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BUSINESS WEEK
September 24, 2018 - www.cbw.ge
#253
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Bitcoin Mining Remains Profitable, Regardless of ASIC Size Historically, hardware advancements in bitcoin mining have yielded better profit margins. The move to ASICs from CPUs and GPUs brought processing bitcoin transactions to a new level and made old hardware obsolete, meaning those with the fastest and smallest chips brought home the most value.
Private Property is Inviolable p.8
Interview with Salome Gvelesiani, Marketing Communications Manager of AgroHab
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Georgian Startup COCOnut Helps You to Create Romantic Atmosphere
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IMF Upgraded the Economic Growth Projections for Georgia
Mikheil Batiashvili: We will have New System of Assessment by 2020
Prospects of economic growth of Georgia and progress achieved towards macroeconomic stability were discussed by Mamuka Bakhtadze, Prime Minister of Georgia and Christine Lagarde, Managing Director of the International Monetary Fund (IMF) in Washington D.C.
Minister of Education, Science, Culture and Sport Mikheil Batiashvili announced plans for revising the united national exams. By 2020 a new system of assessment will be introduced, he said.
The Financial, Energy, and Construction Sectors Attracted the Most FDI in Georgia Exports from Georgia to CIS Countries Increased by 51.3% In January-August, 2018, exports from Georgia to CIS countries amounted to 1 025.6 million US dollars, which is 51.3 percent higher than the previous year’s index, and 47.8 percent of the country’s total exports.
According to the preliminary data, in the first half of 2018, FDI in Georgia amounted to US$676.2 mln, a US$73.2 mln (9.8%) decrease compared to the corresponding period of 2017.
Georgian Business Ombudsman Introduces Its Representative in Adjara Region
ESCO: Electricity Export Declines by 14% in Eight Months In August 2018, the quantity of balancing electricity, purchased (sold) through ESCO was 178 322 147.1 kWh, which represents 17% of total delivery to the grid in mentioned month. The cost of balancing electricity have made up GEL 21 146 639.06.
Government to Free Electric Minibuses and Busses from VAT and Imports Taxes Kakha Kuchava, head of the parliament’s committee for environment protection and natural resources talks about the new bill which calls for exempting electric minibuses and buses from imports and VAT taxes.
Amazon Discuss Significant Potential of Georgia in Developing Digital Technologies With Geogia Growing role of Georgia in digital technologies, regional projects and potential cooperation were the key issues discussed during a briefing between Mamuka Bakhtadze, Prime Minister of Georgia and Amazon Web Service (AWS) Management in Washington, DC.
Tornike Rizhvadze, head of Adjara Government, and Business Ombudsman of Georgia Irakli Lekvinadze met with about 200 representatives of private sector of Adjara Region and officially introduced the Business Ombudsman’s representatives in Adjara Region.
Natia Turnava Appointed As Deputy Minister of Economy Natia Turnava has been appointed as deputy Minister of Economy and Sustainable Development of Georgia. Since 2013 Natia Turunava has been working as Deputy Executive Director of “Partnership Fund”.
Economy of Georgia is Open for Investments: OPIC President Ray Washburne “Economy of Georgia is open for investments” noted Ray Washburne, President of the Overseas Private Investment Corporation (OPIC) at a meeting with Mamuka Bakhtadze, Prime Minister of Georgia during his Working Visit to USA.
