US Business in Georgia - 16 November, 2015 by The FINANCIAL

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US Business in Georgia AmCham Georgia:

“We Have Some Nervousness Coming into Election Year in 2016” The FINANCIAL

“The Main Problem Now is Restoring Confidence in the Future of Georgia” Tako KHELAIA

CURRENCIES 1 USD 1 EUR 100 RUB 1 TRY

Nov 14

Nov 6

2.4018 2.5879 3.6095 0.8370

2.3998 2.6007 3.7805 0.8334

Record Number of Businesses Registered by US Citizens in Georgia in 2015 See on p. 12

CMYK

HEADLINE NEWS & ANALYSIS

FINANCIAL

16 NOVEMBER, 2015 | FINCHANNEL.COM

US Business in Georgia

AmCham Georgia: “We Have Some Nervousness Coming into Election Year in 2016” The FINANCIAL By MADONA GASANOVA

eorgian political parties are being advised not to destroy the country’s image in the international arena in the process of demolishing each other. The political battle of parties for the 2016 elections is raising the level of nervousness in the business community. Court injunctions to freeze a company’s assets and tax audit are named the main concerns for businesses in Georgia. AmCham Georgia’s President calls on Georgia’s partners in the West to step up and help companies to understand and get the benefits of the AA and DCFTA deals, in order to halt growing Russian influence over Georgians. “I hope that all of us in Georgia have learned lessons from the early years. All of the political parties should focus on promoting Georgia in a good way. I am not naïve enough to believe that it will definitely happen, but if it does, we should not see too much disruption in 2016. On the other hand, if the opposite happens it will be very difficult on the economy. Nobody feels comfortable investing, or even reinvesting- when there is political instability. Therefore, we hope that all the parties work hard to ensure stability for the 2016 parliamentary elections,” Sarah Williamson, President of the American Chamber of Commerce (AmCham) in Georgia, told The FINANCIAL. According to Williamson, Georgia has clearly adopted its Westernisation agenda. “It has to make sure that it is seen as a democratic, transparent society; that its values are really standing on free market economy principles.”

SARAH WILLIAMSON, President of the American Chamber of Commerce (AmCham) in Georgia Q. What was the most significant development in 2015 for businesses in Georgia? A. The most significant thing for businesses and future investors is the recently formed Investors Council. The Council was sponsored by EBRD. The Georgian Prime Minister chairs the council. It’s members include leaders of the major business associations in the country, EBRD and the economic team of Ministers. Other IFI’s attend on a rotating basis. We had our first meeting last month. I believe this is going to be a very strategic means of direct communication with the highest levels of the government for businesses. The Council is in-place to discuss the current issues. At the first meeting we discussed very tough issues with the Government. In addition, we will talk about strategic objectives such as making Georgia a more attractive place to invest and how we can work together to do that. Overall, one of the things that businesses have been asking for is better communication with the high levels of the Government. With the PM chairing, and his economic team of ministers attending, I think this will provide an excellent means of improving publicprivate sector dialogue. We are also, at AmCham, excited about Georgia’s participation in a new Silk Road. The Silk Road Forum that took place here, in Georgia, was very important. There are lots of prospects that Georgia can gain through Asia and the FTA with China, combined with the already-achieved DCFTA with the EU. It provides lots of opportunities for bringing companies into Georgia to do soft repackaging and warehousing here, as well as other investments for transit and logistics along the Silk Road. Q. Did legislation for entrepreneurs improve or worsen over the last three years? A. Any business that has been here for many years certainly got accustomed to, and benefited from, the very libertarian position of the previous government. It was a very necessary thing for businesses to be able to grow. Georgia has a developing economy and businesses really needed the breathing room. At some point, as a country develops, there are some regulations and bureaucracy that will come back into play. That is what we see now with Georgia

trying to amend its legislation and harmonize with the EU. You can call it reforms, but they are examples of more regulations. That is always difficult for to accept, and sometimes painful and costly. Both the Government of Georgia as well as its partner countries that have an interest in seeing it succeed, really need to do everything they can to make sure that the masses understand what the long-term benefits will be. They have to reassure people that they have access to financing and education that will enable them to take advantage of these benefits. In the long term, we certainly think that Westernization, including the EU DCFTA, is going to be worth it. Right now it is painful, especially for the local businesses that are not used to these kinds of regulations. Q. What can Georgia do to attract more US investors? A. The distance problem is the main reason you do not see more US businesses here. Georgia is too far away from the US and in most investors’ minds the market here is too small. Since we can’t bridge the distance issue, Georgia has to stay strong on it’s Westernisation agenda. It has to make sure that it is seen as a democratic, transparent society; that its values are really standing on free market economic principles. We, the private and the public sector, have to work together to promote Georgia more. Georgia is a regional hub. With its trade agreements with the EU and the countries in the region, it makes sense to position Georgia as a regional hub. Perhaps more needs to be done with neighbouring countries to ensure that they honor their trade agreements the way Georgia does. The country needs to promote its achievements, strategic placement and really make the economic case. It is not just about politics. We have some nervousness coming into the election year in 2016. No one does Georgia any favours when they go out into the international press, and destroys the country’s reputation in the process of destroying each other. It is really important to promote what Georgia has to offer economically and geographically. Q. The World Bank has published its economic growth forecast for Georgia measured at just 3%. What are your expecta-

tions for 2016? A. I think 3% is reasonable. However, a country like Georgia really needs at least 5% growth a year to be successful. It’s difficult to predict for 2016, but if we look back at recent history, when we had the last big elections in 2012, on the one hand, there was a huge positive for Georgia in that we were able to show investors that Georgia was the first country in this area to have had a peaceful transition of power. That was excellent. However, at the same time, the antics of both major parties leading into the elections and the uncertainty that comes with a changing government in this part of the world, in a developing country, were bad for business. It is not a comment on one party being better than the other. It’s simply a statement of hope that all of us in Georgia have learned lessons from years. All of the political parties should focus on promoting Georgia in a good way. I am not naïve enough to believe that it will definitely happen, but if it does, we should not see too much disruption in 2016. On the other hand, if the opposite happens it will be very difficult on the economy. Nobody feels comfortable investing, or even reinvesting- when there is political instability. Therefore, we hope that all the parties work hard to ensure stability for the 2016 parliamentary elections. Q. How are US brands growing in Georgia? A. US brands and franchises are popping up everywhere and as far as we know they are doing quite well. There is no street corner that does not have a Wendy’s or Dunkin’ Donuts. They are everywhere in Tbilisi and my children think that is fantastic. We have seen many restaurant chains opening with US franchises during the last year too. On the retail front there have been several US clothing stores, like Gap, Banana Republic, Tommy Hilfiger, and certain others that have opened in Tbilisi. It is a great time, especially for franchising US brands, as right now they seem to be very popular and successful. Q. What are the main obstacles for investors in Georgia? What are the main complaints of AmCham member companies? A. The biggest problems our members are having are court injunctions, where the court is able to freeze your assets based

on another party making claims against you. It relates to even relatively small claims. Very large assets are frozen and it really cripples a company’s ability to function. Unfortunately, based on the legislation this is currently legal. This is legislation that has existed for many years and at AmCham we believe that there has to be changes to fix it. We raised this issue at the Investor Council meeting. We were pleased with the fact that the PM agreed that that has to be fixed quickly. The other big problem is the implementation of tax audit. Most of the problems raised are eventually sorted out through the appeals process in the Ministry of Finance. However, it has unimaginable and unacceptable consequences on companies, in the form of the time and financial resource allocation required to fight those appeals. It is extremely important for the Government to give new directions to the tax assessors. We have also raised this issue with the PM and Investor Council and have agreed to have a special meeting in December to speak about these issues. AmCham’s position is that there needs to be some kind of technical assistance and reform of the audit implementation process, along with some swift direction from the highest levels of government to limit the immediate troubles companies face. We hope we can convince the Government to do that as it is better for everyone. We hope the government realizes that it is not only inhibiting the private companies growth as they waste time and money on lengthy appeals processes that shouldn’t be necessary, but it is also a waste of the government’s resources when these tax claims should never have been made and should never have required their time and resources in the appeals process either. Fixing this problem will be a great bonus for Georgia. I believe that the best advertisers for getting investments to come to Georgia are the people that have already done so and are happy tell others that it is a good place to be. Q. Starting direct communication with officials can be named a positive step. Meanwhile, it is crucial to get concrete results and solve problems that matter to the business community. How optimistic are you in this regard? A. I agree. We are all eager to see how these more open dis-

cussions can bring about positive change and quickly. In AmCham we do not believe that the major problems, for example in the Revenue Service, is a matter of corruption. It is a matter of competency- having enough of the right people and giving them the proper instructions. It is a fixable problem and it needs to be fixed. Q. There are concerning results from an NDI poll, showing that Russian influence is growing among the population. Do you consider it a problem? A. It is a problem. However, it is not just a problem of Georgia, but also of the EU and our western partners. When I see that poll I can easily understand how the masses of Georgians may feel. Georgia has signed the AA and DCFTA with the EU. We hear of progress on the visa liberalization processes. All of these sound great when you are only hearing headlines. However, when you get into the business of what is actually required to achieve that, it is quite scary. These regulations can be expensive for businesses. Accordingly, it is very important for Georgia’s partners in the West to step up and help, especially small and medium companies in Georgia, to understand what the benefits will be and help them to get these benefits. If we do not do this we are going to see Georgians get even more fatigued by all of these new regulations. It is a wake up call to all of us to realize that Georgia’s westernisation and western integration is really important. I think the West has a huge responsibility to try to help everyone here understand and participate in the process of these things, going forward. To keep things in perspective, lets acknowledge that luckily we are not seeing a shift of great proportions. Still, this is a trend that we certainly hope does not continue. Q. Georgia has been negotiating an FTA with the US for years. When should we expect this agreement to be reached? A. Unfortunately I have no control over this process. AmCham, has strongly supported this agenda, both in Tbilisi and Washington DC, for many years. We will continue to do so. Realistically, there is so much going on in the world that it is that the US has recently made clear again that it cannot will start an FTA with Georgia in the nearest future. So, while I believe this would be a tangible, bilateral, thing that the US can do to show appreciation for the steps Georgia has made, I guess we’ll be waiting for a bit longer. Q. Do you see the future of Georgia as a member of the EU and NATO? A. If it was up to me Georgia would be a member of the EU and NATO tomorrow. I wish everyone saw it that way, but since they don’t Georgia and it’s partners have to be very careful moving forward. For example, I do not think that NATO’s membership action plan (MAP) will ever be good idea for Georgia because of Russia’s obvious response, as we saw in 2008 when they became afraid that Georgia was getting close to MAP. I hope that someday NATO will recognize Georgia as its member, skipping the MAP process. As for the EU, Georgia is a very European society and the country is taking every step to harmonize further with the EU, legislatively. So, while it is not on the table right now but I hope it will be some day.

CMYK

FINANCIAL HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 16 NOVEMBER, 2015

US Business in Georgia

“The Main Problem Now is Restoring Confidence in the Future of Georgia” Tako KHELAIA The FINANCIAL

ICC GEORGIA PRESIDENT SPEAKS ABOUT GEORGIA’S INVESTMENT PERSPECTIVES

he biggest development that we had in 2015 was in July, when we declared a moratorium on criticizing the Government until October, to give a chance to the investors council under the Prime Minister to solve the problems that we have been talking about for about 3 years now. This was to be able to solve them far from the limelight, not to discredit anyone and not to give credit to anyone else. So we’ll see how this investor council is going to work. If it’s going to work well then there will be no need for us to go public. If it’s not going to work then we will definitely have to go back to the media and speak openly about the problem. Q. What are the main complaints that ICC member companies have in Georgia? There are 4 main complaints: The first one relates to new legislation. Every few days we have a new piece of legislation that’s adopted without consultation with the business community. This is a real problem because we cannot keep up and then we don’t know what’s happening. And this is backfiring very negatively on the confidence of businesses and investors in the country. The second issue is the revenue service. The revenue service is very aggressive with companies. Whenever they audit a company they decide arbitrary penalties that can be manifold what the company actually needs to be penalized for, if it needs to be penalized at all. They freeze bank accounts and totally paralyze the company. The third issue relates to labour inspection. We are quite apprehensive about it. It’s a new controlling body that will be watching over businesses, in addition to the competition agency and the revenue service. This is not good news because it’s complicating the business climate. Finally, the fourth issue relates to the courts. The courts are issuing injunctions against defendants requesting the freezing of assets that are manifold the value of the claim against those companies and thus totally paralyzing the companies. Those are the 4 main issues that are of big concern to the business community and we hope that through the investment council we will be able to solve them. Q. What are the main obstacles that foreign investors are facing in Georgia? A. I can’t differentiate between foreign investors and Georgian businessmen. They face the same problems. Unpredictability in legislation - as I have said before; any day the Government or parliament can come in with new legislation. There is no visibility towards the future. We don’t know where Georgia is going to be in 6 months, a year, in 2 years or 5. Investors want predictability. They want visibility. Without visibility and predictability investors are not interested in a country, especially in a small one like Georgia. For the past 3 years the Government has issued a lot of business-unfriendly legislation that has cooled down investors and scared them off, so now they are looking for destinations other than Georgia. Fortunately the Government has partially reversed this bad legislation. But it’s too late. I believe that the main problem now is restoring confidence. Confidence in the future of Georgia for businesses and investors has been lost

FADY ASLY, ICC Georgia President in the past 3 years. What we need to do together with the Government now is make sure that that confidence is restored, so people invest in their own country and for foreign investors to invest in Georgia as well. Q. It’s often said that doing businesses in Georgia is easy, would you agree? A. On paper it’s easy, but practically it’s not that easy; especially when you have to deal with the revenue service, with the competition agency, with the Georgian courts, with the labour inspection. No, it is not as easy as you can read on paper. And this is a real problem, because it takes one failure to spoil 100 success stories, and since we don’t have 100 success stories, we shouldn’t be surprised by how Georgia has lost its reputation as a good place for business and investment. Q. Does the Georgian Government do enough to attract foreign investors? A. I cannot criticize the Government regarding their will to attract foreign investors. The will is there. What is not there is the understanding of what foreign investors need. This means that if you are in Saudi Arabia and you open a restaurant where the menu is beer and pork, don’t be surprised if you have no clients. In Georgia the situation is exactly the same. The Government is not serving investors what investors want to eat. And the Government is unable to understand what the problems are that investors suffer from. They don’t want to see it, we’ve been saying it a million times and I believe that it’s not the will that is lacking they really want to get investors in, but they don’t know how to attract them. And they are not focusing on understanding what the problems are with attracting investors. Q. What have they done properly? A. What they have done properly is they have stopped using criminal courts to arrest businesses, put them in jail and then pre-bargain with them to take money from them. This, they have managed to do well. By the same token when the revenue service enters a company and fines the company GEL 1 million instead of GEL 10,000, and then freeze the bank account - this is just another way of persecuting an investor or business. The result is the same, but the tool has changed. Instead of jailing them, they freeze their bank account and put pressure on them. I can’t say that the result is better and there is more confidence than before. On the contrary, businesses were more confident about the future of the country then than they are now. Q. In which sectors can new investors expect a rapid positive return? A. I think tourism has huge potential. There is definitely a lack of infrastructure for tourism which investors can get involved in. Georgia is really booming tourism-wise. I don’t know

anyone who has come to Georgia and not wanted to come back another time. So tourism is a definite, and then you have medium-sized industries. Let’s say paint factories, paper tissue factories, not big factories of hundreds of millions of dollars, but anything between 5 to 20 million dollar industries, that’s what we are lacking here and we are really in a very comfortable position considering that Georgia has signed a DCFTA association agreement with the EU. We have cheap labour, the Lari is weak so we have all the parameters on hand to be successful for medium sized industries. Q. You often meet with the Georgian Government. What percentage of these meetings get positive results? A. It depends on the government official. For example, when Minister Kvirikashvili was the Minister of Economy I can say that 70 percent of our requests had positive results. He was fantastic as minister of economy and also as a person. Out of the whole government we had the best relations with him. He always listened very carefully, he understood what the problem was and took action. Unfortunately we lost him as minister of the economy but gained him as Minister of Foreign Affairs. The situation with the Minister of Finance now is whenever we come with a problem he does his utmost to solve it. But this is a tactical approach. On a strategic level, considering that he oversees the revenue service, he never wanted to understand what the real problems with the revenue service were, and the cost of the actions of the revenue service on the economy. I always think of the minister of finance as someone who can be called blind; meaning, when you tell him “This is red,” he says: “No, it’s yellow.” He cannot see the problem because he has no experience of it, I mean from the perspective of businesses. Every time we have gone and talked to him about a particular issue he has always been extremely helpful but we can’t always tactically solve matters. The Economic Adviser to the Prime Minister Giorgi Gakharia is also always open. So, in general I can say that for tactical problems, for punctual problems the Government is solving them, but strategically there is a lack of vision, a lack of understanding, and this is the main issue. This is what we are trying to explain to them - that they need to change strategy. Q. In a 10 points system what would you give the Georgian Government? A. I would give them 3, referring to the economy. I’m not referring to social or other issues, just the economy. Q. I have to ask you about Asian business in Georgia. We often hear hateful speech directed towards Asian investors. Do you think this is Georgians’ character or due to someone else’s manipulations?

