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March 23, 2015 #92

March 23, 2015, Issue 92

caucasian1 Bidzina Ivanishvili: The National Bank was late to intervene in the exchange rate process

BE INFORMED, DO BUSINESS

GEORGIA

INSURANCE SERVICE TARIFFS TO RISE IN GEORGIA

ue to the devaluation of the national currency, prices are rising in the country in many areas - food, medicines, health care services. Pg. 6

MOODY’S LEFT GEORGIA’S SOVEREIGN RATING UNCHANGED

Pg. 8

Kakha Okriashvili: I am quitting pharmaceutical business if the new law is adopted

MOODY’S LEFT GEORGIA’S SOVEREIGN RATING UNCHANGED

he global rating agency Moody’s has left Georgia’s sovereign rating unchanged. Finance Minister Nodar Khaduri appreciated this fact as “very positive”. Pg. 7

PARTNERSHIP FUND INAUGURATES PREPARATORY WORKS FOR NENSKRA HPP CONSTRUCTION

Pg. 8

ilton Worldwide is expected to return to the public ownership after private equity group Blackstone decided to put it on the market. Pg. 7

Pg. 7

ARAB INVESTOR SUSPENDS 85 MILLION USD PROJECT IN GEORGIA

Pg. 8

he incognito Arab investor has changed his mind to invest in Georgia. A 5-star hotel and apartments are likely not to be built on the left bank of the Mtkvari river. Pg. 7

WORLD-FAMOUS CASINO COMPANY “MELCO CROWN ENTERTAINMENT” ENTERS GEORGIA

world-renowned casino brand Melko Crown Entertainment will be opened in the building of a 7–star Millennium Bilmore hotel. Pg. 9

RYANAIR’S ENTRANCE TO CHEAPEN FLIGHTS TO USA

he government of Georgia is trying to bring the Irish low-cost airline to the Georgian market. According to the Economy Minister, the negotiations are still going on with Ryanair. Pg. 9

PROFITS OF MICROFINANCE INSTITUTIONS HIT 80 MLN GEL IN 2014

rofitability of microfinance institutions operating in Georgia amounted to GEL 80 million, meanwhile the percentage of the population impoverished during the loan repayPg. 11 ment is constantly growing.

Research

Fadi Asli: Georgia has Lost its Attractiveness for Foreign Invest

Pg. 13

PRACTICING ONLINE LOANS Recently in Georgia, there has been an increase in the number of micro financing organizations that give short-term online loans.

GOVERNMENT TO FREE EINVESTED PROFITS FROM TAXATION

Pg. 6

160 GEL? CBW Takes a Look at the minimum wage calculated by National Agency of Statistics GeoStat Pg. 3

NATIONAL COMMUNICATIONS COMMISSION – THE WEALTHIEST STATE BODY

Roman Pipia: It’s an honor to work on implementing Hyatt in Georgia Pg. 8 Efrem Urumashvili: VAT Payers should not Pay Tax on Profits Reinvestment Pg. 4

Lasha Antadze: We have one of the most diverse portfolios among the local business consulting firms Pg. 12

Currency

TRADERS MORE OPEN TO ALTERNATIVE INVESTMENTS SUCH AS GOLD

Pg. 12

FOMC TO RULE FOREX MARKET THIS WEEK Pg. 5

EXPERTS EVALUATE CURRENT PROBLEMS BETWEEN THE AUTHORITIES AND BUSINESS SECTOR

Pg. 4

GOVERNMENT NEWS

2 MAIN EVENTS GEORGIA ELECTS FIRST FEMALE SUPREME COURT CHAIRPERSON

EUROPE WILL GET NATURAL GAS VIA GEORGIA

eorgia has a new Chair of the Supreme Court. Nino Gvenetadze was today unanimously elected by Georgian Parliament to the prestigious post. Thanks to Parliament’s approval, Gvenetadze will be the first female chairperson of the Supreme Court of Georgia.

UK OFFERS GEORGIA FINANCIAL AID FOR WITHSTANDING RUSSIAN PRESSURE

he United Kingdom (UK) is pledging to offer €28 million (64.8 million GEL) to Georgia and other Eastern European countries who are facing oppression by Russia. At the European Union Summit in Brussels yesterday, Prime Minister of Great Britain David Cameron announced the UK would assist a number of Eastern European countries, including Georgia, Ukraine, Moldova, Serbia and Bosnia and Herzegovina, as they were countries that struggled to withstand ongoing pressure from Russia’s Vladimir Putin.

CZECH SENATE CONSENTS TO RATIFY GEORGIA ASSOCIATION AGREEMENT

he Senate of Czech Republic has completed the procedure for ratifying the Association Agreement(AA) made between Georgia and the European Union (EU). Today, members of the Senate unanimously voted in favour of the ratification of the AA, which includes the Deep and Comprehensive Free Trade Area (DCFTA). Together with the Senators, Czech Minister of Foreign Affairs Lubomir Zaoralek delivered a speech at today’s plenary session and recommended the Senate to give consent to the ratification process.

NATO-GEORGIA TRAINING CENTRE TO OPEN IN FALL

he NATO-Georgia joint Training and Assessment Centre will open in Tbilisi by the end of the fall, Deputy Minister of Defence Levan Girsiashvili said today. Girsiashvili made this announcement at a joint press-conference with the head of the Georgia NATO Liaison Office William Lahue, after meeting with the NATO Assessment Team who arrived in Georgia earlier today to study the process of establishing the joint Training Centre.

GENEVA TALKS: GEORGIA HIGHLIGHTS RUSSIA’S ‘ILLEGAL TREATIES’ WITH BREAKAWAY REGIONS

Georgian delegation led by First Deputy Foreign Minister David Dondua has departed for Switzerland where the 31st round of the Geneva International Discussions convene on March 17 and 18. At this round of talks, Georgia would highlight the issue of Russia signing illegal agreements with Georgia’s breakaway regions Abkhazia and Tskhinvali (South Ossetia), said Georgia’s Foreign Ministry today. The Geneva International Discussions, commonly known as the Geneva Talks, is the only platform between Georgia and Russia mediated by international organisations.

CROATIA APPROVES EU-GEORGIA ASSOCIATION DEAL

roatia has completed the ratification process of the Georgia-European Union (EU) Association Agreement (AA) after the country’s president signed the final document. The Croatian parliament ratified the document on December 12, 2014 but it needed to be signed by the president before it could come into force. This proved challenging as the country held presidential elections, where Kolinda GrabarKitarovic was elected on February 19, 2015.

March 23, 2015 #92

caucasian business week

urkish President Recep Tayyip Erdoğan and Azerbaijani counterpart Ilham Aliyev attend the ceremony marking the start of work on the $10 billion pipeline in Turkey’s Kars region, part of a drive aimed at reducing dependence on Russian gas. The 1,850- kilometer Trans-Anatolian Natural Gas Pipeline (TANAP) pipeline, which is due to be completed in 2018, will link the existing South Caucasus Pipeline (SCP) which connects Turkey to the Azerbaijani gas fields in the Caspian Sea, through Georgia. TANAP is part of the Southern Gas Corridor, a longawaited plan to bring gas to Europe from Azerbaijan, and from sources other than Russia (see background). The backers of the project expect that the TANAP will then link up with the planned Trans-Adriatic Pipeline (TAP) that will bring the gas from western Turkey to Greece, Albania and across the Adriatic, to Italy.

Azerbaijani media have estimated the pipeline’s cost at $10-11 billion, well above initial estimates when the project was first conceived. According to the partnership agreement signed last week, Azerbaijan’s state energy firm SOCAR and Turkey’s Botas will hold 58% and 30% stakes respectively, while British energy giant BP has a 12 percent share. “There will be no political obstacle before this project,” Turkish Energy Minister Taner Yıldız said at last week’s partnership ceremony. “I hope that we will consume the natural gas from Shah Deniz 2 both in Turkey and Europe by the end of 2018.” The pipeline should help Turkey and the European Union reduce dependence on imports of gas from Russia by exploiting the Shah Deniz 2 field, which, according to BP, will produce 16 billion cubic metres of gas per year. However Turkey, whose relations with Moscow have

warmed considerably in recent years, is also talking with Russia on a new Turkish Stream pipeline that will pump Russian gas under the Black Sea to its own territory, as well as to Europe. Georgian President Giorgi Margvelashvili said during his visit to the city of Kars yesterday, where the foundation for Trans-Anatolian Natural Gas Pipeline was laid that Georgia, Turkey and Azerbaijan have shown how it is possible to create a model of successful regional cooperation and not only in the energy field. According to him, the project will be successful, because there are already examples of successful cooperation between the three countries in some areas. “The South Caucasus pipeline expansion is an integral project of the Shah Deniz Phase 2. It is necessary to note that billions of dollars have been invested in the development of both. We expect at least 2 billion dollars to be invested in Georgia through this project. The South Caucasus pipeline expansion will supply additional gas to Georgia. The project will create more jobs in the country, the Georgian port and railway infrastructure will be further developed and new opportunities will be created for small and medium business development. The project will contribute significantly to the regional and European energy security, which is extremely important, given the complicated unstable political situation,”- said the President. According to Margvelashvili, Georgia has always been a gateway between Europe and Asia, performing the most important function for centuries. In his speech the President focused on the successful trade-economic relations between Georgia, Turkey and Azerbaijan. According to him, Turkey and Azerbaijan were the first and second trading partner countries respectively for Georgia last year. In addition, the President said he believes there is even more potential for deepening the trade-economic relations between the three countries. Agenda.ge

EU DEEPENS COOPERATION WITH GEORGIA, SIGNING NEW STRATEGIC DOCUMENT

uropean Union (EU) member countries are ready to deepen their level of cooperation with Georgia, states a new document signed today between Georgia and the EU. The EU proposed a new document of Strategic Framework for Customs Cooperation to Georgia today at the first session of the sub-committee on customs. The document was signed by Georgia’s Finance Minister Nodar Khaduri and European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici. Strategic Framework for Customs Cooperation includes three main directions: A safe and flexible trade corridor, risk management and investing in customs modernisation. A similar document has already come into force in Moldova and Ukraine. Minister Khaduri assessed this fact as a “historical moment” for the dynamic development of Georgia’s trade relations with the EU. “This initiative once again proves that the EU supports Georgia. It proves that both Georgia and the EU strives

for Georgia’s political, economic and social integration with the EU.” “The Strategic Framework for Customs Cooperation will be a practical instrument for Georgia to overcome the economic problems and negative foreign factors and to continue its rapid growth,” Khaduri stated.

“We will do our best to make more sustainable all the success of the customs sphere, to establish communication with the business society and encourage them to use all the resources for implementing EU standards in their activities,” he said. Agenda.ge

GEORGIA MAKES “THE BIGGEST ADVANCES” OF EAP COUNTRIES TOWARDS EU INTEGRATION

eorgia has shown “the biggest advances” towards European integration of all six Eastern Partnership (EaP) countries, notes the latest report that charts the EU integration progress of EaP countries. Despite Georgia facing ongoing pressure from Russia, the country had made a marked improvement in a number of areas, and the country “continued to have the best business climate in the region”, stated the European Integration Index for Eastern Partnership Countries 2014 report, released last week. Georgia was the second best performer overall [behind Moldova], and the country that showed the biggest advances in the 2014 Index.” The report measured each country in three dimensions – Linkage, Approximation and Management. Using several measurement tools, the Index scored each country based on the progress it had made and the current situation in each country. “As in 2013, Georgia improved its scores in all three dimensions. Georgia remained third in Linkage after Moldova and Ukraine. In this dimension, its Trade and Economic Integration with the EU remained weak – on the same level as Azerbaijan,” stated the Index. “Georgia climbed to share first place with Moldova in

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Approximation, registering the highest improvement among all six countries in Deep and Sustainable Democracy, with particularly marked improvement in elections and human rights. “Moreover, it continued to have the best business climate in the region and performed best in meeting the DCFTA requirements. Georgia leaped ahead of Moldova to become the leading performer in Management of European Integration. This resulted not only from the 17 signing of the Association Agreement, but also the development of a communications strategy for EU integration and university support for EU research.” The Index, produced by the Eastern Partnership Civil Society Forum with partner organisations, revealed the six EaP countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) were on different paths towards European integration. By analysing the recent history of each country and the external pressures facing each nation (particularly Russia’s “destabilising” influence), the Index attempted to explain the different paths each of the six EaP countries have chosen – from pursuing EU integration or shifting their perspectives towards accession to the Eurasian Economic Union (EEU). “The 2014 Index shows a mixed set of results for the six

Eastern partner countries in the period covered (January 2013 - June 2014),” stated the report. On the one hand, Moldova and to an even greater degree Georgia continued steady progress in integration with the EU. On the other hand, Armenia and Ukraine experienced a stop-and-start trajectory, and a range of internal and external challenges. “Ukraine, alongside Georgia and Moldova, proceeded to sign and ratify an Association Agreement with the EU, while Armenia instead abandoned the agreement and prepared to join the Eurasian Economic Union (EEU) with Russia, Belarus and Kazakhstan.” Based on each country’s ambition and current situation, the Index offered recommendations specific for each nation. It noted 2014 was a challenging year that was a “turning point for some, insecurity for all”, particularly in light of Russia’s “destabilising” actions. In Georgia’s case, the biggest challenge facing the nation in 2015 surrounded its goal to have visa free travel with the EU – something Moldova achieved in late 2014 – and whether the EU Council would approve this following completion of the second phase of the Visa Liberalisation Action Plan. Agenda.ge

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

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ECONOMIX

March 23, 2015 #92

caucasian business week

MONTHLY FOOD BASKET FOR NO MORE THAN 160 LARIS?

ational Agency of Statistics Geostat reports that the minimum living wage in Georgia has been lowered by 0,2 GEL since January, to comprise 160 GEL total. This is a sum that a “working age male” is expected to live a healthy life by feeding himself. Geostat writes: “Subsistence minimum is defined on the basis of a food basket. The minimum food basket represents a basket of defined quantities of food products and contains the amount of food that is physiologically required (proteins, fats and carbohydrates) for a working age male to lead a normal life and have the ability to work.” So that sum that guarantees a healthy working male’s needs met, according to the National Statistics Agency, can freely be 160 laris. On its website GeoStat writes “The National Statistics Office of Georgia calculates the subsistence minimum indicators based on the minimum food basket defined and established in accordance with the decree No 111/N, dated 2003May 8, of the Minister of Labour, Health and Social Affairs of Georgia.” After stating this GeoStat goes on to present its table of the “Recommended Composition of Minimum Food Basket,” which indicates different food groups and the calories contained in them. According to GeoStat 2,300 calories is an amount of energy that a working age male needs to consume per month in order to survive and function successfully. However, this is not all of it. The news is that out of the 160 GEL the cost of non-food products amounts to only 30% of the sum. Hence, around 48 laris should be enough for one individual to obtain not only monthly necessary clothing, no matter the season, but also such items of everyday hygiene, such as soap, shampoo, razor blades, etc. Amid depreciation of national currency that ac-

GLOBAL INVESTORS CONTRIBUTE TO GEORGIA’S NEW HYDRO POWER PLANT

tively started in October of last year and is still ongoing, it is unclear how the minimum living wage figure would not only not increase, but also decrease by 20 tetris.

