Caucasian Business Week #97 by Caucasian Business Week

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May 4, 2015 #97

May 4, 2015, Issue 97

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Nodar Khaduri: If External Shocks subside, the Country will not Suffer Budget Problems Pg. 4

BE INFORMED, DO BUSINESS

GEORGIA

IMF FORECAST, LARI DEVALUATION AND GEORGIA AS THE REGIONAL HUB – TOPICS RAISED AT 2030 ECONOMIC FORUM IN TBILISI

r Ivanishvili preferred not to get involved in the process of discussion for now, saying that the public tends to brand him as still very involved in the country’s politics, even after the Ex-PM has made a public decision to not get involved in politics post 2012 elections. Pg. 3

WORLD BANK GROUP APPROVES $60 MILLION IBRD LOAN FOR GEORGIA

WHO ARE OWNERS OF LEADING GEORGIAN TV COMPANIES

ncreased tariffs are badly affecting Georgian citizens. Everybody agrees domestic providers have set unjust tariffs on the market. The Association of Young Financiers and Businessmen (AYFB) shares the same position. Pg. 7

Pg. 5

EUROPEAN INVESTMENT BANK OPENS A REGIONAL OFFICE IN TBILISI Pg. 2

ISET: INVESTMENT RISKS IN GEORGIA ARE STILL HIGH

ccording to the findings of a research organization ISET Economist, the risks associated with investments in Georgia exceed the benefits associated with the ease of Pg. 6 doing business.

COLLIERS: TBILISI REAL ESTATE MARKET OVERVIEW

he total amount of retail space in the three main Georgian cities amounts to around 1.1 million sqm, out of which 80% is concentrated in Tbilisi. Pg. 8

WHY DOES CONSTRUCTION SECTOR AMNESTY DELAY?

onstruction business has not yet benefited from the initiative called by Finance Minister Nodar Khaduri one of the main achievements of the government’s economic team. Pg. 11

Research

Pg. 13

NOISY TBILISI

Pg. 4

David Mirtskhulava: State Will be Involved in Khudoni HPP Project Pg. 8

This was an IBRD (International Bank for Reconstruction and Development) flexible loan of $60 million USD with a 25 year maturity and 14 year grace period. Pg. 5

WHO CONTROLS OFFSHORE ACCOUNTS, WHERE MILLIONS OF USD RAISED FROM GEORGIAN INTERNET SUBSCRIBERS ARE DEPOSITED?!

Merab Kakulia: Georgia is Experiencing a Full-fledged Currency Crisis

LOAN WITH 301% YIELD Bank of Georgia as Online Credit Organization

Pg. 7

HOW MUCH DOES BUSINESS DEGREE COST IN GEORGIA?

Big cities are naturally accompanied by noise. Urban residents are more or less accustomed to this fact, however, loud noises during late hours might become very irritating and as the experts say, might cause insomnia and mental disorders.

Temur Chkonia: A Socially Oriented Economy is Disastrous for Georgia Pg. 8 George Chirakadze: A Closer Cooperation Between the Government and the National Bank of Georgia is Needed Vakhtang Lezhava: Changes in the Government May Bring Investments to the Standby Mode Pg. 12

UK GENERAL ELECTION: IF VOTING CHANGED ANYTHING – THEY WOULD MAKE IT ILLEGAL

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CRUCIAL RELEASES TO KEEP FOREX TRADERS BUSY

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Currency

Caucasian Busineess Week Inquiry

PASHA BANK – SPECIAL PARTNER OF BUSINESS CONFERENCE HELD IN BRUSSELS

Pg. 8

GOVERNMENT NEWS

2 MAIN EVENTS FIRST FEMALE DEFENCE MINISTER ON GEORGIA’S HORIZON

eorgia could soon have its first female Minister of Defence. The country’s Prime Minister Irakli Garibashvili this morning nominated current Member of Parliament (MP) Tinatin Khidasheli to this position. Nominee Khidasheli is an MP from the Georgian Dream Coalition and represents the Republican Party, and a majoritarian from the Sagarejo region. In addition, Khidasheli is the chair of the European Integration Committee of Parliament and the vice chairperson of the ALDE faction of the Parliamentary Assembly of the Council of Europe. She is also married to the Speaker of Parliament David Usupashvili.

TBILISI’S TURN TO HOST GEORGIAUK WARDROP DIALOGUE

ooperation between Georgia and the United Kingdom (UK) is being closely examined this week at the latest Wardrop Dialogue gathering, where officials from both countries are meeting and exploring ways to deepen the current relationship. The intermediate round of the Wardrop Dialogue, held for the first time in Tbilisi on April 29-30, united three thematic groups of politics, economy and security. The dialogue served as a venue where both sides could discuss a wide spectrum of Georgia-UK cooperation. The meetings are held once a year in a year, in London and Tbilisi alternatively. The inaugural session was held in November 19-20, 2014 in London.

UK PRAISES GEORGIA’S METHODS OF INFORMING PUBLIC OF INTEGRATION PROSPECTS

s Georgia strives towards European and Euro-Atlantic integration, informing society of the country’s integration progress is “essential” and in this sense, the country is doing a good job, says a United Kingdom (UK) official who is in Georgia on official business. Director of the Eastern Europe and Central Asia Directorate of the UK’s Foreign and Commonwealth Office, Sarah Swinford, met Georgia’s State Minister on European and Euro-Atlantic Integration David Bakradze yesterday, April 29.

CZECH PARLIAMENT RATIFIES EU-GEORGIA ASSOCIATION AGREEMENT

oth Chambers of Parliament of the Czech Republic finished the ratification process of the Association Agreement signed by the European Union and Georgia on June 27, 2014 in Brussels. Today, members of the Chamber of Deputies voted in favour of the ratification of the EU-Georgia deal. The document was approved by the majority of votes with 116 members in favour and one against at its second hearing. The Senate of the Czech Republic ratified the EU-Georgia deal on March 19, 2015. The ratification process in the Czech Republic will be completely finished when President Milos Zeman signs the document.

GEORGIA’S FOREIGN MINISTER MEETS UN OFFICIALS IN NEW YORK

eorgia’s Foreign Affairs Minister Tamar Beruchashvili is continuing her first visit to the United Nations (UN) headquarters in New York. Within her four-day visit to the UN headquarters, Beruchashvili met with the UN Deputy Secretary General, Chief of the Cabinet Susana Malcorra and President of the 69th session of the United Nations General Assembly Sam Kahamba Kutesa, a Ugandan lawyer and politician. The sides discussed the Russian-occupied lands of Georgia, the Geneva International Discussions and Moscow’s so-called partnership deals with Sokhumi and Tskhinvali.

May 4, 2015 #97

caucasian business week

PRESIDENT CONDEMNS FREQUENT CHANGE OF DEFENSE MINISTERS

resident Giorgi Margvelashvili has complained about frequent change of defense ministers and suggested that a surprise announcement by incumbent PM Irakli Garibashvili to change three cabinet members, instead of initially planned two, leaves an impression that the government operates in a “force majeure situation.” Citing these reasons, President Margvelashvili said that he will use fully his seven-day deadline before sending reshuffled cabinet for confirmation in the Parliament, effectively dragging out the process of confidence vote. Under the constitution the President has no right to change or block cabinet nominations, but he has seven days to put his signature on the list of cabinet members, which should then face confidence vote in the Parliament. Georgian Dream parliamentary majority and incumbent PM Irakli Garibashvili stated for multiple times that they want the confidence vote procedures to be finalized as soon as possible. Before President’s announcement the Parliament was planning to start confirmation hearings on

Friday and hold confidence vote over this weekend, but the legislative body had to change these plans after the President’s announcement as the process now seems to be delayed at least for a week. President made his announcement an hour after PM Garibashvili said that along with new sport and environment ministers he was also nominating MP Tina Khidasheli as new defense minister, replacing Mindia Janelidze, who held this post since November, 2014 when then defense minister Irakli Alasania was sacked. Two days ago PM Garibashvili was ruling out any major reshuffle in the cabinet and was saying that he was going to change only those two government members – ministers of sport and environment – who filed resignation this week. Last week infrastructure minister Davit Shavliashvili was also replaced. In a televised statement, President Margvelashvili said that in the condition when three ministers step down in a week and when “we knew that only two ministers were going to be replaced, but next day we learn that there will be three changes, I have an impression that the government is working in bit of a force majeure situation.” “I want to remind everyone that we are facing difficult challenges,” Margvelashvili said. “As the commander-in-chief, I want to ask a question: how frequently should we replace defense ministers?” the President said. “Against the background of this difficult situation, I want to give possibility both to the Prime Minister and the Parliament to carry out consultation in calmer atmosphere and define composition of the cabinet,” Margvelashvili said. “I use the only constitutional lever available for me in this situation and delay for a week my signature, which I should have put on the list of cabinet members.” “I hope that our political leadership will take a balanced decision in calm conditions within this one week,” President Margvelashvili added.

REACTIONS TO PRESIDENT’S DECISION After the President’s announcement, Parliament speaker, Davit Usupashvili, said that the legislative body was ready to launch confidence vote procedures and hearings of reshuffled cabinet on Friday. “But the President decided to use his sevenday timeframe; under the constitution he has such right,” Usupashvili said. “President is elected to take reasonable decisions important for the state. As it seems he decided that we need more time in this impromptu situation to define whether we are giving confidence vote or not to the reshuffled cabinet. That’s his view. We may have different view and we may think that we were able to decide it today, but let’s respect constitutional authority. He decided to give us more time to think. More deliberation is never harmful. The country’s has incumbent government with full authority, which continues its work. GD parliamentary majority leader, MP Davit Saganelidze, said that although it was “very desirable” to give confidence vote to the reshuffled cabinet as soon as possible, “there is a certain logic” in President’s decision to give more time to the Parliament for consideration. UNM parliamentary minority leader, MP Davit Bakradze, hailed President’s decision not to formally nominate reshuffled cabinet “in haste.” He said that proposed changes, which do not concern PM and government’s economic team, will fail to address “economic crisis” in the country and reiterated UNM’s demand to have a new “technical” government before the parliamentary elections. He also said that UNM will seek a meeting with the President to discuss the issue; the president, under the constitution, has no say over composition of government and can only influence on the pace of confidence vote procedures. Civil.ge

EUROPEAN INVESTMENT BANK OPENS A REGIONAL OFFICE IN TBILISI

he European Union’s leading financial institution, the European Investment Bank (EIB), has opened a South Caucasus regional representative office in Georgia’s capital Tbilisi. Georgian and EIB officials attended a special ceremony today to mark the official opening of the new office – the first of its kind in Tbilisi and the region. The EIB noted it would implement and coordinate its regional projects from its Tbilisi branch. The office would also be used to enhance its support for the public and private sectors and strengthen relations with promoters and partner banks in the region. The EIB regional office’s opening ceremony was held at Radisson Blu Iveria Hotel and attended by Georgia’s Prime Minister Irakli Garibashvili, EIB Vice President Wilhelm Molterer, head of the European Union Delegation to Georgia Janos Herman, as well as representatives from diplomatic corps accredited to Georgia, the banking sector and international financial institutions. The EIB Tbilisi office will cater for businesses in Georgia, Armenia and Azerbaijan. EIB’s Molterer said a presence on the ground will ensure market proximity and an increased operational delivery capability for the Bank, as well as closer institutional ties with national authorities. “We saw a European prospective and business potential in Georgia. We saw Georgia implement the Association Agreement (AA) regulations. That’s why we decided to open an office in Tbilisi,” said Molterer. “We want to support Georgia in many directions including in the infrastructure and agricultural sectors. EIB can provide not only financial assistance but share its experience as well.”