The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Director: Levan Beglarishvili WWW.CBW.GE Address: Aleksidze Street 1 Sales: Mob: +995 591 01 39 36 Email: caucasianbusiness@gmail.com Editor: Nutsa Galumashvili. Mobile phone: 595 380382 Copy Editor: Ellie Rambo Reporters: Nina Gomarteli; Mariam Kopaliani; Merab Janiashvili, Economic columnist: Andria Gvidiani; Technical Assistant: Giorgi Kheladze;
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National Bank Simplifies Crediting Procedures for Physical Bodies Clients to Get Services of Revenue Service and Public Registry under Single-window Principle at Commercial Banks A joint project by National Bank of Georgia (NBG), Government and Revenue Service ensures an exchange of information on borrowers. The document will come into force in October 2018. According to the NBG, for the purpose of promoting a healthy crediting standards and portfolio at commercial banks and bolstering responsible crediting relations, the NBG is providing active job to establish a responsible crediting platform. Namely, in the lending process, income verification will become an obligatory procedure. At the same time, a top margin for the loan service will be determined so as clients could serve credit liabilities without financial difficulties. Efficiency of this platform can be ensured though improvement of Credit Information Bureau and incomes inspection infrastructure. It is worth noting that the authority for regulation and supervision of the crediting bodies was conferred to the NBG under amendments made to the Georgian organic law on National Bank of Georgia. The amendments were approved by Parliament of Georgia at the end of 2017 and the bill came into force on January 11, 2018. Under the same amendments, the NBG was obliged to pass a legal act for regulation of supervision over crediting bodies till October 1, 2018 and carry out a supervision over the crediting bodies starting January 1, 2019. ‘To this end, as a result of cooperation between the National Bank and Government of Georgia, a real time information exchange system will launch operation between Revenue Service of Ministry of Finance and commercial banks. The mentioned system will simplify the borrowing process for physical bodies, who have declared incomes. Namely, when an employee (in-
comes in salaries) and physical bodies receiving other taxable incomes (dividends, service fee, interest rates and other legal incomes) submit a loan application to a crediting organization, the consumer has the following option: a) submission of salary reference and a bank extract, standard document requested by a commercial bank for verifying the applicant’s income sources, in material form and b) in case of desire and consent, the mentioned system will provide a supply of information on the clients’ declared incomes to commercial banks on monthly basis. The mentioned scheme will simplify the borrowing process and save the borrower’s time and expenditures. As a result., the consumers will receive faster and higher-quality services. We also remind you that, by the initiative of the Georgian Government, according to the amendments to the Tax Code, starting July 1, 2018, for citizens engaged in small business with no more than 500 000 GEL consolidated revenues, the turnover tax considerably decreased to 1%. As a result, if a body is registered as a taxpayer and this body obtains the status of the so-called small business, thanks to the mentioned system, the client will pass easier process, cut expenses and submit a credit application. In case of desire and consent, the system will supply information about the client’s monthly declared incomes to a commercial bank and this system will make it easier for commercial banks to discuss loan applications and pass corresponding decisions. It is worth noting that declared incomes represent positive factor for analyzing a crediting project and taking a positive decision. Citizens will be able to ask to pass registration as a taxpayer/individual entrepreneur simultaneously
without visiting National Agency for Public Registry and Revenue Service, under single-window principle and they will obtain the status of a small business. Modern electronic programs are used for the mentioned procedure, which ensure uninterrupted information exchange between administrative bodies and commercial banks involved in this process and this process will save time and finances of the consumer, the NBG representatives noted. It is worth noting that after obtaining the status of a small business, the body is obliged to submit a monthly declaration of incomes tax for a small business entity no later than 15th day of the next month of the reporting month. It should be noted that bodies of such professions as nanny, taxi driver, tutor and similar ones, with no more than 30 000 annual turnover, are able to apply to Revenue Service for the micro business status. And this status frees from payment of incomes tax. In this case commercial banks will receive information on the client’s status. At the same time, representatives of the mentioned professions are able to apply to Revenue Service for the small business status and pay 1% of the turnover, create the history of taxpayer and incomes as a precondition for drawing credits from commercial banks in a simplified manner. Initially, only commercial banks will be able to apply the project, while other crediting organizations will join the system stage by stage.