CBW comprised a table of foods and their prices in a local supermarket. Take a look at the Infographic and think how adequately would 160 laris get you through this month.

GEORGIAN GOV’T SUPPORTS COMPANIES AFFECTED BY CURRENCY CRISIS

tate tender-winning companies affected by the devaluation of the national currency against the US Dollar will be compensated for the currency crisis, announced the Georgian Gov-

ernment. Despite the current challenges facing many businesses, the country’s leaders are encouraging companies to continue implementing infrastructural projects, and are offering privileges in return. During today’s press conference, Georgia’s Economy Minister Giorgi Kvirikashvili said many companies had been affected by the currency crisis in Georgia. He explained that some companies had chosen not to complete their projects with state-invested money that was offered

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before the crisis. “We have got signals that companies are not starting their [infrastructure] activities as they preferred to lose the guaranteed money instead of starting the activities and losing [their own money],” Kvirikashvili said. In order to solve this problem and encourage companies to continue working on various projects, the Government decided to compensate the difference resulted by the currency devaluation. “First of all, I am talking about those companies which are involved in infrastructural, municipal projects. At the same time, the companies involved in projects which are financed by international donor organisations will also benefit from the privileges,” Kvirikashvili said. Georgia’s Economy Minister warned this offer

should not be exploited and only companies that were eligible for the offer were ones that had been affected by the national currency crisis. Kvirikashvili announced appropriate legislative changes would be made in the near future.

GEORGIA’S GDP MAINTAINS SUSTAINABLE GROWTH

eorgia’s market economy is continuing to maintain sustainable growth, reveals the National Statistics Office of Georgia. Latest Geostat data concluded the country’s economy grew almost five percent last year – a positive sustainable trend compared to earlier data. Figures released today revealed the country experienced a 4.8 percent growth in GDP (Gross Domestic Product) in 2014, while the GDP deflator increased by 3.8 percent compared to the previous year, claimed Geostat.

Looking ahead, Georgia’s economy was estimated to grow by 3.5 percent in 2015, reported global rating agency Moody’s. The agency’s latest report saw Georgia retain its stable outlook on its sovereign rating, at ‘BB-’, and retain its ‘positive’ outlook. Geostat noted in 2014, Georgia’s GDP at current prices totalled 29.187 billion GEL – up 8.7 percent compared to 2013. The statistics agency noted the largest share in the sectoral structure of GDP was held by trade services (17.4 percent) and industry (17.1 percent), followed by transport and communication services (10.5 percent), public administration (9.9 percent), agriculture, forestry and fishing (9.2 percent),

construction (7.3 percent) and real estate, renting and business activities (6 percent). Real growth was experienced in a number of sectors, including construction (13.5 percent), financial intermediation (10.0percent), real estate, renting and business activities (8.5 percent), communication (7.1percent), transport (6.4 percent), and trade (6.1 percent). A decrease in growth was experienced in a couple of the country’s economic activities, mainly in electricity, gas and water supply (-2.8 percent), Geostat reported. As well as releasing complete 2014 GDP data, today Geostat also published Georgia’s GDP data for Q4 (fourth quarter) of 2014, which revealed GDP amounted to 1.8 percent year-on-year, while the GDP deflator increased by 4.4 percent. The nominal GDP totalled 8.176 billion GEL. In Q4, the largest share of GDP in terms of economic activity were held by trade (17.8 percent), services and industry (16.6 percent), followed by public administration (11.7 percent), transport and communication services (9.5 percent), agriculture, hunting and forestry, fishing (8.2 percent) and construction (8 percent). Real growth was registered in the real estate, renting and business activities sector (13.7 percent), mining and quarrying (11.4 percent), communication (10 percent), financial intermediation (8.7percent), hotels and restaurants (6.5 percent), education (3.9 percent), and construction (3.1 percent). A decrease in growth was experienced in the country’s manufacturing sector (-6.9 percent), electricity, gas and water supply (-6 percent) and community, social and personal service activities (-3.7 percent), concluded Geostat.

FC, a member of the World Bank Group, the Asian Development Bank (ADB), and the European Bank for Reconstruction and Development (EBRD) are helping Georgia tap its hydropower potential and achieve energy self-sufficiency by investing in the construction and operation of the Shuakhevi hydropower plant, EBRD reported. The $250 million debt financing arranged by IFC represents the largest-ever private hydropower investment in Georgia, consisting of two $90 million long-term senior loans, one each from ADB and EBRD, and $70 million from IFC. IFC’s total investment in this project is $104 million, which includes a $34 million equity investment in the project company, Adjaristsqali Georgia, a joint venture between India’s Tata Power and Norway’s Clean Energy Invest (40 percent each), and IFC (20 percent). The Shuakhevi plant will satisfy Georgia’s electricity demand during winter, reducing dependence on imported fuel and increasing renewable energy output. It will also foster cross-border electricity trading at other times of the year by exporting electricity to Turkey through a transmission line financed by EBRD. The project will benefit local communities by helping create jobs, boosting municipal incomes, and upgrading area roads. “Through the strong partnerships fostered with the Georgian government, our equity partners, Tata Power, IFC, and the other lending institutions, we are realizing the renewable energy potential of Georgia,” said Baard Mikkelsen, Chairman of Clean Energy. “This project demonstrates that non-recourse cross border financing is available for greenfield hydro projects in Georgia, and will be important for the development of the sector and Georgia.” Anil Sardana, Managing Director, Tata Power, said: “I would like to thank the Government of Georgia for their support in exploring Georgia’s huge hydropower potential. We are also grateful to our strategic partners, Clean Energy and IFC Infra Ventures, for putting us on a strong footing. We are confident that the potential will be realized with exemplary clean governance and speed of action.” Michael Barrow, ADB Deputy Director General for Private Sector Operations Department, said: “The project will promote regional cooperation and generate additional revenues for Georgia through energy trade. This groundbreaking renewable energy investment highlights the important role ADB plays in leveraging support for energy security and environmentally sustainable growth in the region.” Some $15 million of ADB’s $90 million in financing will be provided by the Canadian Climate Fund for the Private Sector in Asia, funded by Canada’s government and administered by ADB. Nandita Parshad, EBRD Director for Power and Energy, said: “It is particularly fulfilling to see private investment in energy generation projects stimulated by EBRD’s initial investment in the Georgia-Turkey cross-border transmission line. It is a prime example of how the bank facilitates private sector investment as part of its mandate to help countries transition to open market economies.” Wiebke Schloemer, IFC Regional Industry Head of Infrastructure in Europe, Middle East and North Africa region, said: “We continue to support the Georgian government’s efforts to tap the country’s full hydropower potential by jointly developing worldclass projects with private companies and bringing in important international players, like Tata Power. The Shuakhevi project is expected to strengthen investor confidence in Georgia and stimulate more private sector investment in the sector.” The project is the first hydropower project in Georgia certified by the United Nations Framework Convention on Climate Change for carbon emission reductions. It is expected to produce about 450 gigawatt hours of power annually and reduce greenhouse gas emissions by more than 200,000 tons per year. The project will develop the 187-megawatt Shuakhevi hydropower scheme, consisting of the Shuakhevi and Skhalta hydropower plants located in the Adjara region, in southwest Georgia. Work on the plant began in September 2013 with a target to start producing electricity in 2016. IFC has supported the project since its early development, in 2011, through IFC InfraVentures, together with Clean Energy Invest. India’s largest integrated power company and a pioneer in hydropower generation in India, Tata Power, came on board in 2013. IFC’s investment will be complemented by World Bank financing of the power transmission line, which will connect the plant to Georgia’s national grid and improve power supply to the Adjara region.

INTERVIEW

caucasian business week

VAT PAYERS SHOULD NOT PAY TAX ON PROFITS REINVESTMENT

Interview with EFREM URUMASHVILI, a representative of Nodia, Urumashvili and Partners company. -How would you appraise the government’s initiative for exempting investors from profits tax payment? -I, indeed, welcome this initiative introduced by Economy Minister Giorgi Kvirikashvili and I agree that in the future profits tax should not be charged on invested profits, but we should also know the parameters, under which invested profits will be freed and which category of taxpayers will enjoy this preference. I believe VAT payers should not pay tax on profits from reinvested profits. This category bears the heaviest burden of taxation and such a decision will bring several positive effects to the economy. This decision will lower financial risks to profits tax payers in the profits calculation process. They will not bubble costs and cut revenues. They will increase business capitalization through reinvested funds. Trust me, profits tax basis will double or triple in several years. Estonia is a good sample to this consideration. This country has exempted the business sector

from profits tax and introduced a tax on dividends. This decision has sensibly stimulated the Estonian economy and I am sure similar approaches on the ground of domestic peculiarities will significantly boost the Georgian economy. -Do you think the profits tax removal will benefit either the country or the business sector in the long-term period? -Total revenues from profits tax is 700-800 million GEL. After this decision, the ratio of reinvested profits is expected to halve to 350-400 million GEL to the state budget, but I assure you the real effect will be higher 5 times and 10 times in the coming years. The government can replenish the deficit by taking internal debt or through state bonds. I assure it is absolutely justified to take such financial risks today for Georgia’s future economic recovery and for further intensification of economic processes in Georgia. - Do you think the economic team has timely joined the resolution of two main aspects: privatization of state assets and liberalization of taxes? How would you appraise the relation

between the Authorities and the business sector, in general? - I have discussed the issue with the Business Association. I discuss these issues with my company clients every day. I would like to say nothing is delayed today. It is timely, it is necessary and it must be done. Both directions will bring additional revenues to the country. State-owned assets should be handed over to investors to inspire new economic processes and activate business processes through state property privatization. This direction is very important and necessary for our economy. -Do you find the government’s attitude to regulations logic and adequate amid external global factors? -According to my information from my clients, I would like to note an introduction of regulations is one of the requirements of the associated membership agreement, but this requirement does not belong to the category that must be satisfied unconditionally today. We can adopt the regulations today, but put them into force in 2018, 2019 or 2020. The association agreement does not oblige us to enact these regulations this year. I am an economist and I believe all regulations should be enacted as late as possible. The less regulations, the higher stimulus for economic development and the lower taxes, including the excise tax. This will generate higher stimulus. -How adequately has the government increased excise taxes to beer and tobacco manufacturers? -It is quite difficult to discuss the issue in this respect, because beer production is one of the major and priority fields in Georgia. Therefore, in this concrete situation a growth in excise tax on beer production was not justified. -As to the budget revenues, don’t you think the government is trying to satisfy the association agreement requirements as soon as possible. There are many other interesting directions and the government can make focus on these directions, including transportation sector, agriculture sector. Nevertheless, the Authorities have made focus on the sector that transfers major payments to the state budget. -I suppose the Authorities have followed pragmatic considerations when taking this decision, because this sector controls a certain segment on

March 23, 2015 #92

the market and the proceeds from this sector is considerable. This decision seems to be compensating budget incomes through growth in excise tax. As to the regulations, I reaffirm the country must adopt these regulations under the association agreement, but this does not signify the regulations be enacted immediately today. According to my information, the association agreement includes some compacts. -Your company serves financial and development companies, various business companies on investments-related issues. Do you think the economic team should prioritize a development of industrial zones, while the previous Authorities have showed less success in this direction, for example, Poti free industrial zone? -I absolutely agree with you. Our country has got full potential to develop free economic industrial zones as one of the priority directions. I can substantiate my assertion. Our country has got convenient location, practices low taxes and regulations, is free of corruption. Moreover, electricity price is quite low. All these parameters make preconditions that Georgia become a regional hub in terms of logistics and in terms of free industrial zones. Namely, I believe the country should develop free IT zones as one of the priority directions. IT services require low taxes and we have got a convenient location. Consequently, the status of FIZ should be revised and their quantity should increase. -I would like to ask you about the board of appeals. According to the PricewaterhouseCoopers’ report, a major part of the 100 respondents backs a reformation of the board of appeals. What are the problems in this body? -My company frequently applies to the board of appeals. The current system of the board consists of three stages: the mediation board of the audit service, the board of appeals of the Revenue Service and the board of appeals of the Finance Ministry. An absolute majority of my clients will affirm today the board of appeals is a quite efficient body compared to the previous period and we finish a major part of the disputes at the board of appeals of both the Finance Ministry and the Revenue Service. It would not be bad if some simplified innovations are introduced.