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“The AA allows us to support the country. We evaluate the principles; make the steps forward and try to use everything as a positive instrument for making European progress more obvious in the country. This is in the Georgian citizens’ best interest. Use our Bank office’s service. We are in your country to support you and meet your demand, not immediately but after a certain period,” he added. Georgia’s Finance Minister Nodar Khaduri said it was “very important” to Georgia and its capital Tbilisi to have such an important office in the country. “Tbilisi is gaining back the functions of a regional hub, including in the financial sector,” he said. Today the EIB loaned €40 million to Bank of Georgia, the country’s largest bank, to finance investment projects promoted by SMEs and mid cap companies. The EIB loan will support the implementation of projects important for the development of Georgia’s private sector as well as undertakings in the areas of social and economic infrastructure, cli-

mate change mitigation and adaptation. The loan is also expected to contribute to job creation and maintenance. Earlier, the Bank allocated €380 million to finance several investment projects and support the state sector in Georgia, and a further €110 million in the private sector. The EIB financial aid supported projects to develop the country’s energy, water and road infrastructure and SMEs. Garibashvili said every project financed by EIB had created additional jobs, which accordingly supported Georgia’s economic growth and improved the people’s living conditions. The announcement about opening an EIB representative office came back in October 2014 after Georgia’s Finance Minister Nodar Khaduri met Molterer in Washington. At this time the EIB said it would implement and coordinate its regional projects from Georgia. The EIB offered €217 to Armenia and €25 million to Azerbaijan, where the first operation was signed last year. Agenda.ge

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Editor: Nino Gojiashvili. Mobile phone: 595 050404 Reporters: Nutsa Galumashvili; Lazare Gvimradze

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May 4, 2015 #97

caucasian business week

IMF FORECAST, LARI DEVALUATION AND GEORGIA AS THE REGIONAL HUB – TOPICS RAISED AT 2030 ECONOMIC FORUM IN TBILISI

MF’s prognosis for the country, Georgia becoming “regional agricultural hub” in the region, and lari’s devaluation are some of the main topics discussed at the new economic forum titled “Georgia Economy: Current Achievements and Challenges” in Tbilisi Mariott on April 30th. The country’s ExPM opened the forum, presenting it to the public and the gathered journalists. Mr Ivanishvili preferred not to get involved in the process of discussion for now, saying that the public tends to brand him as still very involved in the country’s politics, even after the Ex-PM has made a public decision to not get involved in politics post 2012 elections. However, he did make some juicy comments about Georgia’s economy. “In 2014, Georgia’s economy proved to be the fastest growing in Europe,” Ivanishvili said during his opening speech at the economic forum. “Of course, we cannot directly compare the economies of the developed countries with that of Georgia, because the former are ten times more advanced and larger than our country’s.” “If you disagree with my view, survey the international organizations’ data and find out for your self,” Ivanishvili said. “Today, when lari is experiencing an extreme devaluation, which of course is risky for the local business and economy, a right type of analysis should be applied to the situation,” he added. According to Ivanishvili, the government does not have means to address every challenge the economy faces. It cannot affect the processes that are ongoing in the region, such as the devaluation of oil.

The Ex-PM asked the experts present at the economic conference to discuss the ongoing challenges in Georgia’s economy without politicizing the matter. Ivanishvili wished to minimize his involvement in the new conference, by only taking part in opening it and giving up the floor to the economists who further discussed the prevailing issues in Georgia’s economy, such as lari’s devalution and the country’s aspiration to become the “regional agricultural hub.” IMF and World Bank’s recent studies where cited, according to which the country’s economy is doing much better than it was in the period prior to 2012-2014, with indicators such as “economic freedom” and “ease of doing business” having gone up. However, IMF’s analysis have met criticism by former Vice Finance Minister David Ebralidze who argued that IMF’s prognosis have proved to be erroneous by so much as 60%. “If we keep relying on IMF’s five-year long prognosis we will not get much further in the current crisis,” Ebralidze said. “In the end of the previous year our country’s budget was agreed. The IMF back then prognosed a 5% growth for Georgian economy. In about 2-3 months the organization’s assessment was experiencing a 60% erroneousness. Accordingly, we cannot keep on relying on this organization’s long-term analysis for our country’s economic situation. Otherwise, we will face serious challenges,” he said. “Regarding the lari devaluation, Levan Kalandadze was right to note that there is a short-term problem. I agree that today’s discussion subject

should be monetary policy first and foremost.” Another important subject raised at the conference was Georgia’s potential at becoming an agricultural hub in the South Caucasus region. The idea was presented by economist Vakhtang Burkiashvili, representative of Georgian Investment Solutions program. Becoming an agricultural regional hub implies finding five major companies who will take on the responsibility of working in the direction of energy and Asia logistics. “We started working on this project back in 2013,” Burkiashvili said. “The project implies a very close cooperation between the Georgian government and the private sector. Georgian In-

vestment Solution has already established ties with several companies interested in working in the agricultural direction of Georgia.” “We want to select four projects that in our view have most potential and thus create their agricultural production in Georgia. The support of the Georgian government consists in its allocated a certain territory for the project and arranging the necessary infrastructure. The rest of the work will be done by the corresponding companies and their private investors,” Burkiashvili said. “Starting this project we envisioned European Union’s investment environment as our target in terms of corporate financing, since these companies have a very high liquidity.”

4 HEADLINES GEORGIA ATTRACTS $5M TO IMPROVE MUNICIPAL SERVICES AND INFRASTRUCTURE

eorgia will enjoy a $5 million USD grant from Swiss Agency for Development and Cooperation (SDC), with support of the World Bank, to improve the efficiency and reliability of targeted municipal services and infrastructure. Georgia’s Finance Minister Nodar Khaduri and the International Bank for Reconstruction and Development (IBRD) regional director Henry Kerali signed a grant agreement which guarantees the financial assistance for Georgia, through the Second Regional and Municipal Infrastructure Development Project.

INTERVIEW

FINANCE MINISTER: IF EXTERNAL SHOCKS SUBSIDE, THE COUNTRY WILL NOT SUFFER BUDGET PROBLEMS An interview with the Minister of Finance Nodar Khaduri

GEORGIA’S GDP GREW BY 3.2% IN Q1, 2015

eorgia’s Gross Domestic Product (GDP) experienced an average real growth of 3.2 percent in the first three months of the year, says the country’s National Statistics Office (Geostat). Preliminary data revealed the GDP growth in Q1, 2015 compared to the same time in 2014, while in March 2015 the country’s real GDP growth rate reached 4.3 percent. Today Geostat published information about the economic growth of March 2015.

PEGASUS AIRLINES STARTS CHEAP FLIGHTS TO 30 EUROPEAN CITIES

eorgian air travellers will soon enjoy cheap flights from Kutaisi International Airport via Istanbul to more than 30 European destinations. Amsterdam, Brussels, Cologne, Copenhagen, Milan, Munich, Stockholm, Stuttgart, Vienna, and Zurich are among the European cities where Pegasus Airlines will soon carry passengers. The Turkey-based low cost airline will launch its first flight to these destinations on May 19. Georgia encourages gender equality in business Georgia’s most gender equal entities will be revealed at a special awards ceremony that honours the equal treatment of men and women in business.

- Success, achievements – these are topics the government is fond of talking about, can you list the failures, what do you consider your biggest failure? - We are in the second hundred of the world’s economics that is obviously a very serious challenge to us. In the last 15 years Georgia is ranked approximately 114th by the standard of living, which is a poor indicator.

group of British officials are visiting Georgia to learn about the country’s investment potential in the agriculture sector, and will later share this knowledge with British investors once they return to the United Kingdom (UK). The UK delegation, which included head of the South Caucasus Group Neil Floyd, met Georgia’s Deputy Minister of Agriculture Levan Davitashvili today at the Ministry of Agriculture. The sides mainly spoke about trade-economic relations between Georgia and Britain.

nitial data from the 2014 Census reveals less people were emigrating from Georgia, and fewer were also coming in. In 2014 there were 88,704 emigrants - a 6.7 percent decrease on 2013, while the number of immigrants coming into Georgia reached 82,161 year-on-year (y/y) – a decrease of 11.1 percent. This information comes from preliminary Census data released by the National Statistics Office of Georgia (Geostat). In 2014 the net migration (difference between the number of emigrants and immigrants) was negative (-6,543).

DOMINO’S PIZZA OPENS IN TBILISI, GEORGIA

omino’s Pizza ,the recognized world leader in pizza delivery and digital ordering platforms,has opened in its third new market so far this year, as the first Domino’s store in the Republic of Georgia began serving customers in the capital city of Tbilisi. The opening on April 26 marks the third global market Domino’s has opened in so far this year.

GEORGIAN FILMS GAIN RAVE REVIEWS IN BUDAPEST

ungarian cinema-lovers are praising Georgia’s film industry after two Georgian films were screened in capital Budapest this week and were loved by the audience.

Banks, commercial banks and we know that serious measures are planned. - Whether adjustments are planned to be made in the budget? - As for the budget adjustments, the budget suffers a serious growth in terms of tax revenues, we have planned a 9% growth for the year, for today it is 13% higher compared to the last year’s corresponding period, but we have already made adjustments to the budget, and the government issued a decree to reduce administrative costs by GEL 20 million and redirected these funds to infrastructure. This year a record amount of one billion will be spent on infrastructure projects and in addition, I would like to tell you that the agriculture programs will be continued. So we are working to make the economy strong enough. - That means, the Finance Minister Nodar Khaduri takes responsibility that the 2015 budget will be executed? - Finance Minister Nodar Khaduri hopes that the budget will not suffer serious problems if the external shocks don’t further develop. - What do you think of the excise tax which is an additional burden for business? - An excise tax has two loads- fiscal, ie it is a serious source of budget replenishment and regulatory to restrict harmful products consumption.

An interview with a former Vice-president of the National Bank of Georgia (NBG) Merab Kakulia

Also, I think that the lari exchange rate remains an important challenge which has fallen due to the recent events in the world and the region. So, obviously, we have challenges and we are working on these challenges. I clarify that the budget impact on the exchange rate is equal to almost zero. At this point, from the operating point of view, a budget is executed with a proficite, we do not increase the amount of money in the circulation, thus it will not affect the exchange rate, however, I’d like to mention two serious factors such as reduced exports and amounts transferred by our compatriots, which has quite a serious impact on the exchange rate . At the same time it should be noted that the dollar in Georgia behaves just as it does in many countries. In fact, the dollar strengthened in many countries, including against the euro and other currencies. I understand that people who have taken loans in dollars, are facing a very serious problem, but as far as I know, the banks and the banks association is working to alleviate this burden somehow. - Do you have any additional information in that regard? - We do not supervise this sector, though, of course, we are in constant communication with the public, the National Bank, the Association of

GEORGIA IS EXPERIENCING A FULL-FLEDGED CURRENCY CRISIS

GEORGIA INTRODUCES ITS AGRICULTURE POTENTIAL TO UK DELEGATION

GEORGIA EXPERIENCES LESS EMIGRANTS/IMMIGRANTS, SHOWS 2014 CENSUS DATA

May 4, 2015 #97

caucasian business week

- What impact will a government reshuffle have on the economic situation of the country, including the national currency? - I do not think that the change of Minister of Sports will influence the currency market. And in general, changes in government will not cause serious changes. We are dealing with the fundamental causes that predetermined such a serious fall of the national currency. And these factors have not disappeared; they still exist and continue to deepen. First of all it should be noted that export decreased by 30% in the 1st quarter of 2015 compared to the same period in 2014. This process continues today. In particular this applies to exports to Azerbaijan, which is now also experiencing serious problems fue to the 33% devaluation of the manat. Azerbaijan was one of the largest export markets, and a deterioration of the situation there will affect the situation in our country. Turkey is also experiencing serious problem , where the currency has depreciated by 5% during the year. Based on this, situation in exports has not changed and, unfortunately, in the near future is not likely to change. The second factor is remittances. The statistics show a slight increase, but if compare to last year, in any case there is a serious backlog, and I do not think that some improvement in Russia will be able to change this trend for the better. With regard to investment, ie statistics for the 3rd

and 4th quarters of 2014, which showed an increase in investment, and we must assume that in the first months of 2015 inertia will continue. However, it must be borne in mind that the official figures on investments do not always coincide with the real - in particular, about 25% of the statistics is reinvestment, that is money in circulation inside the country, and do not come from abroad. In addition, there is the so-called debt between the companies, when a private company cannot repay a debt to its foreign parent company, and the amount of shortfall is accounted an investment. However, in doing so, virtually no money come into the country. - Can we say today that the country has a financial crisis? - Definitely we can say that the country is suffering a full-fledged currency crisis caused by fundamental factors, although of course, market fluctuations played its role that often can affect the supply and demand for foreign currency. For example, recently the lari fell sharply, and most likely it is connected just with market fluctuations. At this time of the year , the importers need a lot of currency to meet their obligations. It always has been, but we did not notice, because they were active sources of receipt of currency, and today the situation is quite different. At the same time, the demand for the currency remained virtually unchanged, imports declined slightly and this imbalance is already evident in market fluctuations. Importers need the currency, but it is not present in the system in the required quantities. There is one thing about which neither the representatives of the government nor experts say almost nothing - the corporate debt to foreign companies and financial institutions. In the first quarter of 2015 companies had to pay $ 320 million that is an additional pressure on the currency. - When it comes to fundamentals factors , where is the way out? What can be done in the near future? - A quick and short-term solution to the problem unfortunately does not exist. Concerted and concrete steps from the government and the Na-

tional Bank are needed, but no one should expect a quick effect. The first step is to remove pressure from market factors that create negative expectations. At the same time it is not necessary to carry out large intervention by the National Bank. If analysis of the situation shows, then interventions can be continued, it all depends on specific factors. We cannot spend foreign exchange reserves too actively , as this will cause a decrease in the money supply, and it will worsen the economic situation of the country. As a reduction in the money supply is not a method to improve the economic situation. I agree with the position of the current President of the National Bank, who believes that the sharp decline in the money supply brings more negative than positive. In general, of course, the National Bank will not be able to cope with the problems alone. A more active work of the government in terms of export promotion is required. It’s bad that the government has begun to speak about it just now. We should not forget also that the foreign currency is needed not only to importers, but also to commercial banks, which also have debts to foreign partners that should be covered in dollars. - Many businessmen say that the government should cut social spending. How can it help? - This approach is justified when we see the negative impact of the budget on the exchange rate. It is not happening now. Accordingly, the reduction of social spending will give nothing. At this stage, the impact of budget expenditures on the foreign exchange market is minimal, as well as in terms of money supply. We should not look for a way out of the situation in these areas. The Government must think about promoting exports. Tourism is another very important source of foreign currency. In the first three quarters of 2014 the number of tourists has grown consistently, and this year began to decline. That is, it turns out that tourism is not a priority for the government? But this is a very wrong opinion, as in the medium term, tourism can play an important role in addressing these problems.