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The Final Frontier: By John Mercurio Historically, hardware advancements in bitcoin mining have yielded better profit margins. The move to ASICs from CPUs and GPUs brought processing bitcoin transactions to a new level and made old hardware obsolete, meaning those with the fastest and smallest chips brought home the most value. But, as hardware becomes more complex, that will no longer be true. In short – hardware superiority will be measured by more than nanometers. Investors must start looking at overall performance. The economics of crypto-mining are rather straightforward. Mining equipment and infrastructure costs are considered capital expenditures (CAPEX) while operational expenditures (OPEX) primarily consist of electricity costs. The success of a mining operation is then based on two fundamental parameters – your cost per terahash/second (TH/S), which is really the price of your equipment; and your Joules per terahash (J/TH), which indicates the power efficiency of your hardware. Missing from this equation is the cost/benefit analysis of technological innovation. That needs to change. Consider the car engine. For years, people assumed that higher engine volumes meant “faster” engines, and faster cars. That is, of course, until the advent of turbo-charged, hybrid and electric vehicles. The small volume of a 1.6-liter Formula-1 engine is irrelevant if the race car can achieve 300kmh. In this case – and as will soon be the case with mining hardware – secondary technical characteristics don’t tell the whole story. Performance characteristics will. In the ever-competitive market for mining ASICs, we’ve already seen a similar effect. Customers, understandably, have expected a serious performance increase when they moved from 16nm ASICs to 7nm ASICs. But one by one, mining vendors fell short. Mining machines based on 7nm technology not only demonstrate unimpressive results, but they also have identical performance characteristics to the massively deployed and well-known 16 and 14nm ASICs. The cost, however, of producing and releasing these newer chips is (according to multiple experts) astronomical. Bitfury is leading the way by focusing on improving all performance characteristics of our next generation of hardware. We are looking at all factors, including silicon packaging, chip efficiency, optimal power distribution, cooling designs and speed of development. We think that this will lead to a turnkey solution that delivers the best ROI for our customers – regardless of ASIC size. In 1993, Intel upended the entire microprocessor market when they released Pentium. Pentium microprocessors were not any smaller than their existing products, but unbelievably faster and more efficient. The “Pentium” effect is coming to the crypto mining industry soon. Bitfury is ready. Are you? John Mercurio is the acting chief communications officer at The Bitfury Group
Tbilisi Free Zone (TFZ) - the only free industrial zone in Eastern Georgia, located in the capital city Tbilisi. TFZ occupies 17.0 ha land, arbitrarily divided into more than 30 individual plots equipped with all the necessary utilities needed for seamless operation of the warehousing or production facilities. It provides direct access to the largest labor pool in Georgia, as well as immediate proximity to the main cargo transportation highway, Tbilisi International Airport (30 km) and the city center (17 km). TFZ offers such tax, legal and administrative environment, where tenant companies oriented on production of export goods or engaged in international trading and services, can receive maximum financial effect. We are welcoming companies from diverse fields of business including technology, trading and services, manufacturing, logistics, warehousing and others. Companies registered in the Tbilisi Free Industrial Zone benefit from following advantages: • Tax incentives, which implies full or partial exemption from taxes. • Simplified procedures for company registration and its further operation. • Strategic location, which ensures easy access to different markets and reduction of operational costs. • Eligibility to national certificate of origin which gives local companies all the benefits of free trade agreements between Georgia and EU, China, CSI, Turkey Being registered in the Tbilisi Free Industrial Zone, companies engaged in international commercial and industrial operations are exempt from the following taxes: • Corporate tax - 15% of the taxable profit base. • Dividend tax - 5%. • Value Added Tax (VAT) - 18%. • Import tax - up to 12% of import value. • Property tax - 1% of the average book value of property. Tbilisi Free Zone is a tenancy destination for international and local companies uniquely combining the benefits of the capital city location and a tax-free environment.
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rivate Property is Inviolable
Tbilisi City Hall Intentions for 150 owners of Eliava Market and Thousands of Employees Eliava Market and its adjacent territory may become a scene of huge confrontation in the near future. Tbilisi City Hall plans to relocate this market and it is seeking mechanisms for resolution of this issue. The owners do not plan to concede anything. About 150 owners and thousands of employees stand behind the biggest marketplace in Tbilisi. The Tbilisi land arrangement general design calls for arranging a municipal park on the territory of Eliava Market and its neighboring zones. According to the Tbilisi land arrangement general plan, over the past 20 years, in the center of Tbilisi, Eliava Market, which was developed on the left bank of river Mtkvari and its neighboring zones, poses a threat to the health condition of local residents and degenerates the existing residential and natural environment. Tbilisi Mayor Kakha Kaladze says that the market will be relocated with the consent of the owners and Tbilisi City Hall is ready to allocate an alternative arranged territory. Several days ago, Tbilisi City Hall announced tender for preparing the Eliava Market development plan. According to the document, facilities on these territories worsen and hamper road traffic, obstruct an access to the river Mtkvari. Moreover, the existing recreation spaces have lost their initial functions and there are high risks of soil and air pollution. All these circumstances threaten the health of local residents. The municipality asserts that it is indispensable task to examine the territory and prepare a development plan. The document does not specify whether Eliava Market will move to other territory, but it notes that the plan is to maintain the existing functional variety, on the one hand, and enhance the potential of the territory for healthy, safe and equally attainable residential, recreational, industrial and other projects. The research work comprises 3 key objectives: maintaining multifunctional character of the territory and its development, rational use of its land resources and identification of potential recreation spaces. The research work is to identify regulations and conditions for the territory development, prepare feasibility studies and determine its impact on the life quality of neighboring zones, describe land ownership forms on the territory, appraise the condition of the existing public space and analyze the engineering and social infrastructure, specify the residential stock. “Functional zoning of the territory and