“WE HAVE ONE OF THE MOST DIVERSE PORTFOLIOS AMONG THE LOCAL BUSINESS CONSULTING FIRMS” Interview with a business consulting company MBConś founder Lasha Antadze

MBConś is a Georgian-based market research and business consultancy firm, with offices operating in Tbilisi and Batumi. The company assists its clients with evaluating the local market for a business endeavor to be successful in Georgia. MBConś is the official member of Georgian Farmers Association and a partner of Agricultural Project Management Agency. - Tell our readers a little bit about your company and what services it provides to its clients, please. - MBConś is a business consulting company started in 2012, we are working with various business industries and offer our clients numerous services such as: raising capital, writing business/investment plans, financial modeling, market research and feasibility studies. We as well provide consultations at the start-up phase of business ideas to optimize them for becoming suitable to our market. In addition, at the commencement stage we offer our beneficiaries their historical financial analysis

to measure the approximate capacity of funds that could be allocated from different institutions such as: banks, state programs and existing funds. - Do your services only cover the initial stages of the project, or do you continue assistance once the business is set up and functioning? - Our service is more tailored for the start-up phase, or during the business expansion, but we do have clients, that we helped to allocate funds and now after the launch of their business we give recommendations towards strategic decision making, doing their their sales and financial analysis on a daily basis. - MBConś cooperates with Agricultural Projects Management Agency, which is the Ministry of Agriculture’s agency that provides affordable loans to agricultural start-ups. How far does your cooperation extend? Would you say MBConś can provide for its clients in this sphere more than other consulting firms would? - Under this state program, grants and subsidized loans are issued for agricultural factories. We are the contractors of the Agency for more than a year now and our competences are to provide market evaluation and business plans. The projects are directly forwarded to our company from the Agency and all the costs for the service are covered by them, so the beneficiaries are not additionally charged. In terms of the competition, I can say that we are the company that has the biggest number of Agro projects conducted so far. We as well have worked with the projects that are absolutely new and revolutionary for the Agro industry, such as: cultivation of rice and blubbery in Georgia. I think we have the most diverse portfolio among the local consulting firms. - MBConś portfolio is very diverse, indeed, with

clients ranging from industries such as agriculture, energy sector, tourism and pharmaceuticals. Which area would you say is your company’s forte? - I would not say that there is a particular field that we concentrate on. Our service is universal and what we offer, the methodology of it, easily fits to any industry or product. The vast majority of projects conducted in Agriculture, Hotel industry and Manufacturing is due to the market tendencies and demand that exists because of the state support and interests of the foreign investors. - Foreign investment is one of main driving forces of the Georgian economy. How do you go about attracting foreign investors? Would you say MBConś has made a significant contribution to the local business activity in this regard? - At the initial phase of our consulting business, major part of our clients, were foreign investors whose interests were to invest in local hotel and

restaurant businesses. By then, we had a major project of a 4-star hotel, in Batumi, investment ranging around 23 million USD. But since the governmental change and a shift towards statesupported programs in Agriculture and Manufacturing (where there are restrictions for foreigners to invest), the proportion of FDI’s has lowered. Today we still have several ongoing foreign projects. On a local level we already have contributed in opening of 12 new manufacturing factories around the country. In the near future they will all make a significant contribution to the local community and business activities in Georgia. - What would you say are the specificities of Georgian market that you find is often unfamiliar to them? - It is the banking system, permits and state regulations that foreign investors are most unfamiliar with. Our company, of course, provides them with solicitation towards settling these issues as well.

March 23, 2015 #92

ECONOMIX

NATIONAL COMMUNICATIONS COMMISSION – THE WEALTHIEST STATE BODY

he Georgian National Communications Commission (GNCC) is the wealthiest state body in Georgia, the Young Barristers nonprofit organization asserts that has published a report on monitoring of the GNCC activities. According to the report, GNCC is Georgia’s wealthiest state body that is not financed from the state budget, but it collects colossal funds from payments of regulatory fees in the communications and broadcasting sector. According to the preliminary report, the 2014 revenues marked 4 815 534 GEL. Nino Isakadze, a defense lawyer for the Young Barristers, says the organization has analyzed wages and bonuses of the GNCC members and the GNCC chairman. According to the requested information, the GNCC Chairman’s monthly salary makes up 13 312 GEL, while GNCC members take 12 648 GEL a month. The organization has publicized information on salaries and bonuses of Irakli Chikovani, an ex chairman of GNCC (up to April 2013), and Vakhtang Abashidze,

a current chairman of GNCC. The information also reveals revenues of GNCC members Sopio Britanchuk, Akaki Sikharulidze, Irakli Moseshvili and Kakhi Bekauri. The report covers not only the 2014 period”, Isakadze said. Since April 16, 2014 GNCC Chairman Vakhtang Abashidze has taken bonuses of 23 966.16 GEL as of August 1, 2014. Irakli Chikovani, the GNCC chairman in 2009-2013, received revenues of 235 221.84 GEL in 2012, including 168 595.04 GEL in salaries and 66 626.80 GEL in bonuses. GNCC member Sopio Britanchuk has taken 247 908.78 GEL revenues in 2013, including salaries of 151 783.18 GEL and bonuses of 96 125.60 GEL. Akaki Sikharulidze has taken 196 549.31 GEL in 2012, including 151 796.11 GEL in salaries and 44 753.20 GEL in bonuses. Irakli Moseshvili has received 247 908.78 GEL in 2013, including salaries of 151 783.18 GEL and bonuses of 96 125.60 GEL.

Kakhi Bekauri has taken 42 057.96 GEL bonuses as of August 1, 2014. The Young Barristers has also requested information on salaries, bonuses and allowances of heads of eight structural departments, but GNCC has not issued information. Under the legislation, the mentioned information may be publicized by consent of those heads, but GNCC asserts despite multiple efforts those officials have not given such consent. The Young Barristers urge the Georgian President and the Parliament to show a position of principles towards GNCC, because there are serious questions concerning the GNCC efficiency and fulfillment of legal obligations. GNCC fails to cope with the four main tasks and goals: prevention of monopolistic activity in the field of electronic communications and broadcasting, creating equal and just competitive environment, attracting modern technologies, providing active cooperation with international organizations to this end and protection of legal rights of consumers. GNCC influence and monitoring for creating antitrust regulations and competitive market are only of symbolic character. According to the Young Barristers, the legislation determines GNCC as a legal entity of public law and a constant independent state body that is liable to submit a report on its activities to the President and the Parliament, but public discussions and even new legislative regulations may be introduced to increase the GNCC accountability, because its revenues come from payments by authorized bodies and licensees in the electronic communications and broadcasting field and these payments should serve the consumer rights and interests and GNCC must provide the environment commensurate to these payments”, Nino Isakadze said.

WRITING OFF TAX ARREARS WILL PROMOTE SMALL AND MEDIUM-SIZED BUSINESS SECTORS

iorgi Kapanadze, a vice president for the Association of Young Financiers and Businessmen (AYFB), has held a news conference at the press club of the Reporter news agency. The Georgian Finance Ministry’s initiative for writing off tax arrears from a certain category of taxpayers will stimulate and promote the business sector, Giorgi Kapanadze told the news conference. As reported, the initiative calls for writing off: 1) Tax arrears that arose before January 1, 2005, but remain unpaid prior to enactment of this initiative, if the indebted companies have halted activity. 2) The fines charged on recognized tax arrears that arose before January 1, 2009 and the recognized fines charged before January 1, 2009 if the company has promised to pay the recognized tax and if this entity has halted activity before the initiative enactment. 3) The fines imposed or charged before January 1, 2013

for having violated regulations for a use of cash registers, as well as the fines that remain un[aid before the initiative enactment. “The third article is very important that mainly refers to operating companies and small and medium-sized business sectors. The sector is reportedly facing major challenges and the state support will be of crucial importance for them”, Kapanadze said. Currently, the state has written off tax arrears of over 334 million GEL from over 3500 entities. Moreover, according to the Revenue Service statement, this decision will refer to over 20 000 business companies and in whole, over 1 billion GEL tax arrears will be written off, Kapanadze added. “AYFB is sure these debts, in reality, are irremediable and this is a heavy burden on the business sector, while the budget will lose nothing by writing them off, because these business entities could not pay these debts for many years. The companies that have halted opera-

not refer to only one field of the business sector. This issue concerns all directions, but particular tendency is discerned in relation to oil products distributor companies. We believe the Authorities have to initiate certain changes in this direction, including system changes and revision within controlling bodies in terms of audit. First of all, this refers to a further liberalization of auditing practice, optimization of calling business sector representatives to the controlling bodies and frequency of audits, reduction of tax inspection deadlines to reasonable terms, Kalandadze noted. The problem deepens by continuous disputes over adequacy of oil products prices in Georgia. Amid the existing challenges, the Authorities should determine priorities and resolve the issue as soon as possible, Kalandadze added. “The issue with intensity and deadlines of an audit remains relevant for the business sector. We understand

HEADLINES GEORGIA’S FINANCE MINISTER POSITIVELY REVIEWS FEBRUARY’S BUDGET

eorgia’s Finance Minister Nodar Khaduri says February was a “very promising month” in terms of the country’s budget development. Khaduri announced the turnover of VAT (value-added tax) payer enterprises had increased by 15.5 percent in February, and reached 3.9 million GEL.

JAPAN WILLING TO SHARE AGRICULTURAL KNOWLEDGE WITH GEORGIA

Japanese government agency who assists economic and social growth in developing countries is interested in helping Georgia develop its agricultural, tourism and eco-tourism sectors. Mino Sato of the Japan International Cooperation Agency (JICA) announced the organisation was interested in supporting Georgia’s development while meeting Georgia’s Deputy Minister of Agriculture Levan Davitashvili

MELCOLOT SHAPES BETS ON CASINO IN GEORGIA

ong Kong-listed company MelkoLot Ltd is coordinating investments for a new casino project in Tbilisi, Georgia’s capital. A company controlled by Melco Crown Entertainment Ltd is in the process of obtaining a gaming license for Tbilisi under a wholly owned subsidiary, called Express Wealth Enterprise Ltd. The Express Wealth entity is what’s known to investors as a special purpose vehicle or ‘SPV’.

GEORGIA LINKS CASPIAN SEA TO EUROPE WITH GAS DELIVERY

ork has begun today on a new gas pipeline that will travel through Georgia to better connect Europe with gas from the Caspian Sea, thus reducing dependence on Russian gas. Georgia’s President Giorgi Margvelashvili visited Turkey’s Kars region today where he and his Turkish and Azerbaijani counterparts attended a ceremony to mark the beginning of the $10 billion USD Trans-Anatolian Natural Gas Pipeline project (TANAP).

GEORGIA’S REGIONS IN SEARCH OF BEST BUSINESS IDEAS tion because of these debts will be able to continue activities and this step will boost economic development and make positive affect on tax revenues” Giorgi Kapanadze said.

EXPERTS EVALUATE CURRENT PROBLEMS BETWEEN THE AUTHORITIES AND BUSINESS SECTOR

ndependent experts have held a news conference over the existing problems between the Authorities and the business sector. Expert in economy Levan Kalandadze and lawyer Imeda Dvalidze have overviewed problems before businessmen. The independent experts urge the Authorities to improve the auditing system and shorten deadlines. They also call on the competition agency to timely finish oil products market research. Today the Authorities have minimized the past’s erroneous practice of sealing up enterprises and cessation their operation. At the same time, last period businessmen express more and more pretences against intensified audits and extended deadlines, they noted. This problem equally concerns all directions of the business sector, but it is the most sensible in relation to oil products importer and distributor companies, Levan Kalandadze said. Intensified audits and breached deadlines are problematic issues. This problem does

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there are exceptional positive decisions and cases, but the system, in general, suffers from problems. The main task should be an establishment of general principles. I expect the executive power to start working on the issue. I have no illusions the issue will be resolved in one day or two, but the inauguration of communication may commence today and the competition agency can determine priorities today”, Levan Kalandadze noted. Businessmen express more and more regrets over intensified audits and deadlines of inspections, lawyer Imeda Dvaladze said. There are problems with appealing the decisions too, where appeal deadlines are violated, he added. “The problems are related to the deadlines and intensified audits. Appealing deadlines are also violated. There are many reasons behind these violations. First of all, this is related to a lack of human resources, magistrates and numerous cases. These problems must be resolved. We believe the government should take efficient steps to this direction”, Dvaladze said. The business sector shows willingness for active communication and thematically cooperation with the Authorities. I mean tax offices, the competition agency, business ombudsman’s office and other controlling institutions, he added. “Correct, efficient and timely use of the existing opportunities will considerably improve the business and investment environment in the country”, Imeda Dvalidze said. The experts have also talked about the competition agency and urged it to finish the oil products market research as soon as possible to introduce due inferences to the society. Publicity and transparent discussion of the report will cast light on issues concerning the oil products market and oil products prices in Georgia, he concluded.

reative and unique business ideas from Georgia’s regions are starting to be revealed as a way to develop and support entrepreneurship, encourage creation of new enterprises and increase export potential in the country. Samtskhe-Javakheti and Lower Kartli are the first regions of Georgia where a competition to find the best business ideas has been launched. Hyatt Regency luxury hotel ahead for Tbilisi An international hotel chain will open its doors in Georgia’s capital city and offer luxury service that can cater for hundreds of guests. After Berlin, Deli, Dubai, London and Paris, Tbilisi will soon be the latest member of the Hyatt Hotels Corporation family, with a Hyatt Regency Hotel set to open its doors in central Tbilisi in 2017.

