, of which 67 (86%) indicate as being employed, of these employed recent graduates, 31% (ranking highest) found positions using personal/family connections, 17.5% indicate referral other than personal/family connections, 17.5% sought employment through job announcement websites. These findings confirm the expected trend that significant part of employed recent graduates sought employment through personal/family connections and other referrals. Survey results indicate that a recent graduate with no connections has roughly only 18% chance of finding employment through job websites. Choice of major Another important factor in determining educated unemployment is students’ choice of majors. Even if we take into account that some industries and sectors are hiring more than others, there are limited number of openings in each particular major. Georgian National Statistics Office reports that during year 2013, out of female graduates the most popular majors were: Business Administration (39%), Health (23%). For male graduates leading fields were Engineering (63%) and Business Administration (16%). For both males and females, Science came to be the least popular choice.

elor degree programs in Science, Technology, Engineering and Mathematics. Such programs can raise popularity of particular projects in short term and hopefully set ground for long-term effect. On the other hand, popularity of particular majors causes a significant number of graduates with similar background competing for same or similar positions. This forces some of the graduates to seek employment outside of their major. Our online survey results corroborate this line of thought. About 35% of respondents indicate they do not work in their own field, and out of the unemployed and those who do not work in their own field, 50% indicate they would prefer to work in the area of their major. Economy and employers The economy in general also contributed to rise in educated unemployment. In 2013 created 12,000 additional jobs helped decrease actual unemployment level by 0.4%. Nevertheless there were 10,790 college graduates in the same year, most of whom had no work experience, and therefore could not match requirements for all jobs created. Even if we assume that out of 12,000 created jobs 10% were entry level, they would provide work opportunities only for 1,200 students, overlooking the fact that each graduate sought to gain work experience in their fields of choice. It is also interesting to consider whether employers have a share of “blame”. On average, every low level employee, regardless of industry, is to be given on-job training. Therefore educational background constitutes one of the major items of employer checklists. Still, it is not surprising that employers prefer applicants with prior experience. However in this case, businesses cannot ensure getting the best people in the workforce, because experience-oriented approach for entry level positions that do not in themselves require experience discriminates against those graduates, whose university schedules do not permit internships or work, thus leaving them at a disadvantage.

CONCLUSION

Such choice of majors might explain the lack of recent graduates in science fields, or abundance of BA graduates who work in industries and sectors outside of their major. This particular problem is effectively being targeted by Millennium Challenge Corporation’s Georgia Compact II program, which proposes STEM Higher Education Project, the key objective of which is long-term delivery of bach-

Educated unemployment is no news to the world; however in the face of this problem, several countries have adjusted their educational policies to fit graduates’ needs. Many European universities have corporate partners which provide internships for graduating students. In many countries public educational systems make internships an integral part of their curricula, allowing students earn experience and fit their skills to job market needs upon graduation. Damage by unqualified workforce and educated unemployment, inexperienced and poorly selected workforce not only disrupts efficient functioning of an organization, but also slows down overall economy – there is no need for innovation and increased productivity when poor performance is not penalized since there is no healthy competition, workers are not motivated to “play hard”. In such conditions, mundane functioning barely ensures survival. Grant Thornton’s International Business Report (IBR) offers interesting follow up debate on this topic highlighting the relationship between poorly selected workforce and business growth. IBR asked businesses around the world about the extent to which lack of skilled workers is constraining their ability to grow. Since 2012, the global average has increased by just three percentage points to 31% who say it is a problem. But the rises in the US (nine percentage points to 25%), China (five to 35%) and Japan (12 to 52%) have been far more substantial. MARIA GODZIASHVILI is part of advisory team at Grant Thornton and holds Bachelor of Business Administration from Baruch College, specializing in Finance and Investments. During her time with Grant Thornton, she has worked on valuations, financial modeling assignments and agreed-upon procedures for clients in public utility and financial services sectors.

ANALYTICS

QUOTES

GDP GROWTH PROMPTS DEMAND FOR REAL ESTATE IN TBILISI

“Georgian export would have more difficulties if GEL had not been devaluated”

AZIM SADIKOV, IMF Resident Representative to Georgia “If GEL had remained on the same rate, as it had been before devaluation, Georgian national currency would get more steady towards the currencies of important trade partners: ruble and hryvnia, so it would put Georgian export on uncompetitive conditions,” Sadikov notes. It should be noted, that export from Georgia decreased by 2% in 2014. Sadikov thinks that avoiding recent devolution of GEL at the expense of foreign exchange reserves’

expenditure would be ineffective. This will not strengthen GEL, but Georgian foreign exchange reserves. Sadikov declared in an interview with local TV, that his organization supports the policy of National Bank of Georgia (NBG) – linked to GEL free floating regime. “Georgia already has high trade deficit. The volume of foreign currency reserves pre-conditions investors’ confidence towards the country’s financial system and its stability. Reserve expenditure should be made in the extremely rare occasions to avoid significant shocks,” - Sadikov has declared. IMF expert also noted that GEL devaluation will not be instantly reflected on the prices, it will take some time. “Annual inflation rate was 1,4% in January, while NBG’s targeted inflation rate was set at 5%. However, it should be expected, that effect of GEL devaluation will be reflected on prices later. We should wait and see what decision NBG will take regarding the rate of monetary policy next week” - Sadikov said. In his view, one of the negative effects of GEL devaluation is the impact on the borrowers of USD. “Dedolarization should be made to Georgian economy and people, who have revenues in GEL, they should be given possibility to take credits in GEL as well,” Azim Sadikov believes.

“Monetary Policy Tightening will not Affect Interest Rates of Issued Loans”

ZURAB GVASALIA, President of the Association of Banks of Georgia “The National Bank’s strategy provides for continual and gradual actions to ensure macroeconomic stability. This is not the first time - in 2014 the rate of monetary policy increased by 0.25% compared to 2013, but this did not lead to an increase in loan interest rates,”- he says. In his words, despite the devaluation of the national currency in recent months, the policy of the National Bank was justified.

“The GEL is falling largely due to external factors, and the national currency needs some time to reach a new equilibrium point. This process is happening now. Accordingly, there is nothing strange in the fact that the National Bank takes measures to correct the exchange rate,”- Zurab Gvasalia notes. He says that the devaluation of the national currency primarily affects those who have loans in dollars, but the National Bank’s main task is to control inflation and price level. “Assuming that the exchange rate falls, but it does not result in higher inflation or higher prices, the National Bank is not obliged to automatically intervene in preserving the exchange rate. There are threats associated with inflationary processes, but the National Bank’s intervention and administrative retention of the exchange rate can have only short-term effect. In the short term, the effectiveness of such actions will be risky, especially in terms of economic growth. When the National Bank decides to change monetary policy, first of all it takes into account the macroeconomic factors. For this reason, I support the decision to tighten monetary policy, since against the depreciation of the national currency, a real threat of inflation growth already exists, “- Zurab Gvasalia adds.