development parameters for construction projects will be determined after the research process outlines the territories for construction projects and the territories inappropriate for construction projects”, the tender documentation reads. The tender participant company must submit at least two variants to be discussed with customers and interesting bodies to select the best one. Under the tender terms, applications must be submitted through September 25. The Caucasus Business Week (CBW) has inquired the position of businessmen and urbanists whether markets like Eliava Market should exist in the center of a city and if not, what should replace it. Urbanist Lado Vardosanidze explains that a market like Eliava Market should not exist in the center of a city. However, another issue should be also considered – a multifactorial analysis should be made, timeframes should be determined when and how it should be relocated. The key issue is – where? Urban planning is to answer all these questions, he said. The Market with similar functions should not be isolated from the city. It is desirable to arrange similar centers within underground station zones so as people had easy access, Vardosanidze said. It is not sufficient to remove Eliava Market. It is necessary to re-cultivate the mentioned territory, heal the soil cover, because this territory is saturated by various oils, Vardosanidze said. Moreover, private property aspects should be also taken into account. Accents should be made on recreational aspects, he added. “Today Tbilisi has problem with development of the city center. I mean conditionally the Tbilisi version of Manhattan. Multistoried buildings are located chaotically”, Vardosanidze noted. Businessman Mindia Gadaev says that two aspects should be differentiated in the mentioned case. First – what is better functionally and second – private property rights. “This territory has owners and this factor cannot be ignored. It does not matter what we prefer and what would be better. Private property exists and this right is inviolable. For me, it is important what is acceptable the owners. If the agreement cannot be achieved with them, then what is our opinion worth? The City Hall may have to pay expensive price in compensation. Functional aspects may be discussed only after achievement an agreement with the owners”. It is necessary to know whether the owners will receive alternative place or compensations. In
this case, it will be optimal to arrange recreation zone in the place of Eliava Market, but this should not be carried out to the detriment of owners, he said. Eliava market has fulfilled its mission, its role and function, like many other things in Tbilisi. For example, the so-called Marshutkas (minibus taxis), which played a significant role in 1990s, but today society requires other higher class and more comfortable transport, he said. Eliava Market has fulfilled its mission and the society needs other alternatives, for example, hypermarkets like Domino and Gorgia networks, he said. Sergi Rusadze, one of the owners of Eliava Market, director for Didube shopping mall, explains that civilized decisions should be taken and private property rights must not be violated. Eliava Market should satisfy modern tendencies and meet the visions of the Government and the country. “It should be noted that for 8 years Tbilisi City Hall has not approved any project. This issue has been stuck therefore. It is also important that the project should be agreed with everybody and acceptable for everybody. If the Tbilisi Council asks me to build Hong Kong, I will not. Bilateral discussions should be held at the council, where owners will be also invited”. If the offered project will not be acceptable, Eliava Makret administration will apply to the court, Sergi Rusadze said. “There is the world charter about protection of rights, which protects the rights of any person and company. We will go there if they oppress us. However, at this stage, under the ruling of Kakha Kaladze we do not feel oppressed. We are waiting what steps the new Mayor will take. As to the former Mayor David Narmania, we are very discontent by this period. He protracted projects on behalf of City Institute for 5 years. “City Institute and Its founders chopped down the whole Mziuri and raised residential buildings. Sport Palace is surrounded by these buildings and they are so close that neighbors can watch each other”, Rusadze noted. Eliava Market is located on 180 hectares, were about 80 000 citizens are employed, he said.
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Salome Gvelesiani: "Innovation Forms Very Fast in Public Relations Field’’ Interview with Salome Gvelesiani, Marketing Communications Manager of AgroHab. Why did you decide to enter this field, and what kind of opportunities does this profession give you? I haven’t made any specific decision like: ‘’I’m going to be a PR Manager’’. When I was starting out studying, I haven’t even heard of such profession. I I am a specialist of diplomacy and international relations, after which I worked in journalism for long time. I was always interested in communication, observing kinds of ways to share information, and how situation changes due to right or wrong approach. I also got experience in advertising field and I realized, marketing united all kinds of communication, and here I am! What is it necessary to hold successful communication with the public? My priority is sincerity, truth always works. You should believe and be sure in what you offer. There is saying: ‘’You can promote bad product, if you are a professional’’, which is not acceptable for me, I may be wrong about this but I chose my principles in this regard. What three tips would you offer someone just starting out in PR? Expand acquaintances, always write and speak specifically, in good order and accordingly business. One shouldn’t try to link any trending topics to her company’s PR, it mostly seems ridiculous.
What do you wish you knew before starting your career in PR? Basic theory, it took me more time to learn it in practice. Describe a typical work week. Endless banquets and parties… I’m kidding. It’s a standard work week, a lot of hours spent in the office.