BUSINESSMAN MR. KHAZARADZE PLANS TO BUILD A HOTEL AND SHOPPING CENTER IN BATUMI

former machine factory area in Batumi has been sold for GEL 10 million. It is reported that the hotel construction is planned on the area, the project will be carried out by the business group belonged to the businessman, “TBC Bank” founder Mamuka Khazaradze.

TUSHETHIAN SHEEP WILL BE SHAVED WITH MECHANICAL DEVICE FROM SPRING

he Czech Development Agency has bought 24 mechanical device to the cooperative “Tushethian Golden Fleece”. However, they had to shave the sheep with hands before, which is a very hard process. Sheep has not been shaved mechanically after the Soviet Union. There are not any mechanical shaving devices within the whole country, so the sheep is shaved merely with hand scissors. The Czech Development Agency has paid 65 thousand EUR for the British mechanical shaving devices and delivered them to the cooperative under the common usage.

BUSINESS

caucasian business week

March 23, 2015 #92

INSURANCE SERVICE TARIFFS TO RISE IN GEORGIA

GOVERNMENT TO FREE EINVESTED PROFITS FROM TAXATION

einvested profit will be exempt from taxes for 3 years from June 1, 2015. The corresponding initiative was presented by the Parliamentary Committee on Sector Economy. The draft states that its purpose is to promote in-

vestment and develop production. This measure is considered as one of the mechanisms to attract investors and develop export the government begins to develop due to the devaluation of the national currency and economic crisis. As reported, one of the causes of the crisis is the decline in exports and insufficient investment.

MOBILE PHONE SALES DECREASED

ue to the devaluation of the lari, sales of mobile phones have decreased in Georgia - household appliance stores say. Marika Mkheidze, chief accountant at “Žumer Georgia”, states that the company’s management is trying to compensate the loss of income from sales caused by the national currency’s depreciation by saving costs. “Now everyone is waiting for the stabilization of the lari, and at this stage is not in a hurry to buy,” - she says. Currently, the network “Žumer” has 10 stores and two wholesale warehouses. In total 80 people are employed in the network.

The dealer center “Nokia” speaks about a 35% reduction in sales volumes. According to the head of the center Bondo Goletiani, the main reason is the devaluation of the lari and a 30-40% hike in prices. “A long-term devaluation may bring a small business to bankruptcy. At the moment, we doesn’t face such danger, but the overall situation is disturbing,”- he notes. The mobile phones network “Moby” is also facing the challenges and even was forced to reduce the number of objects from 11 to 8. In addition, the Belarusian network of electronics stores “Tsifrovik” has left the Georgian market because of the financial problems.

COMPETITION AGENCY TO EXAMINE GAS FILLING STATIONS MARKET

he Competition Agency is studying the current situation in the autogas market. The market survey has launched by order of the Agency’s Chairman dated February 6, 2015 on the basis of the fact of the alleged violation on the auto gas market. The Agency is required to study whether cartel deals among the operators has occurred in the market . The Consumer Rights Protection Society applied to the Agency after in August 2014the product price hiked by GEL 0.05. What is the position of the autogas companies on the issue, will they cooperate with the Agency, whether cartel deals is reality on the Georgian market? Vakhtang Chakhnashvili, a representative of TRADE STONE IBERIA company which owns 50 percent of shares in the gas station “GasWill” says it would be good, if the Competition Agency was interested in the issue of unhealthy competition in the field. According to him, the country’s

gas stations are not controlled. State doesn’t carry out any supervision, equipment installed in the stations is not checked whether it complied with the standards. In Chakhnashvili’s opinion, the quality of the gas container installed in the car should be checked whether safety standards are observed. Today the vehicles are charged under high pressure that can cause an accident. As Chakhnashvili notes, what cartel deals we are we talking about, when prices in the sector are not regulated and there is a total freedom. “Today 15 different prices are set at the gas stations. For example, our company owns 4 gas stations where different prices are set. What deals can we talk about ? We regulate the price depending on the location, “- Chakhnashvili adds. In Chakhnashvili’s words, everybody knows that due to the lari’s depreciation, the auto gas companies’ profit margin decreased by GEL 0.20, while the price rose only by GEL 0.05-0.07.

COMPETITION AGENCY TO EXPLORE PHARMACEUTICAL MARKET

he newly established Competition Agency continues to study various sectors of the economy in order to identify monopolies and cartel deals. For example, the Agency is currently studying the situation on the oil and coffee markets. “The process of receiving and processing information from the relevant services and business companies is ongoing. In addition, a public opinion is being studied with use of electronic means as well as through questionnaires, “- the Service’s head George Barabadze says. According to him, the Agency also began to study the flour market based on the request of the Bakery Producers Association. “In the process of market research the most important circumstances have been identified. In accordance with the law, after analyzing the information the Agency in a timely manner will prepare a report and develop recommendations, “- Barabadze notes. In his words, in the future the Agency may start

studying the pharmaceutical market. “We are now studying a lot of things, but we have not yet received any requests concerning violations of the principles of free competition on the part of any pharmaceutical company. Because of the specifics of the market, we didn’t begin to study the market on our own initiative, although it is possible that this issue will arise on the agenda, “- the head of the Competition Agency notes. In his words, a comprehensive analysis of the automobile market in the country is also planned to be carried out in the fall. Work will begin with a meeting with representatives of the automobile gas sector. “In February we began to study the auto gas market because of the information about the alleged violation of competition rules. This is primarily due to the fact that all companies selling auto gas simultaneously increased prices by GEL 0.0 5 in August 2014. For this reason The Autogas Users Association has applied for the study of a possible cartel agreement between the players of the market, “- Giorgi Barabadze notes.

ue to the devaluation of the national currency, prices are rising in the country in many areas - food, medicines, health care services. Because of this, health insurance is becoming more and more expensive - insurance companies have already increased prices, although slightly. A cause for a rise in prices of policies are increased prices for medicines and medical services. According to the Statistics Service, in 2014 prices in the health care system were constantly growing, and this trend continues in 2015. In January services increased by 7.3%, medical products and equipment rose by 15.8%. Medical services hiked in price by 6.4% in February, medical products and equipment rose by 11.1%, outpatient services – by 4.4%, hospital services - by 5.2%. According to the Business Development Director at the insurance company “Ardi” Mikhail Japaridze, pricing in insurance reflects the current state in whole health care system and the pharmaceutical industry. Accordingly, the company was forced to adjust price several times. “The dynamics of growth of prices for medical services had been observed before the devaluation of the national currency, but the lari’s

fluctuations created additional discomfort. In general, the current pricing in insurance is not keeping pace with the changes in exchange rates, and because of this the sector constantly faces challenges. Of course, it primarily relates to the companies for which the insurance is the main type of activity, rather than additional business today just a few such companies are operating in Georgia, “- he said. In his words, the company’s customers have no complaints, because they know that the increase in prices for services is associated with the constant rise in prices for medical services and medicines, and the company only responds to these changes. “Irao”and “Unison” insurance companies also confirmed price adjustments. They say in the company “Unison” that prices are linked to services of providers, respectively, if provider hikes prices , the insurance business is also forced to increase them. “GPI-holding” has not yet increase the prices at this stage. “We do not intend to adjust the prices of our insurance policies, but we are studying the situation on the market, and if the devaluation of the national currency continues, we’ll have to revise the prices, “ – they say in the company.

BUSINESSMEN PREFER BANKING PRIVILEGES TO ABOLISHING INCOME TAX

usinessmen prefer the introduction of bank concessions to the abolishing income tax announced by the government. As reported, some investors engaged in medical and agriculture spheres will be exempt from paying income tax. The changes are under development. Whether this change will be a real help for businesses and what do businessmen think about this initiative? Medical business takes the initiative of concessional lending. According to Givi Chikobava, Director at “Guidmed” clinic, for example, the medical field’s profits are not large, but if remain, they are used for reinvestment purposes. As a result, the medical business has not paid income tax for years because of law profits, as business uses these funds to upgrade the medical equipment. Chikobava notes that it will be good if the gov-

ernment thinks about granting preferential loans even to medical field, otherwise medical business cannot be developed. In Chikobava’s words, the company has suffered from the lari’s sharp devaluation, as took a loan in dollars. In Chikobava’s opinion, the government should develop a mechanism to resolve this problem. According to Nina Petrova-Dzneladze, a founder of the greenhouse agriculture “Nectar”, the implementation of this initiative will be really a great help for businesses but it would be better if the government helped in resolving problems related to loans. She notes that many entrepreneurs have taken out loans in dollars and now they are facing serious problems. Petrova-Dzneladze says that the National Bank’s initiative to restructure bank loans has not affected the company because it does not apply to limited liability companies (LLCs) and the companies involved in the preferential agro-credit program.

GEL RATE PLUNGE CREATES PROBLEMS TO FILBERT EXPORTERS An interview with Zurab Kukhalashvili, a representative of the Chamber of Commerce in the region of Samegrelo - What is a current situation in the nut business? - At this stage the national currency devaluation has brought great challenges in this industry. the difference between the purchase price in Georgia and wholesale price in Europe is evident. With regard to efforts by the state, in this respect there are no problems, everything possible is done to facilitate the work in this market. Currently, 40 nut processing enterprises are operating in Zugdidi and new plants with a new, modern equipment are opening every day. - What kind of new factories are opening? - A citizen of Canada has invested in the construction of the plant about 2 years ago. The Italian company “Ferrero” constantly invests in the business development. They have large plantations where the locals are employed, and the products are exported. The company constantly expands buying new lands across the region. - Whether the signing of a free trade agreement with the EU had an impact on the business? - Nuts from the region are mainly exported to Europe, and now export is likely to increase. Nuts in a small amount are exported to Russia and

Ukraine, but mainly to Europe. Now, procedures are simplified and accordingly, we should expect export growth. - There is much talk that decision-making has become more complicated in the country, bureaucratic barriers have increased. If such a tendency is being observed in your region and your industry? - From this standpoint, we have no problems. The export documentation we need is issued in one day. I have not heard that any barriers impede someone. - What is the situation in the region in terms of attracting investment? - The work on the definition of the company, which will build a port in Anaklia, is now coming to an end. In the autumn the first phase of the project will presumably start. It is very important for the region, because the port construction will provide for the arrangement of the other infrastructure. There is a serious progress in the tourist business - many caves, cultural monuments, old churches, etc are located in the region. Tours that will be cost effective in the near future are being arranged.

ECONOMY

March 23, 2015 #92

COST OF LIVING DROPS TO 160 GEL

ational Agency of Statistics reports, that monthly minimum living wage of a working men totals to 160 GEL, the figure is less by 0,2 GEL in February comparing to January, while exceeds by 4,7 GEL (155,3 GEL) to the data of February, 2014. The minimum living wage of average family amounts to 268,4 GEL in February, the index is grown by 7,8 GEL after February of the previous year.

The living wage has been the highest in October, 2014 and the rate has made up 160,6 GEL. National Agency of Sakstat calculates the index of minimum living wage according to the minimum food basket, which contains necessary quantity of food (including proteins, fats, carbohydrates and the minimum amount of calories) for the normal living of working-men. The share of food staff expenditure totals to 70% of the minimum living wage. The share of nonfood expenditure is defined by 30%.

TSKALTUBO RESORT DEVELOPMENT PROJECT GOES TO FRANCE

etevan Bochorishvili, Deputy Minister of Economy and Sustainable Development of Georgia participates in International Exhibition MIPIM 2015 in France. The event is annually held in Cannes and is the leading international real estate exhibition in Europe. It is attended by heads of companies, representatives of administrations of cities and regions, investors, developers of the mentioned sector, banks and other financial structures. Within the framework of the exhibition, Ketevan Bochorishvili delivered a presentation (country presentation), that was organized by COLLIERS INTERNATIONAL, leader in global real estate. The Deputy Minister of Economy and Sustainable Development of Georgia stressed the current business environment in Georgia and large investment projects in terms of real estate. Ketevan Bochorishvili discussed the current projects in Tbilisi. The issues regarding the regions, development of sea and mountain resorts and Tskaltubo Resort as a recreational center were also discussed. The presentation was attended by

caucasian business week

more that 40 foreign companies’ representatives, including investors, developers and investment funds. The Deputy Minister of Economy and Sustainable Development of Georgia discussed in details the investment potential of Georgia while talking with Courtney Fingar, the Editorin-Chief of fDi Magazine. “Why Investors should be interested in Georgia?” Georgia is the fastest growing country in the region, with good tourist potential, sea and ski resorts. Tbilisi establishes itself as a location for various events and regional conferences. Several important events are planned in Georgia this year, including Youth Olympic Games that will be held in summer, as well as EBRD annual meeting, during which about 2,000 business guests will arrive in Tbilisi” – Ketevan Bochorishvili said. Within the framework of the exhibition, Ketevan Bochorishvili met with the representatives of various foreign investment companies. Together with Ketevan Bochorishvili, representatives of Tbilisi City Hall and JSC Partnership Fund also take part in the international exhibition.