“I call Georgia the future of the European Union”

ORTWIN HENNIG, German Ambassador to Georgia “For long-term social and economic development of the country, Georgian government should pay special attention to the agricultural sector. Prosperity of any country’s economy starts with the development of the countryside” — German ambassador to Georgia Mr Ortwin Hennig, said at the “New Social and Economic Development Strategy: Georgia 2020” forum.

Mr Hennig stressed the importance of civil society’s active involvement for the successful implementation of the document. According to the ambassador, German investors’ interest in Georgia is quite high. The latter are especially interested in the country’s agricultural and energy potential. However, the ambassador noted that from the perspective of a large size investor Georgia’s market is markedly small, which holds back foreign businesses from entering the country. “Georgia is a quite attractive region for foreign investors. As an embassy representative I always advise German investors and businessmen to visit the country. I call Georgia the future of the European Union. Political instability, of course, scares a big number of foreign investors. From their perspective, the Georgian market is quite small. In spite of this, German investors show a considerable interest toward Georgia. This interest is evident in the high number of presentations that our economic ministries are holding in the country to raise the awareness about Georgia among potential German investors.”

“In 2014 McDonald’s brought GEL 8, 722, 530 into country’s budget”

TEMUR CHKONIA, Founder of McDonald’s in Georgia Mr Chkonia links the brand’s misfortunes on the global market to Russia’s financial crisis. He thinks the country is hindering the company’s development. According to Chkonia, McDonald’s in Georgia is not facing any new challenges at this stage and continues

February 9, 2015 #86

caucasian business week

its work steadily. “On the contrary, we are thinking of expanding our business. Two new restaurants will open on July 2nd in Zugdidi. In Tbilisi, construction of a new McDonald’s near the American Embassy will begin around 2-3 of February,” — Mr Chkonia says. Number of McDonalds goers in Georgia increases year by year, says the founder. “In 2014 McDonald’s brought GEL 8, 722, 530 into Georgia’s budget. Which restaurant franchise could show such high economic contributions? Everyone should be interested in what good we do for the government and, subsequently, our citizens —this figure says it all.” Meanwhile, McDonald’s is not doing so great globally. Its CEO Don Thompson announced his resignation last week, after two and a half years of heading the company. The news of the resignation came after McDonald’s, the world’s biggest restaurant company, reported fourthquarter and full-year results that made 2014 the first with a decline in same-store sales in a dozen years.

Accelerating growth of GDP and household expenditure has driven demand for retail real estate in Tbilisi over recent years

uring the last decade the Georgian economy has made significant progress, which has been reflected in GDP and average salary growth of 3.13 and 6.14 times respectively. Along with the development of GDP and the retail trade sector, annual per capita retail expenditure has been growing during the last decade. Per capita retail spending has doubled from GEL 591 in 2005 to GEL 1,218 (around USD 700) in 2011. The share of spending on food is very high (60% in 2013), but there is clear evidence that this is decreasing (65% in 2011). This growth has resulted in increased demand for retail space. Together with the number of new international brand entries in recent years, existing retailers are expanding their branches throughout the country. The fastest growing sectors include fast food retailers, supermarkets and fashion brands. Supply of modern shopping centres rises but still remains far behind the CEE average. The total amount of retail space in the three main Georgian cities amounts to around 1.1 million sqm, out of which 80% is concentrated in Tbilisi, 11% and 9% in Batumi and Kutaisi respectively. During the last two years the total volume of shopping centre supply in Georgia grew by 28% approximately and currently amounts to 292,000 sqm. Growth has mainly been driven by developments in the capital, Tbilisi. After the opening of the country’s first large modern mall in 2012 (Tbilisi Mall), the next major scheme (East Point) will start operations at the beginning of next year. Shopping centre supply in Georgia will rise by 42% in 2015 and by 10% in 2016. Despite this, the country will still remain far behind the CEE average level of shopping centre supply. Although the Georgian retail landscape is still dominated by traditional supply, modern shopping centre development is accelerating. After the opening of the country’s first large modern mall in 2012 (Tbilisi Mall), the next major scheme (East Point) will start operations at the beginning of 2015. Currently, retail development is primarily driven by the expansion of modern supermarket formats (Carrefour, SPAR and Smart) and an increasing number of fast-food retailers, such as McDonald’s, Wendy’s, Subway and recent entrant KFC.

Given the country’s urban structure, the bulk of expansion potential in the Georgian retail market can be found in the capital Tbilisi, the only city with a catchment area of sufficient size and affluence. The city’s retail market is undergoing significant changes, driven by increasing competition between retailers and locations. The high street retail offer is strengthening and older shopping centres are undergoing refurbishment and – in some cases – repositioning, which is expected to continue further in the nearest future. Retailer interest is fuelled by the country’s confirmed orientation towards Europe, its ever improving business climate and strategic location in the region. After the current surge in modern supermarket development, it is anticipated that international big box retailers will start to eye this market with increasing appetite. It is worth mentioning, that during the recent years internet shopping is becoming increasingly popular in Georgia. Apart from the fact that significant portion of customers wary of online shopping, demand is still characterized by the growing trend. With Tbilisi leading the way, more retail chains are also expanding regionally. Outside Tbilisi, modern retail is virtually non-existent, with the exception of a small volume of high street supply and some modern supermarkets, mainly in the Kutaisi city of the Imereti Region. Other regional cities that offer potential are Batumi, Zugdidi, Poti and Telavi. The embryonic real estate investment market in Georgia, featuring prime retail yields at around 12-13%, coupled with significant potential for rental increase, opens up a myriad of attractive investment opportunities. In addition, streamlining local property management practices alone will have the potential to add significant value. For the coming years, the Georgian retail market will continue to offer attractive niches for retailers, developers and investors. With the country embarking on its journey towards integration with the European Union, demand for modern retail formats will continue to increase. The transformation towards a modern market has started and in the next phase shopping centres will see improved design and concept as new international developers enter the market.

February 9, 2015 #86

BANKING & STATISTICS

caucasian business week

TOURISTS INFLOWS TO GEORGIA FALL

he National Tourism Administration explains the reduction in the number of tourists by the currency crisis in Russia, Ukraine, Armenia and the difficult situation between Russia and Ukraine. The National Tourism Administration says that these data do not give reason to panic, especially when they have already developed a plan of action and activities on both the domestic and international markets, which will focus on attracting tourists. “It should be noted that there were some interesting indicator in January, for example Azerbaijan showed 12% growth in international arrivals among neighboring countries. As for the EU countries – number of tourists from Lithuania grew by 16% and Germany – by 12%. From Central Asian countries, Kazakhstan has shown a growth of 16% in international arrivals – “Commersant “ was told

at the National Tourism Administration. The Administration officials expect big tourist flows in 2015. Georgia will hold a number of international events, including: the European Youth Olympics and the UEFA Super Cup match. Also for the first time in the Caucasus, Tbilisi will host the EBRD annual meeting and business forum that will be attended by high-ranking officials, government delegations, representatives of business and international organizations. Shalva Alaverdashvili , tourism expert, relates a drop in the number of tourists visiting the country to a strict visa policy. However, he hopes that the simplification of the government’s policy will not reduce the number of tourists in the coming months. Work on the easing of the visa policy is underway at the Foreign Ministry. As reported, the e-visa presentation will be held in the near future.