I don’t have any recipe, people with different skills can find unique ways and achieve success. Especially nowadays, when digital technologies changed everything. What trait do you value the most in your co-workers? Team-player, namely in our field, when everything depends on strong team.
How do you go about finding relevant contacts and sources?
What is the best PR practice technology can’t change?
Any tactful way. I never agreed point of view :‘’enter through the window, if the door is closed’’ even as a journalist. I don’t think good PR specialist is the one knowing all Tbilisi, the important thing is to reach relevant people delicately. I’ve never had an experience to call someone for business and get rude response. I always manage to consider their interests and start conversation with this attitude.
I would say human emotion, but I am not sure about it anymore. We live in amazingly interesting era and technologies have already changed approached, agenda of planet. I feel like it can even change intellectual and emotional levels.
How would you prioritize and start your work day? I’m at work at 9Am, sitting at Agrohub’s open air cafe, drink coffee and watch thousands of cars driving on Marshal Gelovani Avenue, as I think, how much work I should do to attract even more cars to our parking. What are the skills a Public Relations Specialist needs?
What are some growing trends in the public relations industry? Innovation forms very fast in Public Relations field. Smartphones twisted everything upside down. Any person can spread top story, once she is at the right time and right place and presses Facebook Live button. It takes a lot of thinking to make your story bold among the huge flow of information.
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Business News PwC Georgia Appoints Two New Directors
Silknet Presents a Refreshed Brand to Public
PwC in Georgia has strengthened its practice with the addition of two new women directors. As PwC bids to boost its expertise in the region and meets changing customer demands, as well as rewards top performer and talented women, the firm has
Silknet Becomes Main Brand and Geocell with the Unchanged Name is represented as Its Mobile Direction. International Advertising Festival AD BLACK SEA Being Held with Support of TBC Bank In the framework of Check In Georgia and supported by TBC Bank, International Black Sea Festival ”Ad Black Sea” is being held in Batumi on September 20-22. Successful people working in the advertising industry from different countries around the world will gather in Batumi. ETC to Launch Wine Exports in 2019
announced an extensive roster of promotions in Assurance and Advisory Departments. Nino Kadagishvili, Assurance Director and Tamta Shermadini, Advisory Director.
ETC, a Georgian winemaking brand, is conducting negotiations with countries of Central and Eastern Europe to launch exports in 2019, the company cofounder Teo Khukhuni told BM.GE.
Skate Park of Olympic Standards Opened in Kutaisi The first skate park of Olympic standards in Georgia was opened in Kutaisi, where championships will take place on site soon. Innovate in AgroTourism-Students Finding Solutions Impact Hub Tbilisi, in collaboration with the Embassy of the Netherlands in Georgia is organizing a 12-hour challenge, which will take place in Fabrika on 28th of September. Tsinandali Museum Presents Revived Time from September 20
TBC Bank Introduced Technological Innovations to Business Sector
Tsinandali Alexander Chavchavadze House Museum and Archive of Internal Affairs of Georgia present an exhibition “Revived Time” on September 20, at 15:00.
TBC Bank introduced technological innovations to business clients and interested audiences.
Geocell is Well on Its Way to Continue Massive Network Modernization Works Company offers enhanced 4G network and other advanced technologicalsolutions to make a different customer experience all over the country. About 17 000 Applications Submitted to Micro Entrepreneurship Program of Enterprise Georgia Enterprise Georgia agency is implementing a new phase of micro entrepreneurship support program.