A. No, I don’t think anyone is manipulating them. I think that Georgians are ambivalent regarding foreigners. They have something like a double approach to them. There is a social approach to foreigners where Georgians are extremely generous, extremely hospitable and extremely nice. And then there is a professional approach to foreigners where there is professional xenophobia. It means that Georgians don’t like to see foreign people operating in the country, working in the country. They are very happy to see them as tourists: drinking wine around a “supra”, enjoying the landscape. But they don’t want to see foreigners working in Georgia. This is generally speaking though, not all of them of course. Generally there is a xenophobic feeling in the country professionally-wise. Q. There are constant speculations among local and international media about the country’s political course. Do you doubt Georgia’s western aspirations? A. I think that Georgia today is still western-oriented, but if you compare the pure results of 2 years ago to the pure results of 3 months ago you will see that enthusiasm towards the West is fading. This is not because of Georgians. This is because of the attitude of the West towards Georgia. You know that NATO’s MAP has been postponed year after year, the visa facilitation also has been postponed. Georgians feel very frustrated. Georgians are very proud, they are not beggars, yet the message that they are receiving from the West is as though they are begging for something. So, for a proud nation I understand this feeling within the population. I mean if Europe doesn’t want us or they don’t want to give us visa facilitation, or if we cannot be on the map soon, then let’s forget about it. They think along these lines: “If we managed to survive for millennia without the EU, then we can survive without the EU for the next millennia,” especially as the EU has its own problems internally. Q. Considering the current economic situation what do you fear the most? A. I think that we are melting. We have lost our competitive advantage. There are many other emerging markets that are competing with Georgia and that are offering even better packages than Georgia - larger markets than Georgia as well. We are losing our competitive advantage and we have lost our momentum since 2012. We had a fantastic window of opportunity early in 2013. Unfortunately, the Government couldn’t take advantage of this window of opportunity and they turned to social programmes instead of focusing on the economy, on investment, on boosting, and this made us lose lots of momentum. So I believe that this is the main challenge now - to restore confidence and to put Georgia back on the map, because Georgia unfortunately is not on investors’ maps

so much anymore. However, there is still a fantastic opportunity for Georgia now for everyone to be aware of. What is going on in the Middle East now is that many Easterners from wealthy countries like Saudi Arabia, the Emirates, feel uneasy at home because of what is going on in the Middle East and are looking for other places to buy a house, to build a villa or make an investment - and they are looking to Georgia. We know this because they come to us and they speak with us and this is a fantastic opportunity for the country. The Government needs to capitalize on it because they won’t have another opportunity like this one. We lost the opportunity with the Iranians; we shouldn’t lose this opportunity with the Middle Easterners. Q. Looking ahead of developments around National Bank of Georgia, It seems like international donors are losing their control over the Georgian Government. Do you think that western partners should be stricter in their demands? A. Frankly, I don’t think that the international community is losing its control over Georgia. First of all there should be no control that the international community has over Georgia. Why should there be any control? Georgia is a sovereign country with a sovereign policy so it shouldn’t be controlled. Now we were very much against the removal of the branch of controlling banks from the national bank into another entity. We think this is counterproductive and the risk of it is that it could be controlled by the Government to put pressure on the banks to control who is contributing to which political party and to bankrupt any bank any time if the bank is not following the Government’s policies. So this is what we don’t like about it. If you were in Switzerland and they would have separated from the national bank no one would even talk about it, but the problem is that everyone knows that every administrative tool is used by the Government to strengthen itself and weaken the opposition. This is something that is not ethical and is not proper - this is where everyone got very twitchy about moving the bank controlling body to another body. Q. As a Georgian citizen do you believe in a NATO or EU future? A. I am going to answer that for myself, not on behalf of the International Chamber of Commerce. Personally I don’t think that Georgia will be a member of NATO any time soon. And I don’t think that Georgia will integrate into the EU any time soon, at least not as long as I’m alive. Let’s be pragmatic, regarding the EU, it has its own problem internally with Greece, Spain and Italy. They are not in the process now of enlarging themselves. Concerning NATO, we know the situation with the Russians, so I don’t think that NATO is going to impose membership on Russia. This is my personal opinion. We need to be more pragmatic and not focus too much on it. I think Georgia needs to do good homework for itself, be a brilliant student for itself, not to get a reward from NATO or from the EU. Having said that though, I think that the EU needs to make an effort towards Georgia. Signing a DCFTA and an association agreement leads to a very high compliance cost for the economy. You know we have to adapt our legislation according to the EU legislation. This will complicate doing business in the country. We need to see something in return. Because when you pay you want to take advantage of it. We want to use the advantage of having an association agreement with the EU now and pay over a period of 12 years. And this is the feeling that Georgians are getting now - frustration. The EU needs to make a very serious effort regarding this issue. I believe that if Georgians at some stage change direction and head towards Russia (and it is possible), it will not be the Georgians’ fault but the fault of the EU and the West.

CMYK

HEADLINE NEWS & ANALYSIS

US Business in Georgia

FINANCIAL

16 NOVEMBER, 2015 | FINCHANNEL.COM

AGH to Position itself on Regional Level The FINANCIAL By MADONA GASANOVA

lliance Group Holding (AGH) plans to position itself as a strong financial and consulting company on a regional level. Geographical location together with human capital is believed to be the core competitive advantages of Georgia on a global level. Given the increased competition between developed and developing countries, it is recommendable for Georgia to build up its agro and energy sectors to ensure its economic future. “Development of the agro sector is crucial for Georgia. It will allow us to supply local demand under the huge increasing deficit and volatility of prices on a global level. Together with energy independence, it will ensure the future of our developed economy. The cooperation of society with the Government is important in this direction,” Aieti Kukava, CEO at Alliance Group Holding, told The FINANCIAL. According to Kukava, AGH is a company of global ambitions. “Our goal is to be positioned as a strong consulting and financial group in the region in 5-7 years’ time. Our current strategy is to attract more income from abroad rather than from local services. We believe that economic and political processes domestically will be in a better way and will promote the pace of our growth,” he said. Alliance Group Holding was established as an investment and consulting company in 2005. The Holding incorporates: Alliance Group Leasing; Alliance Group Capital; Alliance Group Microfinance; the National Credit Information Bureau; Alliance Energy; Alliance Group Property; Alliance Group IT. “Bringing value to the country’s economy has always been the main goal of the company. This approach is unique; rarely do companies use it as their mission. We have always realised that bringing long-term value to the economy is directly linked to the company’s future solid prospects. We have managed to make significant progressive impact on all of the seven industries which are incorporated under our holding.” When the team of AGH started business in Georgia in 2002, its goal was to develop strategic industries that were key to the country’s development. The members had experience of the consulting and financial industries. Accordingly, they chose other fields: business information; credit bureau; real estate database; microfinance, leasing and investment. The energy sector was later added to these sectors. “There were two main reasons that encouraged us to develop these fields. These industries were of strategic importance to the country. They would contribute important benefits to Georgia and our society. The develop-

AIETI KUKAVA, CEO at Alliance Group Holding

ment of the credit bureau has significantly raised the efficiency of banking and the financial system. Risk optimization contributed to considerable enhancement of crediting the economy. Therefore, the already competitive banking and financial system of the country made a big step forward in increasing the competitiveness of the region,” said Kukava. Offering those financial and investment services that are outside of the banking sector was the next stage of AGH. The company started developing microfinance, leasing and investment services. As Kukava explained, classic micro financial companies that are mostly focused on financing micro and small enterprises bring lots of benefits to the country’s economy. Such organizations are successfully helping entrepreneurs that then start using banking and other services at later stages. Leasing is the most optimal

source for financing equipment, according to Kukava. As he said, it is an attractive alternative to financing for entrepreneurs in both financial and taxation terms. Later on, AGH started offering its investment and consulting service. This incorporates assisting entrepreneurs to attract capital and long-term resources, as well as attracting strategic partners or just purchasing businesses back. The Holding is developing the business information sector. The company is producing a database of active Georgian companies. All of this simplifies and increases the attraction of potential foreign partners to Georgian companies. The Holding considers energy to be a core industry of our country. “That was the main motivator for why we decided to become involved in this sector. The development of renewable energy resources will increase export income by direct trade with generated energy. It will also increase

the supply of cheap energy resources for the local economy. Finally, the production of local export production will significantly increase.” As the CEO of AGH explained, the company’s mission is about creating values for all stake and shareholders by developing the country’s strategic fields. “AGH has contributed to the country’s economy by developing the above-mentioned seven fields. However, we are not going to stop at that.” “Georgia is a country of huge opportunities,” believes Kukava. He distinguished its geographical location and natural resources as well as prosperous human resources as the core advantages of the country. “The geographical location allows the country to be a trade hub not only in terms of maritime and land but also from an aerial view,” Kukava said. “An abundance of renewable energy can be used for developing

the economy. It will allow Georgia to meet the future with more confidence when oil and other energy resources will be getting exhausted in the world,” he explained. Kukava believes that human resources are the most important thing the country has. “Through proper development and optimal usage of this resource, Georgia can compete and enrich all high skilled fields with innovations in a 5-15 year period.” “The ongoing political processes and tension are pushing investors to invest in traditionally less risky regions, like the US and Europe. Currently developed and developing countries are in fierce competition over attracting capital. Therefore, Georgia is facing quite a difficult task,” said Kukava. “Georgia should use all of its potential and properly promote itself. The country should create stimulating packages to attract strategic investors with,” Kukava told The FINANCIAL.

CMYK

FINANCIAL HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 16 NOVEMBER, 2015

US Business in Georgia

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FINANCIAL

16 NOVEMBER, 2015 | FINCHANNEL.COM

US Business in Georgia

“It’s a Challenging Year, although it is Not Over Yet” Tako KHELAIA The FINANCIAL

MR. LOZYNSKYY JOINED GEORGIAN MANGANESE IN MAY 2012 AS THE COMPANY’S GENERAL DIRECTOR. IN HIS CURRENT ROLE, HE IS RESPONSIBLE FOR OVERSEEING ALL OPERATIONAL ACTIVITIES AND STRATEGIC INITIATIVES. MR. LOZYNSKYY WORKS DIRECTLY WITH GEORGIAN AMERICAN ALLOYS, GEORGIAN MANGANESE’S PARENT COMPANY, TO ENSURE OPERATIONAL EXCELLENCE THROUGH THE ORGANIZATION. PRIOR TO JOINING GEORGIAN MANGANESE, HE SPENT TWO YEARS REFINING HIS MANAGERIAL SKILLS AT NORTH AMERICA-BASED WARREN STEEL HOLDINGS. MR. LOZYNSKYY HOLDS DEGREES FROM KYIV STATE UNIVERSITY AND O.S. POPOV ODESSA NATIONAL ACADEMY OF TELECOMMUNICATIONS.

VELVEL LOZYNSKYY SPEAKS ON THE DEVELOPMENTS AT GEORGIAN AMERICAN ALLOYS

eorgian American Alloys (GAA), Inc., headquartered in Miami, Florida, manufactures and supplies ferroalloys used in the manufacturing of iron and steel through wholly-owned US based subsidiaries Felman Production, LLC, Felman Trading, Inc., CC Metals & Alloys, LLC, and Eastern European-based Georgian Manganese, LLC, which is comprised of Chiatura Manganese Mine, Zestafoni Ferroalloy Plant, and Vartsikhe Hydroelectric facility. Georgian Manganese is a major producer of high-grade and regular-grade silicomanganese in Georgia. Georgian Manganese’s mining operation includes seven mines and eight quarries. Vartsikhe 2005, LLC is a hydroelectric power plant that supplies power to its affiliated companies Chiatura Manganese Mine and Zestafoni Ferroalloys Plant. GAA is the largest Georgian exporter. In 2014, the company invested USD 15 million. Out of this, USD 5 million has been issued for the construction of a hydro separation district, and USD 3 million - for Zestafoni power plant. Q. The year 2015 has been quite tough for the business community, how would you evaluate the current year for Georgian American Alloys? A. It’s a challenging year, although it is not over yet. World raw materials are falling apart, every week the prices are going down. Right now we are somewhere in the middle of 2009 and things are getting worse every week. There are no positive results. I don’t know if in the real economy world or raw material world anything positive exists. One of my colleagues was recently at a ferroalloys conference and it was like 3 days of visiting a cemetery, nobody had anything positive to share. Nobody has any positive information, any positive news, everybody expects the year 2016 to be even worse than 2015 and nobody has any idea what has to happen for a comeback to be possible. Q. The investment climate hasn’t been very good lately in Georgia. Has that affected your company? A. It’s not about the investment climate, it’s just about what’s going on in the world with the oil price falling down, raw material prices falling down; everything that people are digging out of the earth is going for very low prices. When oil companies are cut-

“WE ARE STUCK IN THE MIDDLE OF GETTING PERMITS, ENVIRONMENTAL AND CONSTRUCTION PAPERS.” ting their budgets I think it affects the steel industry. The steel industry is closing plants, which in turn affects us. The steel industry is cutting consumption, so are the truck producers, and so too the heavy equipment manufacturers. They are shutting down their facilities. China’s consumption is going down as well, while in steel production the Chinese make up about 55% of the world market so everything depends on them as well. Manganese and oil prices are also falling every week. Q. GAA was going to construct a mining factory in Chiatura in 2015. Did you manage to stick to your plan as scheduled? A. Actually we are still planning to construct that factory. That’s the future of Chiatura - doing what has to be done, no matter the situation, but unfortunately nothing is getting done on time in Georgia and we are in the middle of getting paperwork sorted between ministries. Basically we are stuck in the middle of getting permits, environmental and construction papers. The plan has been pushed back to 2016 but it’s still in the works. Q. What was the impact of the GEL’s devaluation on your business? A. The Georgian Lari’s devaluation was actually one of the problems that helped the business, not damaged it. If you ask me, personally I think it should be more devalued. I think 2,4 is not such a number if you compare it with our neighbours. One and a half years ago the GEL and Turkish Lira were 1 to 1; now the Turkish Lira is 3,1, and the GEL - 2,4. We as an exporter have interests in the currency

being devalued. We actually benefit from it. Q. In 2014 GAA was the largest Georgian exporter. Which figures are you expecting to reach this year? A. The 2015 figure will for sure be less for 2 reasons; the price of the material export is lower, and also the amounts are getting lower as well. We should be about 65% of 2014, and in 2016 we cannot predict the price, but volume-wise we should be about 60% of 2014 as well. Q. GAA is an American company operating in Georgia. What are the main things that need

Q. How has the business environment of Georgia changed since 2012? A. I think in terms of the pressure. All businesses were under pressure before the parliamentary elections, and since then there has been no pressure from the Government, so it’s kind of a relief. There is less interference from the Government and I think sometimes there should be more involvement than there is now, but we have definitely got more freedom. Q. Have you witnessed anything positive in regard to the country’s business growth?

local TV channels in Chiatura and Zestafoni where we always have something happening. Q. Companies like GAA carry extra responsibility in dealing with environmental issues, as well as the healthcare of your employees. What can you say about CSR issues? A. From a corporate point of view and social responsibility we try to help the community as much as we can. Both of the towns Zestafoni and Chiatura kind of depend on us a lot and we are helping everybody. For example, right now we have a project in Zestafoni with 3 private schools where we subsidise the tuition fees for the children of our workers. We also have a hospital in Zestafoni and we have a small clinic in Chiatura as well. All our workers, including their families, have insurance. People’s expenses are covered in the event of an emergency.