LAST YEAR ACHARA HOTELS ACCOMMODATED 10.5% MORE FOREIGN TOURISTS

ccording to the statistic data of Tourism Department of Adjara, in order of tourism accommodation on territory of the region, 10.47% more tourists have been visiting Adjara in 2014 comparing to the same period of 2013. According to the Department, Georgia is included in the top ten in terms of the tourist accommodation index in the hotel sector: Turkey, Azerbaijan, Russia, Ukraine, Armenia, Poland, Israel, Belorussia, Kazakhstan and Lithuania. In 2014, the following countries have been distinguished with growing percentage index among the foreign tourists: Kazakhstan (+ 106.5%), Belarus (53.2%), Armenia (36.7%), Azerbaijan (29.7%), Poland (29.1%), Russia (21.9%), Ukraine (12.9%) and Israel (8.2%). “This group includes those countries, which are the targeted tourism markets. Tourism and Resort Department of Adjara carries out active marketing and advertising campaign in those countries.

It should be noted, that most of the visitors in Adjara are accommodated with private sector and their registration is linked with difficulties. Works are conducted on the new statistic methodology in Tourism Department of Adjara to solve this problem. The new methodology will be based upon the different researches, which will create a real image of the tourist number”, - Truism Department of Adjara declares. Positive trend is sustained in terms of foreign tourist inflow in Batumi International Airport. The number of foreign tourists in Batumi International Airport exceeds by 19% to the index of 2013, while 44% - 2012. “Cruise truism statistics are unprecedented: 14 793 tourists have entered in Batumi with 33 cruise ships, the figure exceeds by 186,5% comparing to the tourists number entered by cruise ships in 2013 (16 ships, 5162 tourists in 2013)”, - the Department explains. It should be noted, that the number of tourists, who uses tourism information centers, is grown by 69,8%.

DECEMBER RECORDS 5.2% GROWTH IN ANNUAL TURNOVER OF VAT TAXPAYERS

ccording to the preliminary data of “Sakstat”, turnover of enterprises’ value added tax has made up 5,202 billion lari in December, 2014, the figure exceeds by 5,2% to the previous index. It should be noted, that annual increase pace is one of the lowers among the months of the previous year. Merely, indexes of April and Novem-

ber are behind. Turnover of enterprises’ value added tax has been annually increased respectively by 5% and 2,7%. The highest index of annual increase pace of such enterprises has been increased in March in the previous year and the figure has made up 19,6%. About 3612 new emperies have been registered in Georgia in December, the index exceeds by 13,2% comparing to December of 2013.

ADB WATER AND SANITATION LOAN MARKS START OF NEW PARTNERSHIP WITH GEORGIA

he Asian Development Bank (ADB) and Government of Georgia today signed a $108 million loan agreement for a project to improve water and sanitation services in Poti and Zugdidi, signaling the start of a new country partnership strategy (CPS) for 2014-2018. Signing the loan agreement were Minister of Finance, Nodar Khaduri and ADB’s Director General of the Central and West Asia Department, Klaus Gerhaeusser. ADB’s Georgia Resident Mission Country Director, Kathie Julian, and Senior Urban Development Specialist, Sanjay Joshi witnessed the signing. “ADB’s new CPS with Georgia will help it address some of the barriers to inclusive growth including deficiencies in transport, energy and basic infrastructure, as well as the private sector’s inadequate access to finance,” said Kathie Julian. “Strengthening infrastructure, along with providing support for policy reforms and capacity development, will help stimulate investment, job creation, and income opportunities.” The water and sanitation project, which is the fourth under a $500 million multitranche financing program, will provide a water supply system in Zugdidi and sewerage system in Poti. Currently, 84% of people in Zugdidi have no access

to piped water and the new system will result in round the clock supplies. In Poti, a comprehensive sewage collection and treatment facility will be built, serving the entire town, with nearly 34,000 households in both towns benefiting from the improvements. The project will also support the implementation of a public awareness program, including information on hygiene and sanitation, through service centers of the United Water Supply Company of Georgia LLC which is responsible for water supply and sanitation services. ADB has previously approved three project loans totaling $218 million under the program and a fifth loan totaling $75 million to support a sewerage system in Zugdidi, and a sewage treatment plant in Mestia, is being processed. The new CPS will provide assistance to promote sustainable and inclusive growth, and to boost regional connectivity. Although Georgia is among ADB’s most recent members—joining in 2007— assistance has grown rapidly with $1.6 billion in loan approvals as of 31 December 2014. ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.

BANKS’ TOTAL OUTFLOW PEAKED IN DECEMBER

he total outflow of private Georgian banks have amounted to 128,1 million GEL in December of the previous year and also, the index of National Bank of Georgia’s outflow has been on the year’s peak. The figure has amounted to 6,6 million GEL. “Sakstat” reports the statistics and according to it, total outflow of private banks has been increased by 36,7 million GEL in

December, while National Bank of Georgia – 2,2 million GEL. Total outflow of commercial banks has been less in 2013 comparing to 2014 and the figure has amounted to 92,4 million GEL, while NBG’s outflow has been more by 0,3 million and the volume has made up 6,9 million GEL. February has been the minimum for the total outflow of Georgian private banks through 2014 and the figure has totaled to 73,1 million GEL.

GEOSTAT: CHANGES TO CONSUMER BASKET

iorgi Kakulia, deputy Finance Minister has made a comment about the statement of the president of National Bank of Georgia, that an agreement is reached as a result of consultation with the government, that budget expenditure will be balanced or proficient, in the better case. Deputy Minister has declared to broadcasting company “Imedi”, that Ministry of Finance has active consultations with NBG and information is changed daily. “Balanced expenditure means, that we should not have influence on the money supply, pressure on the rate, especially negative pressure. We should expend such amount of funds, that we take from the economy and respectively, there will not be pressure on the currency rate from the budget side. However, pressure has not been in December of the previous year and January of this year as well”, - Kakauridze has declared. According to him, review of budget expenditure part is not planned by this time. All expenditures and commitments, which have been approved by

the parliament, will be fulfilled and continued in the same conditions, as it has been planned. “We think, that the expenditure will be maximally balanced, as the annual budget. It will not be deficient i.e. the planned spending will not be made at the expense of deposit reduction In addition, he has declared about the revise of growth forecast (5%) in terms of reduction, “it is early to say, but not excluded”. It should be noted, that government has been expecting 5% economic growth in 2014 as well. However, as of the preliminary data of Geostat, Georgian economy has been expanded by 4,7% in the last year. The list of products and services, which Geostat use for monthly calculation of inflation level and describes expenditure structure of average consumer. The consumer basket contains 295 products and services in 2015, which is identical to the consume basket of 2014. Weights of goods and services included in the consumer basket are renovated as well. Weight renovation is conducted in per year.