MOODY’S LEFT GEORGIA’S SOVEREIGN RATING UNCHANGED

he global rating agency Moody’s has left Georgia’s sovereign rating unchanged. Finance Minister Nodar Khaduri appreciated this fact as “very positive”. “Despite the difficult economic situation throughout the region, Moody’s has left Georgia’s sovereign rating unchanged at the level of BB and the country’s prospect of economic development is again assessed as positive,” - said the Minister. According to him, particularly noteworthy is the fact that in the context of the processes occurring in the region, the rating agency expects economic growth to reach 3.5% in 2015. Moody’s considers stable economic growth, progress in the development of political, economic and social initiatives, effective fiscal and monetary policies as determining factors. The Agency’s report says that the signing of the Association Agreement with the EU, and there-

fore, rapprochement with the European standards play an important role in the country’s subsequent development. A low level of public debt and quite favorable conditions for its service are also highlighted. At the same time, the report refers to the factors that may lead to the rating downgrade in terms of geopolitical situation, which may have an impact on the economic situation in the country and Georgia’s foreign policy positions.

PARTNERSHIP FUND SETS UP EXPORTS PROMOTION AGENCY

he Partnership Fund (PF) is working on the structure of the Export Promotion Agency to help exportoriented local companies. For this purpose, the Foundation has selected an international consultant - Italy’s export credit and project finance agency SACE. The PF along with SACE will work on the formation of the Agency’s structure as well as products and procedures in the next three months, which will contribute to the financing of exporters in Georgia. “This will allow us to create at least 4 products at the first stage with prospect for further development and expansion such as credit insurance, documentary lending, factoring operations, financial guarantees, “- Irakli Kovzanadze, Executive

Director of the Partnership Fund, states. According to Kovzanadze, all this will allow exporting companies to obtain financing for the local operations to expand the export market. The Foundation suggests that the Agency will be established and staffed within three months. The Export Promotion Agency will be established on the basis of the Partnership Fund as subsidiary. The SACE group offers a wide range of insurance and financial products: export credit, investment protection, financial guarantees, surety bonds and factoring. It operates in 189 countries, ensuring more stable cash flows and transforming the insolvency risks of 25,000 business customers into development opportunities. SACE has a rating of A- (Fitch). The group has 30 years’ experience, €70 billion of insured projects in 189 countries.

ARAB INVESTOR SUSPENDS 85 MILLION USD PROJECT IN GEORGIA

he incognito Arab investor has changed his mind to invest in Georgia. A 5-star hotel and apartments are likely not to be built on the left bank of the Mtkvari river. Therefore, the project worth $ 85 million will not be carried out. A business consulting company conducted a financial analysis of the project commissioned by the businessman interested in

investing in the hotel business. The information on the suspension of the project was provided just by this company. According to the company, the project was suspended at the stage of studying and in 2015 the investor did not appear in the country. The company doesn’t specify a reason for the investor’s decision, however, suggests that the client either failed to attract additional funds or was not satisfied with a current situation in the country.

NEGATIVE EXTERNALITIES NOT REFLECTED IN THE FOREIGN INVESTMENT

ccording to the Statistics Service, in the 4th quarter of 2014, as well as throughout the year, investments grew despite external factors named by the government as the main cause of economic difficulties. In this case, it is important what kind of investment we are talking about - the continuation of ongoing projects or the influx of new investments? In addition to the so-called “old investor”, in 2014 appeared new investors such as the “Old City Development” company which is implementing the project “Panorama - Tbilisi” whose main investor is the former Prime Minister Bidzina Ivanishvili. The top five investors includes several companies, whose names say nothing and their activity is also unknown. In 2014, in total 59 new foreign companies were registered in Georgia which invested about $ 60 million in the country’s economy. However, “Old City Development” says that in 2014 the company invested $ 60- 65 million in development of its business, so it turns out that other companies have invested nothing and exist only on paper.

Among the biggest investors are the Azerbaijani “BP Group’’, the Chinese “Hualing international”, which is building the Olympic Village in Tbilisi, “Ajaristskali” and “IDS Borjomi”. “Old City Development”, the only major new investor, finishes the top five. By sectors of the economy, transport and communication is in the first place , the second is the construction, the third - the processing industry. Investment in energy decreased 2.5 times, although, according to the Minister of Energy, there is nothing to worry, as energy projects are increasingly funded by Georgian commercial banks. At the same time investments are not almost made in agriculture and health care, despite the fact that the government heavily finances the development of these sectors. According to the Minister of Finance of Georgia Nodar Khaduri, there is nothing strange, as investors prefer to invest in the sectors where one can faster make larger profits. “Foreign investors invest in the sectors where the profit is greater and lead in terms of attracting investment. We are focused on export development, and we spend our money primarily in this direction, “- he says.

PARTNERSHIP FUND INAUGURATES PREPARATORY WORKS FOR NENSKRA HPP CONSTRUCTION

artnership Fund has agreed with Korean Company K Water, which is responsible for the construction of Neskra hydropower station, on implementation and basic conditions of electricity purchase. According to the Fund, the agreement has been signed at the Partnership Fund’s office on March 19 in Tbilisi. Currently, construction tender of Neskra is being carried out and 7 candidates are taking part in the tender, among them are Italian, Spanish, Korean and Turkish companies. Each of them has many years of experience in the construction of Hydropower stations and infrastructure facilities. The tender winner company will be named in May, which will provide implementation of construction works. Partnership Fund has selected participants of the tender jointly with K Water, Fichtner, Allen@Overy, IFC, BNP Paribas. According to Irakli Kovzanadze, executive director of Partnership Fund, construction of the HES will be continued through 5 years. However, first electricity will be generated before the completion of the construction. The South Korean Company K Water is the in-

vestor of the project, which is responsible for the implementation of the project according to the agreement signed with the Partnership Fund. The advisor of the Fund in the project is International Finance Corporation (IFC). Partnership Fund constructs hydropower station with capacity of 280 mgwt on the river Enguri in Svaneti, its annual output will be 1.2 billion kwt. The total value of NeskraHES is 1 billion USD. The project will be finished in 2021. The Partnership Fund works on the Gardabani combined cycle power plant project with a capacity of 230 mgwt except Neskra. However, the country will receive electricity of 1.8 billion kwt annually in addition. Turkish company “Calik Energy” is the contractor of the project. Subsidiary company of Partnership Fund, jointly with “Georgian Oil and Gas Corporation” funds project of 220 million USD and plan to put the station under the exploitation before the end of 2015. The South Korean water Resource Company K Water holds assets of 20 billion USD and its annual turnover amounts to 2 billion USD. The corporation makes projects in the different countries of Europe and Asia.

ANALYTICS

8 QUOTES

“The National Bank was late to intervene in the exchange rate process”

BIDZINA IVANISHVILI Businessman and Former Premier Minister Former PM Bidzina Ivanishvili has once again

criticized the National Bank. While meeting with journalists at the National Library on March 20th, he claimed that the National Bank was too late with its intervention. The former PM also explained a statement he made a few weeks ago regarding the healthy exchange rate. “I said GEL was healthy, but then I stated that we have a weak economy. Then I sent a letter to the President of the National Bank. I was completely consistent,”- the former PM said. According to him, the ongoing GEL-related processes are normal. “Fluctuation within a 2 GEL margin is admissible, since regional processes have not been regulated yet,”- the former PM said.

“I am quitting pharmaceutical business if the new law is adopted”

KAKHA OKRIASHVILI Founder of PSP Group Tbilisi City Council is considering a new law, according to which every medicine imported into Georgia will have to have an annotation in Georgian. Founder of PSP Kakha Okriashvili says that

if the new law is adopted, he will quit the pharmaceutical business. According to Mr Okriashvili, Georgian consumers can already acquire drug annotations in the national language. Mr Okriashvili stresses that in case the new law is adopted many medicaments would disappear from the local market altogether. “Any buyer at a pharmaceutical store can request a drug annotation in Georgian and will be provided one shortly. The said law is already up and functioning in Georgia for many years” “There are 700 importers in the pharmaceuticals industry. Nor Americans nor any other foreign investors will start making annotations in Georgian. Many drugs will disappear from the market, if the new initiative requires including Georgian annotations in the drug packages. As a result, a national shortage in pharmaceuticals will be created,” Mr Okriashvili says.

“Georgia has Lost its Attractiveness for Foreign Invest”

FADI ASLI President of the International Chamber of Commerce Mr Asli urges the Georgian government to give the Economy Minister more leeway. He recommends the governing team to give the Minister of Economy more freedom to speed up the processes in the economy as he is competent and is surrounded by a team of professionals. However, as

long as it is covered by the decisions of other political forces, the situation will not improve. Fadi Asli notes that the government is starting to understand that they have made mistakes and now are trying to correct them, which is a positive fact. In his opinion, privatization is one of the mechanisms that will be used by the Government to mobilize so much needed foreign currency into the budget. In his view, the problem is that Georgia has lost attractiveness for the foreign investors and yet the government wants to carry out privatization of some objects that will be a good challenge to search investors which at the moment want to buy assets in Georgia, if, of course, Bidzina Ivanishvili doesn’t gain the significant assets offered for privatization through his foreign holdings! He says the government has largely affected the overall situation in Georgia in terms of attractiveness for investors. “Almost in two years the government has adopted a large number of business unfriendly laws which harmed Georgia’s global competitive advantage,” – Asli notes.

“It’s an honor to work on implementing Hyatt in Georgia”

ROMAN PIPIA Founder of Loyal Capital group Roman Pipia’s company has assigned a contract on hotel management with Hyatt. Hyatt Hotels Corporation announced last week

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that a Hyatt affiliate has entered into a management agreement with Rustaveli Property Ltd for a Hyatt Regency hotel in Tbilisi, which is expected to open by 2017. Hyatt Regency will be placed in the center of Tbilisi in the former building of Justice, Hyatt Hotels Corporation reported on the company’s official web-site. Hyatt Regency Tbilisi will feature 170 guestrooms. “We are glad to cooperate with Hyatt. It is a great honor to participate in the redevelopment of such iconic buildings,” Roman Pipia, owner of Rustaveli Property Ltd declares. Rustaveli Property Ltd is a company established for the development of the new hotel. The company is a part of Loyal Capital Group founded by Roman Pipia.

HOTEL MARKET OVERVIEW Summer Resorts

The main summer resorts in Georgia consist of the following Black Sea coast cities: Kobuleti, Gonio, Kvariati, Sarphi, Chakvi, Anaklia and Ureki. Kobuleti is a seaside resort on the coast of the Black Sea. It is annually visited by tourists, mostly from former Soviet Union countries. The vast majority of Kobuleti visitors are from Armenia. Gonio, Kvariati and Sarphi are next to Batumi in the direction of the Georgia-Turkey border. The Gonio fortress dates from the 1st century AD. Sarpi is the main land border between Georgia and Turkey. The number of hotel guests going to summer resorts declined in 2008. From 2009 to 2012, numbers were increasing, but in 2013 the number of hotel guests declined by 4%. The total number of accommodation units in these cities is 82, which has grown by nine since 2013. The total number of rooms and beds supplied is 2,399 and 6,264 respectively. In 2014 the number of rooms has grown by 25% compared to 2013 data, with the number of beds having grown by 31%.

Regional Business Destinations

Kutaisi, Rustavi and Poti are considered to form the Regional Business Destination segment in Georgia, attracting around 11% of national tourism. Kutaisi is Georgia’s second largest city, legislative capital and the capital of the western region of Imereti. It is 221 kilometres (137 miles) west of Tbilisi. The landmark of the city is the ruined Bagrati Cathedral, built by Bagrat III, King of Georgia in the early 11th century. The Bagrati Ca-

thedral and the Gelati Monastery, a few km east of the city, are UNESCO World Heritage sites. Besides the churches, there are many interesting places in Kutaisi, such as: Sataplia Cave, where one can observe footprints of dinosaurs and Geguti Palace, which was one of the residences of Georgian monarchs. Rustavi is a city in the southeast of Georgia, in the province of Kvemo Kartli, situated 25 km southeast of the capital Tbilisi. It has a population of 122,900 as of the 1st January of 2014. The economy of the city is mainly dominated by the Rustavi Metallurgical and Nitrogen factories. Several years ago, the country’s main car market was transferred from Tbilisi to Rustavi and several administration buildings were constructed at the same place. Rustavi became the only location for Tbilisi and its catchment area to obtain a driving license. Poti is a port city in Georgia, located on the eastern Black Sea coast in the region of SamegreloZemo Svaneti in the west of the country. Built near the site of the ancient Greek colony of Phasis and deriving its name from the same, the city has become a major port, city and industrial center since the early 20th century. It is also home to a main naval base and the headquarters of the Georgian navy. Adjacent to the Poti port area is the Free Industrial Zone, inaugurated in April 2008. The number of hotel guests in Regional Business Destinations has been growing through 2009 to 2012, but in 2013 it has declined by 23%. The biggest increase was in 2010 (109%). The share of business travellers peaked in 2010, reaching 81%, then it declined to 53% and 50% in 2011 an 2012 respectively but in 2013 the share of business travellers increased again to 58%. The total number of accommodation units supplied is 84, it has grown 33% since last year. The total number of rooms and beds supplied is 978 and 2,044 respectively.