“WITH USD 20 MILLION GEORGIAN AMERICAN ALLOYS IS GOING TO CONSTRUCT A MINING FACTORY IN CHIATURA IN 2015. IN TOTAL THE COMPANY PLANS TO INVEST USD 36 MILLION DURING THE CURRENT YEAR, UP FROM USD 15 MILLION FROM LAST YEAR.”

to be improved to attract more US businesses here? A. First of all, a direct flight. It is very difficult to fly from America to Georgia and I think Alitalia doesn’t fly anymore either so it’s getting a little difficult, but the good news is that Turkish Airlines has started to fly to Miami and our headquarters are in Miami which is useful for us. I think the overall climate is good, maybe what should be improved is quality of Tax and Revenue Service, the rest is fine I think.

A. It’s hard to say, but as they say - “no bad news is good news”. However, it’s hard to recall something so positive that has happened in the last 5 years that has really changed something. But the fact that the French supermarket network Carrefour came to the country makes life a little better. What I can say about our company is that we have continued to grow. We are investing, changing things for the better. Every day we are doing something interesting. Lately we have started doing weekly news announcements on the

We also have an outsourced network of food-stores. Our workers get slightly cheaper food, and also if they want they can use credit, and not have to pay straightaway. We are helping provide a water supply in Zestafoni and Chiatura. Additionally, for some villages we provide transportation for our employees to get to and from work. So there is a big list of CSR. In regard to caring for the environment, we are trying to bring in the most western technologies possible, and I think anybody in Zestafoni nowadays doesn’t see the big

black cloud that there used to be. There is a big project for Chiatura, to build a new beneficiation plant that would eliminate the water pollution that exists right now and also the recovery of the big open mines together with the Ministry of Environment Protection. Q. What are your company’s advantages over other competitors? A. The biggest advantage is that we have a production complex; it is a mine plant and hydropower plant which operate together. Therefore we will always have the advantage of being able to produce our own electricity and use it to make our product. Georgia has a very free economy with very low tax system, so the low tax has also been an advantage. The history of the plant is that it is 80 years old, which means we have some skilled workers. Q. What are your expectations for the year 2016? A. We are scared that it will be a very difficult year and as we see what’s going on with the economy, we expect it to be very difficult and we are going to have to fight for every person’s job. It’s not going to be easy, that’s for sure. Q. What will be the key plans of GAA in 2016? A. Besides the Chiatura beneficiation plant that we still have planned, I don’t think we will be doing much. With the cut expenses, we have to survive. When the world is pushing you to the wall that’s what you do. Q. There are concerning results from the NDI poll showing that Russian influence over the population is growing. Is this trend reflected in the plans of American investors? A. Russia is a part of the western world. Even though Russia doesn’t want to admit it, they use Apple products, they drive western cars, their kids are in Western schools. They couldn’t live without the Western world.

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US Business in Georgia

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BAT: “We will Continue to be a People-Focused Company” The FINANCIAL By MADONA GASANOVA

ritish American Tobacco (BAT), celebrating its 20 year anniversary in the Caucasus this year, has managed to achieve a 26% share of the market, up from 3% from early 1995. Passion, drive and belief in success - these are at the core of the multinational company, which has been operating since 1902. BAT was named the Best Employer of 2013 and 2014 in Georgia. The award demonstrated to the company’s management that they are on the right path, and to this end BAT plans to continue to be a people-focused company. BAT operates at a local, as well as global, level. The company does not own tobacco farms or directly employ farmers. More than 1,000 BAT leaf technicians worldwide support over 100,000 contracted farmers. BAT is a part of many local communities - both large and small - around the world, and in many countries BAT is the top employer and the company of choice for people employed at every stage of its supply chain. In 2014, the company sold 667 billion cigarettes, made in 44 factories in 41 countries. The number of employees amounts to more than 57,000 people worldwide, with many more indirectly employed through the supply chain. British American Tobacco alone contributed approximately £30 billion to governments worldwide in excise and other taxes in 2014. On behalf of US Business in Georgia The FINANCIAL interviewed Kakhaber Benidze, General Manager at British American Tobacco in the Caucasus. We asked him to share the company’s experience and the key factors in building and running a successful multinational company.

KAKHABER BENIDZE, General Manager at British American Tobacco in the Caucasus Q. BAT is one of the leading multinational companies, which has been operating in the Caucasus for twenty years already. Please can you tell us the main factors in creating a successful company? A. BAT is a global tobacco company with more than 200 brands sold in over 200 markets. Few companies founded in 1902 still exist today, yet BAT continues its journey to becoming one of the most successful companies in the

world. With one billion adult smokers around the world, we manufacture the cigarettes chosen by around one in eight of them. BAT has been present in the Caucasus since 1995, celebrating its 20 year anniversary of successful operations this year. Our market share has increased from 3% to 26% during this period while the number of our employees grew from a few people employed back in 1995 up to 150 today. BAT Caucasus offers its consumers the following

brands: Kent; Dunhill; Vogue; Rothmans; Yava; Viceroy; Lucky Strike; and Pall Mall. To run a successful company you need to have passion, drive, and to believe in its success. We at BAT take our business and our impact on society very seriously, and do our business in a very responsible way - from growing the tobacco leaf through to how we market our products to adult consumers. Q. As a multinational company BAT has always been actively in-

volved in CSR activities. How do you structure and prioritize your social activities? A. We are proud to have a number of important achievements across our markets in the Caucasus. For example, BAT Georgia was awarded the Golden Brand award for the Best CSR Company (Education) and Best Employer in 2013 and 2014. This important award is organized by the newspaper The Financial, marketing company Global Idea, and supported by the International Chamber of Commerce and Georgian Chamber of Commerce. This recognition came as a result of a number of projects run by BAT, such as the Scholarship Project under which we managed to fund up to 30 Master level students of Tbilisi State and Sokhumi State Universities; a Business Case competition project where we managed to bring all the best universities of Georgia and Azerbaijan together, along with the Ministries of Education of both countries. We continue our best efforts in this direction. As for Azerbaijan, BAT recently won its first ever CSR Excellence Award for continuous support in improvement of education and employment, a successful nationwide innovative job fair project supported by the local government. I am very pleased to see that all of our CSR initiatives are so successful and well recognised by other companies and local governments. This is all the result of our hard work, dedication and passion for the best results. Q. Human resources are at the core of the success of any company. Tell us about your experience of finding and recruiting professionals - how do you try to incentivize your workers? A. British American Tobacco is one of the world’s most international businesses. We employ more than 57,000 people worldwide meaning that we have a very diverse workforce in terms of nationality. Because our employees come from many cultures and backgrounds, it provides variety and different ways of looking at challenges, encouraging creativity and innovation, who support each other’s successes and create a unique mix. We are dedicated to providing equal opportunities for

each employee. We devote a lot of attention to internal communications and relations, focusing on a sense of belonging and trust. We seek to encourage confidence to ensure that employees can air questions and problems arising during the course of their work. We truly believe that the success of BAT is determined by our employees’ meaningful and confident contribution. Therefore we devote a lot of effort to developing our talents and initiatives. As we aim to foster a sense of pride and to be the employer of choice, we drive important projects to highlight the role of being a responsible citizen and best employer. The awards for the Best Employer in Georgia in 2013 and 2014 clearly demonstrate that we are on the right path, and we will continue to be a peoplefocused company. Q. How has the company transformed over the years? A. We always have a long way to go, and as much as our business has changed, so has the world around us - from evolving consumer demands and emerging opportunities in a new generation of products, to increasing expectations of the role of business in society. In 2014, we sharpened our approach further with the development of a new sustainability agenda, focused on the most material issues for our business and our stakeholders in three key areas: harm reduction; sustainable agriculture and farmer livelihoods; and corporate behaviour. These are not only where we face some of our biggest challenges, but also where we see the greatest opportunities. Q. What is BAT’s ecosystem policy? A. We recognise that we have both an impact and a dependence on biodiversity, through our business operations and use of ecosystem services, such as forest products, soil and water. Under the British American Tobacco business principle of Good Corporate Conduct, we aim to minimise our impact on biodiversity and the wider environment. Part of this commitment means avoiding, minimising or mitigating our impacts on biodiversity and linked ecosystem services, or where this is not appropriate or most beneficial, offsetting those impacts at a regional or national level.

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BLC Law Office Sees Significant Increase in Mergers and Acquisitions Deals The FINANCIAL By MADONA GASANOVA

LC Law Office has handled more than 50 cases in 2015. However, due to the difficulties in court proceedings and extended deadlines, only five of them have been concluded thus far. Liberal and less stringent regulations are considered key factors in creating a business-friendly climate in Georgia. While the country continues with proceedings for certain EU regulations, transparency of their adoption and avoidance of over-regulation remain high on the agenda. BLC is celebrating its 15th anniversary this year. 2007 was the most successful year for the company due to the booming economy. The cornerstones of the company’s legal services are: banking and finance law; tax law; corporate transactions and structures; real estate; energy; civil and administrative litigations. The company is witnessing a significant increase in upcoming transactions and mergers and acquisitions (M&A) deals in 2015. “This is a very promising tendency given the fact that legal service providers may be considered first level indicators of economic growth. Now we have reason to expect that the end of 2015 and 2016 should be promising years,” Ketevan Kvartskhava, Partner at BLC, told The FINANCIAL. BLC was established in 2000 by attorneys educated in Georgia and the United States of America and experienced in different fields of law. The company grew together with the Georgian market and businesses. BLC provided legal services to the very first direct investors, multinational companies, international organizations, financial institutions, foreign embassies and diplomats, NGOs and Georgian companies.

KETEVAN KVARTSKHAVA, Partner at BLC

BLC is the only Georgian law firm with an international practice operating a branch in Batumi and a number of correspondents in neighbouring Armenia, Azerbaijan, Russia and Ukraine. Through its practice, BLC has worked in collaboration with prominent international practices, a few examples of which are: Slaughter & May, Baker & McKenzie, and White & Case, amongst others. “We have carried out many successful litigations and arbitrations; provided our clients with comprehensive due diligence studies; have been engaged in large and medium transactions involving mergers and acquisitions. Through its associates and experts, BLC has provided services in family law, inheritance, criminal and administrative matters. BLC has been largely involved in privatizations and auctions, carried out by the Georgian Government,” said Ms. Kvartskhava.

Q. Georgian legislation has been developing year after year. Meanwhile it still remains far from international standards. What are your suggestions in this regard? A. We do believe that Georgian legislation in essence is adequate and quite compliant with the leading international standards. It does correspond to the declared vision of the country to create a businessfriendly climate and easy venue for startups. For this purpose, liberal and less stringent regulations should exist, which is the case here. We do observe a tendency of adopting certain EU regulations, but do expect that the process of adoption shall be transparent and over-regulation shall be avoided. Q. What are the main differentiating features of running a law firm in Georgia compared to in its neighbouring

countries? A. Georgia is a small market; legal services cannot develop on their own, they need to have economic support and demand. Nevertheless, this market is constantly growing, partially due to the increased public perception of the need for the legal profession, as well as due to the somewhat stable growth of the economy. Q. How many disputes did you assist in solving this year? How many of them were successfully concluded? A. We have handled more than 50 cases this year. Due to the difficulties in court proceedings and extended deadlines we have not yet concluded more than 5 of them this year. Q. Your clients have included large companies like Canargo, BNP Paribas, TBC, HSBC and more. How did you manage to succeed in the competitive legal market from the beginning? A. I believe that BLC has the best team of business lawyers in this country. With their diverse experience in various segments of law we provide very quick, efficient and reliable advice. We come when needed and find solutions. Our working culture, ethical standards and attitude have always been outstanding. Partners and associates of BLC have excellent local as well as foreign

legal education and long term experience of engaging in Georgian legal services. Q. BLC is one of the leading law companies in Georgia, accordingly you might be continuing your evolution in this direction. Where do you glean lessons from? A. BLC is particularly aimed towards further professional development. We have the internal practice of frequent professional trainings, a system of sharing experience, attending all professional forums and discussions. We make sure that our lawyers are well informed of the practical, theoretical and legislative trends and novelties, so as to maintain the highest quality of legal services available in this country. We add experience from our cooperation with a number of international law firms and renowned legal practices. Q. Recently Baker & McKenzie, the world’s largest law firm, announced that its global revenues had declined, attributed to global currency fluctuations. It turns out that law companies are no exception to being affected by economic changes. What was the impact of the devaluation of the Georgian Lari on your company? A. We are usually affected when our clients

suffer losses, therefore we can say that our revenues have also been affected by the local and global economic trends. Q. The main subject of this edition is US business in Georgia. On what basis would you encourage US businessmen to invest in Georgia? A. Georgia is a startup market. Usually, the largest revenues come from emerging markets, in conjunction with favourable local legislation, low taxes, absence of corruption and very reasonable state administration, Georgia remains one of the best places to invest. Q. How has the investment climate of Georgia changed over the past three years - has it worsened or improved? A. Georgia passed the test of sustainable progress and democracy during the past few years. It’s declared path of simple, understandable and business-friendly regulations have been steadily followed. Therefore, we would sum up the recent years as progressive. Q. What will be the main challenges for BLC in 2016? A. BLC is a growthoriented professional organization. We are used to planning our progress in a sustainable and prudent manner, therefore we do not expect to face any unusual challenge that we would have difficulty coping with.