BUSINESSMEN PROPOSE TO SET UP EXPORTS PROMOTION BANK

ccording to Zurab Janelidze, Director of Herbia company, the state must to some extent subsidize banks that will give out business loans in local currency. In addition, exporters must have advantages in areas such as logistics and infrastructure. Government’s intention to create a financial institution to support exporters is hailed by the Association of Producers and Exporters of Nuts. According to its Chairman, Alexander Motsereliya, it would be correct to create a bank for this purpose. This is a worldwide practice. The principle of Eximbank is to give loans to companies that have a good history and experience. State acts as a

guarantor, and helps them with cheap loans. If a new agency to promote exports is established, it should have levers necessary to solve the problems of exporters, and could become a mediator in the relationship between business and government “- he says. Economy Minister Giorgi Kvirikashvili announced that the government plans to establish a special institution to promote exports. “We evaluated the influence of external factors on the economy of Georgia, and took a number of useful solutions. In particular, we will create a special institute for export promotion, we plan to issue state guarantees for export. Moreover, this Agency will be created not in the long term, but very soon, “- the Minister notes.

EVENTS

caucasian business week

BREAST CANCER CAMPAIGN “TARGET FOR LIFE” HAS STARTED

nformative campaingn on the accesibility of Breast cancer therapy,with the support of patient organization “Europa Donna Georgia” has started.the name of campaign is target for life. On a cancer awarness day Tbilisi Marriott hosted a presentation and a press conference. Aim of the campaign is to inform public about the effectivness of target therapy and increase its accessibility. The petition was devised to increase accessibility of targeted biologically drugs for breast cancer patients.The petition signatories are asking the state to fund a universal health care program for breast cancer patients. According to the president of “Europa Donna Georgia” Anna Mazniashvili to increase accessibility of treatment is one of the main messages.

She said the caimpaingn aims to raise public awarness of effectivnes of breast cancer target therapy. ”we signed the petition and appeal to the government to finance lifesaving drungs,which are used for treatment and life span,as excessively expensive drugs are not funded. Every woman has right to live”,-said Anna Mazniashvili As per the leader of cancer research Giorgi Dzagnidze’s statement,studies that are intended for discovering these targets are not funded. He talked about the importance of financing immunohistochemistry research.According to him one inevitable drug “Herceptin” cost of vial is 4500 Laris. The treatment needs 10-18 vials. Giorgi Dzagnidze emphasized on the necessity of funding Herceptin and other researches.

February 9, 2015 #86

NICOLAS FLEIDERMAN, EUROPE-BET. COM’S CEO, WILL BE AMONG SPEAKERS AT GEORGIA GAMING CONGRESS

n February 20, 2015, a hospitable capital of Georgia will play host for Georgia Gaming Congress, a professional international forum devoted to gambling business. Both international and Georgian experts in all market segments of gambling will visit the event. In particular, Nicolas Fleiderman, current Europe-bet.com’s CEO, will deliver his report within the framework of the event. Nicolas Fleiderman is an Israeli/Argentinean gaming veteran with more than 10 industry experience. Nicolas has more than a decade of experience in the igaming market. He has operated, counselled, and revamped a number of new and established gaming operations during his career. His clientele includes expekt.com, Net Entertainment, Boylesports, Netrefer, William Hill Online, WinUnited-Youwin.com, Interwetten and CityClubCasino. He has founded CBN Gaming, a technology company broadcasting live games from traditional casinos to the internet. Europe-Bet.com is one of the leading organiza-

tions in the market of betting and online gambling. Its services combine a wide range of online products such as betting, online casinos, roulette, blackjack and classic games of the region (backgammon, dominoes, borax and seca). In January 2011, Europe-Bet.com launched online poker. In June of the same year, it launched the online version of one of the most popular game of the region - backgammon. In May 2012, Europe-Bet. com launched online slots of the world’s leading manufacturers. Main values of Europe-Bet.com, in particular, honesty, integrity, pioneering spirit and commitment to new technologies and techniques, help to provide the best quality in betting and online gambling. Do not miss the speech of Nicolas Fleiderman at Georgia Gaming Congress; discover new opportunities and solutions for your business. BUY A TICKET NOW Detailed information about Georgia Gaming Congress and all the speakers can be found on the event website g3congress.ru.

February 9, 2015 #86

PROJECTS

PANORAMA TBILISI REFINES ITS PROJECT

nformation about this company, initially, was found in the report of Geostat, the National Statistics Office of Georgia, where Old City Development was recorded among three top companies in 3Q14 in terms of foreign direct investments. Besides 45 million USD investments in 3Q14, Old City Development has put 20 million USD for preparatory works in 4Q14. Old City Development was founded by the CoInvestment Fund in March 2014. The company is owned by JSC Frankston International that is registered in the Panama Offshore zone. The project implementation has not started yet. Irakli Karseladze, an Old City Development project management director, says land plots and real estate will be bought off. A part of the project will be implemented on the Erekle Square, where Bidzina Ivanishvili owns a part of the land plots and real estates. Ivanishvili is also a main and basic investor of the Co-Investments Fund. In response to the question whether Ivanishvili had sold his own real estate to himself, Karseladze said an ordinary transaction had been carried out. “In this case, the investor, who owned these lands, and the investor, who is implementing the project, is the same person. This is an ordinary transaction. This is investment in reality, because these land plots were purchased from various legal entities in the course of time and now these assets are being consolidated by the project implementing company”, Karseladze said. According to the company information, a basic part of the funds were spent on buying off the former building of Tsekavshiri (about 15 million USD). They have also bought one building on Erekle Square from a private person at 4million USD. They also have paid 1.5 million USD to buy off the former building of Bank of Georgia. In the structure of investments in 3Q14, Karseladze also named expenditures on making architectural outlines and various researches. There works became relevant after changes in the primary concept of the project. “Indeed, respective groups are working on pol-