MEDIA

May 4, 2015 #97

caucasian business week

WHO ARE OWNERS OF LEADING GEORGIAN TV COMPANIES

TOP STORY

interest of the family of Ivanishvili was in the 9th channel, but after Ivanishvili came to power, he took a decision on closing the company and the ex prime minister explained the step by conflict of political interests. Ivanishvili was saying it was unacceptable for him, as the highest political figure to have direct or indirect access to a media outlet.

TABULA

nternational organizations carry out media transparency and freedom monitoring every year. In terms of media freedom, today Georgia ranks 69th among 180 countries, but the country is leader in the Region. As to the rating dynamics, Georgia improves positions year by year. Especially, after the 2012 elections, Georgia is frequently recorded in the growing trend of ratings and this tendency, in its turn, depends on state policy. One of the benchmarks for media transparency calls for publicity of its owners and representatives. Under the 2010 legislative amendments, all media outlets were obliged to publicize owners and founders. The bill also banned offshore companies to own a TV company in Georgia. These amendments were developed under recommendations of foreign partners. Moreover, various nongovernmental organizations and political parties have requested from the previous government to publicize the information. The US Establishment has frequently stressed the necessity and importance of making these legislative amendments. Similar recommendations were embodied into the US-Georgia strategic partnership charter with a clear indication that Georgia must improve the situation in terms of media freedom. OSCE has given the same recommendation for banning offshore companies at the legislative level of owning broadcasting license and for publicizing the owners. Secrecy of founders of media outlets has often caused political confrontation and sharp debates. Moreover, biased coverage by various media companies generate grounded doubts that this or that media body is controlled by this or that political party or a politician. Fortunately, today internet space enables to clarify who stands behind this or that TV company. We introduce information on owners of several leading TV companies. It is interesting who manages the fourth Authorities and what political goals drive owners of Georgia-based media outlets.

Imedi

When talking about media freedom, all of us may recall, first of all, Imedi TV company developments, dispersal of this TV company. It was appropriated through violation of all norms and laws. The then Authorities disrupted the live broadcasting and appropriated it from the legal owner by illegal means. Later, the then Authorities appointed Giorgi Arveladze, member of the then government and Economy Minister, as a director of the company. He used to serve interests of the ruling political party in the TV company. In several days after the 2012 election, the TV company was returned to its legal owner. Today LLC Georgian Media Group holds a 100% stake in Imedi TV Company. At the same time, Badri Patarkatsishvili’s spouse Ina Gudavadze holds a 100% stake in the mentioned company.

Rustavi 2

Personalities of owners of Rustavi 2 TV company are very important and interesting in this respect. It is often said the TV company is owned by ex President Mikheil Saakashvili, but it is impossible to prove this consideration in terms of documents. According to various journalistic investigations and NGO researches, there is a direct connection between Saakashvili and Rustavi 2. Currently, high ranking officials of the former Authorities occupy top management positions in Rustavi 2. Director general Nika Gvaramia worked at highest positions under the ruling of the United National Movement (UNM): The 2003 parliamentary elections made Nika Gvaramia a member of the Georgian Parliament. In 2004 to 2007 he was MP from UNM. In 2007 he was appointed as deputy prosecutor general. In January 2008 Gvaramia was appointed as Justice Minister. In October 2008 Gvaramia was appointed a Minster of Education and Sciences, but in 2009 he resigned and continued studies abroad. Rustavi 2 financial director is Kakhaber Damenia, the former Deputy Economy Minister from UNM. As reported, Damenia jointly with Nika Gvaramia, Aleksandre Khetaguri and other officials were detained by the Finance Ministry investigation department after the 2012 elections on charge of taking bribe in huge amounts and developing and implementing criminal case through adulterated tax and official documents to mask the crime. They were released soon on bail. Rustavi 2 founders are as follows: Levan Karamanishvili (22%), Giorgi Karamanishvili (18%), Nino Nizharadze (9%), LLC Georgia TV company (51%). It is worth noting brothers Karamanishvilis own 100% stake in the company that holds a controlling interest in Rustavi 2. As a result, they control a 91% stake in Rustavi 2. It is also interesting who brothers Karamanishvilis are. This business group had got exclusive conditions for doing business under the UNM ruling and they were considered the ex President’s familiar persons. According to certain information, one of the brothers was a university fellow of Mikheil Saakashvili. Moreover, reliable sources assert the mentioned business group has provided considerable financial support to the Rose Revolution and this factor had become a ground for granting them exclusive rights for doing business.

GDS

Owners of GDS TV company that is associated with ex Prime Minister Bidzina Ivanishvili is also very interesting. The TV company is owned by Bera Ivanishvili, a son of the ex Prime Minister. He holds a 100% stake in the TV company. This information is public. It should be stressed GDS followed only entertainment TV company policy, but later this profile has changed. At this stage, the TV company broadcasts informationanalytical talk-show 20/30. Besides GDS, media

After the new Authorities came to power, a new TV channel appeared with name of Tabula. The company started broadcasting in January 2013. It is owned by NPLE Civil Development Fund. The list of founders is as follows: Giorgi Nodia, Giga Zedania, Levan Ramishvili, Aleksi Machavriani, Beka Mindiashvili, David Paichadze, Kakha Bendukidze, Giorgi Pruidze, Nino Gogiberidze, David Kovziridze, Irakli Saghinadze, Ketevan Devdariani, Giorgi Liponava and Tamar Chergoleishvili. Tamar Chergoleishvili occupies the position of a director of the TV company. The Georgian society perceives Tabula as an opposition TV company and it is often mentioned as a satellite company of UNM. Similar considerations are natural, because a major part of the TV company founders have direct relations with UNM. For example, Gia Nodia who was an education minister under the UNM ruling. Kakha Bendukidze, who dies in 2014, was also an Economy Minister under the UNM ruling, while Tamar Chergoleishvili is a spouse to Giga Bokeria, one of the ideologists and leaders of UNM. Levan Ramishvili is one of the founders of Liberty Institute and a key figure in the Rose Revolution planning.

MAESTRO

Maestro TV company is one of the leading television bodies in Georgia. Eter Gabadadze is its director general. The list of founders is as follows: Mamuka Ghlonti (15%). It should be noted the TV company was founded by Mamuka Ghlonti and initially, the channel broadcast only entertaining programs. Levan Chikvaidze holds a 15% stake, Giorgi Ebralidze - 15%, Maka Asatiani - 25%, singer Giorgi Gachechiladze - 25% and Ekaterine Akobia controls 5%. Maestro TV company was often criticized under the UNM ruling. The company’s property was arrested in that time. In 2011 Maestro purchased satellite antennas to widen coverage by handing over these antennas to Georgian citizens. The previous government appropriated these antennas and seized the TV company entirely on charge of plans for bribing electors through these antennas. This was an absurd accusation and its aim was to restrict free opinion. This decision was immediately appraised as a pressure on media freedom at reports of various international organizations.

Public Broadcaster

As to the Georgian Public Broadcaster (GPB), in this case the situation is different. The TV company founder is the state that holds a 100% stake in the entity. GPB is a legal entity of public law and it is fully independent from the Authorities on the ground of its statute. GPB is responsible to only the society. The GBP managing structure is as follows: director general that is elected by the supervisory board. The supervisory board members are elected by the Parliament. Various bodies submit candidates for the board with the following portions: Public Defender (2 candidates), parliament’s majority (3 candidates), at least one fourth of majority MPs outside the parliament put forward 3 candidates and the Autonomous Republic of Achara is able to name 1 candidate. The main mission of the GPB is to provide maximally unbiased coverage without serving some political interests. GPB also includes the 2nd channel and two radio stations. Bfm.ge

WORLD BANK GROUP APPROVES $60 MILLION IBRD LOAN FOR GEORGIA

he World Bank Group has confirmed a $60 million USD loan for Georgia to increase its competitiveness and economic growth, which are two of the most important components of the cooperation strategy between the World Bank and Georgia in 2010-2013. This was an IBRD (International Bank for Reconstruction and Development) flexible loan of $60 million USD with a 25 year maturity and 14 year grace period. The loan was allocated for the First Programmatic Private Sector Competitiveness Development Policy Operation for Georgia yesterday. By strengthening competition in the private sector it is possible to improve the conditions of the Georgian population and to experience economic growth,” said World Bank Group economists John Goddard. “Providing the desirable conditions for the businesses, developing the financial sector, increasing the social and financial safety network, supporting the innovations and trade is an agenda of Georgia,” he said. This loan was the first in a series of three Development Policy Operations (DPOs) aimed at strengthening shared prosperity and eliminating extreme poverty in Georgia through policies that stimulate private sector productivity, foster investment and create a fair business environment that enables growth by small and medium enterprises (SMEs) and new firms. The development objective is to increase private sector competitiveness through second generation business environment reforms, financial sector deepening and diversification, and increasing firms’ capacity to innovate and to export. These policies have been prioritised in the Government’s development strategy Georgia 2020. This DPO series will support the reforms addressed in the Government’s strategy by strengthening public-private dialogue, connecting small and medium sized enterprises (SMEs) to markets and information, and enhancing the public procurement system. Reforms are also being introduced to strengthen social and financial safety nets, particularly through comprehensive pension reforms and the introduction of a deposit insurance system. Reforms in the capital and insurance markets will help to address supply and demand-side constraints to accessing financial services. Reforms to upgrade the telecommunications sector; the introduction of an innovation support framework aligned with European Union (EU) practices; and upgrading of the services provided by state institutions in the areas of metrology, standards and accreditation, will underpin long-term productivity growth and leverage the benefits of membership in the Deep and Comprehensive Free Trade Area (DCFTA) and the Association Agreement with the EU.

BUSINESS

HOW MUCH DOES BUSINESS DEGREE COST IN GEORGIA?

INVESTMENT RISKS IN GEORGIA ARE STILL HIGH

ccording to the findings of a research organization ISET Economist, the risks associated with investments in Georgia exceed the benefits associated with the ease of doing business. According to the organization, the reforms carried out in the country, are not mythical - they represent a daily reality for the residents. Georgia is a very safe country where there is virtually no street crime, almost no violence by the police and no petty corruption. “Doing business in Georgia is undoubtedly very simple. We can say that the country has the most porous borders in the region, exporters and importers can easily cross them. Customs procedures are greatly simplified, the border guards are professional and friendly. Bureaucracy is quite flexible and professional, most officials speak English. Rating agencies Fitch and Moody’s state that the Georgian reformers could in the short term achieve incredible results – eliminate all kinds of obstacles to business and attract both foreign investors and foreign nationals working in the free mode. Overall, in the period up to 2012 open-door policy in Georgia was almost a state religion “- believe in the organization. However, according to ISET Economist, opendoor policy is not enough to attract large and long-term investments. “If a business is profitable , the investors will come to the country even through the keyhole, as it happens in the oil-rich Azerbaijan. If there are serious risks, investors can enjoy the openness and hospi-

tality of the country, but will refrain from investing. The main problem of Georgia is that the investment risks are still higher than the benefits of doing business. First of all, this is the shortage of qualified personnel, which creates a great risk for any investor, and any open doors will change it. Georgia’s economy will take a lot of time in order to move to the European standards from Soviet and post-Soviet “- the report says. The organization also drew attention to the geopolitical risks that prevent the long-term investment. “ There are several industries in the economy of Georgia which were able to attract long-term investments - transport, energy, and the nut production. In 2007-2008, the volume of investments was very high, but they were not long-term investments, and basically created a bubble in the real estate sector. In addition, Georgia showed poor results in the protection of ownership. Excessive amplification of the Prosecutor’s Office and the Ministry of Justice combined into one structure led to the loss of control office by the parliament, the legal system, and public organizations. Later, the Justice Department and the Prosecutor’s Office were used against opposition-minded businessmen. To date, the government is trying to restore justice in th, ese matters “- believes ISET Economist. However, according to the organization, underdeveloped democratic institutions of Georgia cannot play a decisive role in solving these problems, as well as deepening reforms, which led to increased political risks in the economy.