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Record Number of Businesses Registered by US Citizens in Georgia in 2015 The FINANCIAL By MADONA GASANOVA

he number of businesses registered in Georgia in cooperation with US citizens amounted to 154 units during January-October 2015, up from 69 from the same period of the prior year. The easy bureaucracy, considerably low sum of investments required, and free niches in various fields are the main factors encouraging US citizens to start up business in Georgia. “If American companies or investors are looking for something economically friendly, Georgia is it. Keeping in mind they do not overpay or exploit the base margins. And obviously, more professionals will only build up this country - hopefully, for a better and a stronger Georgia,” Nikol Burton, founder of Mr. Traveller Ltd and You Studio, told The FINANCIAL.

“We hear a lot about the political uncertainty. For us, it has not affected our decision to relocate our family of four, as the pros outweigh the cons. However, it may play into the decision of a large investment which would depend on several years to recover,” said Burton. Nikol Burton, together with her husband, is developing two small companies in Georgia. One is in the fitness industry - You Studio, and the other in tourism Mr. Traveller Ltd. In total the couple has invested approximately EUR 50,000. “Georgia is developing. There are many opportunities in a wide range of sectors. As in other developing countries, having a foreign mind and experience works in our favour towards the execution of such projects. What we liked about Georgia is the efficiency and seemingly easy bureaucracy when it comes to starting up a business. Also, depending on what you are doing, the investment is considerably lower to that of a developed country. Employment salaries are low and literacy is high. Trainable,” Burton said. As Burton said, in their particular sectors, the fitness business will be the most challenging. “There is a very low fitness culture in Georgia. Though hopefully through education and a handful of fun events, we can begin to educate the importance of being physically healthy. Tourism is developing. Language and being foreign may slow us down here, but thanks to the very

open culture we are experiencing and exploring many beautiful options to share with the world.” Burton and her partner have over 20 years of entrepreneur experience in developing countries. She described themselves as young, educated, and motivated. Burton’s experience lies in the fitness sector, whereas her husband’s is in logistics and tourism. “I was one of ten of the first CrossFit instructors in Europe and the first to operate an affiliated CrossFit fitness centre. I worked closely with both CrossFit HQ and Reebok in training and promoting the CrossFit brand. I also worked in the collaboration of several sport related competition and obstacle races (Spartan) with Reebok. I hope to use that knowledge base/ contacts and create something fun and exciting in Georgia,” said Burton. Her husband’s background lies in internet business and commerce. Combined with his love of travel and adventure he is developing a tourism package for Europe to introduce Georgia. Through his logistic experience he will manage up to 50 Georgian employees in transport, rural tourism, and a small hotel resort. Burton strongly encourages their co-citizens to start up business in Georgia, however there is one ‘if’.

“If it supports the culture and can aid in creating a better Georgia - then good. But, if it is to invest and take advantage of the natural resources for their own benefit without the intention of maintaining the ‘rawness’ of Georgia, then please no. Factories and such would destroy this country.” The main message Burton has for their co-citizens is: “Invest to invest in a well preserved culture. Do not invest to exploit or destroy the beauty of what Georgia is as we know it today.” William Ipsen, together with his partner Andro Dzneladze, has formed Georgia Pacific Partnership as an investment vehicle to take advantage of prospective investment opportunities in Georgia, most specifically within the field of medicine. Currently the founders have issued just over USD 100,000 in their initial opportunity, and have several more opportunities they are actively pursuing which could total another USD 200,000 to USD 1,000,000 if all options are exercised over the next 24 months. “The opportunity in which we are currently engaged in Georgia had both the need for and, more importantly, the addition of well-qualified Georgian partners to allow us maximum opportunity to succeed,” said Ipsen.

Ipsen has spent 40+ years in the medical field, both in hospital administration and in the commercial business of medical imaging equipment. For the last 20 years he was co-owner of a medical ultrasound business based in the USA, with a satellite office located in Tbilisi for some 5+ years, of which he was actively involved and knowledgeable regarding the Georgian market for imaging systems. Following his retirement in December 2014, his former Georgian partner in Tbilisi contacted him regarding other business opportunities. They are now engaged in one such opportunity. According to Ipsen, Georgia offers some very interesting opportunities for foreign investment. In his words, the people are friendly and local business infrastructure mostly available at reasonable cost. “That said, any foreign investment should not be undertaken without proper vetting and, more specifically, I recommend if at all possible having partnership in some form with local investors / operators experienced in the local business climate for your specific offering. One should also speak with financial people early in the beginning of the due diligence process if Georgian financing is important.”

“The main challenge we faced, and likely that of other prospective investors in Georgia, was securing financing through Georgian financial institutions. The length of the process is one that may persuade other investors to look outside Georgia for opportunity,” Ipsen said. Giorgi Dalakishvili founded Rectus Development in Georgia. The company is involved in the construction and development fields. As a developing country, the market in Georgia is not saturated yet, therefore it is full of opportunities. This is why Dalakishvili decided to try his hand in Georgia. “The bureaucracy is on a minimum level. No corruption, no criminals, great location. Now is the greatest time to make investments here, because in the nearest future this market may also become very saturated and the competition will become very tough as well,” Dalakishvili said. Dalakishvili previously worked in the agricultural business. He has worked for most of the leading agricultural companies in the country. In addition to this, he managed to establish his own company, which is one of the most successful right now. He founded it as a very interesting and challenging business. Nevertheless, Dalakishvili thinks he has already achieved everything he could in this field. “I have almost fully used all my resources and it is time to change the field. That is one of the reasons I am switching to the construction business.” Dalakishvili recommends everyone to make investments in Georgia. “My main suggestion is to use the moment which the country is in right now. Georgia is at a level where from a developing country it will become a developed country very soon. This is a wave, which should definitely be caught. Such opportunities do not appear that often.” The main challenges Dalakishvili and his partners have faced in Georgia are making the decision about choosing the location for construction. “There were a lot of interesting alternatives and we had to think carefully to select the best one. As we have only just begun our business, we will have much bigger challenges in the future.” The main field of operation of the company Go Services is implementing technology, specifically in the transportation industry. The current project of Go Services is GoTaxi.ge, which is a mobile platform for hailing a cab. “We provide technology to connect customers to the service providers directly without a middle man, while making it convenient, engaging and a pleasant experience. We are currently undergoing Beta testing, with second iteration available on Android platform, and in

production for iOS, and will be fully functional by the end of January, available in all major cities throughout Georgia by the summer of 2016,” said Zaza Zhvania, founder of Go Services. From the first draft of the business plan, till the final Beta product, which Go Services has recently pushed out to its customers and employees (Android & iOS Platforms), its team of highly experienced staff have always kept an eye on one thing: growing the capital, and doing so quickly. “Our company platform in Tbilisi, Georgia, was launched this year with investments in the tens of thousands and I am happy to report that we have been well received among our demographics, with high levels of interaction and interest.” From a business perspective, investing in a business in Georgia was a no-brainer for Zhvania. “Georgia is a very interesting market, mobile services space is not as saturated as in other countries therefore there are tons of opportunities to grow and develop. The low amount of regulations on businesses like transportation, and low investment needed for start-ups, are also a big factor. But from a personal perspective, besides the fact that I was born and raised in Georgia, I’ve worked and collaborated with businessmen and the creative minds of my peers within Georgia and had wonderful experiences in the past.” Zhvania graduated with a bachelor’s degree in International Business Administration, and started up a few companies early in his career. Other than GoTaxi in Georgia, he is currently a partner at LV Tech Inc, in the US, and works for the New York State Department of Finance. The biggest hurdle for Zhvania was to find qualified and competitive software engineers, as their company relies heavily on software developers to bring products to life, it was definitely the biggest challenge. “The next big challenge was adapting to a marketing state of mind, which is very unique and specific to the Georgian market. For foreigners it is a big challenge to understand it so that the product can be properly presented, and positioned for success.” According to Zhvania, Georgia is such a lucrative market that he would imagine it to be a great place to invest, although the political situation is very volatile, it would seem that this is the best time to invest long term foreign capital in Georgia. “The Dollar to Lari ratio is high, and it will not remain so high for long. Also given the fact that foreign investments are in dollars it gives higher capital in the local currency, and an advantage over local investors,” Zhvania told The FINANCIAL.

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US Business in Georgia

Most Georgians Continue to Support EU Membership

Zviad Dzidziguri: Member of the Georgian Dream Coalition

The FINANCIAL

“We have one of the best economic growth E S L rates in the region.” FA Beso NAMCHAVADZE

FactCheck

n 22 September 2015, on air on Rustavi 2, a member of the Georgian Dream coalition, Zviad Dzidziguri, stated that Georgia’s economic growth rate is one of the best in the region and is better than the economic growth rates of Azerbaijan and Turkey. According to Mr Dzidziguri, under such regional circumstances, a 2% economic growth rate is not a bad result. FactCheck verified the accuracy of the statement. Zviad Dzidziguri named Georgia’s neighbouring countries whilst talking about the region’s economic growth rate and so we looked into the economic growth rates for the first months of 2015 in Georgia and the geographical neighbourhood. Preliminary data on economic growth rates for the period January-August 2015 is already available (see Table 1). The Georgian economy grew by 2.8% in this period and is higher than that of Russia and Ukraine but not of any other neighbouring country. Azerbaijan’s economy is heavily dependent upon oil export and so falling oil prices has a negative impact upon its economy. In spite of this, Azerbaijan’s economy grew by 7.3% in January-August 2015. Even though Armenia is more heavily dependent upon the Russian economy, this year’s growth rate of the Armenian economy is higher than that of Georgia. Additionally, notwithstanding the serious challenges facing Turkey (political crisis, fight against the Islamic State, more than two million refugees from Syria, terrorist attacks), the Turkish economy is

Table 1: Economic Growth Rate in the Period of January-August 2015 Country Azerbaijan Armenia Turkey (2 quarters) Georgia Russia Ukraine (2 quarters) growing faster than the Georgian economy. On 7 October 2015, the International Monetary Fund updated the annual economic growth prognosis for its 188 member states. The prognosis for Georgia’s economic growth rate remained the same at 2%. Based upon this prognosis, Georgia ranks 127th among the 188 countries. Georgia’s economic growth rate is estimated to be 3% in 2016. According to the data of the International Monetary Fund, Azerbaijan’s economy will grow by 4% in 2015, Turkey’s economy will grow by 3% in 2015 and Armenia’s economy will grow by 2.5% in 2015. Again, of the neighbouring countries, Georgia’s economic growth rate is only higher than those of Russia and Ukraine. Russia’s economy will shrink by 3.8% this year. If we look at the regional picture, we have to compare Georgia’s economic growth rate to the analogous data of the larger group of countries. Even though Georgia, similar to Ukraine, is not a member of the Commonwealth of Independent States (CIS), the International Monetary Fund groups Georgia and Ukraine with the member states of the CIS. In the CIS region, Georgia, together with Kyrgyzstan, is ranked in the 6th and 7th places, respective-

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January-August 2015 4.2% 3.9% 3.8% 2.8% -3.5% -16% ly, based upon their economic growth rates. The highest economic growth rate (8.5%) will be registered in Turkmenistan whilst Ukraine will have the worst economic performance as its economy is expected to shrink by 9% in 2015. According to the classification of the World Bank, Georgia belongs to the region of the developing countries of Eastern Europe and Central Asia. This means that 12 Eastern European countries are added to the group of CIS member states. If we look at the picture of the economic growth rates of the different countries from the Eastern European developing countries region, we will see the following: Georgia ranks 10th from the 13 countries. Of note is that compared to the economies of these 12 countries, Georgia’s economy is less developed and, therefore, has a higher potential to achieve a faster economic growth rate. Since 2013, Georgia’s economic growth rate has significantly decreased. The economic growth rate was 6.4% in 2012 and 3.3% in 2013. The year 2014 was relatively better and Georgia registered a 4.8% growth of its economy. However, since 2015, the economic growth rate has dropped again.

CONCLUSION ACCORDING TO THE DATA OF THE FIRST EIGHT MONTHS OF 2015, GEORGIA DOES NOT HAVE THE “BEST” ECONOMIC GROWTH RATE AS COMPARED TO ITS NEIGHBOURING COUNTRIES. MOREOVER, GEORGIA’S ECONOMIC GROWTH RATE IS LOWER THAN THE ECONOMIC GROWTH RATES OF TURKEY, AZERBAIJAN AND ARMENIA. IT IS IMPORTANT TO UNDERSCORE THAT THE ECONOMIC CRISIS IN RUSSIA HAS A GREATER NEGATIVE INFLUENCE UPON ARMENIA, AZERBAIJAN IS SERIOUSLY SUFFERING FROM FALLING OIL PRICES AND TURKEY HAS MULTIPLE SERIOUS CHALLENGES TO MEET. ACCORDING TO THE PROGNOSIS OF THE INTERNATIONAL MONETARY FUND, GEORGIA’S ECONOMY WILL GROW BY 2% IN 2015, AZERBAIJAN’S ECONOMY WILL GROW BY 4% IN 2015, TURKEY’S ECONOMY WILL GROW BY 3% IN 2015 AND ARMENIA’S ECONOMY WILL GROW BY 2.5% IN 2015. IF THEREFORE, FACTCHECK CONCLUDES THAT ZVIAD DZIDZIGURI’S STATEMENT IS FALSE.

1 percent of Georgians support the country’s goal to join the European Union (EU), according to poll results released in October by the National Democratic Institute (NDI) and CRRC Georgia. At the same time, some citizens are considering alternatives such as the Eurasian Union, which earned 31 percent support. Those Georgians approving Eurasian Union membership primarily cite perceived economic benefits (71 percent), not political or governance improvements, while 68 percent of European Union supporters say the same about joining the EU. In comparison, only 7 percent of Eurasian Union supporters think that Eurasian Union membership would strengthen democratic development. 21 percent of EU supporters believe that EU membership would strengthen democratic development. While the majority of Georgians supports joining the EU, when reflecting on benefits and offered a choice between European and Euro-Atlantic (EU and NATO) integration and abandoning this direction in favor of better relations with Russia, 45 percent of citizens said Georgia would benefit more from European and Euro- Atlantic integration, while 30 percent would abandon these aspirations for better ties with Russia. Again, citizens give an economic, not political, rationale for closer relations with Russia, and only 6 percent of Georgians believe that Russia should have political influence on Georgia. The poll also found that 14 percent of all citizens identified Georgian Dream as the party closest to them, and 13 percent identified United National Movement (UNM). Irakli Alasania-Free Democrats and the Alliance of Patriots both have 4 percent support, although the Irakli Alasania-Free Democrats is the most popular second choice, with 6 percent.

Responding to the question - if parliamentary elections were held tomorrow, would you say you are decided or undecided - 59 percent of citizens said they are undecided, including 41 percent of likely voters. Of likely voters, 15 percent would vote for the United National Movement (UNM) and 14 percent would vote for Georgian Dream Coalition. The poll also revealed that most Georgians still do not have a preferred political party. Responding to the question - if parliamentary elections were held tomorrow, who would you vote for - 35% said don’t know, 14% - no party and 13% refused to answer.