COMPANY NEWS

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E- BIKES ALREADY IN GEORGIA

lectric bikes are being sold in Georgia. “Alliance Group” brought products from China. The price of the mountain, cargo and city bicycles ranges within $ 421- 889. It is known that at that time about ten bikes have been sold. In addition to direct purchase, the product can be leased. The company explains that the main advantage of e- bikes is the ease of riding and charging with electricity. Apart from Tbilisi, electro bicycles can be bought in Batumi, Kutaisi, Abasha, Rustavi and Zugdidi.

GEL DEPRECIATION MAKES NO AFFECT ON SALES IN OLYMPIC VILLAGE

ales in the Olympic Village built by the Chinese company “Hualing” began in November and intensified in December and January - the company says. According to management, the majority of buyers are the citizens of Georgia. Cost of 1 sq. meter starts at $ 635. The Georgian representation of “Hualing” claims that the lari’s devaluation had no effect on sales. “On the contrary, the sales are so active that ex-

ceeded our expectations” - say in the company. The management notes that construction of a shopping complex has completed, and much of the area has already been leased. Under a contract with the Government of Georgia, in 2015 “Hualing” will complete the construction of the Olympic Village, a residential area, hotels, restaurants designed for 2 000 people, wellness center, parking lots and shopping center area of 110 000 sq.m. “Hualing” invested in the project a total of $ 150 million.

WHITE MAGNOLIA PROJECT TO COME TO FINISH IN BATUMI IN APRIL

hite Magnolia” project carried out by “Center Point” company in Batumi will be completed in about a month. Maya Rcheulishvili, one of the founders of the company, states “Commersant” that lifts and lightning conductors are left to be installed. Maya Rcheulishvilis notes that all apartments

have been sold and it’s already possible to live in the complex. The development company has invested $ 300 million in the “White Magnolia” project. The complex includes 920 apartments and commercial spaces. Under the project, the area of 124 thousand square meters will be built, one square meter costs $ 300. “Center Point “ began “Magnolia” construction in 2007.

RYANAIR’S ENTRANCE TO CHEAPEN FLIGHTS TO USA

he government of Georgia is trying to bring the Irish low-cost airline to the Georgian market. According to the Economy Minister, the negotiations are still going on with Ryanair. But the letter sent to “Commersant” by the Irish airline says that since last year there has been nothing new about the company’s entry in Georgia. In February last year the airline told “Commersant” that Ryanair was ready to negotiate with those who are interested in low prices on their market and negotiations are continually underway with the world’s airports, but even then Ryanair didn’t talk about the entry in Georgia. Ryanair is Europe’s number one low-cost airline. Now a few airlines fly from Georgia to the US cities and the average price of a round-trip ticket varies from GEL 1500 to GEL 2 000. The board of Ryanair, like any PLC, have approved the business plans for future growth, including transatlantic,” the airline said in a statement. Ryanair said it was already in talks with manufacturers about purchasing long-haul aircraft but couldn’t comment further. Chicago, Boston, New York, London, Berlin and Dublin are understood to be among the cities included in the plan, which could come into operation in four or five years time if the airline can reach a deal to buy long-haul aircraft - most likely with Airbus or Boeing. Ryanair chief executive Michael O’Leary has been discussing the possibility of low fare transatlantic flights for several years. Addressing the Deloitte Enterprise Ireland CEO Forum last November, Ryanair chief executive Michael O’Leary said the airline would like to operate a low-cost transatlantic service, from 15 European cities to about 12 US cities, but that sourcing long-haul aircraft is a challenge.

Michael O’Leary, Ryanair’s chief executive, has long hoped to set up a low-cost transatlantic service. The company has, until now, held off as a series of predecessors have tried and failed to make such an idea pay. Zoom Airlines, a Canadian operation linking Gatwick and North America, had a brief existence in the last decade, while Sir Freddie Laker’s Skytrain famously went bust trying to pursue cheap flights to the US in the 1980s. More recently, Oslo-based low-cost airline Norwegian Air Shuttle began a transatlantic service in 2013 with a return ticket from London’s Gatwick airport to New York starting at £389, although the cheapest flights can be few and far between. Gatwick boss Stewart Wingate described Norwegian’s long-haul launch as a “game-changing event”. But the costs of expanding into the US have plunged Norwegian into the red for the first time in eight years. Ryanair’s head of marketing, Kenny Jacobs, told the Financial Times that the Irish carrier was a bigger brand and business than Norwegian and so would be able to build more traffic and a more efficient cost model. The transatlantic route is one of the most profitable in the world, but it is dominated by long-established airlines, led by British Airways, American Airlines and Virgin Atlantic. Despite this, John Strickland, an independent aviation consultant, said the success of Ryanair’s transatlantic venture would depend on the airline getting a good deal on the purchase or lease of planes: “It is not just any aircraft, it is about getting efficient and cost-effective aircraft, otherwise you could lose your shirt.” A low-cost transatlantic service would also need to attract a mix of customers, he said, both costconscious tourists and business travelers prepared to pay more. “If you have got people travelling for business, you have got a better chance of spreading your risk.”

“CITY OF THE FUTURE” TO BE BUILT ON TBILISI’S OUTSKIRTS

former political prisoner, “Niba Invest” co-founder Bakur Kighuradze plans to carry out the project worth $ 450 million in the Okrokana district. As Kighuradze says, the “City of the Future” will be built in Okrokana, where houses, schools, kindergartens, university, shopping centers, parks and playgrounds will be placed. The businessman explains that the project area will be developed based on future vision and future technologies. Approximately $ 450 million will be spent on the complex development. Kighuradze notes that the work will be carried out in stages and the first stage, which cost will be $ 10-12 million, will be implemented in 2017-19. A 150 -room hotel is another project on which “Niba Invest” is working. It is known that the hotel will be built by the company’s partner

“Uta”. Kighuradze notes that the project with the investment volume of 30 million is under development. Bakur Kighuradze also plans to build greenhouses on the area of 10 hectares in Gardabani region. In his words, construction is expected to start in September this year. Construction of “Niba Delisi” will presumably begin in April. As reported, in total $ 24 million will be invested in the project. One part of the funds will be allocated by the Georgian Co-Investment Fund (GCF) while another- by “Bank of Georgia”. “Niba Delisi” will house a multifunctional trade centre on the area of 35 thousand square meters that includes 4 underground parking lots and a 5-storey shopping zone. The project will be completed by 2016.

WORLD-FAMOUS CASINO COMPANY “MELCO CROWN ENTERTAINMENT” ENTERS GEORGIA

world-renowned casino brand Melko Crown Entertainment will be opened in the building of a 7 –star Millennium Bilmore hotel. Deputy Economy Minister said in an interview with the “FDI Intelligence” magazine at the International Real Estate Fair in Cannes. According to Keti Bochorishvili, the processes in the neighboring countries generally affect Georgia, but in spite of this, many large investment companies still want to invest in Georgia. Deputy Minister explains that this year the biggest world representative of gambling business”Melco” will come and invest in Georgia, and notes that “Melco” is successfully operating in both Macau and Las Vegas. Dhabi Group Executive Director told “Commersant” about the entry of the world’s most modern casino a month ago. Melco Crown Entertainment Ltd. operates, owns, and develops casino gaming and entertainment resort facilities. It is focused exclusively on the Macau market. The company has been listed on

the NASDAQ stock market since December 2006. The opening of a 7-star presidential Millennium Biltmore hotel behind the so-called Imeli building is planned for January 2016. As reported, Millennium Biltmore is functioning only in the United States, California, and the second hotel will be opened in Tbilisi. Dhabi Group intends to invest $ 140 million in Millennium Biltmore construction.

AIRZENA TO LAUNCH FLIGHTS TO THREE NEW DESTINATIONS IN RUSSIA

irzena” airline in the near future plans to launch flights to another 3 cities of Russia. Direct flights will be performed to Samara, Saint - Petersburg and Vladikavkaz. The company’s Director General Iase Zautashvili says in a conversation with “Commersant” that the company has already filed an application to the Aviation Agency. According to him, they sent data to the Russian side and the final decision will be announced in the near future. Only after that flight schedule and tariffs will be specified. Zautashvili notes that flights to Samara are likely to be carried out 4 times a week, to St. Petersburg- twice a week and to Vladikavkaz- once a week. However, this depends on the Russian

side’s decision. Zautashvili says that study is being conducted to find out demand level for the above-mentioned routes. Technical consultations between the aviation authorities of Georgia and Russia were held at the end of December 2014. But given the fact that the final agreement has not been reached between the parties, the technical consultation will last until March 28, 2015. Georgian and Russian sides cannot agree on this issue for several months. The Georgian airline “Georgian Airways” protests against 18 -18 frequency and says that it can lead the company to bankruptcy. A frequency of flights to Samara, St. Petersburg and Vladikavkaz is still unknown.

DINING

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EXPERTS REVIEW GEORGIA’S FOOD SAFETY STANDARDS a worsening food security situation,” he warned. “Georgia’s dependence on imports further increases food security risks as there are no state reserves or supplies to ensure food security in the face of global price fluctuations” he added. The review noted the optimal limit of the ratio between local and imported products was 20 percent globally. However, Georgia imported more than 70 percent of its total consumed food. According to the National Statistics Office of Georgia, selfsufficiency coefficient for 2013 was: vegetables – 75 percent, beef – 39 percent, pork – 41 percent and poultry – 18 percent.

xpert eyes have scrutinized the country’s food safety standards and compiled a report noting Georgia has a tough road ahead to develop and implement food safety standards that meet EU requirements. International support agency OXFAM completed a comprehensive review of the food safety and nutrition security in Georgia – at national and individual levels – and noted the current situation presented a “high risk”. OXFAM is an international confederation of 17 organisations working in approximately 94 countries worldwide to find solutions to poverty and injustice around the world. The review noted in spite of Georgia signing various international agreements in the recent history, “food safety does not exist in the country”. “Most food security is assured by means of remittances paid by Georgian nationals working abroad to their families. In 2014 remittances decreased significantly,” said Mikheil Jibuti, the

report’s lead author and economic expert from Georgian Economists Association. “Secondly, food security is somewhat assured by an increase in the national debt. Local agricultural production takes a third and last place in Georgian food security. Nutrition is rarely considered within any food security policy,” he said. The review stated Georgia’s current food safety standards were inadequate and could not ensure the population with stable, high quality or appropriate food, even in non-crisis periods. “Due to a disproportion between the market prices of products and local income levels, the population cannot afford high quality food. Instead, they have ben reoriented towards the consumption of cheaper imported, low-quality or falsified products,” Jibuti stated. “Local food production has not managed to compete with cheap and frequently subsidised imports and has thus decreased considerably. Due to these low levels of food self-sufficiency and low disposable incomes, there is a high probability of

Risks to the availability of sufficient amounts of food

The availability of the necessary quantity of locally produced wheat in Georgia was only 12 percent. Per capita in Georgia, people used less food products than the requirements for physiological wellbeing. The rate of actual consumption against these norms was estimated as: • Bread and bread products – 81 percent; • Potatoes – 63 percent; • Vegetables – 38 percent; • Meat and meat products – 33 percent; and • Milk and dairy products – 33 percent. These figures showed the overall consumption of food did not depend on the availability in the markets, but on high prices. Foods that were cheaper were more readily consumed. “Because of poor purchasing power, consumers substitute bread for their main daily portion of energetic value. The consumption of bread and bread products exceeds the physiological norm by 1.8 – 2 times. This means that almost 62 percent

of Georgians’ calories come from bread products, while in developed countries this does not exceed 15 percent,” Jibuti said.

Risks for food utilisation

In Georgia, basic nutrition levels were lower than established norms, stated the review. According to the World Bank (2006), nutrition security existed when food security was in compliance with sanitary conditions, the relevant level of healthcare, compulsory medical services and care and feeding – to ensure healthy lives for all members of the household. “From a theoretical point of view, all probable risks are present in Georgia: nutrition is non-diversified and of poor quality” Jibuti said. Based on the example of bread where almost 62 percent of the energetic value from food is derived from bread products for many people, it is imperative that the quality of bread be ensured. However, the review said there was a “very acute” problem in Georgia of low quality bread, meaning people were eating lots of bread but gaining little nutritional benefit in return. Furthermore, Georgia does not produce dietetic and diabetic bakery products for children or the elderly.