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Georgian digital ecosystem is represented by miners, start-ups, infrastructure projects, programs supporting digital involvement, diverse digital products and services, growning incomes of Internet market, and increase of employment. There are 329 organizations engaging in the e-communication field in Georgia. Their incomes are more than 1.3 billion GEL. Revenues in the state budget from this sector reaches 299 million GEL (in 2017). 71.5% of Georgian families are supplied with the Internet. The country is at a high level of e-government development. Innovative activities of companies are increasing. Georgian Internet market is presented by important attractiveness of investments as well as by export potential of e-commerce. It is essential to note that in Georgia, both private and governmental sectores are using blockchain technology to the full. However, cryptotechnologies are adopted only by citizens and business sector. Georgia is one of the first countries that is using Blockchain by registration of real estate. The innovative technology of Blockchain makes entries accessible, transparent, and even more secure worldwide. It should be highlighted that Georgia doesn't stay behind the business competition of crypto industry, which is an important step forward to the digital development of the country, in terms of technological development, and Internet activities of citizens. On the world market of Bitcoin mining, Georgia is
among the leader countries. Bitfury Group is the obvious example of the Bitcoin mining market in the country. In 2014, Blockchain service provider company - Bitfury Group established 'Datacenter' in Gori (20 megawatt) for the mining process. Because of the attractive investment environment, the company launched the second 'Datacenter' (40 megawatt) in Tbilisi (Gldani district) in 2015. The company produces bitcoin mining infrastructure, and supports transactionsof crypto-currency. In 2016-2017, it mined about 15% of all bitcoins. It is operating in the USA, Iceland, London, Amsterdam, and Hong-Kong. For the first time, throughout Transcaucasia, cryptocurrency terminals are placed in Georgia (Tbilisi), which belong to the company 'TPS'. Through those terminals and the website, a consumer can buy and sell Bitcoin and Litcoin. It is planned to add purchase services of another crypto-currencies (including, Ripple, Bitcoin Cash, Etherium) too. In sum, we regard the crypto industry with its technological and social-economic advantigies as well as with its challenges.
Bitcoin’s Role in Georgian Economy
Bitcoin Energy Consumption
Certainly, the cryptocurrency industry is power intensity, i.e. dependent on energy. One transaction of bitcoin mining consumes so many electricity as one Georgian family consumes in a month. However, I should indicate that because mining process consumes high electricity, yet it is not bad. Of course, its disadvantages are numerous, but discussions about the high electricity consumption are political, and show only political challenges. For example, when many tourists visit a country with less developed economy, it increases consumption of electricity, food products, money supply, different kind of danger, etc. In this case we should not talk about demarketing, or regulation of tourist flows, because it is difficult to prevent problems. It is a challenge for the
state; it should be ready for all possible scenarios. Last 3 years, total electricity consumption of the country has been increased, on average by 6,3% yearly, including consumption of high voltage by 12,6%, of middle voltage by 9,1%, and of low voltage (commercial sector) by 8,3%. Taking also into consideration the growing business sector, the mining process of crypto currency does not have an essential influence. I justify the operationswith different economic mechanisms on the market. I positively assess forming the pricing policy based on the necessity of economic policy of the country. However, Georgia has enough potential to keep electricity prices affordable for its population. At this stage, the mining process does not cause electricity problems, and rise in prices. Moreover, the biggest company in Georgian bitcoin mining market enjoys privileges for producing the mining process. We should take into consideration that our country has a high potential of energy resources. Hence, increasing of energy consumption by the cryptocurrency industry does not diminish its importance.
Challenges and Opportunities of Cryptocurrency I should notice that Georgian crypto market is viable, and highly profitable, and its main 'product' - cryptocurrency is considered as risky, unstable, speculative, and assets for a developing class. It has been met competition with securities and with gold (it has become as a saving means). We need to take into consideration the fact that the citizens fear for using the crypto assets as savings and investment means, because their financial interests are not secured due to speculative character and legal challenges. Unfortunately, there is only fragmented information in the country about the size of crypto market, and about its share in the economy because the cryptomarket is still young. Certain studies confirm that recently many Georgian young people are engaging in crypto mining. It has become trendy in the society to have cryptocurrency (even members of the legislative body own the cryptocurrency). According to 'e-money' (a company that enables consumers to monetize their bitcoins), the number of bitcoin users in Georgia has increased by 400% from 2015 to 2016, and by 130% from 2016 to 2017. In sum, there are private and public societies formed in the country, which are users of crypto-currency. Forms of online transactions are widespread in the country. Mechanisms of digital payments are also developed. It is possible to trade products with crypto currency (in particular, by Bitcoin), as well asto exchange, keep, save, and invest in those investment instruments that are tied to bitcoin price. We should take into account innovative products of the Georgian financial sector (especially those of a bank sector), which has been developing hand in hand with the digital environment. It is also important to mention that the government sector watches the crypto market, and mining process. The National Bank of Georgia observes the system of crypto industry. The National Bank of Georgia implements an information policy concerning the danger of using virtual (cryptographic) currencies by citizens. In turn, an academic sector (including myself) studies and evaluates the crypto industry, digital monetary policy, mining process, and peculiarities of their development, in order to find ways in time for solutions to expected challenges. In sum, free industrial zones, low taxes, highly qualified IT specialists, safety, presence of a calm and educated society increases the investment attractiveness of the digital environment in the country. In the country, a main challenge of the crypto market is an attitude and conditions formed towards it. Among them, we can notice problems of liquidity, legal recognition in public transactions, effectiveness of exchange means, vouching for private companies, safety of keeping, and value stability. Crypto-currency does not exert influence on national monetary system. Its reputation raises many questions in the Georgian society. It has a status of illegitimacy and of outsider. It is seen as digital financial pyramid. It is a digital asset and not a currency. According to the constitution of the country, the only body that has authority for emission of money, defining its name and unit, is the National Bank of Georgia. Consequently, the Georgian society only recognizes money issued centralized by the National Bank (if it issues digital money in future), and it considers crypto-currencies issued by the private sector as a product, that has functions of money. In this regard, we do not even consider it as a parallel strategic direction in the country. However, I think that the country faces a new reality because of rapid digital processes. Therefore, the government is active, and prepares strategically for global digital challenges. By Rati Abuladze Doctor of Economics, Associate Professor at University of Georgia, Founder of E-governance Research Academy (EGRA)
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World News
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Huawei Celebrates 10 Million HUAWEI P20 Pro & HUAWEI P20 Units Sold Globally Huawei Consumer Business Group (BG) announced that it has sold 10 million units of HUAWEI P20 Pro and HUAWEI P20 in the first five months, empowering photography enthusiasts globally to take stunning photos with their smartphones.