GEORGIANS CONCERNED ABOUT JOBS AND THE ECONOMY The poll shows that Georgians perceive jobs, inflation and rising costs, and poverty as the most important issues. In the survey, 67 percent chose jobs, 43 percent rising prices and inflation, and 37 percent poverty as among their top three priority is-

FOR SALE 9,8 ha non-agricultural, privately owned parcel for industrial use (cadaster code # 01.19.26.004.088) located next to Tbilisi Airport

FALSE Address: Airport settlement, Samgori district, Tbilisi Tel: +995 599 529 529 info@cei.ge The views expressed in this website are those of FactCheck.ge and do not reflect the views of The FINANCIAL or the supporting organisations

sues. Reflecting on these top three issues, less than 3 percent of Georgians described the situation as improved over the last two years. Demonstrating growing concern, only 11 percent reported their household situation as ‘better off’ since October 2012, while 34 percent said they were “worse off” compared to 17 percent in August 2014. The survey found that only a quarter (23 percent) of Georgians feel the country is moving in the right direction, down from 40 percent in August 2014. For the first time, more citizens believe the government is not making decisions that matter to them (49 percent) than those who believe it is (44 percent). Communication between parliamentarians and constituents remains weak, and citizens have low expectations with regard to their representatives. The view is not entirely pessimistic, however. The majority of Georgians are satisfied with the public service they have received, and the vast majority (90 percent) of those who have used government offered health insurance reported that they were very satisfied or satisfied.

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FINANCIAL HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 16 NOVEMBER, 2015

US Business in Georgia Giorgi Kadagidze: President of the National Bank of Georgia

Time Is Right for a US-Georgia Free Trade Agreement

By SARAH WILLIAMSON

his week Vice Prime Minister and Foreign Minister of Georgia Giorgi Kvirikashvili will meet with U.S. Trade Representative Michael Froman to conduct a high-level trade dialogue. The American - Georgian business community hopes that this meeting will lead to the beginning of negotiations on a U.S.-Georgia Free Trade Agreement (FTA). Opening such negotiations would increase opportunities for American businesses to export to, and invest in, Georgia. At a time when ‘Westernization’ is under pressure in the region, an FTA would be a tangible political signal of continued U.S. support for Georgia.

This type of visible support is particularly important as Russia continues to pressure Western-oriented governments in the region. While the government of Georgia remains committed to EuroAtlantic integration, there are forces inside the country that would dearly love to see that orientation come to an end. The U.S. alone can’t deliver NATO or EU membership. However, opening negotiations on a U.S.-Georgia FTA is a bilateral step that would be an ideal signal of support for Georgia’s Westernization agenda. U.S. exports to Georgia, at $300 million in 2014, are significant and largely concentrated in machinery and cars. However, there is evidence of fast expansion in others areas. In the last two years fast food chains such as Wendy’s, Dunkin Donuts, Domino’s Pizza, Burger King, Taco Bell, KFC and Subway have all entered the Georgian market for the first time. Clothing retail is also rapidly expanding with U.S. brands such as GAP, Banana Republic and Tommy Hilfiger opening storefronts in Georgia. Large infrastructure projects and government procurements also offer sizeable opportunities for U.S. firms. Projected investment in hydropower alone is $4.1 billion over the next few years. While

U.S. investors are prominent in developing large-scale projects, Asian and European firms have been winning the majority of engineering and construction projects. American firms would do well to enjoy the same trade agreements as their international competitors. The government is also currently selecting the final consortium to build a new port in Georgia that could represent a $5 billion investment over the next 7-10 years. The Conti Group, a U.S. firm, is on one of two final consortia. American companies are also participating in projects from medical facility development to waste management. An FTA between the two countries would not only aid these companies in exporting American products and machinery to facilitate these projects, but would also greatly encourage other American companies looking to expand into the region. Georgia has worked hard to become a valuable partner to the U.S. The country is already a hub for the region, with low corruption, a simplified tax system, bilateral trade ties with its neighbors and a business-friendly legislative environment. In the technology sector, the government of Georgia Continued from p. 21

PASHA Bank – Sponsor of Georgia Agro Forum 2015

n November 19, 2015, Tbilisi hosts the first Georgia Agro Forum 2015 supported by the Ministry of Agriculture of Georgia, the Georgian Agricultural Projects Management Agency (APMA), the Georgian Farmers Association, the Shepherds Association of Georgia, and other organizations. The Forum, which is organized by APKInform Agency is a large-scale event for the agricultural sector of Georgia, which will bring together up to 200 Georgian and foreign industry representatives as delegates, and present the highly topical business and networking program. Being a regional bank providing corporate and in-

vestment banking services to large and medium-sized enterprises, PASHA Bank views the agribusiness sector as one of the most promising areas for investment and is strongly interested in supporting agro business development in the country. The event is aimed at fostering growth of the agribusiness sector, by showcasing the investment opportunities to the potential investor base and facilitating the B2B interaction. A diverse selection of agricultural enterprises active in manufacturing, processing and trading of agricultural products will partake in the event. Representatives of foreign businesses - suppliers of raw materials, equipment and wide range of material,

technical and educational resources for agribusiness industry, importers of agricultural products, logistics companies, investment companies with agribusiness focus, financial institutions, industry bodies, government agencies from Georgia and other countries will also be in attendance. “We see Georgia Agro Forum as an important industry gathering bringing together a wide range of industry participants and financing providers. Being keenly interested in funding the promising players in this sector we gladly accepted the opportunity to sponsor this event – said Goga Japaridze, Commercial Director and Member of Board of Directors at PASHA Bank Georgia.

“International organisations are positively assessing the policies e of the National Bank of Georgia.” u r Zaza ABASHIDZE

FactCheck

hilst speaking about the policies of the National Bank towards the depreciation of GEL, the President of the National Bank of Georgia, Giorgi Kadagidze, stated: “The policies of the National Bank of Georgia are positively assessed by all international organisations and partners.” FactCheck took interest in this statement and verified its accuracy. Due to the depreciation of GEL, the National Bank of Georgia has on many occasions been accused of both an incorrect monetary policy as well as an intended depreciation of the national currency. The most severe accusations could be heard from Bidzina Ivanishvili and members of the Government of Georgia. In June 2015, the Manager of the World Bank Reserve Management and Consultation Programme, Christian Malder, assessed the policies exercised by the National Bank of Georgia (in the field of reserve management) as positive and successful. According to him, the National Bank of Georgia is one of the best participants of the programme and its policies in the past months absolutely correspond to leading international practices. According to Mr Malder’s statement, a significant intervention from the state is not effective whilst the intervention of the National Bank of Georgia during the period of the depreciation of GEL was both sensible and reserved. The monetary policies exercised by the National Bank of Georgia were also positively assessed by the Regional Director of the World Bank in the South Caucasus, Henry Kerali. The President of the European Bank for Reconstruction and Development (EBRD), Suma Chakrabarti, has also assessed the monetary policy of the National Bank of Georgia as successful and exemplary. He made a statement

about this issue during his visit to Tbilisi on 12 May 2015. According to Mr Chakrabarti, it is important to maintain reserves and take good care of them which has been successfully implemented in the case of Georgia. Another high-ranking EBRD official, the Deputy Director of the Middle East and Central Asia Department, Iuha Cah-Colen, has further positively assessed the work of the National Bank in crisis situations. According to him, it is important for the National Bank of Georgia to have complete freedom in choosing the banking instruments it uses in order to maintain a low level of inflation. Another authoritative organisation, the International Monetary Fund, considers the work of the National Bank of Georgia to be successful and calls on the Government of Georgia to more actively coordinate with it. According to the 4 March 2015 statement made by the organisation’s Head of Mission, Mark Griffiths, it is important to preserve the independence of the National Bank of Georgia for its future success and this is threatened by political attacks. A representative of the International Monetary Fund in Georgia, Azim Sadikov, also assessed the steps taken by the National Bank of Georgia in crisis situations. He believes that the policies conducted by the National Bank are one of the most correct in the Caucasus and Central Asia the as they employ reserved currency interventions. In 2015, a well-known British journal, The Banker, named the President of the National Bank of Georgia, Giorgi Kadagidze, as the Central Bank Governor of the Year in Europe. Stability during major shocks and the stability of the banking sector were some of the reasons for the President of the National Bank of Georgia to be granted this status. Mr Kadagidze is the first in the Caucasus region to garner such recognition. On the contrary, international organisations have negatively and critically assessed the decision of the Parliamen-

tary Majority to take away the function of financial supervision from the National Bank of Georgia. On 27 June 2015, the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development and the Asian Development Bank sent a highly critical letter to Irakli Gharibashvili and Davit Usupashvili. According to the position of these organisations, the aforementioned legislative changes will hinder the stability of the country’s financial sector previously ensured by the National Bank of Georgia. Despite such assessments, the Parliamentary Majority adopted the changes and separated the financial supervisory function from the National Bank of Georgia. However, the Parliamentary Opposition has appealed to the Constitutional Court of Georgia against these legislative changes. According to the assessment of the opposition, taking away the financial supervision department from the National Bank and establishing it as a separate structure is unconstitutional. The Constitutional Court has taken the appeal under consideration and stopped the operation of the Financial Supervision Service (as a separate agency) until reaching a final decision. The aforementioned decision of the Constitutional Court has caused a major outcry in the governing coalition. Commenting on this issue, the Chairman of the Finance and Budgetary Committee of the Parliament of Georgia, Tamaz Metchiauri, stated: “Despite my deep respect to the court of any instance, the Constitutional Court is a direct supplement of the United National Movement and nothing more… it is not excluded that the Constitutional Court will make a decision according to the preference of the United National Movement. This is being done for destabilisation. I would like to say that there are other ways to see what is really happening in the National Bank of Georgia; for example, the creation of an investigative commission.”

CONCLUSION FACTCHECK CONCLUDES THAT GIORGI KADAGIDZE’S STATEMENT IS TRUE.

TRUE

The views expressed in this website are those of FactCheck.ge and do not reflect the views of The FINANCIAL or the supporting organisations

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HEADLINE NEWS & ANALYSIS

16 NOVEMBER, 2015 | FINCHANNEL.COM

US Business in Georgia CURRENT PRICES ON GASOLINE AND DIESEL

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KHACHAPURI INDEX AS A MEASURE OF REAL INCOME ACROSS GEORGIA

hachapuri index changes its value in different regions according to seasonal demand and supply peculiarities. The latter are affected by milk production cycles (low in fall and winter, high in spring and summer), Georgia’s religious calendar (e.g. the Great Lent), as well as the ups and downs in tourism. Given khachapuri’s ubiquity, we used our index to estimate real income per capita for different Georgian locations, measured in khachapuri portions. We do so by dividing the average nominal income in each region (using the latest available GeoStat data from 2014) by the corresponding Kh-Index (average for last 12 months). The result of this division stands for the number of (real) khachapuri portions a family can afford in each city of interest. As can be seen from the chart, the wealthier Georgian regions are wealthier in both nominal

and real terms. Not only does an average Tbilisi household enjoy higher nominal income, but also – despite facing higher prices – it

is able to maintain a higher level of consumption compared with other Georgian locations. Measured in khachapuri portions,

the gap between the average households in Tbilisi and Telavi stands at exactly 100 portions per month.

Tax Inspection With a Human Face? DISTRIBUTION The FINANCIAL distribution network covers 80 % of key companies operating in Georgia. 90 % is distributed in Tbilisi, Batumi and Poti. Newspaper delivered free of charge to more than 600 companies and their managers. To be included in the list please contact distribution department at: temuri@financial.ge CONTACT US EDITOR-IN-CHIEF ZVIAD POCHKHUA E-MAIL: editor@financial.ge editor@finchannel.com Phone: (+995 32) 2 252 275 HEAD OF MARKETING LALI JAVAKHIA E-MAIL: marketing@financial.ge marketing@finchannel.com Phone: (+995 577) 74 17 00 CONSULTANT MAMUKA POCHKHUA E-MAIL: finance@financial.ge Phone: (+995 599) 29 60 40 HEAD OF DISTRIBUTION DEPARTMENT TEMUR TATISHVILI E-MAIL: temuri@financial.ge Phone: (+995 599) 64 77 76 COPY EDITOR: IONA MACLAREN COMMUNICATION MANAGER: EKA BERIDZE Phone: (+995 577) 57 57 89 PHOTO REPORTER: KHATIA (JUDA) PSUTURI MAILING ADDRESS: 17 mtskheta Str. Tbilisi, Georgia OFFICE # 4 PHONE: (+995 32) 2 252 275 (+995 32) 2 477 549 FAX: (+95 32) 2 252 276 E-mail: info@finchannel.com on the web: www.financial.ge daily news: www.finchannel.com

Intelligence Group ltd. 2015 Member of

By LASHA LANCHAVA AND ERIC LIVNY

in which at least some share of locally collected taxed is visibly contributing to the quality of local infrastructure, public schooling, etc. Rather than hiring expensive tax consultants, a business might just as well contribute a bit more to the local budget, if it sees any tangible benefits from doing so. [To avoid any misunderstanding, fiscal decentralization (or fiscal federalism) is not about breaking a centralized tax payment system of which Georgia may be proud; it is about linking the amount of taxes collected in a region to the amount of public funding it is able to spend on local needs]. Unfortunately, Georgia’s fiscal system is overly centralized, killing the incentives of local government to cultivate local businesses, and those of local businesses to reciprocate by contributing resources, ideas and knowhow. For example, the Rooms hotel is by far the largest taxpayer in the Kazbegi municipality and the only paying client of the governmentcontrolled United Water Supply Company (UWSC). Yet, none of its taxes remain in Kazbegi, which helps explain the poor quality of the road leading to the hotel and the fact that, until 2014, UWSC did nothing to prevent chronic water shortages that poisoned the hotel’s relationship with the community. This is clearly not the way to strengthen voluntary compliance.

ISET

postle Matthew was a tax collector in Galilee -- perhaps the most hated occupation in the ancient world. By quitting his job and deciding to follow Jesus, Mathew accomplished one the greatest transformations possible in a person’s life. Modern tax inspectors are certainly not expected to follow Jesus. However, by following insights from behavioral economics, they may gain in respect and social status while also improving tax collection, in Georgia and elsewhere around the world. As discussed in our previous article, Georgia’s tax administration has improved quite significantly following a massive crackdown on corruption and a series of reforms implemented after the Rose Revolution of 2003. As a result, the Georgian shadow economy has indeed shrunk, but not by as much as one might have expected. According to a World Bank study, Georgia’s shadow economy declined from 68.3% in 1999 (at the pinnacle of Shevarnadze’s rule) to 62.1% in 2007 (four years after the glorious Rose Revolution). Six per cent in 8 years is certainly an improvement, but… Anyone puzzled by the resilience of shadow economic activities should understand that being in the “shadow” is not necessarily about plain tax evasion. Equally important is tax avoidance (a variety of tactics used by corporations to shift profits to tax heavens or otherwise legally reduce their tax liability). Being legal, tax avoidance is very difficult to fight in the absence of motivation for voluntary compliance.

Antoine-Laurent de Lavoisier – arguably the father of modern chemistry – was beheaded by angry mob because of his tenure as a tax collector under the Ancien Régime. Can paying taxes ever be enjoyable?