Risks to food stability

In Georgia state reserves are non-existent. The report said: “there is no mechanism in place to ensure the population will have even a single product, for example bread, if prices skyrocket. This is true especially if the world market will not provide wheat. This increases the chance that a risk turns into a real threat during any emergency brought about by infrastructural causes or force majeure.” Agenda.ge

CAESAR, VICTORIA, MARGHERITA AND BENEDICT: THE PEOPLE BEHIND LEGENDARY FOODS

hen people really like something, they tend to act a bit strange. Every now and then they become rather possessive and proud they even name it with their own name. But when it comes to delicious food, the origin of the name seems to get lost in the greatness of their taste. Foodpanda (www.foodpanda.ge) selected the top 10 foods that owe their name and fame to another person’s name and fame, but ultimately outshined their godfathers. So the next time you eat a pizza margherita or one of these historical foods, picture the story of its namesake and have a very British and very royal afternoon with Earl Grey tea and Victoria Sponge cake. EARL GREY TEA Earl Grey tea and the classic Victoria sponge cake, are Britain’s most favoured foods and drinks named after historical figures. Earl Grey tea takes its name from Charles Grey, the second Early Grey, and British prime minister from 1830 until 1834. It has a distinctive bergamot flavour to it, which at the time of discovery, was seen as new and exciting. Twinings tea claims to be the home of Earl Grey tea and says: “The story goes that Earl Grey, the Georgian prime minister, was given cases of this tea by a Chinese Mandarin. He liked it so much he brought it home and asked Twinings to recreate it for him.” VICTORIA SPONGE CAKE As a child, Queen Victoria was not allowed to eat sweet things often. As a Queen, however, the case was a tad different: Every week each of her royal residencies received a consignment of pastries from the Buckingham Palace kitchens including: ‘16 chocolate sponges, 12 plain sponges, 16 fondant biscuits, one box of wafers, one and a half dozen flat finger biscuits, one princess cake and one rice cake’. She reigned for 63 years and a range of foods were named after her, but it seems

perfectly fitting that the most classic British teatime cake is proudly carrying her name. EGGS BENEDICT Not so surprisingly, these miraculous eggs began from a long night out. It was back in 1894, when New York socialite Lemuel Benedict returned to his hotel, the Waldorf-Astoria, after a big night of drinking and asked the maitre d’hotel for a specific remedy. His request included a piece of toast, a poached egg, bacon and hollandaise sauce. He received his order but an English muffin was substituted for toast and ham for bacon and hey presto- Eggs Benedict were born. To this day, it still remains one of the best cures for a hangover and one of the most famous brunch dishes. CAESAR SALAD No, this super popular salad does not take its name from the Roman Emperor. It’s a common mistake to associate it with Julius, but in fact it was invented by Caesar Cardini, a Mexican restaurateur in Tijuana. On the weekend of July 4th in 1924 Caesar served finger foods by placing garlicscented leaves on platters. He eventually started shredding the leaves into smaller pieces and it evolved into a salad. The salad became famous when it was a big hit for Hollywood stars who visited Tijuana. Soon it was added to the menus of many restaurants and now it has reached the top 3 salads ordered online. CARPACCIO If you hear Carpaccio and you think of Italian Renaissance -Botticelli, Masaccio, Giotto, Parmigianino, Bellini, Caravaggio- you’re right. This dish was named after Vittore Carpaccio, a Venetian School painter born in 1465 and was dedicated to him because the redness of the meat reminds the vivid hue of red he was known for. FETTUCINE ALFREDO It all began with Alfredo Di Lelio, chef of the very popular Alfredo’s restaurant in Rome. He invented this dish for his pregnant wife to give her strength.

He prepared a sauce with cream, butter and Parmesan cheese and then added the fettucine. Buonoooo. It jumped in popularity in the United States when Hollywood couple Douglas Fairbanks and Mary Pickford tried the recipe at Alfredo’s restaurant on their honeymoon in Rome. PIZZA MARGHERITA Top order in most countries, Pizza Margherita took its name from a Queen. On a trip to Naples in 1889, Queen Margherita of Savoy, was presented with this pizza that was made with only tomato, basil and mozzarella to represent the colors of the Italian flag. Little did they know, this dish would come to represent the whole country, globally. PAVLOVA This dreamy baked white dessert made of meringue crust, whipped cream and fresh fruits such as strawberries and kiwis, is named after the Russian prima ballerina Anna Matveyevna Pavlova. The name and the recipes began soon after she toured both Australia and New Zealand in 1926. Anna Pavlova was considered the greatest ballerina of her time and her visit to New Zealand has been described as “the chief event of 1926”. It

was said “she does not dance; she soars as though on wings”. This totally does justice to that light, airy dessert. GRANNY SMITH Sometime in the 1800s, while working on her farm near Sydney, Australia, Maria Ana Smith found a small sapling growing where she had discarded some rotten apples days earlier. She replanted the tree and it eventually bore fruit, green apples with a tart flavor. She shared these apples with her friends and neighbours and they grew in fame. BEEF WELLINGTON Some say it was named after ‘the hero of Waterloo’, the first Duke of Wellington, Arthur Wellesley, during the Napoleonic wars. Others say it was the English name given to the French dish, beef en croute (beef in pastry) at the time. There are even reports it may have been named after Wellington’s boots. Sometimes a story can be repeated so many times it garners assumed truth. But all we care about is that this amazing dish of beef tenderloin with mushrooms, pate, and a pastry crust was actually invented.

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BANKING

PROFITS OF MICROFINANCE INSTITUTIONS HIT 80 MILLION GEL IN 2014

rofitability of microfinance institutions operating in Georgia amounted to GEL 80 million, meanwhile the percentage of the population impoverished during the loan repayment is constantly growing. Experts recommend the government to develop a law on credit activities, which will establish at least the minimum rules of the game on this wild market. In total 70 MFIs and 17 credit unions are operating in the country as well as several dozen companies in the market of online loans. In 2014, the assets of the sector amounted to GEL 1.107 billion that is 300 million more than in 2013. In 2014, MFIs net profit amounted to GEL 80 million and the property value received to cover debts on loans reached GEL 6 million. Loans to the microfinance sector amount to GEL 852 million, of which the largest share of 427 million falls on consumer loans, GEL 187 million - on agriculture and GEL 170 million- on trade. Various online credit institutions whose activities are completely uncontrolled have been growing like mushrooms after the rain in recent years, so accurate information on the volume of loans issued by them doesn’t exist yet. It is known that the interest rate on loans issued by them varies from 26% to 55% per year. In addition, very high penalties for overdue payments are provided. On-line credit institutions make loans very quick-

ly in 15 minutes- 1 hour, without any proprietary collateral. At the same time interest rates significantly grow in the case of delay in payments. As a result, credit in the amount of $ 1 000 may result in the loss of apartments costing ten times more. According to the banking expert Lia Eliava, microfinance institutions, especially recently appeared on the market, lead to the impoverishment of clients and rising social tensions. “We are talking not only about the MFIs, but also about private creditors, moneylenders who changed status and became legal entities. Their activities are virtually uncontrollable. The market is completely unregulated. The situation is about the same as with pawnshops. Activities of microfinance companies that are licensed by the National Bank are not even regulated. This is absolutely wild business where the elementary human rights are not protected. Ultimately the population faces impoverishment and social background becomes harder and harder ,”- she notes. According to experts, the control over financial institutions should be entrusted either to the National Bank, or to a specially created structure. “The government does not pay attention to the situation, and is not aware of the need to adopt a law on credit activities. When the market is fully deregulated, speculators and moneylender appear immediately. This is very dangerous from the social point of view ,”- Lia Eliava adds.

FEBRUARY RECORDS ONTRACTION IN MONEY TRANSFERS FROM ABROAD

ccording to the NBG data, in February 2015 the volume of money transfers coming into the country amounted to $ 82 million, or GEL 71.1 million, which is $ 22.7 million (GEL 47.4 million), or 21.7% less than in February 2014. A volume of money transfers from 12 donor countries accounts for 91.6% of remittances coming into Georgia from abroad and exceeded $ 1 million in February. In February of last year, these 12 countries accounted for 92.9% of all money transfers. In February of 2015, $ 14.6 million (GEL 30.5

caucasian business week

million), were transferred from Georgia abroad instead of $ 12.6 million(GEL 22.1 million) in the same period of last year. It should be noted that the volume of money transfers coming into the country reduced in January 2015 and amounted to $ 75.5 million, ie GEL 146.5 million, which is $ 23 million ( GEL 44.6 million), or 23.3% less than the same figure for January 2014. And, in January 2015, $ 12.5 million ( GEL 24.3 million) were transferred from Georgia abroad compared with $ 12 million (GEL 21.2 million) in last January.

ASSOCIATION OF BANKS OF GEORGIA: ANTI-BANK SENTIMENT IN GEORGIA SMELLS OF 1937 - How do you assess the situation on the currency market and the growth of refinance loans by the National Bank? Doesn’t this lead to the increasing pressure on the national currency? How reasonable is in the current situation to issue such a number of refinance loans? - Due to the situation in the foreign exchange market in Georgia, many estimates have been done by the international organizations such as the IMF, but an emotional background still remains high, talks typical for the Soviet mentality are often heard- the search for the guilty and the witch-hunt. People should finally understand that currency fluctuations is a usual thing, they are often unpleasant, but are typical for the market economy, so there is no need to look for a black cat in a dark room. Otherwise, all these searches of scapegoats remind 1937. Today the banks are announced “enemies of the people” which are allegedly speculating economic situation of the country. But in reality the situation is quite different - the figures show that in 2014 the banks bought currency in the amount of $ 6.3 bln and sold – 6.46 billion that is $ 92 million more was sold than bought. Overall, these data show that banks act as an intermediary – they are buying currency from some market players, and sell to others. This is one of the most common, ordinary banking operations. In fact, the currency crisis involves all natural and legal persons who, for one reason or another, buy or sell currency. Commercial banks do not create demand for the currency, they only meet it. Demand is created by importers, while exporters, tourists, remittances from abroad, etc are sources of its satisfaction. Supply and demand is formed on this basis, and not because commercial banks benefit from a particular exchange rate. To blame banks in formation of the exchange rate is the same thing as to blame the mirror when we do not like hairstyle. - How reasonable in the current situation is to give banks refinance loans in the amount of GEL 900 million and whether it will contribute to the devaluation of the national currency? - Refinance loans is one of the instruments of the National Bank’s monetary policy to be used for short-term liquidity needs of banks. The purpose of these loans is to manage short-term interest rates on the market. The National Bank is the sole supplier of short-term liquidity. A term of a refinance credit is 7 days, securities in GEL are accepted as collateral. On Thursdays, commercial banks are required to cover the refinance loans received in the previous week, they can take new ones, if necessary.

ZURAB GVASALIA Head For Association Of Banks Of Georgia For example, if last week the National Bank issued GEL 600 million, and this week – GEL 700 million, this means that 600 million were spent to cover the debt and 100 million is a new refinance loan. These funds are available on the correspondent accounts of commercial banks and their amount is always dependent on expenses in a given day. One shouldn’t mislead the society and say that these GEL 700 million will be immediately put into circulation and collapse the financial system. Banks need refinance loans to carry out usual operations - customer service, etc. It is very difficult to answer illogical statements logically as if refinance loans should be abolished in a situation when the demand for foreign currency is high. - Where do you see a way out of the current situation? - I see a way out in an increase in import substitution, production growth, which can be produced in Georgia and can be competitive. The trade deficit, which is 53% of turnover, always carries with it the threat of pressure on the national currency. From this perspective, we can only welcome the new government’s initiative aimed at stimulating the economy, especially the program “Produce in Georgia”, which on the one hand can promote import substitution and export growth. In addition, after the signing of an Association Agreement with the EU which opens Georgia an access to a 500 –million European market, the interest of foreign investors is growing. All this can create the conditions for major changes, which ultimately will improve the balance of payments and reduce the pressure on the national currency.

LIBERTY BANK ANNOUNCED LAUNCH OF GIFT ACTION FOR LIBERTY CLUB PAYROLL CLIENTS

ll subscribers of Magti, Geocell and Beeline, whose salaries are transferred in Liberty Bank, will get LB scores (10 minute talking time) on each transaction by any card of the bank. The minimum transaction volume is defined by 10 and each payment is deter-

mined by 10 GEL. The user’s time is automatically filled with 10 minutes after 10th payment. In addition, the consumer continues score saving, which withdrawal is possible on www.LBClub. ge or ATM of Liberty Bank. In addition, Cheap.ge envisages sales up to 50% in the partner objects.

FEBRUARY RECORDS GROWTH IN TRANSACTIONS BY BANK CARDS

ebruary transactions by resident banking cards have made up 932,8 million GEL (01/2015 – 835,4 million). The figure is increased by 23% (02/14 – 756,7 million) in the same period of the pervious year. As of NBG’s statistics, transactions by ATMs have totaled to 708 million GEL throughout the country (01/15 – 613,5 million, 02/14 – 577 million), while transaction by POS terminals of the

shopping centers – 116,8 million GEL ( 01/15 – 116,9 million, 02/14 – 88 million). Transactions of 60,3 million were performed by Georgian banks’ cards outside the country, at that over 21 million have been carried out by ATMs, while 39,6 million – POS terminals and internet. However, 7,8 million cards are in the circulation, 1,4 million credit and 6,3 million debit. To note, 49% accounts for Visa, while 2,4% - EC/ MC and the remained - on other system cards.