Small and Medium Business Houses to Be Created in Azerbaijan “Small and medium business houses will be created in Azerbaijan,” said Chairman of the Board of the Agency for Small and Medium Entrepreneurship Development Orkhan Mammadov at the 7th Caspian Energy Forum Baku-2018.
Amazon Is Launching a New Shopping Service That Steals a Page out of Instagram's Playbook Called Amazon Scout, the idea is a hybrid of all visual shopping and discovery. Customers will be given a number of options for products in a few categories, which they can then 'like' or 'dislike' by clicking the thumbs up or down buttons.
Mexico Intends to Increase Trade with Azerbaijan This Year Trade turnover between Azerbaijan and Mexico may reach $25 million in 2018, Mexican Ambassador to Azerbaijan Juan Rodrigo Labardini Flores said at an event dedicated to the Independence Day of Mexico.
California Businesses Investing in Armenian IT Sector
Ford Opens New Regional Business Centre in Budapest
With the support of Business Armenia, regional high-tech development manager at Enterprise Incubator Foundation and the executive director of Gyumri Information Technologies Center, Amalya Yeghoyan, paid a business visit to California, U.S., where a conference on foreign direct investment in the IT sector of Armenia was held for 50 businessmen.
Automotive manufacturer Ford has opened a new regional European business service centre in Budapest. By the end of the year it will employ 700 people, becoming the biggest service centre of its kind in Europe.
Turkey Unveils Plan to Stave off Economic Crisis Under a new economic program, Turkey wants to cut its growth sharply and promised to curb public spending, as it seeks to avoid a full-blown economic crisis fueled by massive inflation and a plunging currency.
IFC Commits More Support to Emerging Europe Ukraine’s Ports Show Struggles to Join Global Economy Gleaming silos, towering container cranes and hulking cargo ships docked at quaysides in Europe’s biggest corn and sunflower producer should be a symbol of an agricultural exporting powerhouse.
The International Finance Corporation (IFC), a member of the World Bank Group, expanded its operations in Europe and Central Asia during its last fiscal year (which ended June 30), with investment commitments that reached 2.9 billion US dollars, driving the diversification of the region’s economies, promoting access to finance for small businesses and tackling climate change.
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Georgian Startup COCOnut Helps You to Create Romantic Atmosphere
As it seems, inspiration can be anywhere, whether when you walk to a grocery store it can be the beginning of your business story. Founder of COCOnut Irakli Kobauri shared his story with CBW how married couple started their startup by seeing a coconut from different perspective: Tell us a little bit about your company – what is COCOnut all about?
I was into DIY and working on wood since childhood. The process of making coconut lamps takes a lot of work, for which I use wood and coconut. Basically, I work with hands, then it needs equipment to bind it. My spouse Madona and I take care of design, we share our ideas and then I create models.
On our way from work to home, we would often visit one tiny vegetable store. Once, we saw a coconut for sale. Even though, I’ve never thought of trying it, it was my initiative that day to get one for exotic evening. However, its taste didn’t meet our expectations and prepared it coconut for throwing away. Irakli, who was going to village next day, took it with him and sent me a picture of some kind of object, that would shine romantically. Long story short, he made a candle holder, that inspired not only me but our friends. I realized, we had an opportunity to create a new shape from a coconut, that’s how our idea was born.