LESS STICKS AND MORE CARROTS One way to increase voluntary compliance might be to invest in the government’s own image and quality of public services. Corpo-

rations (and individuals) might be more willing to pay taxes knowing that their contributions are used for good purposes by a benevolent, lean and efficient administration. It is worth noting that voluntary compliance may be stronger in a decentralized fiscal system

NAMING AND SHAMING? LESSONS FROM THE UK Corporations do care about their reputation. The fact that Starbucks, Google and Amazon Continued on p. 21

CMYK

FINANCIAL HEADLINE NEWS & ANALYSIS

FINCHANNEL.COM | 16 NOVEMBER, 2015 TBC BANK TBILISI BRANCHES Tbilisi #9 Service Center in Zahesi (Customs Terminal) 0125, 105 A, Mshvidoba St. Vake Branch #1 0179, 41, Abashidze St. Central Branch 0179, 11, Chavchavadze Ave. Chavchavadze Branch #1 0179, 29/31/33, Chavchavazde Ave Vera Branch 0179, 31, Melikishvili St. Parliament Service Center 0118, 8, Rustaveli Ave Mtatsminda Branch 0105, 1, Rustaveli Ave. Rustaveli Service-Center 0108, Marriot hotel Rustaveli Branch #1 0108, 44, Rustaveli Ave. Mtatsminda Branch #2 0105, 22, Leselidze St. Rustaveli Branch #2 0105, 52, Rustaveli Ave. Avlabari Branch #1 0103, 2, Ketevan Tsamebuli Ave. Varketili Branch #1 Javakheti St. Isani Branch 0120, 67, K. Tsamebuli Ave. Vazha-Pshavela Branch #2 0186, 73, Vazha-Pshavela Ave. Vazha-Pshavela Branch #1 0160, 11, Vazha-Pshavela Ave Saakadze Branch 0160, 6, Shartava St. (Saakadze Sq.) Saburtalo Branch 0160, 12, Al. Kazbegi Ave. Tbilisi Central Service Center 0112, Vagzali Sq. 2 Agmashenebeli Branch #1 0102, 138, Agmashenebeli Ave. Marjanishvili Branch #2 0102, 16, Marjanishvili St. Tamar Mepe Branch 0112, 7, Tamar Mepe Ave. Head Office & Marjanishvili Branch 0102, 7, Marjanishvili St. Tsereteli Branch #2 0119, 73a, Tsereteli Ave. Didube Branch 0119, 117, Tsereteli Ave. Digomi Branch in shop («My House») 0131, Agmashenebeli Alley, 12th km, furniture shop «My House» Digomi Branch in “Goodwill” 0131, 1, Parnavaz Mepe Ave. (Hypermarket Goodwill) Nadzaladevi Branch 0180, 109, Dadiani Ave. Gldani Branch 0172, Mukhiani Settlement, Plot 1/6 Tbilisi Airport Service Center 0158, Tbilisi National Airport

TBILISI ATMS Vazisubani Vazisubani III dstr., II Blk. Sanzona 50, Guramishvili Ave. Nikora Store Vake 11, Chavchavadze Ave. Vake Branch 1, Tamarashvili St. Pharmacy “36.6” 34, Chavchavadze Ave. Trading Center “Pixel” 7, Kipshidze St. 41, Abashidze St. Vake Service Center #1 29, Chavchavazde Ave. TBC Bank Branch 59, Paliashvili St. “Simba” Supermarket 50, Chavchavadze Ave. 15, Phaliashvili St. Aversi Pharmacy Vera 7, Kostava St. 36, Kostava St. Cinema “Amirani” 8/1, Akhvlediani Ave 18, Melikishvili St. 60, Barnovi St. “Fresh Market” 31, Melikishvili St. TBC Bank branch Mtatsminda 13, Rustaveli Ave. Hotel «Tbilisi Marriot» 11, Rkinis Rigi Acura Billiard Room 5, Rustaveli Ave. Rustaveli Cinema 4, Freedom Square 22, Leselidze St. TBC Bank branch 52, Rustaveli Ave. TBC Bank branch 44, Rustaveli Ave. TBC Bank branch 1, Rustaveli Ave. TBC Bank branch Avlabari 84, K. Tsamebuli Ave. 2, K. Tsamebuli Ave. TBC Bank branch Navtlugi 2, Cholokashvili St. “36.6” Pharmacy Varketili 34a, Kakheti Highway 44, Javakheti St. (Varketili Metro) Varketili 3, 4th m/r. Javakheti St. TBC Bank branch Isani-Samgori 39a, Moscow Ave. 169, Khmelnitski St. Supermaket “Isani” subway station 67, K.Tsamebuli Ave. TBC Bank branch Saburtalo 40, Vazha Pshavela Ave. ESM Tbilisi 67, Vazha Pshavela Ave. «Nikora» Shop 68, Kostava St. Public Television Building 22, Bakhtrioni St. 53, Saburtalo St. Nikora store 12, Al. Kazbegi Ave. At Saburtalo Branch 74, Kostava st. Shop “Caesar” Z. Zhvania Sq., 45, Gamsakhurdia Ave. “PSP” Pharmacy 1, Nutsubidze St. 52, Vazha-Pshavela Ave. Mobi Shop Riverside named after H. Aliev At Wissol gas station Turn at 4th Plateau of Nutsubidze 179, Nutsubidze St. “PSP” Pharmacy 26, Kazbegi Ave. Shop “Planeta Z” Vazha-Pshavela V Blk, 4 Bld. 29, Gamsakhurdia Ave. Shop “Okaidi” 6, Shartava St. 4, Gamsakhurdia Ave. 11, Vazha-Pshavela Ave TBC Bank Branch 11, Mitskevichi St. Supermarket 29b, Kazbegi Ave. 73, Vazha-Pshavela Ave. TBC Bank branch 11/5, Dolidze St. Supermartket “Mango” Chugureti 39, Chitaia St. Aversi Pharmacy 7, Marjanishvili St. Marjanishvili branch 19 Tsabadze St. Trade center «Pasazhi» 8, Tsabadze St. Trade center «Kidobani» 4, Khetagurov St. Humana Pharmacy 16, Marjanishvili St. TBC Bank branch 4, Chubinashvili St. Aversi Pharmacy Didube 73a, Tsereteli Ave. At #2 Didube Branch 114, A. Tsereteli Ave.

«Coca-Cola» 117, Tsereteli Ave. At Didube Branch 82, Tamar Mepe Ave. “MedService” Pharmacy 1, Tsereteli Ave. Trading Center “Panda” 7, Tamar Mepe Ave. TBC Bank branch 138, Agmashenebeli Ave. TBC Bank branch 12, Kereselidze St. “Megaline” Trading Center Digomi Digomi District 3/2 Digomi District II BLK. Building 7 Digomi District, 3rd blk. D. Agmashenebeli Alley “Lukoil” Gas station Didi Digomi Entrance of Didi Digomi Trade center GOODWILL 12th Km, Agmashenebeli Alley. Shop “Chemi Sakhli” Nadzaladevi 106, Ts. Dadiani Ave. Nadzaledevi Branch 321, Ts. Dadiani Ave. Aversi Pharmacy 144, Ts. Dadiani Ave. Supermarket Temka Temka, 10th Block, BLD. 2. Gldani Gldani District 1st blk. Supermarket “Bingo” Akhmeteli Metro Trading Center “Mariami” Mukhiani Settlement, Plot 1/6 TBC Bank branch Mukhiani Mukhiani III MKR, Dumbadze Ave., BLK.5a Mukhiani II M/R, Noneshvili St., BLk. 5 “Red A” Pharmacy Avchala 3, Sarajishvili St. “Alfa Express” Ortachala 39, V. Gorgasali St. 28, Gorgasali St. Airport Tbilisi International Airport

CONSTANTA BANK BRANCHES AND ATMS Tbilisi Sadguri Branch 137, Tsinamdzgvrishvili Street Varketili Branch 20, Vazisubani turn Isani Branch 84/86, Ketevan Tsamebuli Avenue Gldani Branch The right side of the Akhmeteli Subway Didube Branch 117, Tsereteli Ave Lilo Branch 2, Chirankhuli Str. Saburtalo branch 28, Vaja-Pshavela Str. Baratashvili Branch 2, Baratashvili Str.

BANK OF GEORGIA TBILISI Mtatsminda-Krtsanisi 3 Pushkin Str. 4 Leselidze Str. 38 Tabukashvili Str. 7 Pushkin Str. 1 Vekua Str. 3 Pushkin Str. Vake-Saburtalo 24 Kostava Str. 29 Vazha-Pshavela Ave. 7 Kipshidze Str. 14 Gamsakhurdia Ave. 22 Bakhtrioni Str. 72/12 I.Abashidze Str. 70 Kostava Str. Sheraton Metheki Palace 10 Melikishvili Ave. 62 Chavchavadze Ave. Mtatsminda-Krtsanisi 8 Rustaveli Ave. (Parliament) 38 Tabukashvili Str. 19 Rustaveli Ave. 4 Freedom Square (Courtyard Marriott) Metro Station “Tavisuplebis Moedani” Metro Station “Rustaveli” 3 Vekua Str. (Populi City) 37 Gorgasali Str. Ortachala Radisson SAS Iveria Hotel Isani-Samgori 10 Ketevan Tsamebuli Ave. 80 Ketevan Tsamebuli Ave. 7 Kalaubani Str. Airport Metro Station “Avlabari” Metro Station “300 Aragveli” Metro Station “Samgori 1” Metro Station “Samgori 2” Metro Station “Varketili” Metro Station “Isani” Temqa Block 10, Bulding 25 44 Moskovi Ave. Vazis ubani block 4 (“Populi”) Vake-Saburtalo 41 Vazha-Pshavela Ave. 23 Chavchavadze Ave. 70 Kostava Str. 16 Gamsakhurdia Ave. 7 Petritsi Str. Melikishvili Str. 10 Gldani-Nadzaladevi 39 Tsotne Dadiani Str. 5 Tornike Eristavi Str. (“Electroplast”) Shopping Mall “Mariami”, Gldani Metro Station “Akhmeteli” Metro Station “Grmagele” Metro Station “Nadzaladevi” Metro Station “Sarajishvili” Metro Station “Guramishvili” Mukhiani, Block 4, Bulding 4 34 Tsotne Dadiani Str., Bulding 8 Metro Station “Elektrodepo” Vake-Saburtalo 1a Bulachauri Str. Metro Station “Politeknikuri Instituti 1” Metro Station “Politeknikuri Instituti 2” Metro Station “Vazha-Pshavela” Metro Station “Sameditsino Instituti 1” Metro Station “Sameditsino Instituti 2” Didube-Chugureti 99 Tsereteli Ave. 18 Tamar mefis Ave. 60 Tsereteli Ave. 83/23 Davit Agmashenebeli Ave. 142 Davit Agmashenebeli Ave. 19 Tsabadze Str. (“Pasazhi”) 12 Kereselidze Str. 1st turn (“Megaline”) 137 Tsinamdzgvrishvili Str. 127 Davit Agmashenebeli Ave. Metro Station “Vagzlis Moedani” Metro Station “Vagzlis Moedani 3” Metro Station “Tsereteli” Metro Station “Didube” Metro Station “Marjanishvili” 3 Vagzali Str. Gldani-Nadzaladevi Gladni 1 Vekua Str., Block “a” 38 Guramishvili Ave.

ATM’S TBILISI Vake 8 Mtskheta Street 12 eristavi street 72/12 Abashidze Street 48 Chavchavadze Avenue 22/23 Chavchavadze Avenue 22/23 Chavchavadze Avenue 62 Chavchavadze Avenue 50 Chavchavadze Avenue 52 Chavchavadze Avenue

22 Chavchavadze Avenue 78 Chavchavadze Avenue 7 Kipshidze Street 9a nafareuli street 13 Kipshidze Street 2 Berdzenishvili Street 41 abashidze street 81/9 Abashidze Street 3 Tamarashvili Street Tamarashvili Street 16 Phaliashvili Street Tskneti 3 Rustaveli Street 2 Rustaveli Street Saburtalo 67 Vazha-Pshavela Avenue 41 Vazha-Pshavela Avenue 41 Vazha-Pshavela Avenue 2 Vazha-Pshavela Avenue 27b Vazha-pshavela avenue 27a Vazha-Pshavela Avenue 17 Vazha-Pshavela Avenue 27 Vazha-Pshavela Avenue 72 Vazha-Pshavela Avenue Vazha-Pshavela Avenue, II Block 35/37 Shartava Street 7 Shartava Street 21 Dolidze Street vakhushti bridge Saakadze square Samedicino Vazha-Pshavela Politeqnikuri 1 Politeknikuri 2 17a Saburtalo Street 37 Saburtalo Street 70 Kostava Street 70 Kostava Street 26 maisi street 1 26 May square Kostava Street 44 Khazbegi Avenue 10 Khazbegi Avenue 13 Khazbegi Avenue 14 Khazbegi Avenue 12 Khazbegi Avenue bagteriofagi 8 a mitschkevichi street 19 Gamrekeli Street 23 kandelakis street 43 Gamsakhurdia Avenue. gagarini 16 Gamsakhurdia Avenue 2 Gamsakhurdia Avenue 14 Gamsakhurdia Avenue 1a Bulachauri Street 3 mk.2 kv. Nucubidze 175 Nutsubidze Street 221 Nutsubidze Street 25 nutsubidze street Nutsubidze plato III mr. II kv 1 Sandro Euli Street 13 Bakhtrioni Street 22 Bakhtrioni Street 6 Phanaskerteli Street 16 Chikovani Street 25 Kavtaradze Street 4 Gabashvili Street 5 Jikia Street Mtatsminda 2 Freedom Square mtawminda square 3 Pushkin Street 3 Pushkin Street 3/1 Pushkin Street 3 Pushkin Street Tavisuplebis Moedani 7 Pushkin Street 4 Freedom Square 12 Chanturia Street Rustaveli 16 Rustaveli Avenue 8 Rustaveli Avenue 19 Rustaveli Avenue 37 Rustaveli Avenue 2 Leonidze Street 22 Leselidze Street 4, Leselidze Street 38 Tabukashvili Street 2 Baratashvili Street 7 Ingorokva Street GTC 8 Erekle II Street 13 Savteli Streer 20 Akhvlediani street 1 Vekua Street 40 Khetagurovi street rose squire rose squire Vera 28 petriashvili street 25 Kostava Street 24 Kostava Street 44 Kostava Street 1 Khorava Street 10 Kekelidze Street 8 Kuchishvili Street 50 Gogebashvili Street 13 Melikishvili Street 10 Melikishvili Street 10 Melikishvili Street Gldani-Nadzaledevi 2 gudamakhari street Gldani V m/r Block14 Gldani III m/r 2 Khizanishvili Street 2 Dadiani Street 7 Dadiani street 34 Dadiani Street 151 Dadani Street 21 Sarajishvili Street Sarajishvili Grmagele Guramishvili 38 Guramishvili Avenue 33a GuramiSvili avenue 84 Guramishvili Avenue 7 Guramishvili Avenue 84 Guramishvili Avenue Peikrebi street Mukhiani, IV m/r, 4 block Dumbadze str IV m/r, Block 5 Nadzaladevi Nadzaladevi metro Square 15 Khizanishvili Street 31 Khizanishvili Street metro axmetelis mimdebare. mariami metro axmetelis mimdebared 1 Vekua Street 1 Vekua Street Akhmeteli Temka 10 Kv, Block 25 Temka samshobiaro saxli # 5 mimd 34 Khosharauli Street Didube-Chugureti 8 tsabadze street 17 Uznadze Street 1 Tsereteli avenue 60 Tsereteli Avenue 55 Tsereteli Avenue 95 Tsereteli Avenue 110 Tsereteli Avenue 99 Tsereteli Avenue 118 Tsereteli Avenue 118 Agmashenebeli Avenue 127 Agmashenebeli Avenue 80 Agmashenebeli Avenue 96 Agmashenebeli Avenue 1 Agmashenebeli Avenue 89/24 Agmashenebeli Avenue 86/90 Agmashenebeli Avenue 15 Tamar Mepe Avenue 10 Tamar Mepe Avenue 20 General Kvinetadze Street 5 marjanishvili street Marjanishvili 83/23 Agmashenebeli street 1 Chitaia Street 19 Tsabadze Street, pasage 2 Chkheidze Street Tbilisi central Tsereteli Vagzlis moedani 2 Vagzlis Moedani 1 Vagzlis Moedani 2 19 Agladze Street 2 Vagzlis Moedani 95 Tsinamdzgvrishvili Street 137 Tsinamdzgvrishvili Street Mtkvari Left Riverside (mushtaedi) 1 chaladze street Digomi 8 chachava street Military Base (vashlijvari) Digomi II kv. 5 Block Digomi Block V, I a Building 11 George Balanchini Street Agmashenebeli alley II km Agmashenebeli alley 9 km. Agmashenebeli alley Didi Digomi way. Digomi village way (vashlijvari) 8 Petritsi Street 7 Petritsi Street 10/12 Godziashvili Street Vashlijvari