EXPORT TO TURKEY REDUCED BY 17,5%, WHILE IMPORT INCREASED BY 0,7%

urkey has remained Georgia’s main trade partner in Q1, wirh export having reduced significantly, while import having grown slightly. According to Geostat, export carried out from Georgia to Turkey has made up 40,779 million USD through January-March of this year, whereas import – 320,222 million USD. However, export has grown by 17,5% in Q1, while import – reduced by 0,7%. Trade by all leading commodities has increased with Turkey in relation to export. With exception of iron and non-alloy steel produced products, export has been decreased with such scales that it outweighed the growth of

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other products’ export – export of this commodity is reduced 3-fold, from 10,383 million USD in the last year to 3,111 million USD in this year. Export of knitted products from is declined form 6,639 million USD to 8,961 million USD; export of fish is grown from 1,426 million USD to 4,129 million USD; nut export is grown from 124 thousand USD to 2,916 million USD; export of men costumes and sets is increased from 2,162 million USD. Number one import good from Turkey is drugs: their import has made up 8,689 million USD, while this year the figure increased up to 21,931 million USD; import of black metal constructions is grown from 6,235 USD to 10,26 million USD.

Caucasian Business Week Inquiry

In 2014, Georgian American University became the winner of Harvard Business Case Competition that was held in Georgia for the first time. Year after year business education becomes more and more popular and currently is one of the most requested and prestigious professional degrees. Business Week set out to find out how much it costs to get a business education at leading universities of Georgia. Georgian American University (GAU) is one of the leaders in the sector of business education. According to the University’s website, the tuition fee is 5900 Lari annually. During the course of study, GAU offers special benefits and scholarships for its students. Based on cumulative grades, calculated by the end of each regular semester, it awards scholarships, which apply to the forthcoming semester’s tuition fee. The Bachelor’s students are ranked on the scale of I, II, III and IV places. In accordance with grades and credits accumulated during the term, and for the following term is funded: I place – 100%, II place – 50%, III place – 25%, IV place – 10%. In addition, GAU offers tuition discounts to students who are immediate family members (siblings, spouses, etc.) of GAU students. Upon enrollment they receive a 20% tuition discount. GAU’s graduates also have a unique opportunity to gain free MBA and PhD at U.S. universities. Free University of Tbilisi is another popular university in Georgia with quality program in business education. The European School of Management (ESM) is the most expensive program in the University; its fee is 7850 Lari a year, against the 6950 Lari for other programs. But it is worth to mention that since 2014 in collaboration with the Knowledge Foundation they provide 2900 Lari discount for every student, so the real fee for studying at ESM is 4950 Lari annually. This price is valid if a student is not able to get

the state grant. According to the current legislation on grants, depending on the score obtained in the Unified State Exam, an applicant can get 100, 70, and 50% of funding from the government. In addition, Free University of Tbilisi has additional grants for the best students. So, with excellent performance one can get an education in the business field completely free of charge. Caucasus School of Business (CSB) has a similar program. Annual education fee is 7590 Lari, but the University has 2900 Lari discount for the best applicants, as well as a state grant system. As a result, the fee can be reduced to 2390 Lari annually. The University at the end of each academic year, in accordance with the rating of students, also provides grants: I place - 100%, II place – 50%, III place - 30%. In contrast to these three leading private universities, Tbilisi State University (TSU) is the only leading state university in the field of business education and as a result is the most affordable one. Annual fee for any program is the minimum price that Georgian government set for the high education – 2250 Lari. That means that with excellent results in the Unified State Exam you can study there free of charge. It is worth to note that with the grant’s flexible systems that provide private universities and with affordable prices in state institutions, it is a quite feasible task to get a good business education in Georgia. By Eka Karsaulidze

GALT & TAGGART EXPECTS A 20% DROP IN EXPORTS

alt & Taggart expects that export from Georgia will be reduced by 20% in this year and advises the exporters to make a focus on the EU, the USA and Turkey. Investment Bank does not expect sharp growth of foreign debt service expenditures in this year and he dose not consider, that government should take radicalism (for example: tax increase). According to Galt & Taggart, currency devaluation in Georgian main trade partners and reduction of economic growth pace negatively reflects on Georgian export. “Respectively, export has been reduced by 59,8% with basic trade partners (Azerbaijan, Armenia, Russia, Ukraine, Kazakhstan) of Georgia in Q1, 2015 and the share of these countries in the whole export is reduced from 52% to 29% comparing to the same period of the previous year. On this background, exports should be increased from Georgia to the European Union (where ex-

ports grew by 21.1% and it totaled to 34% in total exports in the first quarter of 2015), as well as in the United States (where is the high economic upturn) and the Turkish economy, where a better prospect is revealed due to lower prices on oil products caused by the consumption growth. Envisaging these factors, drop of 20% is expected in 2015 envisaging the negative an positive factors”, - Investment Bank regards. However, rating agency Fitch Rating made a forecast of export downturn of 20% for Georgia in the previous week. According to Fitch, Georgian foreign debt volume is grown towards GDP. “Schedule of foreign debt service is rather preferential, which means that the debt and costs of services by the state is enough low. According to 2015 budget, foreign debt service is merely 5.8% of total expenditures. Foreign debt service fee might be increased by 120 million GEL due to GEL devaluation towards USD, which is merely 1.3% and 0.4% of GDP. As these parameters are enough low, so to control pressure on the state budget is rather easy and does not require to adopt harmful drastic measures for Economy (for instance: tax increase), as it in the agenda of Greece, where state debt is up to 180% of GDP and the country hardly copes with the debt burden”, Galt & Taggart regards.

COMPETITION AGENCY: NO MONOPOLY ON GEORGIA’S COFFEE MARKET

here does not exist a monopoly on the coffee market in Georgia. As Competition Agency has noted in the report of 2014, the Agency has started monitoring of coffee market with their initiative from November. “After the processing of information received from Rev-

enue Service and National Service of Statistics has been revealed, that dozens of companies operate on the coffee market and none of them have a share more than 10%”. However, competition level is low on the market as well, which indicates that there is not problem in terms of competitions”, - the Agency’s reports of 2014 says.

OIL PRODUCT DISTRIBUTORS INCREASE PRICES

etrol price has increased in the retail chain. As of the official web-sites of oil product distributor companies, fuel price increased by 7 tetri in the retail chain. All products prices have been increased by 5 tetri in “Luckoil” and “SOCAR” chain. Prices have been increased from 4 to 7 tetri according to the types of products in the “Gulf”

chain, while from 4 to 5 tetri in “Wissol”. However, prices are not increased in “Rompetrol” yet. Oil product price increase has been expected according to the announcement made by the Union of Oil Product Importers in the previous week, as the Union has noted, that average price of A-95 petroleum has been grown by 0,02 EUR through the last two weeks and the cost totals to 1,27 EUR.

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BANK OF GEORGIA AS ONLINE CREDIT ORGANIZATION

Loan With 301% Yield

everal months ago commercial banks were banned to hold non-core assets. Commercial banks have fulfilled instructions of the National Bank of Georgia (NBG) and non-core assets are not registered in their foundation documents any more. In reality, everybody knows commercial banks will not entirely refuse their business interests at once. However, another interesting thing is that last period a new tendency has emerged in the Georgian civil sector – some commercial banks in Georgia are moving to the civil sector to promote their interests. Namely, representatives of commercial banks were registered in the managing chain of one of the recently founded economic-profile nongovernmental organizations. To be precise, representatives of Georgia’s leading commercial bank are participating in management of various education and future-oriented companies. Moreover, these NGOs are officially located at the real estate owned by the leading commercial bank. Indeed, there is nothing illegal in all these combinations. We should just note that because of their conservative character, commercial banks have long refrained from penetrating the civil sector. However, in this case, economic-profile NGO founded by the commercial bank openly makes political accents. To protect their business interests and to enhance the perception of these business interests, commercial banks have founded an NGO and this is not an illogical step and there is nothing surprising, but when the NGO founded with other goals shows political inclinations, naturally, a question arises when the commercial bank, an apolitical structure in its nature, sets up similar NGO, even more so, participates in its management Let’s

suspend answering this question for the future. It should be noted, initially, this NGO started working on very interesting issue before it would spread political messages. Namely, it launched campaigns against direct competitors of commercial banks. Namely, the NGO was carrying out campaigns against private usurers and online credit organizations. Its reports were providing quite high-quality explanations on defaults of private usurers and online credit organizations and their affect on Georgia’s social and economic developments. In this situation the most satiric fact is that the commercial bank that manages similar body through satellites, offers the product similar to ones of online credit organizations. We mean Bank of Georgia’s express credit product. A major part of online credit organizations swindles their clients by calling interest rates as service commission fees. Bank of Georgia has been following the same strategy. According to its website, clients must pay a 10 GEL fee twice a month on 200 GEL credit product, that is 20 GEL a month. Based on the NBG methodology for efficient interest rate calculation, Bank of Georgia express credit’s efficient interest rate makes up 310%. Bank of Georgia website reads about express credit product: The fastest loan. If you suddenly need money for household appliances, gifts and you do not want to borrow money from your relatives, visit Bank of Georgia express service center and take a loan in several minutes by submitting only ID card! Express Credit terms - Borrower’s age – from 20 to 60 years old - Amount – 200 GEL - Currency – GEL - Maturity period- 12 months

- Interest rate – 0% - Ahead of schedule payment commission fee – 0% Borrowers will twice pay a 10 GEL commission fee a month, while the principal sum will may be paid after the cessation of the agreement. Borrowers are able to partly cover the loan, but despite this, the fixed commission fee and the payment schedule will not change. This signifies borrowers will pay 20 GEL a month despite the principal sum makes up 200 GEL or 20 GEL for a year. It is worth noting the loan approval commission fee makes up 19 GEL. Consequently, the real loan amount shrink to 181 GEL. To take an express loan, you should have an express card and its annual service commission fee is 9 GEL. This is added 0.2% commission fee from money withdrawal from ATM (172x0.2=34). This signifies if the clients borrow 200 GEL, they will receive

only 171.65 GEL (200-19-9-0.34=171.66) in reality. As to the loan payment, borrowers have to pay 10 GEL commission fee twice a month, totally 20 GEL a month. Bank of Georgia calls this a commission fee and clients pay commission fee, not a loan interest rate. In reality, all financial costs for taking and serving the express loan show that nominal annual interest rate of the express credit is 147% and the annual efficient interest rate is 301%. It should be also noted under the NBG due resolution, if the loan amount is under 300 GEL, the bank is not obliged to indicate efficient interest rate with all financial costs in agreements. Consequently, when taking express credits, borrowers have no information on real interest rates. Bfm.ge

WHO CONTROLS OFFSHORE ACCOUNTS, WHERE MILLIONS OF USD RAISED FROM GEORGIAN INTERNET SUBSCRIBERS ARE DEPOSITED?!

ast period the Banks&Finances newspaper has been actively covering the issue of internet tariffs in Georgia. Increased tariffs are badly affecting Georgian citizens. Everybody agrees domestic providers have set unjust tariffs on the market. The Association of Young Financiers and Businessmen (AYFB) shares the same position. According to an AYFB conclusion, today there are several tens of companies on the Georgian internet market, while Caucasus Online and Silknet control over 60% of the market. The uncompetitive environment has brought cartel collusion signs. The companies have been jointly growing prices and subscribers are left without choice. Caucasus Online has recently set a new tariffs system. Changes have been made to both Internet and TV services. According to the revised tariffs, subscribers will pay the following prices: Optimal: 10mb/sc – 27 GEL (previously 25 GEL), Express: 30mb/sc – 37 GEL (previously 35 GEL), Extreme: 50mb/sc - 50 GEL ( previously 45 GEL); Infinite 100mb/sc – 100 GEL. Another major provider Silknet has resorted to the same strategy. Tariffs have increased because of accelerated connection speed and plans for adjusting to the market realities, Ilia Enuqashvili, a director for the strategic development department of the company, said. AYFB has introduced a report on the volume of internet purchased by Caucasus Online and Silknet and their expenditures in 2013 to 2014. Silknet has bought 21 656 megabytes more internet and has consequently paid 2 056 542 GEL more. According to the regulator’s report, the company has sold 46 000 megabytes more internet to only

foreign providers in 6 months and earned 605 393 GEL more profits compared to total revenues in 2013. Moreover, the company has sold the service to Georgian providers and received revenues from them, increased the number of subscribers and revenues from them. AYFB has collected information on internet tariffs in various countries of the world. The analysis has showed Georgian internet providers have set in practice one-sided prices. The monopolized market works for only these companies. It should be noted both companies have become the market dominants under ruling of the previous government. Initially, Silknet company was formed with support of the United National Movement (UNM). Everybody remembers the methods Silknet was using against competitor Caucasus Online. The latter was owned by Mamia Sanadiradze, a businessmen unacceptable to UNM. The company of businessman David Ramishvili (Zarala) promoted by UNM was trying to damage technical system of the competitor company and draw new subscribers from Caucasus Online in this way. Finally, the confrontation between Silknet and Caucasus Online ended after the company was appropriated from Mamia Sanadiradze and UNM took control over the company. The Banks&Finances has collected information on real owners of internet providers. According to the official report from the Business Registry, the information on owners of Silknet and Caucasus Online is completely unclear. These companies are registered in an off-shore zones and their revenues are mainly directed abroad. According to the registry data, a 44% stake in Caucasus Online is owned by Gross Master Hold-

ings that is registered on Channel Islands. A 20% stake is owned by International Online Networks LLC that is registered on Virginia Islands and a 19.80% stake is owned by Nelgado Limited that is also registered on Virginia Islands. As to Silknet, only Silk Road Group is famous from its owners and no other additional information is available on the company. As to other small internet providers, there are several companies with unclear owners and they are registered in various offshore zones. Hence, Georgian internet market is controlled by UNM favorite businessmen. Officially these companies are registered in offshore zones and money raised from Georgian citizens are directed

to unclear accounts. These companies still remain under the control of UNM high-ranking officials and naturally, a growth in internet tariffs will make profits to this political group and its leaders. There are one of the most expensive internet tariffs in Georgia, but the Georgian national Communications Commission (GNCC) does not show interest in this issue and it has not launched internet market examination. The regulator has not set a top margin to the companies to somehow regulate the market disorders. Moreover, inadequate decisions of internet providers make impression that these companies may be carrying out certain sabotage on behalf of UNM. Bfm.ge