CURRENCY

March 23, 2015 #92

caucasian business week

FOMC TO RULE FOREX MARKET THIS WEEK

I OLE HANSEN Head of commodity research at Saxo Bank

TRADERS MORE OPEN TO ALTERNATIVE INVESTMENTS SUCH AS GOLD

old has moved back into negative territory for 2015 after a strong beginning brought the promise of a potential recovery in the yellow metal following the sharp losses witnessed since the peak in 2011. Uncertainty related to the potential introduction of a full scale round of quantitative easing from the ECB, worries about Greece and the Swiss National Bank’s decision to drop its currency peg to the Euro in mid-January all help lift safe-haven demand for gold by investors. Since then however the introduction of QE by the ECB and focus on the future policy action by the US Federal Reserve have dealt the euro a major blow and helped lift the dollar to a 12 year high not only against the euro but also against several major global currencies. With safe-haven demand fading and the dollar racing higher gold was left with limited support and it succumbed to a month long selling spree during which it managed to fall 8 days in a row, a feat that has only been seen a few times since the gold standard was abolished in the early 1970’s.

The dollar is and will continue to be a major influence on the future trajectory of many commodities, not least gold and this will ensure a prolonged period of raised volatility offering day traders and short term traders through CFD’s plenty of opportunities to benefit from these market swings. Other key markets which could influence gold are US government bonds where yield movements are currently adversely correlated to gold’s performance. The strength of the US economy is reflected through bonds with stronger economic data sending yields higher (and gold lower) while potentially bringing closer the timing of action from the US Fed. Gold support has come from the fact that 23 Central Banks across the world have eased monetary policies so far in 2015 and with safe-haven bonds in countries like Germany now offering negative yields on its bonds investors have become more open to alternative investments such as gold. Market consensus are currently for lower prices but the question remains how much of the gold negative news, apart from a further strengthening of the dollar has not already been priced in.

FOREIGN NET BUYING OF JAPAN STOCKS BIGGEST IN 3 MONTHS

oreign investors’ net purchases of Japanese stocks in the last week was the biggest in more than three months as risk appetite was boosted by hopes of economic recovery and better shareholder returns, exchange data showed on Thursday. Foreign net buying of Japanese cash stocks was 306.2 billion yen during March 9-13, data released by the Tokyo Stock Exchange showed. It was the largest level since the week of Dec. 1-5. The Nikkei benchmark has been hitting fresh 15year highs on optimism over steady economic recovery, improved corporate earnings and better shareholder returns, as well as expectations Japan will be one of the main beneficiaries of weak oil prices. The benchmark has outperformed other global peers this year. It has gained 11.6 percent, while the U.S. S&P 500 index has added 2.0 percent since the beginning of the year.

“Long-only investors who were underweight Japan have to increase Japanese stock holdings if they don’t want to lose,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “Even foreigners who were neutral on Japan started thinking about being overweight.” Fujito said that when foreign investors want to raise their investment stance on Japan, they tend to buy stocks with large market capitalisation. “There is a reason why Toyota and MUFG are hitting multi-year highs,” Fujito said. Toyota Motor Corp has been continually hitting new highs, while Mitsubishi UFJ Financial Group rose to the highest level since October 2008. On the other hand, trust banks, which manage pension funds’ investments, were net sellers of Japanese stocks last week. They sold a net 35.47 billion yen of cash stocks, the biggest since Nov. 4-7, the exchange data showed.

gnoring disappointing US retail sales data and a drop in consumer sentiment index, the US Dollar last week resumed its broad based rally against other major currencies. Last week’s rally helped the overall US Dollar Index (I.USDX), which measures the US Dollar strength against the basked of six major currencies, to test the 100.00 mark barrier. Going forwards, outcome of the Federal Reserve’s two-day monetary policy meeting, starting Tuesday, happens to be the most anticipated event for the Forex market this week. Market participants expect the Fed to sound optimistic in its monetary policy statement, which scheduled to be announced on Wednesday. The Fed is also expected to remove the phrase “patience” from its monetary policy statement, indicating that it remains on track for first interest rate hike sometimes during mid-2015. The FOMC statement this time will be accompanied with an update to the Fed’s economic projection for inflation and economic growth over the next 2 years. This would be followed by a press conference by the Fed Chairwoman Janet Yellen, where Yellen’s comments would be closely scrutinized in order to determine the strength of the overall US economic recovery and start of the rate-hike cycle. Investors this week will also get an update on the US housing sector as the Commerce Department is scheduled to release reports on building per-

(BoE) latest monetary policy meeting and UK employment report, both scheduled for release on Wednesday, are highlights from this week’s UK economic calendar. Apart from US central bank, BoE is the only other central bank from major economies to have hinted towards the possibilities of a interest-rate hike, possibly in 2015. Forex market already seems to be pricing-in a unanimous vote for not raising near-term interest rate; however, should this week’s minutes provide some clues over the timing of a possible rate-hike by the central bank, it could trigger a short-covering rally and boost near-term demand for GBP pairs. Meanwhile, the UK labor market report is expected to show the number of people claiming unemployment related benefits declining by 31,000 and the unemployment rate dropping to 5.6%.

mits and housing starts for the month of February on Tuesday. Continuing with the slow pace of recovery in US housing market, economists are expecting building permits in February to have grown to a seasonally adjusted annual rate of 1.07 million, while housing starts are expected to have slowed to a 1.05 million-units pace in February. From the US manufacturing sector, investors will confront the release of two regional manufacturing indices, namely - Empire State Manufacturing Index and Philly Fed Manufacturing Index, scheduled for release on Monday and Thursday respectively. Following a unexpected drop to 7.8 in February, the Empire State manufacturing index is expected to rise and reach 8.1 in March. Meanwhile, the drop in Philly Fed manufacturing index in last three months has been sharper than expected and analysts this time are expecting a minor recovery to 7.3 in March. Also watch out for industrial production data for the month of February, also scheduled for release on Monday. From UK, minutes from Bank of England’s

In addition to this, traders will also watch for some meaningful releases from other parts of the world. Few of the releases include, German ZEW economic sentiment on Tuesday, monetary policy meeting minutes from RBA and BoJ’s latest meeting on Tuesday and Friday respectively. New Zealand’s GDP growth rate for the fourthquarter of 2014 on Thursday. The Swiss National Bank (SNB) is scheduled to release its quarterly Monetary Policy Assessment on Thursday, which will be followed a press conference by SNB Chairman and Governing Board Members. The recent surge in the US Dollar has been fueled on speculations that the Federal Reserve could be moving closer to the first rate-hike in over sixyears. Moreover, dropping the phrase “patient” is more likely to spur further rally for the US Dollar. However, higher market expectations now seems to pose some near-term risk of a corrective move for the US Dollar, should the Fed hint towards holding the near-zero interest rate policy until the last quarter of 2015.

UK UNEMPLOYMENT AND CLAIMANT COUNT CHANGE Elsewhere, this week’s BoJ’s monetary policy decision, scheduled to be announced on Tuesday is likely to prove as a non-event for the Forex market. However, market player would be keen to see BoJ’s evaluation of the latest economic conditions after the release of weaker-than-previously estimated GDP data, that showed Japanese economy expanding at a slightly slower pace of 0.4% in the last three months of 2014.

Admiralmarkets.ge/analytics/ facebook.com/adimralmarketsgeorgia/

March 23, 2015 #92

RESEARCH

caucasian business week

PRACTICING ENERGY SECTOR - 2014 ONLINE LOANS

ecently in Georgia, there has been an increase in the number of micro financing organizations that give short-term online loans. The aforementioned product is simple, fast, and comfortable – a customer can simply fill in a form on the website and receive a credit up to 1000 GEL without leaving home. ACT was interested how popular these online loans are among the residents of Tbilisi. The research results show that in the last 6 months, one in every ten citizens (10%) has had experience with online loans. This practice was more common among men than women (13% and 8%, respectively). Interesting differences appear in the cross-section analysis of age. According to the results, online loans are most popular among 18-24-years olds (21%). As the age rises, the attractiveness of online loans decreases.

NEIGHBORHOOD

Azerbaijan, Turkey make EU energy dreams come true

zerbaijan and Turkey in a very short period of time were able to demonstrate to the whole world how in having the desire and making concerted efforts, one can implement a major project, which is very important not only for these two countries, but also the whole of Europe. On March 17, the Turkish province of Kars hosted laying the foundation of Trans-Anatolian Gas Pipeline (TANAP). This event is very difficult to overestimate, because never before has the EU been so close to the cherished goal of diversifying energy supplies to its market. Start of construction of TANAP is proof of the commitment of Azerbaijan and Turkey to the task, their reliability as a manufacturer, supplier and transporter of gas.

Turkey decided to grant Ukraine $50 million worth of credit

ecep Tayyib Erdogan announced that Turkey decided to grant Ukraine $10 million to be used for displaced people in the country, in addition to $50 million worth of credit, “as a sign of strategic partnership and neighborly relations”, Anadolu Agency reported. The Turkish president said he also wanted to increase the mutual trade volume. “Twelve years ago, it was $1.3 billion. It went up to around $6 billion at the end of 2014. Let’s increase it up to $20 billion by the end of 2023,” he said, adding that he and Poroshenko decided to “finalize the free trade agreement between the two countries at the earliest,” in order to reach these goals.

Armenia places $500 mln of Eurobonds

As it turns out, this practice has quite a frequent nature – the majority of customers (56%) have taken multiple online loans in the last 6 months.

euters news agency disseminated information that Armenia has placed $500 million of Eurobonds. In other words, the country has taken on a new, half-billion dollar foreign debt by way of Eurobonds, Haykakan Zhamanak daily reported. “According to the agency’s information, the yield of these Eurobonds—that is, the interest rate of this new debt—is 7.5 percent per year, and the repayment period is 10 years. In other words, we [, Armenia,] must return 875 million dollars over the course of 10 years. This is the priciest foreign debt the Armenian government has ever included.

Russia overcomes the worst, sees stabilization – finance minister As for the amount of micro credits, research has determined that people usually take online loan of 200 or 250 GEL (25% and 27%, respectively).

he Russian economy has begun to stabilize, climbing from its lowest point, according to Finance Minister Anton Siluanov. He says the ruble is becoming a stronger currency as it has sustainably grown since the beginning of 2015. “The negative peak has already passed and we are observing certain moments of stabilization,” Siluanov said at a meeting of the Russian Union of Industrialists and Entrepreneurs Thursday.

Fitch Assigns SOCAR’s Notes Final Senior Unsecured ‘BBB-‘ Rating

F The research was conducted on 419 adult residents of Tbilisi in February, 2015. The statistical error of data does not exceed 4.9%. The survey was conducted exclusively for internet magazine “Marketer”. Third party must give a notice before using the given information fully or partially.

itch Ratings international rating agency has assigned State Oil Company of the Azerbaijan Republic (SOCAR) $750 million, 6.95 percent issued notes due 2030 a final foreign currency senior unsecured rating of ‘BBB-‘, in line with SOCAR’s long-term issuer default rating, said the message of the rating agency published on its website.

WORLD NEWS

And the ‘worst IMF client ever’ award goes to… Greece

elations between Greece and the eurozone have deteriorated rapidly in recent weeks with recriminations on both sides. As the German finance minister warns of a possible ‘Grexident’, the IMF was reportedly described Greece its most unhelpful client ever. International Monetary Fund officials have told eurozone colleagues that Greece is the most unhelpful country the organization has dealt with in its 70-year history, according to Bloomberg. In a short ill-tempered conference on Tuesday Fund officials complained that Greece wasn’t adhering to the $254 billion bailout extension deal reached in February or cooperating with its creditors.

France, Germany, Italy to join China-led $50bn infrastructure bank

rance, Germany and Italy have confirmed they’ll join China’s new Asian Infrastructure Investment Bank (AIIB). Participation in the rival to the US-led World Bank is seen as a setback for the Obama administration. The three European countries on Tuesday confirmed in a statement they intend “to become founding members of the Asian Infrastructure Investment Bank,” according to AFP.

Business leaders urge EU ‘energy union’ to promote low carbon investment

usiness leaders have urged European heads of state to make sure the bloc’s “energy union” promotes low carbon investment, RTCC News reported. The European Council is holding a meeting on Thursday afternoon to set the direction of a plan. Unilever, Heathrow and GlaxoSmithKline signed a letter along with 22 others, calling for the package to tackle the “escalating climate crisis” as well as geopolitical threats. The EU needs to invest more than €2.5 trillion in energy infrastructure over the next decade “the vast majority of which is needed for capital-intensive low carbon infrastructure,”according to the letter.

US blows through $18trn debt limit

n Monday, the US reached its legal debt limit of $18 trillion -more than the country’s entire GDP. Lawmakers will either have to again lift it, or attempt to cap spending. As of March 12, the US Treasury reported federal debt at $18,114,324,000,000.00 in its daily treasurystatement. This figure is above the statutory debt limit, which was extended by Congress through March 15 this year. Treasury Secretary Jack Lew told Congress that the limit would be reached on March 16, and he also requested lawmakers raise the debt ceiling “as soon as possible,” in a letter written in early March.

Windows 10 Will Be Released In Summer

he Company Said At Launch that the update would be release later this year, but it confirmed today that it would be coming in the coming months. The new release will bring A Host Of New Features, including a streamlined look and the ability to load it on devices of all kinds,Including Holograms. It will also get rid of some old ones, Including Killing Off Internet Explorer. The update will be free to all Windows 7, Windows 8.1 and Windows Phone 8.1 users for its first year, as the company announced when it launched the operating system in January. To make that upgrade process easier, some PC companies have already committed to helping their customers get on the new operating system. Lenovo, for instance, will offer free upgrade services at 2,500 service centres in China so that customers will be able to be guided through the upgrades.

COMPANY NEWS caucasian business week

March 23, 2015 #92

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

March 23, 2015 #92