US Business in Georgia Agmashenebeli alley 13 km 6 gelovani avenue 5 Lubliana Street Isani-Samgori Isani Samgori 1 Samgori 2 Varketili Varketili 3, IVm/r, near by 410 Building 1 Khomleli street 64 Javakheti street Vazisubani IV m/r I block, petefi str. Vazisubani IV m/r I block 2 Landia street 300 Aragveli Kakheti Highway 21km 60 Kakheti Highway Military Base (alekseevka) Military Base (alekseevka) AIR 3a Khomleti Street 10 Ketevan Tsamebuli Avenue 80 Ketevan Tsamebuli Avenue 51a Ketevan Tsamebuli Avenue 4 Kiziki Street Airport Airport Airport Military Base (vaziani2) 7 Kalaubani Street 7 Kalaubani Street 14 Kalaubani Street 39 Moscow Avenue 17 chichinadze street 44 Moscow Avenue 10 Telavi Street Avlabari Avlabari Metro Square 8/10 Chekhov Street 23 Shuamta Street 155 bogdan khmelnitski street 6/4 Naftlukhi Street Atskuri, isnis metros mimdebare Kairo & Javakheti Street 64 Melaani Street 1 Abdushelishvili street 122 Kakheti Highway market lilo 113 gakhokidze street 38 Kakheti Highway Krtsanisi 41 Gorgasali Street 39 Gorgasali Street Military Base (krtsanisi)2 Military Base (krtsanisi) 16 Gorgasali Street 16 Gorgasali Street 6 Gorgasali Street 77 Gorgasali Street 117 Gorgasali Street 37 Gorgasali Street 19/2 Rustavi Highway 7 a krtsanisi street 10 Gulua Street Kodjori military base Mtskheta 23 arsukidze street Bebriscixis mimdebared 12 samxedro street

BANK REPUBLIC TBILISI BRANCHES AND SERVICE CENTERS Head Office and Central Branch 2 Gr. Abashidze St. Tel: (995 32) 292.55.55 Fax: (995 32) 292.55.44 Vake 13 Chavchavadze Ave. (24 hour) 33a Paliashvili St. Freedom Square 2, Leonidze St. Airport International Airport (24 hour) 24 hours, except Christmas and Easter Didube 10 Building, Tsereteli Ave. Sadguri 10, Tamar Mephe Ave. Sadguri Near the Railway Station Sanzona 34 Guramishvili Ave. Nadzaladevi 34 Dadiani Ave. Saburtalo 28 Pekini Ave. 71 Vazha-Pshavela Ave. 47 A. Kazbegi Ave. Isani 6/2 Navtlughi St. Gldani 20 Khizanishvili St. Mukhiani 8b Block, IVa micro district Iashvili Clinic 2/6 Lubliana St. Police Office 8 Gulua St. Dighomi 1b Block, 1 micro district, Dighomi Building of City Court of Tbilisi David Aghmashenebeli Alley VI km. Ortachala 37 Gorgasali St. Varketili Aerodrome Settlement. St N 29-31

ATM Tbilisi Vake 2 Gr.Abashidze St. 13 Chavchavadze Ave. 33 A Paliashvili St. 1 Chavchavadze Ave. 49b Chavchavadze Ave. 50 Chavchavadze Ave. 2 Mosashvili St. Mrgvali Bagi 7 Kibshidze St. Mtatsminda 27 Kostava St. 32 Br/Zubalashvili St. 20 Rustaveli St. 10 Pushkini St. 8 Erekle II 2, Leonidze St. 4 – 9aprili St. 24 Gorgasali St. Ministry of Justice 24 Gorgasali St. General Office of Public Prosecutor 37 Gorgasali St. 8 Gulua St. Saburtalo 75 Kostava Ave. 16 Kazbegi Ave. 47 Kazbegi Ave. 2 Gamsakhurdia Ave. 23-25 Gamsakhurdia Ave. 28 Gamsakhurdia Ave. 45 Gamsakhurdia Ave. 6 Shartava St. 19 Nutsubidze St. 179 Nutsubidze St. 5 Sandro Euli St. Nutsubidze Plato 3rd , 5 Dzotsenidze St. 13 Bakhtrioni St. 11 Dolidze St. Building 4/5 34 Vaja Pshavela Ave. Vaja Pshavela Ave. 48 Vaja Pshavela Ave. 71 Vaja Pshavela Ave. 72 Vaja Pshavela Ave. Building 1, Block of flats 7, Vaja Pshavela Ave. Kavtaradze St. Digomi 1st Block, 1 Micro District, Dighomi Masivi 9 Mikeladze St. 3rd Block, Dighomi Masivi Aghmashenebeli alley 6 th km. Aghmashenebeli alley 2/6 Lubliana St. 5 Lubliana St. 13 Petritse St. Didi Digomi Didube-Chugureti 1 Khetagurovi St. 2 Tsereteli Ave. Tsereteli Ave. Building 10 67 a Tsereteli Ave. 144 Tsereteli Ave. 10 Tamar Mephe Ave. Near Railway Station

44 Aghmashenebeli Ave. 4 Chubinashvili St. 19 Vakhtang Bagrationi Ave. 19 Tsabadze St. Isani-Samgori International Airport of Tbilisi, „Sakaeronavigatsia“ International Airport of Tbilisi, Airport Service Center Kakheti highway 112 Kakheti highway 6/2 Navtlughi St. 23 “Ghvinis Aghmarti” Varketili Subway Territory 7 Varketili, Kaloubnis St. 9 Tsinandali St. 91 Ketevan Tsamebuli Ave. Opposite side 2 Ketevan Tsamebuli square 44 Moscow Ave. Vazisubani III Mik. II Block #15 Gldani-Nadzaladevi 34 Dadiani St. 39 Dadiani St. 263 Dadiani St. 20 Khizanishvili St. Mukhiani 2nd , Block #5 (Noneshvili St.) Mukhiani, Building 8, 4a m/d Temka District, Building 10, 2 m/d, Block of flats: 25 34 Guramishvili Ave. 36 Guramishvili Ave. Subway Sadguri, Akhmeteli Theatre Territory

VTB BANK Tbilisi 37, Uznadze Str. 14, Chanturia Str. 5, Jikia Str. 3, Gotua Str. 6, Gorgasali Str. 16/18, Rustaveli Ave. 54, Chavchavadze Ave. 10, Chavchavadze Ave. 21, Vazha Pshavela Ave. I tr. 33, Kostava Ave. 16/18, Tamar Mepe Ave. 4, Leselidze Str. 15, Tamar Mepe Ave. 76, Tsereteli Ave. 3, Vani Ave. 147, D. Aghmashebeli Ave. 5, Khizanishvili Str. 12, Ketevan Tsamebuli Ave. 20, Telavi Str. 42, Al. Kazbegi Ave. 8, Tsabadze Str. 6/2, Navtlughi Str. 9, Tsinandali Str. 48a, Bogdan Khmelnitsky Str. 19, Gamrekeli Str. 143, Tsereteli Ave. 78, Nutsubidze Str. Aghmashenebeli Alley 60, Barnov Str.

KSB BANK TBILISI BRANCHES Vake (09.30-21.00) 43, Chavchavadze ave. Avlabari 3, Ketevan Tsamebuli str. Vera 8/2, Melikishvili str. Didube 60, Tsereteli ave. Agmashenebeli 147, Agmashenebeli ave. Varketili 7, Kaloubani str. Krtsanisi 37, Gorgasali str. Pekini (09.30-20.30) 24a, Pekini ave. Didi Digomi 8, Ioane Petritse str. Gldani 15, Khizanishvili str. Freedom sq. branch (24 hour) 4, Freedom sq. Service centre - Gudushauri hospital (24 hour) 18/20, Lubliana str.

ATM’S TBILISI Vake – branch 43, Chavchavadze ave. Vake - Fashion house 24, Chavchavadze ave. Avlabari - branch 3, Ketevan Tsamebuli str. Vera - branch 8/2, Melikishvili str. Didube - branch 60, Tsereteli ave. Agmashenebeli Avenue - branch 147, Agmashenebeli ave. Varketili - branch 7, Kaloubani str. Krtsanisi - branch 37, Gorgasali str. Pekini - branch 24a, Pekini ave. Didi Digomi - branch 8, Ioane Petritse str. Agmashenebeli Alley - Prosecutor 12 km, Agmashenebeli Alley Gudushauri Hospital 18/20, Lubliana str. Gldani - branch 15, Khizanishvili str. Freedom sq. - branch 4, Freedom sq. Publich Television 68, Kostava ave. Public Service Hall 2, Sanapiro str. Mtatsminda-Krtsanisi, Revenue Service 16, Gorgasali str. Mtatsminda-Krtsanisi, Revenue Service 4, General Gulua str. Georgian railway 15, Tamar Mepe ave. Trade center Panda 1, Tsereteli Ave. Agmashenebeli Avenue 96, Agmashenebeli ave. Old Tbilisi 5, Virsaladze str. Church store 67, Vazha-Pshavela ave. Book store 14, Vazha-Pshavela ave. Dighomi district 2nd block, building 6a. Airport customs clearance zone Old airport Lilo customs clearance zone Martkopi,Gardabani Region

LIBERTY BANK BRANCHES IN TBILISI Vake-Saburtalo Central Branch 74, I. Chavchavadze Ave. Central Branch’s s/c #1 2, Sanapiro St. Didi Dighomi s/c #1 9, I. Petritsi St. Pavilion #1 10-12, Vazha-Pshavla Ave. Pavilion #2 Kostava St. (Near Sports Palace) Pavilion #4 33-35, I. Tchavtchavadze St. (Near Hospital 9) Pavilion #9 48-66, Vazha-Pshavela Ave. Pavilion 13 13 Km. Aghmashenebeli Highway Saburtalo s/c #1 34, Pekini St. Saburtalo s/c #2 7, Shartava St. Saburtalo s/c #7 2g, B. Zhgenti St. (Nutsubidze District) Saburtalo s/c #8 6, Budapeshti St. Saburtalo s/c #9 5, Kavtaradze St. Saburtalo s/c #11 10 Km. Aghmashenebeli Highway Sopeli Dighomi s/c #1 Village Dighomi, B. 7b Saburtalo s/c #15 2, Gamsakhurdia St. s/c #332 70, Tchavtchavadze Ave. Saburtalo s/c #13 3, Micro-District Nutsubidze Saburtalo s/c #14 46, Dolidze St. / 41,

Balanchivadze St. Tskneti s/c #1 3a, Rustaveli St. Vake-Saburtalo Branch 2, Marijani St. Vake s/c #2 1, Mosashvili St. Vake s/c #3 84, Tchavtchavadze Ave. (National Agency Bureau) Vake s/c #4 38, Paliashvili St. Vake s/c #12 14, Kipshidze St. Mtatsminda-Krtsanisi Krtsanisi s/c #1 10, Kikodze St. Krtsanisi s/c #2 2a, Sanapiro St. Mtatsminda-Krtsanisi Branch 37, Gorgasali St. Mtatsminda s/c #1 24, Kostava St. Mtatsminda s/c #4 3, Kostava St. Turn 2 Ponitchala s/c #1 19, Rustavi Road, B. 4 Ponitchala s/c #2 3, Micro-District Ponichala, B. 2 Didube-Chughureti Chughureti s/c #2 153, Aghmashenebeli Ave. Chughureti s/c #3 3, Abashidze St. Chughureti s/c #4 21, Chitaia St. Digomi s/c #2 7, Robakidze St. Didube Branch 126, Tsereteli Ave. Didube s/c #1 60, Tsereteli Ave. Pavilion #5 A. Tsereteli St. (near Tsereteli Underground) Pavilion #10 Dighomi (Near Mayakovsky Monument) Pavilion #15 Didube (near the railway square) Gldani-Nadzaladevi Avtchala s/c #1 1, Libani St. Avtchala s/c #2 7, Libani St. Avtchala s/c #3 5, Sarajishvili Ave. Gldani Branch 3, Block Gldani Gldani s/c #2 Mukhiani (Near Akhmeteli Subway Station) Gldani s/c #4 3, Block Gldani, B. 86 Gldani s/c #5 7, Micro-District Gldani (Prison Gldani) Gldani s/c #6 2, Botchorishvili St. Gldani s/c #7 6, Micro-District Gldani, 11 Tiulenevi St. Gldani s/c #9 8, Micro-District Gldani, B. 23 Gldani s/c #10 2, Micro-District Gldani, B. 24b Gldanula s/c #1 Gldani Khevi (Ravine), Near B. 6a Gldani s/c #11 18, Gombori St. Lotkini s/c #1 164, Tseronisi St. Mukhiani s/c #2 2, Micro-District Mukhiani, B. 5 Mukhiani s/c #3 3, Micro-District Mukhiani, B. 5 Nadzaladevi Branch 36, Guramishvili Ave. Nadzaladevi s/c #1 34, Dadiani St. Nadzaladevi s/c #3 261, Dadiani St. Nadzaladevi s/c #4 12a, Guramishvili Ave. Nadzaladevi s/c #6 30, Guramishvili Ave. B. 1 Temka s/c #1 11, Micro-District Temka, Block 1 Temka s/c #2 3, Micro-District Temka, Block 3, Near B. 41 Zahesi s/c #1 1a, Tchitchinadze St. Isani-Samgori Afrika s/c #1 27, Tchitchinadze St. Afrika s/c #2 17, Tchitchinadze St. Isani-Samgori Branch Kakheti Alley 2 Isani s/c #1 51/2, Ketevan Tsamebuli Ave. Isani s/c #4 22, Metekhi St. Isani s/c #6 30 Km. Kakheti Highway Isani s/c #7 Moscow Ave, Block 2, B. 1 Isani s/c #9 90, Ketevan Tsamebuli Ave. Lilo s/c #1 Lilo Settlement, Block 2, B. 8 Pavilion #6 4, Abzianidze St., Orkhevi Settlement (Near Customs Department) Pavilion #8 10 b, Airport Settlement Pavilion #11 103, Kvareli St.(Metromsheni Settlement) Pavilion #12 10, Akhalubani St. Ponitchala s/c #3 Rustavi highway, KM 30 Samgori s/c #1 37, Moskovi Ave. Samgori s/c #2 36a, Trialeti St. Samgori s/c #4 151, Bogdan Khmelnitski St. Varketili s/c #1 Javakheti St. Second BlindAlley (Near Varketili Subway Station) Varketili s/c #2 3, Micro-District Varketili, B. 310 Varketili s/c #3 Varketili Block 10, B. g Varketili s/c #5 Tbilisi International Airport Varketili s/c #6 3, Micro-District Varketili Varketili s/c #7 12, Shuamta St. Varketili s/c #9 1, Micro-district varketili 3, Near B. 25 Varketili s/c #10 Kaloubani St. 9 Vazisubani s/c #1 4 Micro-District Vazisubani 1B,Shandor Petofi St. Vazisubani s/c #2 2, Micro-District Vazisubani (Super Market “Smart”) Vazisubani s/c #3 1, Shandor Petofi St Didgori Didgori s/c #1 97, Block Tabakhmela, plot 516