COMPANY NEWS DISPUTES ON “KHVANCHKARA” HAS BEEN SUCCESSFULLY FINISHED IN CHINA

ishing the initial concept. For example, Freedom Square planning, technological arrangement, disposition of spaces. We have hired an English expert to this end. This specialist is a master in this field. Indeed, all these moves need finances. All the research works were financed in an ordinary regime. We had ordered the research works and suitable funds were paid”, Irakli Karseladze noted. According to the initial concept of Panorama Tbilisi, the Erekle Square, Freedom Square and Sololaki Gardens were to be interconnected with ropeways. This concept was changed and only Freedom Square will be connected with Sololaki Gardens by ropeway. No other essential changes have been made to the project and it still consists of four complexes –Multifunctional complexes on Erekle the Second and Freedom Squares and Sololaki Hill, as well as the Sololaki Gardens. At the same time, the company refuses information as if the Sololaki Hill will be cut off. “On the contrary, this building will replenish the hill that exists historically. The American Village

construction has transformed it into the current appearance and later it was dismantled. In reality we mean this location, so as we have ability in line with the legislation to organize a bridge transition and connect these two complexes under the concept”, Karseladze said and added after the project implementation Tbilisi will be advanced on the regional level and its attractiveness will increase, including in terms of tourism. The construction process will employ several thousands of individuals. “We suppose to employ about 6 000 persons in this project. According to preliminary estimations, the wages fund will make up about 150 million GEL. Perspectives after the complex inauguration are also very important. I mean about 2000 persons will be employed on permanent basis”, the Panorama Tbilisi director said. Today, no assets are being constructed under the project, because the company is waiting for due permits from Tbilisi Government. “We will launch due construction works as soon as we satisfy all legal requirements and after obtain due permits”, Irakli Karseladze said.

DEVELOP BUSINESS – JOINT PROJECT BY ASSOCIATION OF YOUNG FINANCIERS AND BUSINESSMEN AND BEELINE

n February 3 Radisson BLU Iveria hotel hosted a presentation of the Develop Business project, a joint initiative of Beeline and the Association of Young Financiers and Businessmen (AYFB). Besides representatives of Beeline and AYFB, the presentation was also attended by the Deputy Ministers of Finances and Economy, economy experts and analysts. The Develop Business project covers small entreprenrusgi0op promotion issues in Georgia. The project calls for promoting this very important segment of the economy. “The project’s target group includes self-employed citizens; this is a segment that records over 60% of the employees in Georgia. Consequently, research of problems before the self-employed, making efforts for their resolution, popularizing the business activities of the self-employed will be an additional step for recovering the current social and economic situation in Georgia. The project calls for identification of the problems before the selfemployed and outlining ways and means for their resolution”, the project authors noted. Teona Baghdavadze, a head of Beeline PR Service, said the project is being carried out as part of the MAKE YOUR MARK, a Beeline’s new

caucasian business week

social responsibility campaign. AYFB welcomes Beeline’s involvement in the new direction of the social responsibility. The project will cover a significant part of our society by identifying problems before small entrepreneurs and taking concrete steps for their resolution. Naturally, we will tightly cooperate with state institutions in this process. The last period has registered many interesting initiatives that may bring very useful results to the country if the target group manages a valuable and correct adaptation. The main objective of the project is to assist small entrepreneurs so as these initiatives be implemented in their interests. These initiatives are proposed by both state institutions and comparatively bigger business sector”, AYFB President Nodar Chichinadze said. “Several days ago a new technological resvolution started in Georgia. Beeline offered 4G intetnet technology to the clients with the widest broadband. The largest-scale social investments in Georgia ever and its value makes up several millions of GEL and we beliebe our social responsibility direction fully fiots this historical moment, as well as business deveoipment. We believe new technologies represent one of the important factors that assists the business to bet-

ter operate in the modern environment”, Beeline director general Giorgi Tkeshelashvili said. “First of all, I would like to say a set of problems has been properly determined. 99% of business bodies in Georgia are registered in the small and medium-sized business sectors. At the same time, their contribution to the economy is very little. It is very important that the small and medium-sized business sectors, as well as the self-employed sector increase production capacity and their contribution to the economy, because this segment definitely represents a backbone of our economy. I would like to note last year the Economy Ministry created the Entrepreneurship Development Agency with the aim to develop and promote entrepreneurship through concrete projects and instruments or various amendments on legislative level or regulatory level. Naturally, I welcome this initiative of AYFB and Beeline and we will also join this project with pleasure. I have get acquainted with the project objectives and priorities and I believe similar projects will make much contribution to the state so as our important initiatives be properly and valuably delivered to beneficiaries”, Deputy Economy Minister Keti Bochorishvili said. “I believe it is very important and interesting project AYFB and Beeline have jointly inaugurated. I would like to say the Finance Ministry backs this project and shows readiness to take active part in resolving the identified problems. The existing taxation regime considerably simplifies the accountancy part to small entrepreneurs. In practice, we have got 3-5% tax attached to the turnover. In general, considerable liberalization was carried out for small entrepreneurs. The existing sanctions have been considerably minimized, tax debts of over 200 million GEL were written off, including considerable debts were written off from small entrepreneurs. I believe civil involvement is very important in this process and this project will also bring serious benefits”, Deputy Finance Minister Lasha Khutsishvil said.

hina Trade Mark Department has abolished registration of “Khvanchkara” to two Chinese companies and private individual. According to “Sakpatenti”, disputes on the origin place registration of “Khvanchkara”, “Tsinandali”, “Kindzmarauli” and geographical indication of “Chacha” between “Sakpatenti” and Chinese companies have been conducted from February, 2014. National Intellectual Property Center “Sakpatenti” hopes, that the suit will be satisfied with other disputed marks. As it is known, on May 23, 2013, “Sakpatenti” has submitted 6 applications for registration of origin of following Georgian wines “Tvishi”, “Khvanchkara”, “Tsinandali”, “ Kindzmarauli”, “Mukuzani” and Georgian geographical indications of “Chacha” to China Trade Mark Department. China Trade Mark Department took 4 refusal decisions, on the base of they were similar to the already registered trademarks. However, examination has been continued in the regular regime on “Mukuzani” and “Tvishi”. However, registration certificate has been issued on both of them in January, 2015. “Sakpatetnti” will not appeal to the court on “Khvanchkara”, as after the expiry of appeal, Georgia will be automatically registered as the origin place of Georgian wine.

“GOODWILL “ TO OPEN ITS SECOND HYPERMARKET IN BATUMI

hypermarket network “Goodwill” is expanding in Batumi and will open the second object in the summer. According to “Goodwill” Director, the object will be located in the new boulevard on the first two floors of “Orbi” complex. As for Tbilisi “Goodwill” branch on Kavtaradze Street, Kosashvili says that it will be a shopping center, where the children’s and entertainment centers, a sushi bar and a variety of brand shops will be placed. American restaurant chain, KFC another object will be opened in this building in the near future.