ANALYTICS

QUOTES

TBILISI REAL ESTATE MARKET OVERVIEW

“State Will be Involved in Khudoni HPP Project”

DAVID MIRTSKHULAVA Technical Director at Transelectrica Georgia According to Mr Mirtskhulava, KhudonHPP construction will commence in the spring of 2016 and is scheduled to be complete in 2022. He says a Memorandum with the government of Georgia was actually agreed late last year, when investors arrived in Georgia at the invitation of the Ministry of Energy. In Mirtskhulava’s words, the Memorandum

envisages a purchase of electric power by the state for twelve months and the company’s refusal to register in the offshore. He says the Indian company Transelectrica Limited is ready to fulfill this condition, and refuse registration in the offshore, the company is likely to move to the Dutch investment. In this regard, the two sides have agreed. He notes that after signing the Memorandum, procedures will be strictly defined such as a re-review of the environmental impact assessment, also numerous research events were held. Afterwards a construction permit will be obtained and then construction will begin. According to Mirtskhulava, the state’s participation in the project is necessary, the company would welcome it, because such large projects are not possible without the state support. However, he notes that the state’s involvement in management will affect any project, the government’s share should be minor. The company agrees on the 20% state equity participation in the project. Mirtskhulava explains, the state’s involvement is not envisaged in the Memorandum. In case of its participation, ownership structure will change while the Memorandum remains the same. He adds that equity issues will be resolved in the near future, Deputy Energy Minister Irakli Khmaladze also pledged to resolve the issue in the near future.

“A Socially Oriented Economy is Disastrous for Georgia”

TEMUR CHKONIA Founder of Coca-cola Bottlers Georgia “The national currency should stabilize, and for this, tough measures must be taken - Temur Chkonia, founder of Coca-Cola Bottlers Georgia, says. According to Mr Chkonia, the belief that the National Bank alone can

remedy the situation is not true; moreover, the excessive consumption of foreign reserves could put the country’s economy before more serious challenges. “Today, very tough measures for the stabilization of the national currency must be taken. Otherwise, the current policy of a socially oriented economy is fatal for the country. If action is not taken in time, we will find ourselves in a very difficult situation. For instance, optimization of government agencies is needed because too many people are employed there. We need to cut staff. In addition, the government should tighten tax compliance. Any one particular solution doesn’t exist to stabilize the national currency. Today we have a situation, in which if we do not carry out comprehensive action, later we will have to do much more than today to stabilize the national currency, “- Temur Chkonia told CBW. In his words, the opinion that the National Bank may cope with the lari’s stability problem on its own is wrong. “The National Bank can spend foreign exchange reserves, but very soon they will run out, and then, without reserves, we’ll face a real catastrophe,” - the businessman noted.

“A Closer Cooperation Between the Government and the National Bank of Georgia is Needed”

GEORGE CHIRAKADZE President of Business Association of Georgia Mr Chirakadze, President of Business Association of Georgia, calls on the executive branch and the National Bank to cooperate more closely with the government. In particular, he notes, in matters relating to the stabilization of the national currency. Speaking about the reasons for the devaluation of lari,

he specifically drew attention to the external factors. “Many of us do not know what happened with the Turkish lira, for instance, which in recent months has depreciated sharply. Of course, it cannot serve as a reassurance for us, but it is clear that due to the trends in the region, it was virtually impossible to maintain the stability of lari. Of course, there is nothing good about it, no one likes what is happening with the national currency. We hoped that the lari would stabilize, but today we can say with confidence that a significant portion of the factors that weaken the national currency relate to the situation in the neighboring countries. The depreciation of the currencies in Turkey, Russia, Ukraine, Armenia, and Azerbaijan has an impact on our national currency. So, unfortunately, we have to face this condition”- Chirakadze said. According to the President of the Business Association, in this situation, he is waiting for a significant reduction in imports. “It’s generally a very problematic issue. Imports should fall further to minimize imbalance. It does not depend directly on the government. The expectations of people and businesses, as to what awaits them in the near future, play a more important role. It also depends on importers who import goods into the country. In any case, the economy always puts everything in its place”- he noted.

“Changes in the Government May Bring Investments to the Standby Mode”

VAKHTANG LEZHAVA Former advisor of the Prime Minister Vakhtang Lezhava, former adviser of the Prime Minister declared that changes in the government may transfer investments in Georgia to the standby mode.

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“Resignation of the government must not be a positive condition for the investors. When there is a crisis the country and the government is not able to overcome them, their resignation might be regarded as positive. However, in a short-term period. In this situation, investors may take the standby mode and wait to the new signals – how the circumstances develop and what signals will be given to the investment companies from Georgia. They would react accordingly. In this case, the matter does not concern the shift in political power. Merely, members of the government are resigned. So investors’ attitude should be neutral or slightly negative and then, a stand-by mode should be followed,” - Vakhtang Lezhava declared. New Minister Cabinet is under formation currently. Acting Premier Irakli Garibashvili has declared that he would replace merely two ministers in the cabinet – Minister of Sport and Environment Protection. Garibashvili asked the President and the Parliament to confirm the government this week.

RETAIL MARKET The total amount of retail space in the three main Georgian cities amounts to around 1.1 million sqm, out of which 80% is concentrated in Tbilisi. During the last two years the total volume of shopping centre supply in Georgia grew by 28% approximately and currently amounts to 292,000 sqm. Growth has mainly been driven by developments in the capital, Tbilisi. After the opening of the country’s first large modern mall in 2012 (Tbilisi Mall), the next major scheme (East Point) will start operations at the beginning of next year. The prime high street rent in Tbilisi is around USD 60 per sqm, which exceeds several Eastern European cities (Tallinn, Riga, Sofia, Tirana, Vilnius, Bratislava), but is 27% less than the average CEE figure. The estimated prime retail yield in Tbilisi is 13% for shopping centres and 12% for street retail, which exceeds average CEE figures (8.6%-9.1%) significantly.

resulted in stalled projects being resumed. Registered purchase transactions are following a positive trend in Tbilisi. The average growth rate of selling transactions during last three years was 8% in Tbilisi. The volume of registered transactions in 2013 amounted USD 829 million. In 2014 transaction volume increased by 6% in Tbilisi (USD 882 million). During 2010 – 2011, the growth rate of mortgage lending amounted 39% and the volume of issued loans reached USD 314 million. In 2012 a 34% decrease was observed in comparison with the previous year. In 2013, due to the marketing campaigns of commercial banks and reduced interest rates the volume amounted USD 416 million. Comparing the first nine months of 2014 to the same period in 2013, the growth rate stands at 68%. The average residential real estate selling price in Tbilisi grew from USD 826 per sqm in Q1 2012 to USD 830 per sqm in Q4 2014. WAREHOUSE MARKET

OFFICE MARKET The total amount of office space in five Georgian cities amounts to around 1.05 million sqm, out of which 85% is concentrated in Tbilisi, and the rest in regional business cities. During the last few years the total volume of business centre supply in Tbilisi has grown by 15% and currently amounts to 183,312 sqm. The prime rent in Tbilisi is around USD 21 per sqm, which is the least of Eastern European cities and equals the average CEE figure. By 2014 the average modern business centre vacancy rate in Tbilisi stands at around 7%, which has been declining gradually after the highest rate in 2010 (25%). Total modern stock in Tbilisi accounts for 334,800 sqm of which 151,486 sqm (45%) is owner-occupied. Big companies in Tbilisi prefer to build office buildings for themselves, which are fitted to their needs, rather than rent one in a business centre. HOTEL MARKET During the last three years the number of non-resident visitors in Georgia increased annually by 40% on average. At the same time, the number of international tourists1 experienced an average annual growth of 25%. These figures peaked in 2013 reaching 5.4 million of total international visitors and 2.1 million of international tourists2. Fast growth in demand, coupled with slower hotel room growth (12% annually), resulted in increased occupancy rates, especially in Tbilisi, where brand hotels are now achieving an average occupancy of 75%. In June of 2014, the Association Agreement between Georgia and the European Union was signed. This agreement aims to expand political and economic relations between Georgia and the European Union, and to gradually integrate Georgia into the European Union’s Internal Market. The Association Agreement includes the set up of a Deep and Comprehensive Free Trade Area (DCFTA), which is a core part of the accord. During the next few years we expect significant growth in the MICE segment, while numerous workshops and conferences will be organized in the framework to implement the Association Agreement. As of the first half of 2014, seven international hotel brands (Sheraton, Radisson, Marriott, Courtyard by Marriott, Holliday Inn, Citadines apart hotel and Best Western) are represented in the Tbilisi hotel market. The share of international upscale brand hotel rooms in Tbilisi is only 11% and international midscale brands occupy 17% of total supply. Although Georgia has one of the lowest figures for international tourism receipts per capita among selected countries, it has the highest growth rate during recent years. The average y-o-y growth rate in Georgia amounted 28% during 2010-2013. Middle class hotels3 in Tbilisi have better performance indicators than several eastern European cities like Riga, Bucharest, Vilnius and Zagreb, where average daily rate and average occupancy rates for selected cities are respectively 10% and 8% less than the same figures for Tbilisi. RESIDENTIAL MARKET Ongoing and pipeline residential project in Tbilisi amounts almost 2.9 million sq. m. under construction. During next two years supply will rise by 16,000 dwelling units and amount 360,000 dwelling units. In the last two years, strong demand has

The total volume of warehouse space in Georgia amounts to around 1.8 million square metres, of which around 1.2 million square metres is owneroccupied and the remainder is leasable. The largest share of total leasable space is located in Tbilisi 61%. From the 379,000 square metres of leasable warehouse supply, 89% is dry storage and 11% cold storage. The total capacity of cold warehouses in Tbilisi is around 170,000 tons. The broad categories with the highest occupied space are food and beverage, representing 42% of occupied space in listed warehouses and building materials - occupying 14% of stock. Transport companies take up to 13% of space. The warehouse market in Tbilisi is more developed than in other Georgian cities. The only A class warehouse storage in Georgia with a leasable area of 10,000 square metres is the recently developed facility by Gebrüder Weiss near Tbilisi Airport, which was fully occupied at the date of this research. The company plans to develop an additional 37,000 square metres as a second phase of development. ENTERTAINMENT MARKET The government is actively supporting the development of the gambling industry, which gives Tbilisi a competitive advantage in the region. The gambling industry accounts for about 70% of the entertainment industry’s total turnover, which equalled 1.2 billion GEL in 2013. During the next two years several new projects are planed in the city, Tbilisi Fine Art Museum, the refurbishment of the Tbilisi Opera house, relocation of Tbilisi zoo are the major planned projects. The Government of Georgia is actively seeking to hold international sports tournaments in the country and some of them are already planned, such as The Youth Olympic Games 2015 and the UEFA Super Cup 2015. The country’s main stadiums and sports complexes are concentrated in the capital Tbilisi (Boris Paichadze Tbilisi Dinamo Arena, Mikheil Meskhi Stadium and Tbilisi Sports Palace) which will see the development of new sport facilities, such as the new rugby stadium and a new tennis complex. The water entertainment industry (Aqua park and swimming pools) is actively developing in Georgia. The recently opened Gino Paradise and the Euro Park are main players in the country. Completion of a new swimming pool for the Youth Olympic Games 2015 is planned next year. Health and wellbeing becomes more popular in Georgia, especially in Tbilisi. Aspria Fitness is actively expanding its chain. The major amusement parks of the city is Mtatsminda Park. Tbilisi also offers botanical garden, zoo and several recreation parks. The relocation/ expansion of the Tbilisi Zoo and renovation of Park Mziuri are the major planned projects in the near future. Tbilisi is one of the visited destination of the county. Red-tiled roofs, narrow streets and ancient buildings as well as modern architecture buildings impress visitors from around the world. Tbilisi offers visitors unique cuisine, gambling, sports and leisure opportunities. The restaurant market is the most developed sector of the Gastronomic industry in Tbilisi. The Modern Café-Bars, night clubs and international cuisine market is growing fast.