Our first appraisers were our friends, who were excited with our works, that motivated us to make business out of it. As for channels of sharing our product, we are being active on internet at this stage, and we get quite amount of response. Our customers bring their friends to us and so on. We have offers from shops too, but as we are both busy
What methodologies and techniques do you use to make coconut lamps?
How did you get your first customers?
with our jobs, we can’t find time to increase the numbers of our product yet. What are your plans for the future, how do you plan to grow this com? We are planning to grow our staff to produce more, it took us long, and we are still in the process of searching. Also, we are starting to expand our studio. Besides, coconut lamps we will offer other original products. Our production is for people who like to standout and like extraordinary things. We have interesting challenges and steps coming up, it’s important that we’ve started to implement planned strategies. By Ninna Gomarteli
15 September 24, 2018 #253
Pharmaceutical Market Insight from Experto Consulting
Short overview of the current situation, main players and the opportunities of the Georgian Pharmaceutical Sector. Georgian pharmaceutical sector is a dynamic, rapidly growing market benefiting from an easy business environment. Since 2010, the pharmaceutical product registration procedures have been greatly simplified with Seven-day recognition registration procedure in case when product is registered in the European Union, Switzerland, USA, Canada, New Zealand, Australia, Japan, South Korea or Israel. Parallel import is permitted for products previously registered in Georgia, if they are registered and sold in countries mentioned above. There is no state price regulation and customs clearance is 0% (12% for Food Supplements). VAT is 0% (18% for Food Supplements). The pharmaceutical market in Georgia is quite profitable and concentrated. 70% of the market share is divided among 4 leading retail pharmaceutical companies. More than 85% of medicines are imported. The remaining 15% is manufactured by 2 local companies. Medicines are mostly imported from Turkey, Germany, France, Hungary and Switzerland. In the Georgian medical industry, many companies are vertically integrated. For example, retail pharmaceutical companies own hospitals, drug manufacturer companies. Some of them own insurance companies too. As Experto Consulting found out, there is a wholesale and distribution margin on average of
15-25% on the market. There are more than 1,600 pharmacies throughout the country – around 850 are branches of the pharmaceutical chains and 750 of them are independent pharmacies. Market also includes 93 distributor companies, 3 laboratories and 24 local manufacturers.
On average, chain pharmacy branch has about 3 times more income than independent one. As per Georgian legislation, pharmaceutical products must be registered at the Departmental Registry at the Agency of State Regulation of Medical Activities at the Ministry of Labor, Health and Social Protection of Georgia. Admission of pharmaceutical products into the Georgian market may be granted by way of state registration through a recognition regime and national regime. As mentioned before, the market is divided between Independent and chain pharmacies, such as PSP, Aversi, Neopharm+, Impex, Pharm House, etc. The 3 main players are: PSP –on the Georgian pharmaceutical market since 1994. At first, they started its activity by importing medicine from Europe. In 2000, PSP's pharmaceutical enterprise GMP started producing drugs and exports it in 11 countries. Now PSP has its own health insurance company and Approximately 210 PSP pharmacies located almost in every region of Georgia. GEPHA – the part of GHG (Georgian Healthcare Group) is a merge of 2 pharmaceutical chains – GPC and Pharmadepot. Both chains have been on the market more than 20 years and GHG united them in 2016. For the moment, GEPHA manages around 250 pharmacies with more than 3000 employees. Aversi – founded in 1994. It is presented by 103 pharmacies in Tbilisi and 125 pharmacies in regions. In 2002 was founded Aversi-Rational, which is a big pharmaceutical
factory. Since 2006, the company has been exporting its products to a number of post-Soviet states and the countries of near East. From 2007, Aversi has opened several multifunctional clinics. The company also owns a health insurance company Alpha. Georgian Pharmaceutical Market is open for interested companies and provides different opportunities as for international as well as for local players. Simplified pharmaceutical regulation, attractive and efficient tax system, and low cost but well qualified labor force, create opportunities to invest in the pharmaceutical industry in Georgia. Many International brands and modern technologies are still not present on the Georgian market while there could be need for them. The development of pharmaceutical sector increases the demand for high quality industrial equipment. Especially now, when the Government is going to move to selective contracting mechanism. This implies a selection of the facility, which will provide better quality and qualified services. Consequently, only these facilities will remain in universal health program. Local legislation allows parallel imports of pharmaceuticals and there is no pricing regulation related to pharmaceuticals. There are a high number of drug stores per capita with extensive geographic coverage, which shows positive trend of pharmaceutical business in Georgia.
16 September 24, 2018 #23