“LAGIDZE WATERS” RESUMED EXPORTS OF SYRUP TO RUSSIA

agidze Waters” resumed syrup exports to Russia. On January 29, the first bitch of products has already been sent to St. Petersburg, the stocks in Russia will be filled again in the near future. According to Tornike Lagidze, “Lagidze waters” founder, syrup will be initially exported only to Russia. “We received a large order from Russia and will not be able to supply other countries. At this stage we can supply only Russia and Georgia”, - Lagidze notes. In his words, currently 8-9 varieties of syrup are sent to Russia. “Georgian users mainly consume lemon, tarragon and peach syrups as well as a cream-chocolate drink”, - Lagidze explains. He talks about “Lagidze waters” restaurants noting that the number of users on both objects is very high. “Lagidze Waters “ suspended exports to Russia in 2013. The reason for this was failure to pay for 30 liters of syruppurchased by the Russian company “Tikhvin lemonade factory”.

BUSINESSMAN TEMUR TABAGARI TO OPEN A PAPER FACTORY IN THE CITY OF RUSTAVI

usinessman Temur Tabagari plans to build a paper factory. The factory will be located in Rustavi and about 10 million will be invested for this purpose. According to him, a selected place and a land plot will be purchased from the Ministry of Economy. In Tabagari’s words, to carry out the project , he will take out a loan in English bank. The loan will be for 10 years with an annual interest rate of 4 percent. Tabagari talks about very large interest rates offered in Georgian banks that forced him to apply to the English bank. Apart from the paper factory, the businessman Temur Tabagari intends to carry out several other multi-million projects. Including, construction of a tourism complex at Yagluja mountain and aqua park in Mtatsminda.

CURRENCY

February 9, 2015 #86

caucasian business week

FROM DENMARK TO CHINA, CURRENCY PEGS AROUND THE WORLD IN FOCUS

fter the January 15 currency earthquake, when the Swiss National Bank suddenly walked away from the franc ceiling, currency pegs around the world have come into focus. In Europe, the effort has been on finding parallels with the Swiss franc, with two currencies receiving the most attention: the Danish krone (DKK) and the Czech koruna (CZK). The Danish krone peg to the Euro has come under enough pressure to force Denmark’s Nationalbanken (Central Bank) into cutting rates three times – to negative 0.50% now – and selling what some estimate has been 100 billion Danish kroner (13 billion Euros or around 5% of Denmark’s GDP) in actual market intervention in January. But Denmark is not Switzerland – the Danish krone is a thinly traded currency that has no tradition as a safe haven. As well, Danes have enormous pension assets in other currencies and will fight tooth and nail to preserve their value via the peg. Already, the Nationalbanken has colluded with the Danish treasury to stop issuing longer term government debt in an effort to force Danish krone buyers to hold unappealing, negative yielding, short-dated instruments. As well, the Danish peg is the last of the ERM II currencies, in which the peg must also be defended by the ECB itself. The Czech koruna is perhaps a more interesting case study. It is not pegged to the Euro, but the Czech National Bank has declared a 27.00 floor in the EUR/CZK rate as a monetary policy tool to avoid deflation and stimulate industry in the Czech Republic after the central bank policy rate reached the zero bound already in late 2012. The move to a currency floor was in part inspired by the Swiss National Bank’s EURCHF floor. Not so inspiring any more. Speculators may have a better target here, but must still deal with a very thinly traded currency in a currency with a determined central bank. Another difference is that the Czech National Bank (CNB) has established a time horizon for its currency floor, which was never the cast for the SNB. Could this mean that the volatility for CZK awaits once the CNB tries

to extract itself from this policy next year? In the nearer term, we’ll find out if there is any immediate pressure on the peg as the Czech national bank releases its latest reserves data on Thursday. Outside of Europe, let’s consider first the oil exporters on the Arabian peninsula, where the pegs with the US dollar should be under considerable pressure as their economies suffer from the collapsing price of oil in USD terms. But these pegs have survived massive strains before and are backed by massive reserves, even as a strong USD enhances the downside economic risks to these economies, even as it aggravated the excesses of the boom during the heady years of 2010-2013, when we had both a high oil price and weak US dollar. Further east lies the world’s most important currency relationship: China’s managed peg, or “crawl” against the US dollar. Over the last year, China has finally begun coming to grips with the greatest credit bubble the world has ever seen, and is doing so at a time when the US dollar, to which its currency is most clearly linked, is in a major bull market while the next two largest currencies, the Japanese yen and Euro, have now devalued significantly. Are we about to see a yuan devaluation? Signs of strain are already showing: the USD/CNY exchange rate is within a fraction of a percent of posting a two-year high – something that has never happened since the yuan devaluation of 1994. The world will need to gird itself for the consequences of a yuan devaluation. What would it mean? It will unleash another wave of deflationary forces washing over the world and add unbearable further stress on an already shuddering world currency system. Most likely, a yuan devaluation would mean the beginning of the end of the post Bretton Woods currency system since 1971, when Nixon took the USD off gold. As importantly, it will also mean that Asia and China in particular need to step up with a new post-mercantilist economic model, even as they try to turn back the clock with a currency devaluation as they desperately try to extract themselves from a deflationary credit bubble implosion. By John J. Hardy

POSSIBLY YET ANOTHER EVENTFUL WEEK AHEAD IN THE FOREX MARKET

n the final trading week of what could be termed as one of the most volatile months in the Forex market, the US Dollar witnessed some mixed performance against other major currencies. The US Dollar continued with its strong up-move against commodity currencies, namely - AUD, NZD and CAD and extended its recovery against CHF. The greenback, however, lost some weight against EUR, GBP and JPY on the back of weaker-than-expected fourth-quarter GDP and durable goods orders data. The US Dollar mixed performance led to some minor losses for the overall US Dollar Index (I.USDX). Nevertheless, the US Dollar still ended the month on a strong note, marking its seventh consecutive month of gains. Going forward investors will remain engaged with a series of top-tier economic events scheduled at the beginning of a new month and would continue fueling volatility in the Forex market. This week key highlights includes one of the most keenly watched economic indicator from the US, monthly jobs report, popularly known as Non-Farm payrolls data (NFP) and important PMI figures for the month of January along-with monetary policy decision announcements from Australia and UK. Here is a brief overview on some of the important market-moving events scheduled during the course of the upcoming week. US ECONOMIC RELEASES This week’s US economic calendar begin with the release of ISM manufacturing PMI data for the month of January. Following a larger than expected drop in December, the index, scheduled for release on Monday, is expected to drop further and come-in at 54.9, from 55.5 recorded in December. The ISM non-manufacturing PMI data, scheduled for release on Wednesday, is expected to show a minor improvement and reach 56.6, from 56.2 recorded in the previous month. Meanwhile, in the run-up to the NFP release, ADP report, which shows the number of private-sector jobs addition and provides an early estimate for the government’s report, is scheduled for release on Wednesday. The ADP report is expected to show an addition of 221,000 new private-sector jobs in January, down from 241,000 jobs added in the previous month. Although, other economic releases could possibly provide some short-term clues for the markets, but investors attention would still remain focused on NFP, which is scheduled for release on Friday. The US labor market reports is known for fueling volatility in the financial markets and this week’s release would be no exception. Following a big surge in the number of new job additions in November and better-than-expected print