May 4, 2015 #97

BANKING NEWS

caucasian business week

BANKING SECTOR’S PROFITS HIKE Loan Interest Rate Exceeds Deposit Interest Rate by about 300%

he bank sector’s performance makes impression as if there is no problem in the Georgian economy. However, the economic developments and the bank sector’s indicators have long distanced from each other, as the bank sector runs forward at higher paces compared to the whole economy. The economic growth remains under 5%, while a pace of growth in bank assets, including loans, revenues and profits, in general, records two-digit figures, in most cases. The first quarter of 2015 has recorded nothing exceptional. In January to March 2015 commercial banks received 101 million GEL net profits, up 7% (up 7 million GEL) year on year. The dynamics of revenues of commercial banks is also noticeable and the GEL devaluation process has much contributed to that. Total revenues of commercial banks have increased by 62% compared to the first quarter of 2015 and reached 1 billion GEL. The balance between interest and interestfree revenues is nearly 50/50. It is worth noting interest revenues have increased by 22%, while interest-free revenues have increased by 146% and exceeded 480 million GEL. 85% of interestfree revenues are classified. As a result, the ratio of interest-free revenues in total revenues has increased to 50% from previous 35% to 40%. As to the expenditures, in the first quarter of 2015 the sector’s expenditures rose by 77% to 877 million GEL, including expenditures to serve interest rates have grown by 17%, and interestfree expenditures have increased by 90%. Other interest-free expenditures have risen by 160% to 381 million GEL. Expected losses on assets have increased 3.5 times. In the first quarter of 2014 the indicator was a little over 32 million GEL, while in the same paired of 2015 the figure has exceeded 130 million GEL. The important tendency is reflected in financial parameters of the banks’ performance. Namely, interest revenues have grown at higher paces compared to interest expenditures. In the first quarter of 2015 commercial banks received 455 million GEL revenues from loans and spent 129 million GEL on serving deposits, down 3.5 times.

These figures clearly reflect the difference between interest rates of deposits and loans and this moment is called as a spread in the finances. Averaged interest rate on deposits makes up 5.9%, loans – 15.1%. This signifies the spread is 9.2%. This indicator makes Georgia one of the leaders worldwide. In the developed countries the spread does not exceed 3%, in the developing countries the spread is not over 5%. Only several countries record higher spread than Georgia. This signifies commercial banks issue drawn funds in the form of loans at triple higher rates. A logical question arises: what is the reason for such difference between interest rates on loans and deposits? The loan’s interest rate consists of several components. A major ratio in the interest rate we annually pay on average is occupied by drawn funds (about one third of the loan’s interest rate), about the same amount is recorded for salaries, administering and marketing costs. A risk factor is one of the most important components in the credit’s interest rate. But if we analyze the bank sector’s portfolio, it is quite healthy and this signifies additional payments borrowers pay for expected risks are transformed as profits of commercial banks. As reported, additionally requested benefit for risk factors is called a risk bonus that is calculated on the ground of difference between interest rates on bank loans and state securities. As to the current situation in Georgia in this respect, the bank sector credits the state budget through purchase of state securities. Interest rates on this securities range from 6% to10% due to terms. However, a major part of the state securities are issued at 6% to 7%. Consequently, commercial bank issue loans to the private sector at averaged 15%, while the so-called risk-free state securities are financed by 6% to 7% credits. That signifies the risk bonus makes up 8% to 9% and this one of the highest indicators worldwide. Hence, commercial banks issue drawn funds in the form of loans at far higher interest rates and this is reflected on their financial indicators. As a result, despite unfavorable situation in the whole economy, commercial banks increase their profits at higher paces.

CHARGES AGAINST THE CENTRAL BANK REDUCE INVESTORS’ CONFIDENCE

eorge Bakradze, Adviser to the President of the National Bank of Georgia (NBG), believes that the only way to stabilize the exchange rate of the Georgian lari is to grow investment inflow. According to him, charges against the central bank in the lari’s devaluation, adversely affect investor sentiment. “The National Bank takes maximum measures to mitigate devaluation. This is evidenced by at least the fact that in 2015 the NBG carried

out currency intervention in the amount of $ 240 mln. However, the reality is that it’s impossible to keep the rate stable through foreign exchange interventions. The only thing that we can do is to soften sharp jumps of the lari and to minimize the negative effects of the devaluation, “- the adviser notes. In his words, the National Bank cannot be accused of depreciating the currency as such accusations automatically have an impact on investors and reduce the level of their confidence in the government and the state in general.

INTEREST ON DEPOSITS AND LOANS GOES DOWN, WHILE VOLUME OF OVERDUE LOANS IS GROWING

s of April 1, 2015 , a volume of deposits in the banking system of Georgia was GEL 6. 2 billion that is 41.5% more than in the same period of 2014. The volume of deposits in foreign currency increased in all types of deposits, but the biggest increase of 47% was 4egistered in the term deposits segment. The average interest rate on deposits in foreign currency decreased by 0, 5% and amounted to 4, 5% per year. Interest rates on current deposits in foreign currency amounted to 3.8% (in 2014 - 3, 2%), on demand deposits – 2.7% (3.1%), and time deposits – 5.4% (6 .5%). As of April 1, the volume of deposits in national currency increased by 12.4% to GEL 4.7 billion. It should be noted that the volume of current accounts in national currency decreased by 3.1% to GEL 2.16 billion, while the volume of time deposits and deposits in national currency increased

by 39% and 9%. With regard to interest rates, the average interest on deposits in the national currency remained unchanged at 7, 4%, including current accounts 7, 5% (in 2014- 7.6%), on demand deposits 3. 9 (4, 2%), and time deposits – 8.7%. In parallel with the reduction of interest rates on deposits, interest on loans also reduced. The average percentage of loans in foreign currency as of March fell to 15%, whereas in the same period of 2014 - 16, 9%. At the same time, the average interest on loans in GEL makes 18. 5%, whereas a year ago - 20, 1%. As of April 2, 2015, the volume of issued loans increased by 37% and amounted to GEL 14. 7 billion. The volume of loans issued in the national currency increased by 25% to GEL 5.3 billion, in foreign – by 45,2% and amounted to GEL 9 4 billion. It should also be noted that the NPLs increased by 13.3%, in the national currency - by 19.8%.

PASHA BANK – SPECIAL PARTNER OF BUSINESS CONFERENCE HELD IN BRUSSELS

n April 27, 2015 EU-Georgia Business Council (EUGBC) held a Business Conference in Brussels. The conference was funded by the European Union. The Special Partner of the event was PASHA Bank Georgia. “Georgia’s new opportunities in free trade with the EU” was the main topic of discussion. Here sixty-five large, medium and small sized Georgian and EU enterprises from different sectors had the opportunity to discuss business and investment climate in Georgia. Mr. David Bakradze, State Minister of Georgia on European and Euro-Atlantic Integration and Mr. Gerhard Schumann-Hitzler, Director for Neighborhood East of the European Commission (DG Neighborhood and Enlargement) welcomed the participants. Mr. Goga Japaridze, Commercial Director at PASHA Bank addressed the guests and mentioned that PASHA Bank has been sponsoring a range of events aimed at the development of Georgian economy.

„We believe in the importance of the business conference, which was held today in Brussels. We were special partners of the conference and we gladly shared our successful experience as a big foreign investor in Georgia, emphasizing positive business environment, which was the main reason for PASHA Holding to make a direct investment of approximately $60 mln two years back when PASHA Bank started operating in Georgia.”- said Mr. Japaridze. Brussels conference is one of those events aimed at the development of local business and economy sponsored by PASHA Bank. Among those are: - Business Development Forum, where challenges faced by the Georgian economy, ways of improving the business climate and creation of new investment opportunities were discussed. - Business Brilliance Awards annual ceremony organized by London based BOC (Blue Ocean Consultancy) Global Event and Training Group. - Golden Brand 2014 which is considered as the most prestigious and influential annual business award since 2006 and is given to companies that achieved special success in branding previous year.

PASHA BANK – PARTNER OF GOLDEN BRAND 2014 AWARDS

n April 24 Golden Brand 2014 annual awards ceremony was held in Radisson Blu Iveria. PASHA Bank was the partner of the ceremony. Golden Brand is considered as the most prestigious and influential annual business award since 2006 and is given to companies that achieved special success in branding previous year. The ceremony was attended by representatives of more than 100 leading companies. Among the attendees were special guests, governmental and diplomatic corps representatives. Shahin Mammadov, CEO at PASHA Bank Georgia addressed the guests and once again underlined the Bank’s interest to contribute to local business development and growth. “We are glad to have the opportunity to be special sponsors of Golden Brand Awards. We believe that this annual event gives all the winners and nominees additional motivation for developing their business and achieving more. PASHA Bank gladly supports such initiatives,” said Shahin Mammadov, CEO at PASHA Bank Georgia. Mr. Mammadov awarded a Golden Brand prize to winning companies: “Nikora”, “Lisi Develop-

ment” and “Ipkli”. In 2014 PASHA Bank sponsored following business projects: - Seminars “A New Management Paradigm for a New Age of Managers “ and “4D Branding – Surprise Branding - Business Development Forum, where challenges faced by the Georgian economy, ways of improving the business climate and creation of new investment opportunities were discussed. - Business Brilliance Awards annual ceremony organized by London based BOC (Blue Ocean Consultancy) Global Event and Training Group. In 2014 PASHA Bank was named the Bank of the Year by Caspian Energy Group. On the ceremony President of Georgia Giorgi Margvelashvili awarded a prize to the CEO of PASHA Bank Georgia, Shahin Mammadov.

LIBERTY FINISHED Q1 WITH A PROFIT OF 8,3 MILLION GEL

iberty Bank’s profit has made up 8,3 million GEL in Q1 (Q1/2014 – 4,5 million) and its share has made up 8%- share among the profitable banks. As of April 1, bank’s loans amounts to 766,7 million GEL (Q1/2014 – 718,06 million). To note, reserves (64,6 million) total to 8,3% of the portfolio (Q1/2014 – 718,06 million), the fig-

ure is increased comparing to Q1, but is not related to GEL devaluation (currency loans do not exceed 32,9 million GEL). The bank is on high risk segment (retail) and historically, the reserves have been always high. Assets are defined by 1,5 billion GEL, whereas market share – 6,6%. Chartered capital of the bank totals to 166 million GEL.

PUBLICITY

caucasian business week

May 4, 2015 #97

COMPANY NEWS

May 4, 2015 #97

caucasian business week

GEORGIAN FUSE TEA TO COMPETE WITH ICED TEA FROM AZERBAIJAN

usinessman Temur Chkonia launches an iced tea – Fuse Tea domestic production. According to the businessman, the company will bring the equipment in early May, after which production will begin that will stop import of the product from Azerbaijan. In his words, the construction of the plant is already underway and a total of 4 million 700 thousand euro will be spent for this purpose. It has been decided that Fuse Tea produced in Georgia will go for export. Negotiations have been under way with Turkey, where the product will be sold in a liter packag-

ing, an agreement has been signed with Central Asia countries. Chkonia says that iced tea will be of several flavors, gradually the new ones will be added – including a chamomile. The businessman notes, due to the lack of imports costs, the product price will be reduced. At this point Fuse Tea price reaches GEL 1.65. In a conversation with “Commersant”, Temur Chkonia says he will begin to produce natural fruit juices in the near future. Chkonia notes the product is expected to appear on the market in the current year. In June, “Coca-Cola Bottlers Georgia” will start exporting 200 grams “Coca-Cola” to Armenia and Azerbaijan.

MANGO STORE TO OPEN IN TBILISI MALL

branch of the Spain’s most international fashion brand Mango will open in Tbilisi Mall. Mango brand stores, located in the city center closed earlier this year. Novo Group, the brand’s representation in Georgia, claims that the store’s closure was decided at the brand’s head office. Then they could say that Mango was unofficially represented on the market and the company planned to enter the market officially. Retail Group Georgia confirms an official store will be opened in Tbilisi Mall but avoids talking about details. Local publication Commersant.ge reports Mango will be represented not only by women but also men’s and children’s lines as well. After Tbilisi Mall, wellknown company’s store will be opened in other shopping centers.