in December economists remain optimistic over the pace of recovery in the US labor market. The consensus estimate the report to show an addition of 231,000 new jobs to the economy in January and the unemployment rate is also expected to hold steady at 5.6%. Following last week’s disappointing US GDP growth number for the fourth-quarter of 2014, a further disappointment on the data front from this week’s economic releases might trigger some near-term corrective move for the US Dollar. Even if the economic releases come in-line with market expectations, it would undo any uncertainty over the strength of the broader US economic recovery, eventually helping US Dollar to build-up on it recent gains. GLOBAL RELEASES Apart from the US releases, economic releases and monetary policy decision announcements from Australia and UK might provide some momentum for the market. Key economic releases to watch from this week’s UK economic calendar includes PMI readings, construction and services PMI for the month of January. Construction PMI data is scheduled for release on Tuesday and release of services PMI is scheduled on Wednesday. On Thursday the Bank of England is scheduled to announce its monetary policy decisions, where market players are not expecting any major change in the central bank’s current monetary policy stance. Hence this week’s BoE monetary policy announcement is unlikely to have any significant impact on GBP pairs. The Reserve Bank of Australia (RBA) is also scheduled to announce its monetary policy decision on Tuesday. Following surprise rate-cut by SNB and BoC and hint towards a possible rate cut by RBNZ has now raised expectations that RBA might also follow suite and possibly surprise the market. Although the consensus are not foreseeing a rate cut from this week’s meeting, but a dovish economic outlook in RBA’s Monetary Policy Statement, which is scheduled for release on Friday, might be considered as a hint towards a possible rate cut by the central bank in the near-future. This would seriously deteriorate near-term demand for the already slumped Australian Dollar (AUD). Other economic indicators that could this week an eventful week for AUD includes Australian trade balance and retail sales data, scheduled for release on Tuesday and Thursday respectively. Summing it up, this week’s important economic releases/events has all the ingredients to trigger some meaningful volatility and make the upcoming week yet another eventful week in the Forex market. Admiralmarkets.ge/analytics/ facebook.com/adimralmarketsgeorgia/

EXCHANGE RATE MONITORING 02.02.2015-06.02.2015

GEL IN NEW DIMENSION?

t is the second week the national currency of Georgia has been turning around the 2.00 point in relation to USD. A little leak was registered in late January, when the GEL exchange rate against USD hit 2.05 point. From February 2 to February 6, however, the GEL rate considerably strengthened from 2.0557 to 1.9933point. At the end of the reporting week, the GEL exchange rate still sank under the 2.00 point and marked 2.0100 point against USD. Thus, in the reporting week the GEL exchange rate against USD strengthened by 2.3%. The Georgian national currency exchange rate has also changed in relation to EUR. In the reporting period the GEL strengthened by 1.5% against EUR and hit 2.2982 point. The GEL also strengthened by 1.2% against GBP to 3.0648 point from 2.1008 point. As to the YTD report, the GEL exchange rate

against USD has fallen by 7%. The Georgian national currency has shrunk by 0.4% against EUR, by 4.8% against GBP, and strengthened by 9% against Russian Ruble. As to the same reporting period for the last 10

EUR/GEL

GBP/GEL

USD/GEL

years, the GEL exchange rate against USD recorded the strongest point of 1.5855 in 2008 and the weakest point of 1.8151 in 2005. The GEL was strongest against EUR at 2.1432 point in 2006 and the weakest at 2.4479 point in 2011.

The GEL against GBP recorded the highest 2.4072 point in 2009 and the lowest 3.4149 point in 2005. The GEL exchange rate changes in relation to various currencies YTD are as follows:

February 9, 2015 #86

RESEARCH

TBILISITES’ ATTITUDE TOWARD LARI DEPRECIATION

caucasian business week

RC decided to estimate the attitudes of Tbilisites towards changes in Lari exchange rate. A telephone survey was conducted in February and 500 respondents were interviewed. 41% of respondents noted that changes in Lari exchange rate slightly affected their family budgets; the influence of this change proved important for 27% of respondents. 32% of respondents did not feel any influence on their family budgets.

NEIGHBORHOOD Georgia, Azerbaijan to mull prices for supplied gas

Mercedes has record January car sales as core markets jump

eorgia should immediately start negotiations with Azerbaijan to prevent the growth of prices for gas supplied to the country, Georgian Prime Minister Irakli Garibashvili said at a government meeting on Feb.5. “We need to maintain the current tariffs on gas supply to Georgia and with this purpose, it is necessary to start negotiations with Baku,” he said. Garibashvili added that Georgian government has already discussed this issue with the State Oil Company of Azerbaijan (SOCAR), adding that the company’s representatives expressed full readiness for cooperation and reaching agreements. The prime minister said it is not ruled out that the Georgian government will propose Azerbaijan to cancel or delay the increase of tariffs for the gas supplied to the country.

erman luxury carmaker Mercedes-Benz said on Friday sales jumped 14 percent in January to a record 125,865 models, powered by double-digit gains in Europe, China and the United States. Daimler’s (DAIGn.DE) flagship division posted 14.5 percent sales increases in each Europe and China to 47,693 and 28,080 cars respectively, the Stuttgart-based manufacturer said. Deliveries in the U.S. were up 8.9 percent to 24,619 cars.

Turkey to encourage tourism’s development

T For 53% of respondents, the cost of loans taken in USD is the change that affected their family budgets; for 28% of respondents this change is related to increase in prices on medicines and for 19% increase in food prices (we have counted only the answers of those respondents, who believe that Lari exchange rate has affected their family budgets).

WORLD NEWS

urkey will provide financial support for the country’s tourism operators to attract tourists from abroad, Turkey’s Prime Minister Ahmet Davutoglu said, the TRT Haber news channel reported Feb. 4. He said Ankara also intends to compensate the costs of transportation of tourists by aircraft and will allocate $6,000 for the payment for fuel used in flight to one side. However, the PM didn’t specify whether or not this compensation will be non-recurring. He also pointed out that tourism is one of the most important sectors of the Turkish economy. According to the Turkish Statistical Institute (TurkStat), the country’s incomes from tourism rose in 2014 by 6.2 percent compared with the same figures for 2013 standing at $34.305 billion. Some 81.5 percent of these incomes were received from foreign tourists, and 18.5 percent – from the Turkish citizens living abroad and visiting the country.

World record debt of $199trn could drag economies into another crisis

lobal debt has soared by $57 trillion since the outbreak of the financial crisis in 2007, with the debt to GDP ratio jumping to 400 percent in Japan. This raises questions about financial stability and poses a threat of another crisis. “After the 2008 financial crisis and the longest and deepest global recession since World War II, it was widely expected that the world’s economies would deleverage. It has not happened. Instead, debt continues to grow in nearly all countries, in both absolute terms and relative to GDP. This creates fresh risks in some countries and limits growth prospects in many,” according to new research carried out by consultants McKinsey in 47 countries.

Gazprom to remain Europe’s key gas supplier

ussia’s Gazprom says it will increase gas exports to Europe by 5 to 8 percent to 160 billion cubic meters in the next three years, and thus remain the largest gas supplier in Europe. Deputy CEO Aleksandr Medvedev said the company expects exports to Europe to increase by 8 percent by 2017. Talking at an investor day in Hong Kong he said the volume of gas sold could reach 155-160 billion cubic meters.

Eurozone economy ‘likely to grow slightly better’ in 2015

T BTK project to affect regional economy - Turkish minister Respondents’ forecasts about future of Lari exchange rates look as follows: most of them (45%) think that the current exchange rate will be maintained; 31% of respondents suppose that Lari will slightly depreciate against USD; 19% of respondents think that Lari will slightly strengthen against USD. Only an insignificant part of respondents believe that Lari exchange rate will change significantly. How do you think Lari exchange rate will change within the next three months?

he Baku-Tbilisi-Kars (BTK) railway construction project will have a significant impact on the economic situation in the region, Turkish Economy Minister Nihat Zeybekci said at a press conference in Baku Feb. 5. “Turkey, Azerbaijan and Georgia attach great importance to this project as it is one of the most important in the region and designed to be a transport corridor between Europe and Asia,” he said. The minister also said that Tbilisi will host a trilateral meeting of economic ministers of Azerbaijan, Turkey and Georgia on March 6, and a trilateral meeting with representatives of Iran, Azerbaijan and Turkey is expected to be held in Tabriz in the near future. Afterwards, the meeting will be held in the quadripartite format (Kazakhstan, Turkmenistan, Azerbaijan and Turkey).

Armenia’s state debt hits $4.5B

rmenia’s state debt amounted to $4.441 billion in 2014, according to the Armenian National Statistical Service, Zhoghovurd newspaper reported. The country’s state debt increased by $26.847 million in December 2014. Around $3.785 billion of the state debt account for the external debt. It increased by $81.598 million for the last month of 2014.

he EU’s economic forecast predicts that the eurozone economy is likely to grow slightly better than anticipated this year. Eurozone growth will rise to 1.3 percent in 2015, up from 1.1 percent predicted in November, AP reported, citing a winter forecast released on Thursday. The EU’s top economist, Pierre Moscovici, said: “There is still much hard work to do to deliver the jobs that remain elusive for millions of Europeans.”

Ukraine, Japan sign investment protection agreement

kraine and Japan have signed a bilateral investment protection agreement, instrumental in securing more investments, Shigeki Sumi, Japan’s Ambassador to Ukraine, said at a briefing at Ukraine’s Crisis Media Center. The document will help reinforce Japanese investments in Ukraine and protect them from illegal confiscation, according to the envoy. Tokyo has loaned $1.8 billion to Ukraine for conducting reforms and supplementing foreign exchange reserves, Seo-TopNews reported.

Oil rally holds, promising second weekly gai

rent crude oil traded almost $2 higher on Friday, on track for its second weekly increase, as fighting in Libya and stronger economic signals from the United States helped futures rebound from near-six-year lows. Prices remain roughly 50 percent below their peak from the middle of last year, and no rapid recovery is expected amid rising global inventories and steady OPEC supply. But further declines in the U.S. oil-rig count, concerns over dented output from Libya, a key Mediterranean oil producer, and the anticipation of stronger U.S. jobs data boosted prices.

PUBLICITY

caucasian business week

February 9, 2015 #86

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 16 Akhmeta Str., Avlabari, 0144 Tbilisi. E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi ;Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: +995 32 2 75 21 11, Fax: +995 32 2 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 15 Gorgasali Exit, 0105 Tbilisi, Georgia Tel: +995 32 291 01 94; +995 32 291 01 95 Fax: +99 532 291 02 70 Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08; E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze 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

TBILISI GUIDE

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 CORNER HOUSE Tbilisi, I. Chavchavadze ave. 10, Tel: 0322 47 00 49; Email: contact@cornerhouse.ge RESTAURANT BARAKONI Restaurant with healthy food. Georgian-European Cuisine Agmashenebeli Alley 13th Phone: 555 77 33 77 www.barakoni.com CHARDIN 12 Tbilisi , 12 Chardin St. , Tel: 92 32 38 CAFE 78 Best of the East and the West Lado Asatiani 33, SOLOLAKI 032 2305785; 574736290 BREAD HOUSE Tbilisi , 7 Gorgasali St. , Tel: 30 30 30 BUFETTI - ITALIAN RESTAURANT Tbilisi , 31 I. Abashidze St. , Tel: 22 49 61 DZVELI SAKHLI Tbilisi , 3 Right embankment , Tel: 92 34 97, 36 53 65, Fax: 98 27 81 IN THE SHADOW OF METEKHI Tbilisi , 29a Tsamebuli Ave. , Tel: 77 93 83, Fax: 77 93 83 SAKURA - JAPANESE RESTAURANT Tbilisi , 29 I. Abashidze St. , Tel: 29 31 08, Fax: 29 31 08 SIANGAN - CHINESE RESTAURANT Tbilisi , 41 Peking St , Tel: 37 96 88 VERA STEAK HOUSE Tbilisi , 37a Kostava St , Tel: 98 37 67 BELLE DE JOUR 29 I. Abashidze str, Tbilisi; Tel: (+995 32) 230 30 30 VONG 31 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 BRASSERIE L’EXPRESS 14 Chardin str, Tbilisi Tel: (+995 32) 230 30 30 TWO SIDE PARTY CLUB 7 Bambis Rigi, Tbilisi Tel: (+995 32) 230 30 30

SH. RUSTAVELI STATE THEATRE Tbilisi. 17 Rustaveli Ave. Tel: 93 65 83, Fax: 99 63 73 TBILISI STATE MARIONETTE THEATRE Tbilisi. 26 Shavteli St. Tel: 98 65 89, Fax: 98 65 89 Z. PALIASHVILI TBILISI STATE THEATRE OF OPERA AND BALLET Tbilisi. 25 Rustaveli Ave. Tel: 98 32 49, Fax: 98 32 50

Galleries ART GALLERY LINE Tbilisi. 44 Leselidze St. BAIA GALLERY Tbilisi. 10 Chardin St. Tel: 75 45 10 GALLERY Tbilisi. 12 Erekle II St. Tel: 93 12 89

GSS Car rental offers a convenient service for those who are interested in renting car in Georgia. Rental fleet mainly consist of Japanese made SUV’s, the company has various models of cars including sedans and minivans which are in good technical condition. Contact information: Email: info@gsservices.ge. Address: Shalva Dadiani 10

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

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

PUBLICITY

caucasian business week

February 9, 2015 #86