“LA FAMILY” TO OPEN FIVE SUPERMARKETS IN TBILISI THIS YEAR

newly opened supermarket “La Family” plans to open four more branches in the capital this year. According to the company’s marketing manager Maka Kvaratskhelia, a European-style supermarket offers customers the best service and exclusive products. “La Family” first object wax opened in Tbilisi in the current month. Consumers can buy household goods and food,

ready-made meals and bread baked on site. Kvaratskhelia explains that the products prices are similar to market, but some products can be purchased at a lower price. “La Family” management considers “Fresco” and “Smart” supermarket networks as the main competitors. The shopping center is located on 100 square meters. Up to 100 people are employed in the supermarket at this stage. The company doesn’t specify a volume of investment.

NO NEED FOR IMPORTING EGGS IN THE NEAR FUTURE

here will be soon no need for Georgia to import eggs. Agriculture Minister Otar Danelia announced in the village of Ninotsminda while visiting a poultry farm. “We can say that there will soon be no need in Georgia to import eggs. The cost of products will be regulated by competition. There will be healthy competition in the country, which is a natural process. There will be competition not between the imported products but locally produced which will naturally balance the price “, - said Mr. Danelia during his visit to the poultry factory “Ninotsminda 1 “ to-

gether with journalists. According to George Mchedlishvili, “Ninotsminda 1” Director, the company is engaged in the realization of eggs. At present, the factory has 12 600 chickens and produces 150 000 eggs a month. Price egg is approximately 20-21 tetri. “Ninotsminda 1 Ltd” was founded last year. The company took a loan of $ 100 000 in the first phase of the preferential agro-credit project. Later, it became necessary to take additional $ 250 000 at 1% for 5 years. George Mchedlishvili says the price of eggs will be relatively low in the near future, as producers plan to produce food crops for chickens.

WHY DOES CONSTRUCTION SECTOR AMNESTY DELAY?

onstruction business has not yet benefited from the initiative called by Finance Minister Nodar Khaduri one of the main achievements of the government’s economic team. Construction projects that have been stopped because of the war and the global crisis in 2008 will be exempt from taxes and penalties only if they are resumed and completed until 2018 . The tax amnesty will help developers save about GEL 200 million. CBW wondered whether these benefits are enacted, how many companies have benefited and what amounts were written off? President of Developers’ Association and CEO of the development company “Arci” Tornike Abuladze says that the initiative was approved by the Georgian Parliament about a month ago. However, the process of writing off funds has not started yet, because the local authorities and Tbilisi City Hall were ordered to submit a list of construction companies which these benefits will affect. Abuladze notes that the process of clarifying the lists is underway at the City Hall.

According to “Center Point” founder Maya Rcheulisvili, a special commission is to set up in the City Hall which will coordinate this issue. The companies are waiting for the process to finish. In Rcheulisvili’s words, in the frames of the government’s initiative, an amount of about GEL 75 million will be written off for their company. The government’s decision was initiated by Tornike Abuladze, President of the Association of Developers. This is a very important step that will enable construction companies to resume projects, and will provide apartments to citizens who have already paid for them and for many years have been waiting for the completion of projects. “Arci” will save GEL 2 million, “- he notes.

FOODPANDA RAISES ADDITIONAL USD 100 MILLION IN FUNDING LED BY GOLDMAN SACHS

nvestment to be used to expand foodpanda’s last-mile delivery operations and further improve customer experience Foodpanda (www.foodpanda.ge), the global mobile food delivery marketplace today announces a new financing round of USD 100 Million led by Goldman Sachs. Existing investors, among them Rocket Internet SE, also participated in the round. Together with the last funding of USD 110 Million in March 2015, foodpanda has now raised over USD 310 Million since its launch in 2012. After acquiring key competitors in India, Mexico, Russia, Brazil, Eastern Europe and South-East Asia, the company will use the recent investment to further expand its own delivery activities and improve overall customer experience across its 40 markets. Last-mile delivery has been part of foodpanda’s operations since the beginning, it will now accelerate its efforts to drive customer satisfaction, aiming to offer the most convenient way of ordering food – from the mobile app and online. foodpanda, together with its affiliated brands, focuses on emerging markets, operating in 40 countries across five continents, market leading in 32, among them India and Russia. foodpanda is active in over 580 cities around the world, operating in 12 of the largest 20 metropolises, and partnering with over 60,000 restaurants. Ralf Wenzel, Co-Founder and CEO of foodpanda group: “We are very happy about the recent support from Goldman Sachs Investment Partners, with its deep expertise in online marketplaces,

and which, together with our renowned group of investors, will allow us to build the leading mobile food delivery marketplace in Emerging Markets targeting over 3 billion consumers. The Emerging Markets represent the largest opportunity in online food delivery and we are committed to create the most convenient way for ordering and delivering food“. Ian Friedman, Goldman Sachs Investment Partners: “We have been impressed by both the growth trajectory and high-quality management team of foodpanda. We believe that foodpanda has a tremendous opportunity to cement its Emerging Markets leadership position in the coming years. It is our expectation that the Company’s innovative, value-added offerings will lead foodpanda to be the winner in online food delivery within the markets in which it operates.”.” As part of the financing round, Goldman Sachs Investment Partners will join the Advisory Board of foodpanda.

GEORGIA TO BREW BAVARIAN ROYAL BEER

he Bavarian Royal Beer will be brewed in Georgia. Representatives of Castel and Kaltenberg companies signed the due agreement on April 28, 2015. The beer owned by the Bavarian Royal Family that will be manufactured by the Georgian-German investment. HRH Prinz Luitpold von Bayern will pay his official visit to Georgia on May 23. The Royal Family has been brewing the beer in only several countries since the 13th century in line with the Bavarian royal standards and the Bavarian Purity Law. The Bavarian Purity Law was introduced by Duke William IV in the 16th century. Under the law, the beer manufacturers pledge to use only natural and high-quality ingredients in the brewing process. Kaltenberg beer is made of special ingredients.

For many centuries the Kaltenberg brewery has been showing particular attention to the ingredients selection process. Castle company has provided long negotiations for obtaining exclusive rights for brewing Kaltenberg. The Kaltenberg brewery chief brewer will visit Georgia concerning the inauguration of the brewing process in Georgia. He will personally control all complicated and long procedures that are related to manufacturing the Bavarian royal beer in Georgia. “Our company that is associated with one of the important treasuries of Germany, the Bavarian royal beer, is trying to find new and interesting markets for its product. In this region we have chosen Castel brewery that fully meets top standards of the Bavarian Purity Law. Another reason we have chosen Georgia is the fact the market registers significant demand for

high-level and high-quality product. People in Georgia understand very well how to enjoy beer with particular characteristics”, the Kaltenberg chief brewer noted. “We have passed long and quite complicated process to reach agreement with the Kaltenberg representative. Besides the important investment the German party will make in developing the beer consumption culture in Georgia, we are pleased they have recognized all processes in our brewery to be satisfying all the standards that are hailed in the Bavarian Purity Law, the world’s most important charter in beer production”, Castel company founder Temur Chkonia said. The Bavarian royal beer distribution will start in Georgia in the second half of May 2015. It should be also noted in Germany a group of French designers have developed a special brand symbols of Kaltenberg.

CURRENCY

May 4, 2015 #97

caucasian business week

CRUCIAL RELEASES TO KEEP FOREX TRADERS BUSY

UK GENERAL ELECTION: IF VOTING CHANGED ANYTHING – THEY WOULD MAKE IT ILLEGAL* (*) Emma Goldman – Russian/American anarchist

By Steen Jakobsen

irst there were two, then three, and now there will be four major UK political parties. No wonder it’s getting more and more difficult to make predictions for the UK election. The two “old” parties are both far from their historic support levels, and every new General Election they get diluted by newcomers to the scene. The LibDems have of course been around for a while now, but their rise created the hung parliament in 2001. (picture #1) This time it’s becoming a Scottish election as the SNP looks to gain 41 new mandates while the Tories will lose 19, Labour will gain 15 and the LibDems lose 32 mandates. This leaves the major parties miles from the 326 seats needed for a majority government, but even more confusing, even the likely coalitions are short of a majority: Tories + LDP = 283 + 24 = 305 or Labour + SNP = 271 + 47 = 318 (picture #2) A lot can happen between now and May 7th but due to “first past the goal post” rules in the UK a change in overall percentage vote share rarely changes the overall result. Note how the UKIP party with 23% of the popular vote might get only one or two mandates, while LibDems with far less votes will get 18. No wonder there is call for a new electoral law in the UK! There is a tendency to run an election based on the concept: “It’s the economy stupid”. This however has some potential downsides. In the UK they talk about the 1945 effect – Tories won the war with Churchill but were out of office by 1945 despite doing the hard work. Similarly now the Tories are running a dangerous campaign calling for the voters “not to let Labour ruin the economy” The Tories/Lib. Dem coalition has stabilized the UK but the current account deficit is out of control, meaning effectively that the improvement has been borrowed. Still, they point to job growth, slowly rising wages and UK’s relative GDP improvement. The Labour Party have moved their rhetoric back to the 1970’s, fighting for redistribution of wealth, wealth taxes and all the old-school policies which were so dominant during big business, big tax, no growth and over-unionized labour markets. This is a strategy that suggests a world of zero growth – again, arguing for redistribution rather than a path

to new growth. Still, Labour’s platform does address the ugly growing extremes in inequality that have resulted from an aggressive monetary policy of low rates and support for the 20% of the economy which is large, publicly-traded companies and banks. Meanwhile, the 80% of the economy, the smalland medium sized enterprises (SME’s) and middle- and low income earners everywhere are all worse off than ever. I think this election will be decided on two things: Inequality and how many mandates UKIP will get on May 7th. The UK economic numbers may look okay on the surface, but inequality is hard to run from as the 80% have been the biggest losers since the financial crisis started. The problem for the Tories is that these 80% are also the middle class, the voters who are politically engaged. They feel left behind and I am sure also frustrated with the lack of change and hope. This makes UKIP an interesting alternative. They are the “protest party” for many of these voters. We know from France and Spain how parties deemed to be ‘extreme’ fare relatively poorly in polls, but behind the curtains in the voting both people voters are far braver at expressing their political opinion. An Electoral Calculus table suggests that with 20 per cent of the national vote (they have polled as high as 23% over last two years), they could win eight seats; 24 per cent would produce 46 mandates. Finally we need to address the elephant in the room which is that we are likely to see this UK General Election only as the pivot point leading to a UK referendum on the EU. A UK exit from the EU is the single biggest threat to EU’s future and significantly more important than whether we see a Grexit or not. The UK is the anchor of most liberal European countries. Certainly for Denmark, Sweden and Netherland. We all count on UK to step up when Brussels and often Club Med gets too busy handing out “presents” paid for by Europe’s tax payer. Losing the UK in the EU will not only render it rudderless but also create a massive need for the European financial industry to redefine itself. This UK election will mirror many election around Europe since the crisis started in focusing on the inequality and the need for a political protest. This opens for big moves in the mandates. I foresee Scottish National Party and UKIP protest votes will prove far more numberous than the latest polls suggest. This will lead to likely Tory + Liberal Democrat coalition supported by UKIP. The UKIP support will come with UK referendum on EU in 2016. This opens a can of worms as the EU will have to fight for its life by as it juggles the potential fallout from a Grexit, Brexit and QE-exit.

ffbeat US economics continue fading expectations that the Federal Reserve could express concern for interest rate hike sooner, pulling back the US Dollar Index (I.USDX) to register consecutive second weekly decline. The Euro, even after again witnessing failed talks between Greece and its creditors, managed to gain as ZEW Economic Sentiment and German readings surpassed expectations. Further, commodity currencies, mainly AUD, NZD and CAD, remained a bit on the upside with fresh announcement of Chinese stimulus and an extended pullback in commodity prices. Moreover, Crude Oil prices maintained gains with stretched Geo-political tension in Yemen, coupled with signs of decline in US shale output, spread concerns for supply disruptions. Going forward, the current week has many important readings/events on the cards that could continue making forex traders busy. Amongst them, quarterly GDP data from the UK and the US along with three major central bank monetary policy decisions, namely FOMC, BoJ and RBNZ, could help investors determine the near-term direction in the Forex market. US FOMC AND ADVANCE GDP Q/Q COULD CREATE HEADLINES Monetary Policy meeting by the Federal Reserve, scheduled for Wednesday, is an undisputed crucial event of the week where market players will continue seeking hints for the near-term interest rate hike; however, absence of press conference by the Fed Chair, generally following the rate announcement, could dilute the event’s importance. Although, downbeat economics continue restricting the FOMC from signaling accurate timelines for the interest rate hike, needless to say a surprise alteration in benchmark interest rate, some of the FOMC members are split over the view and could communicate the same to fuel USD strength. Advance reading for the Q1 2015 GDP, scheduled also on Wednesday, becomes another important detail for the Forex market to observe. Consensus supports another disappointing print of US GDP, only a 1.0% gain, after the number witnessed 2.2% growth in Q4 2014 against noting the 5.0% gain in Q3 2014. Considering the plunge in headline economic numbers, it is more likely that the GDP print could either match the forecast or miss the mark and provide another lag of decline to the USD. Other than the headline numbers, CB Consumer Confidence, scheduled for Tuesday, Pending Home Sales on Wednesday, Chicago PMI, schedule to release on Thursday, and the ISM Manufacturing PMI, on Friday release, are some of the additional details that could provide meaningful information to determine nearterm USD moves. While Consumer Confidence and the Manufacturing PMIs are signaling an improvements from their prior releases, Pending Home Sales could register a lower than previous growth number. To sum up, recent flow of negative economics may restrict the FOMC from conveying near-term interest rate hike, providing additional support to the USD bears; however, surprise majority of FOMC hawks could provide considerable strength to the greenback. Further, better than expected gains in the Q1 2015 GDP number may provide strong support to these hawkish policy makers to announce interest rate hike sooner than expected, that in-turn could provide noticeable USD gains.

EURO-ZONE CPI, UK GDP, CHINESE PMIS, RBNZ AND BOJ ARE OTHER EVENTS TO WATCH FOR Rest of the global economic calendar is also busy during the week with Flash reading of Euro-zone CPI, Preliminary Q1 2015 GDP from UK, monetary policy meetings by the Bank of Japan (BoJ) and the Reserve Bank of New Zealand (RBNZ) providing important information to fuel the forex market. Flash version of Euro-zone CPI, scheduled for release on Thursday, is an important reading to see whether the QE is paying expected benefits or not. The number is likely testing five month high, to 0.0%, and could help the ECB feel satisfied with the stop in deflation. However, German Prelim CPI m/m, scheduled for Wednesday, is expected to print a negative reading and could provide a bit of Euro decline before the regional currency enjoys Euro-zone CPI reading. Hence, a stronger than expected reading of Euro-zone CPI could support the Euro to extend its recent gains; however, a consecutive decline in the numbers is less likely to provide additional damages to the regional currency, unless there are sharp negatives, as ECB is less likely to add more easing on its QE. Preliminary reading of Q1 2015 UK GDP, scheduled for Tuesday release, and the Manufacturing PMI, scheduled for release on Friday, are important information from Britain to determine near-term GBP moves. While the GDP reading is expected to print a bit softer number, to 0.5% against the upwardly revised previous release of 0.6%, the Manufacturing PMI is likely printing a mild improvement, to 54.6 from 54.4, in manufacturing activity. As there prevail minor differences between the forecast and prior readings, actual numbers meeting the consensus are less likely to reveal much of the GBP strength; however, should the GDP reading surpasses its previous reading it can force the BoE to spell for monetary policy tightening and can help the UK currency witness considerable up-move. Official readings of Manufacturing and Non-manufacturing PMIs from China, scheduled for release on Friday, are important details to determine near-term strength of commodity currencies. While the Manufacturing PMI is likely to continue printing an above 50 reading, a plunge into the Non-Manufacturing PMI below 53.7 could reveal the weakness dragon nation. Moreover, a below 50 print for the Manufacturing PMI from the world’s largest industrial player is likely to witness loud repercussions and can drag the recent gains of AUD, CAD and NZD. Monetary policy meetings of the RBNZ and the BoJ, scheduled for Wednesday and Thursday respectively, are less likely to result in altering their current monetary policies. However, comments from the BoJ Governor, in press conference following the meeting, are likely to be closely scrutinized to see if the central bank continues to show willingness to expand its economic stimulus measures further. Should the RBNZ provides a surprise hike in interest rate, that could be strongly positive for the NZD while an optimistic comment from BoJ can become strong support for the JPY to extend its gains. With an on-going correction in US Dollar, backed by dismal economic readings, only a stronger than expected US GDP could reverse recent losses by the greenback. On a broader view, with multiple releases from major economies on cards, the upcoming week is likely being crucial to determine near-term Forex market moves.

(picture #2)

(picture #1)

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

May 4, 2015 #97

RESEARCH

NOISY TBILISI ENERGY SECTOR - 2014

ig cities are naturally accompanied by noise. Urban residents are more or less accustomed to this fact, however, loud noises during late hours might become very irritating and as the experts say, might cause insomnia and mental disorders. This is why, developed countries have laws to regulate the acceptable levels of noise in the night times. At this point, Tbilisi City Assembly also voiced an initiative to regulate noise in public

spaces. ACT surveyed Tbilisi citizens concerning which type of noise bothers them in the evenings and whether they approve of the initiative to regulate it. As the research results show, one third of the capital residents (31%) are bothered by the outside noise in the evenings. According to the respondents, the noise of the vehicles is the most irritating type (16%). Citizens of Tbilisi are also bothered by the noise of the people in the streets (10%) and fireworks (7%). Interestingly, only 2% of the citizens complain about noise coming from cafés/restaurants in the evenings.

NEIGHBORHOOD

Azerbaijan becomes commercial operator in South Caucasus gas pipeline

OCAR (State Oil Company of Azerbaijan) has become the commercial operator of the South Caucasus gas pipeline through which Azerbaijan currently sells its gas to Georgia and Turkey. Gas is extracted at the Shah Deniz field. Previously, Norwegian Statoil company was the commercial operator. It left the project by selling its share to the Malaysian Petronas company. Norway’s Statoil sold its 15.5-percent share in the Shah Deniz project to Petronas. The cost of the deal, including a 15.5 percent share in the South Caucasus Pipeline Company (SCPC) and a 12.4 percent share in the Azerbaijan Gas Supply Company (AGSC), is $2.25 billion. The contract for development of the Shah Deniz offshore field was signed on June 4, 1996. The field’s reserve is estimated at 1.2 trillion cubic meters of gas.

Turkmen gas could reach Europe through Iran: EU

E According to the research results, majority of Tbilisi residents (67%) have heard of the initiative of the new law to regulate noise levels in public spaces during late hours. Despite the fact that only small portion of the population is bothered by outside noises in the evening (31%), the majority of citizens (71%) positively evaluate the new initiative. Only 8% of the residents of the capital rate the initiative negatively. Interesting differences were observed in age cross-section – as it was expected, the older people had more positive attitude towards new initiative – the absolute majority (84%) of the people over 55 years were supporting the initiative and only 4% of them disliked it. In contrast, only 60% of people aged 18-34 years supported the initiative and every tenth (12%) of them evaluated it positively.

U energy boss Maros Sefcovic said late on April 30 thatEurope could import natural gas from ex-Soviet Turkmenistan via Iran as Brussels ramps up efforts to break its dependence on Russian-sourced energy. Speaking after a meeting with Turkmen President Gurbanguly Berdymukhamedov in the capital Ashgabat, Sefcovic, vice president of the European Commission for Energy Union, also said he expected that imports of Turkmen gas via a pipeline built under the Caspian sea could begin as soon as 2019. Sefcovic said the two had discussed the “possibility of building a pipeline through the Caspian as well as through Iran, since diplomatic relations with Iran are developing positively.”

The research was conducted on 415 adult residents of Tbilisi, in March, 2015. The statistical error of the data does not exceed 4.75%. The survey was conducted exclusively for internet magazine “Marketer”. Third party must give a notice before using the given information fully or partially.

DAMAGE IN NEPAL ESTIMATED UP TO $10BN, MAY EXCEED ENTIRE GDP

“Estimated economic losses may exceed the GDP of Nepal,” the United States Geological Survey wroteon its website. Economic damage is most likely (34-percent chance) to be between $1-10 billion, but there is a 29-percent chance it will reach $10-100 billion, and a 13- percent likelihood it could top $100 billion, the survey said.

WORLD NEWS

Ukraine named worst performing economy in 2015- The Economist

kraine has the fastest falling economy of 2015 according to the British periodical The Economist. The country has seen its GDP shrink by 6.5 percent since last April, with countries like Libya and Macau performing better. The Ukrainian economy showed the most significant deepening recession compared to the rest of the world, according to the data, published on Wednesday by the head of the analytical department of the Economist Robert Ward. The research compared the one-year GDP growth of countries since April 2014. Libya’s economy dropped by 6.4 percent while Macau which turned out to be the third worst performing economy, experienced a 6 percent GDP decline. Equatorial Guinea came out fourth with a 5.5 percent GDP decline and fifth place went to Russia as its GDP fell by 4 percent.

Samsung’s Q1 profit slumps 39%, hit by Apple competition

amsung Electronics’ first quarter earnings dropped 39 percent because of a big fall in revenue from its mobile business due to increased competition from Apple. The South Korean company reported Wednesday a net profit of $4.35 billion (4.63 trillion won) compared with $7 billion (7.49 trillion won) a year ago. The result was worse than the 30 percent decline the market expected, and Samsung’s own forecast for operating profit of $5.5 billion (5.9 trillion won). The company’s revenue slipped 12 percent year-on-year to $44 billion (47 trillion won).

China’s yuan among top Armenia becomes member of 5 currencies in March International Organization of hina’s yuan climbed to become the fifth most used global currency for payments Vine and Wine in March, with a market share of 2.03

he total economic cost of the destruction from Nepal’s earthquake and aftershocks is most likely to total between $1-10 billion, with the second most probable scenario showing damage may reach $100 billion. The country’s GDP stood at $19.29 billion in 2013.

caucasian business week

he OIV is an intergovernmental organization open to all States in the world. The OIV has not to choose countries, but accept adhesion of Sovereign States. After previous conversations in April of this year with Ambassador of Armenia to France H.E. Viguen Tchitetchian, there was a meeting between Minister of Agriculture of Armenia Sergo Karapetyan and me in order to confirm the Armenian authorities’ decision to apply for their country’s accession to the OIV. Stressing Armenia’s viticultural history and the restructuring work currently taking place in this sector, Mr. Karapetyan reaffirmed the importance for Armenia to join the OIV and enjoy the benefit of its international expertise. As the Director General of the OIV I expressed pleasure at the decision of the Armenian government, adding that the process of consulting the Member States of the OIV had been initiated for Armenia to be able to officially become a member at the General Assembly of the OIV.

China and Russia to increase trade to $100bn in 2015

hina intends to ramp up trade with Russia to $100 billion in 2015, the Chinese Ambassador to Russia Li Hui has said. The $4.7 billion increase from last year cements the countries commitment to boosting cooperation in finance and energy. “We intend to increase bilateral trade to $100 billion this year,” Hui said at a news conference in Moscow Wednesday, as quoted by TASS. In 2014, trade between the two countries was worth $95.3 billion. Russia and China are planning to have a trade turnover of $200 billion by 2020. The ambassador said that using more national currencies will also help expand trade. Already, settlements between the two countries in yuan have increased by more than 800 percent.

percent, Reuters reported. The value of yuan payments increased by 33.5 percent in March, according to SWIFT, the global payment services organization. The yuan also became the second most active currency used by Canada for transactions with China and Hong Kong, trailing only the Canadian dollar.

Brent crude holds near 4-1/2 month high

rent crude prices held near a 4-1/2 month high above $65 a barrel on Monday, supported by concerns about fighting in Yemen disrupting Middle East supplies and signs that U.S. shale output may have started to decline. The number of active U.S. rigs drilling for oil has fallen for a record 20 weeks in a row to the lowest since 2010, according to Baker Hughes data. “Support for oil actually came from a lot of positive speculation that oil supply from the U.S. is actually going to drop,” said Shunling Yap, a senior oil analyst at BMI Research. The U.S. Energy Information Administration’s forecast of a drop in oil output in May from April, the first monthly decline in four years, also supported bullish bets, she added. Brent edged up 1 cent to $65.29 a barrel by 0200 GMT after posting its third weekly gain last week and touching a Dec. 10 high of $65.80. U.S. crude fell 3 cents to $57.12 a barrel after rising for the sixth consecutive week, its longest stretch of gains since the first quarter of 2014. Fighting in Yemen raged on as Saudi Arabia continued its air strikes against Houthi militia forces in Aden, but there were no fresh moves towards dialogue. While the Yemen crisis has raised the risk premium for oil, BMI’s Shun said supply from the world’s top exporter Saudi Arabia remained steady and there was no immediate threat to major oil shipping routes in the region.

PUBLICITY

caucasian business week

May 4, 2015 #97

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

METRO ATLAS GEORGIA JSC The project Metro City started its implementation in 2015. It takes place on the Black Sea coast in Batumi, in new boulevard. It integrates two hotels with different concepts, two casinos, a shopping centre, conference halls, dining area, cinema, bowling center and apartments consisting of two buildings. Investment costs:

100,000,000 USD Project completion date: May 2017

Residence - apartments The residence consists of two buildings. Within the project Metro City, there are represented 471 apartments with an amazing sea view, residence pool and special playing area for kids +pool. Prices for apartments are defined according to the 2015/2016 years and the final 2017 year. The height of floors and sea view will also impact on prices. Address: Mtsvane Street N1, Batumi Tel: +995 577 14 17 14 info@metrocity.ge www.facebook.com/MetroCity.GE

www.metrocity.ge

May 4, 2015 #97