ATM’S IN TBILISI 1, Aleksidze St. Agmashenebeli Alley, KM 11. 10a, Akhmeteli St. 13, Bakhtrioni St. 6, Budapeshti St. Zhvania Square 2, Gamsakhurdia Avenue 2/4, Godziashvili St. Block 3, Didi Dighomi Building 11, Dolidze St. 1, Vazha-Pshavela Avenue 10-12, Vazha-Pshavela Avenue 27, Vazha-Pshavela Avenue (near subway station “Sameditsino”) 76b, Vazha-Pshavela Avenue Block 2, Vazha-Pshavela Avenue (near Vazha-Pshavela monument) 46-48, Vazha-Pshavela Avenue (near metro station “Delisi”) 55, Vazha-Pshavela Avenue Block 7, Vazha-Pshavela Avenue Vashlijvari highway 10a, Tamarashvili St. 15a, Tamarashvili St. Kostava St. (near the Sports Palace) 24, Kostava St. 64, Kostava St. Marshal Gelovani Avenue 10, Mitskevitchi St. Nodar Bokhua St. 183, Nutsubidze St. (II-IV plateau turn) III m/d, Nutsubidze plateau 14, Gamsakhurdia St. 15, Gamsakhurdia Avenue 34, G a m s a k h u r d i a ave. 9, I. Petritsi St. 28, Saburtalo St. 2, University St. 36, Phaliashvili St. 5, Kavtaradze St. 21, Kavtaradze St. 2, Kazbegi Avenue 15, Kazbegi Avenue. Kazbegi Avenue (near the school #60) 26, Kazbegi Avenue (Vake-Saburtalo crossroads) 7, Shartava St. Block 1, IV m/d, shandor Petofi St. 10, Tchavtchavadze St. 34, Tchavtchavadze St. 74, Tchavtchavadze Avenue Tchavtchavadze Avenue (near to Hospital No. 9) 84, Tchavtchavadze Avenue (Legal expertise) Tchavtchavadze Avenue (near to school #55) Didube-Chugureti 96, Aghmashenebeli Avenue 153, Aghmashenebeli Avenue 10th km, Aghmashenebeli Alley 1, Beliashvili St. Dighomi, near to Mayakovsky monument Tevdore Mghvdeli St. (near to the Railway Station) 27, KingTamarAvenue 7, Robakidze St. 8, Tsabadze St. 2, Tsereteli Avenue Tsereteli Avenue (nearto subway station “Tsereteli”) 126, Tsereteli Avenue 143, Tsereteli Avenue 144, Tsereteli Avenue 69, Tsereteli Avenue (corner of Vani St.) 7-7a-7b, Tsereteli Avenue 60, Tsereteli Avenue 5/12, Ketevan Tsamebuli Avenue 39, Chitaia St. 17, Tc hitchinadze St. Gldani-Nadzaladevi

2, Botchorishvili St. Gldani, M/D 3. Gldani, M/D 3, Building 86, Near to building 22, Gldani M/D 6 Gldani, M/D 7 (Gldani prison # 8) 12a, Guramishvili Avenue 36, Guramishvili Avenue Guramishvili Avenue (near the subway station “Grmagele”) Guramishvili Avenue (near the subway station “Sarajishvili”) 34, Dadiani St. 34, Dadiani St. 261, Dadiani St. Building 2, 2nd m/d, Dadiani St. 22, Dumbadze St. (Mukhiani settlement) 1a, Chichinadze St., ZAHESI, near the building 41, block 3, 3rd m/d, Temka near maternity house No. 5, block 1, 11th m/d, Temka Kakheti 2nd turn 1, Liban St. Mukhiani turn near the subway station “Akhmeteli” 1, Sarajishvili St. 8, Kerchi St. 146, Tseronisi St. 4, Khetagurov St. 6, Khizanishvili St. Isani-Samgori 1, Abdushelishvili St. Airport settlement 10, Akhalubani St. 151, Bohdan Khmelnytsky St. 6, Gulia St. Building C, block 10, 3rd massif, Varketili Building 310, 3rd m/d, Varketili 3 Tbilisi International Airport Kakheti highway KM 38. 112, Kakheti highway 37, Moscow Avenue 8, Navtlughi St. Orkhevi settlement (near to Customs Department) Saknavti settlement (Kakheti highway) Building 8, block 2, Saksopmankana settlement 103, Kvareli St. (Metromsheni settlement) 22, Javakheti St. Javakheti St. Second turn Mtatsminda-Krtsanisi 23, A. Tchavtchavadze St. 37, Vakhtang Gorgasali St. 93, Vakhtang Gorgasali St. 155, Vakhtang Gorgasali St. 48, Zubalashvili St. 1, Leonidze St. 10, Leonidze St. 22, Metekhi St. 9, Pushkini St. 3, Rustaveli Avenue 2a, Sanapiro St. 10, Kikodze St. 5, Chachava St. 37/4, Tsintsadze St. Ponitchala Rustavi highway, KM 30 Building 2, 3rd m/d, Ponichala settlement Old Tbilisi 12, Kaloubani St. Didgori Plot 516, block 97, village Shindisi, Didgori

ATM’S IN REGIONS Abasha 6, Jorjikia St. Adigeni 24, Tornike Eristavi St. Ambrolauri 18, Agmashenebeli St. Settlement Anaklia Aspindza 31, Vardzia St. Akhalkalaki 82, KingTamar Avenue 11, Charenta St. 71, Tavisupleba St. Akhaltsikhe 1, Tamarashvili St. 98, Rustaveli St. 11, KingTamar St. 2, Shalva Akhaltsikheli St. 1, Kharischirashvili St. 6, Iadze St. Akhmeta 2, Kazgebi St. Batumi 63, Gorgiladze St. 2, Sulkhan-Saba St. 46-48, Vazha-Pshavela Avenue Khimshiashvili St. 11, Tbel Abuseridze St. 80, Javakhishvili St. 11, Pirosmani St. 10-12, Chavchavadze St. 20a, Agmashenebeli Avenue 9, King Parnavaz St. 62-64-66, King parnavaz St. 36, Gorgiladze St. 20, Khimshiashvili St. 102, Melikishvili St. 11/5, KingTamar settlement 75, Chavchavadze St. 16, Tavdadebuli St. 23, Mayakovski St. Baghdati 12, Tsereteli St. Bolnisi Settlement Kazreti 106, Sulkhan-Saba St. 107, Sulkhan-Saba St. Borjomi 7, Meskhishvili St. 147, Rustaveli St. 6, Tavisupleba St. Gardabani 71, David Agmashenebeli St. 89, David Agmashenebeli St. Gori 16, Stalini St. 40, Sukhiahsvili St. 56, Chavchavadze St. 26, Stalini St. 5, Guramishvili St. 43, Ertoba St. 39, Stalini St. Gudauri Hotel “Marco Polo” Gurjaani 10, Noneshvili St. KingTamar St. Village Shashiani Dedoplistskaro 1, Alazani St. 23, Rustaveli St. Dmanisi 41, St. Nino Street (Municipality) 29, Street St. Nino blind alley Dusheti 21, Dadiani St. 27, Rustaveli St. Vani 3, Solomon II St. Zestaponi 61, Agmashenebeli Avenue 11, Tsereteli St. Village Shorapani Zugdidi 45, Gamsakhurdia St. 90, Rustaveli St. 73, Sokhumi St. 7, Paris Commune St. 32, Gamsakhurdia St. 15, Tsotne Dadiani St. Tetritskaro 12, Kingtamar Avenue Telavi 43, Alazani Avenue 95, Alazani Avenue 16, Erekle the Second St. 3, Erekle the Second Square 12, Erekle the Second St. Terjola 2, Chanturidze St. Tianeti 11, Rustaveli St. Kaspi 88, Stalini St. 11, Rustaveli St. 18, Kostava St. Koda, village house Lagodekhi 23, Kiziki St. Lanchkhuti 10, Ninoshvili St. 24 Kingtamar St., Settlement Lentekhi Village house in settlement Manglisi Village Nigoeti

Marneuli 1, Rustaveli St. 72, Rustaveli St. 73, Rustaveli St. Martvili 14, Tavisupleba St. Mestia 52, Kingtamar St. 1, Seti St. Mtskheta Building of regional governor ’s office 17, Kostava St. (near to the Svetitskhoveli Cathedral) 11a, Samkhedro St. Mtskheta highway 73a, Agmashenebeli St. 65, Mamulashvili St. Village Tserovani Ninotsminda 22, Tavisupleba square Ozurgeti 5, Gabriel the episcope St. Village Ozurgeti Tavisupleba Square Oni 16, Rustaveli St. Rustavi 21, Kostava St., near to the Municipality 14, Kostrava St. Megobroba Avenue 3, Megobroba Avenue 11, Megobroba Avenue 21st km, Red Bridge Highway 5, Tashkent St. Village Sartichala Sagarejo 2, Agmashenebeli Avenue Samtredia 11, Stalini St. Sachkhere 92, Kostava St. 17, Gomarteli St. Senaki 14, St. Nino St. 20, Ninoshvili St. Signagi 2, Rustaveli St. 2, Dadiani St. 18, Gelati St. Poti 12, D. Agmashenebeli St. 146, Chavchavadze St. 57, Agmashenebeli St. Village Poka Kareli 3, Ninoshvili St. 1, Mgaloblishvili St. Settlement Ruisi Keda 11, Tbel Abuseridze St. 1, M. Kostava St. Kobuleti 153, Agmashenebeli St. 4, Memed Abashidze St. 141, Agmashenebeli St. 478, Agmashenebeli St. 79, Kingtamar St., Village Chakvi

PASHA BANK

+995 322 265 000 15, Rustaveli Avenue, Tbilisi, 0108 , Georgia office@pashabank.ge www.pashabank.ge

CARTU BANK Head Office 39a Chavchavadze Ave. Tbilisi 0162, Georgia Tel: (+995 32) 292 55 92 Fax: (+995 32) 291 22 79 E-Mail: info@cartubank.ge Central Service Center 39a Chavchavadze Ave. Mtatsminda Service Center 1 Vekua St. Vake Service Center 24 I. Abashidze St. Saburtalo Service Center 14b Pekini St. Isani Service Center 50/18 Queen Ketevan Ave./Bochorma St. Kutaisi Service Center 4 Paliashvili St., Kutaisi Batumi Service Center 2 Griboedov St., Batumi Gori Service Center 10 Stalin Ave., Gori Telavi Service Center Chavchavadze Square, Telavi

ATM’S IN TBILISI Vake 39a I. Chavchavadze Ave., Cartu Bank, Head Office 39a I. Chavchavadze Ave., Cartu Group 24 I. Abashidze st., Cartu Bank, Vake Service Center 54 I. Chavchavadze Ave., PSP Pharmacy Mtatsminda 1 V. Vekua St., Cartu Bank, Mtatsminda Service Center 3 V. Vekua St., Georgian Trade Center 17 Sh. Rustaveli Ave., Sh. Rustaveli Theatre 10 G. Chanturia St., Hotel “Tori” 29 P. Melikishvili Ave. 34 M. Kostava St., Laguna Vere Old Tbilisi 44 K. Apkhazi St. (former Leselidze St.) 6 Kodjori highway, GDS TV Ortachala 79 Gorgasali St., Super Market 12 Krtsanisi St., New Hospital Saburtalo 14b K. Gamsakhurdia St., Cartu Bank, Saburtalo Service Center 5 K. Gamsakhurdia St., Kuzanov Clinic 48 Vazha-Pshavela Ave., PSP Pharmacy 71 Vazha-Pshavela Ave., close to VazhaPshavela Metro station 29 Vazha-Pshavela Ave., Central Clinic of Acad. N. Kipshidze L. Gotua St., Saakadze sq. Good Year Store 10 Al. Kazbegi Ave., M.B.J. 24 Al.Kazbegi Ave., Axis Trade Center Vashlijvari, “Omega” 8 A. Beliashvili St., Maestro TV Didube-Chughureti Vagzali Sq. Trade Center “Tbilisi Central” Trade Center “Passage” 8 A. Tsereteli Ave. PSP Pharmacy 128 A. Tsereteli Ave. PSP Pharmacy 89/24 D. Agmashenebeli Ave. “Global TV” 99/1 D. Agmashenebli Ave., N. Dumbadze theatre 154 D. Agmashenebeli Ave. Danish House 31 Queen Tamar Ave. PSP Pharmacy 7 Ts. Dadiani St.,Trade Center “Karvasla” 39 Ts. Dadiani St., Super Market Isani-Samgori 50/18 Queen Ketevan Ave./Bochorma St. Cartu Bank, Isani Service Center 42 Bogdan Khmelnitski St., Elita Burji Javakheti St., close to Varketili Metro station Isani “Bazroba”, Gun Store 6/2 Navtlugi St. Currency Exchange Point 91 Queen Ketevan St., PSP Pharmacy 12 Meskhishvili St., PSP Pharmacy Gldani-Nadzaladevi Gldani, A Housing Development, Building 50, PSP Pharmacy 5 D. Sarajishvili St., Avchala Temka, Avshniani Settlement (close toTemkaMukhiani Crossroad) 4a Mukhiani Housing Development, Building 14, Super Market “Ori Nabiji” Rustavi Auto Market (Exam Center Building) Kutaisi 4 Z. Paliashvili St., Cartu Bank, Kutaisi Service Center 26 I. Abashidze St., Parliament of Georgia 5 I. Chavchavadze St., “Orgservice” Kutaisi International Airport of D. Agmashenebeli 11 Queen Tamar St., Sachkhere, ATM № 1 11 Queen Tamar St., Sachkhere, ATM № 2 Batumi 2 A. Griboedov St., Cartu Bank, Batumi Service Center 4 V. Maiakovski St. close to Batumi Oil Terminal 44 K. Gamsakhurdia St. 12 M. Abashidze St. Hotel “Alik” Park “Cicinatela”, village Shekvetili Gori 10 Stalini Ave., Cartu Bank, Gori Service Center Telavi I. Chavchavadze sq., Cartu Bank, Telavi Service Center 60 D. Agmashenebeli St., Super Market “Real”

CMYK

HEADLINE NEWS & ANALYSIS

US Business in Georgia

FINANCIAL

16 NOVEMBER, 2015 | FINCHANNEL.COM

U.S. Contribution in Georgia’s Development CURRENT PROJECTS: ECONOMIC GROWTH AND TRADE USAID’s programs in Georgia aim to foster inclusive and sustainable economic growth in the country through improved economic governance, increased competitiveness and employment, responsible management of Georgia’s natural endowments, increased access to quality education, investments in energy and infrastructure, and support for gender equality and women’s empowerment. While Georgia has significant economic advantages, a strategic regional geographic location, proximity to international markets, and vast natural resources, the country has faced some challenges in transitioning from a state-controlled to a market-based economy. Recognizing the importance of overcoming these challenges, USAID’s activities in Georgia support the underlying systems that will sustain the country’s growth and help Georgia prosper in the global marketplace.

CURRENT PROGRAMS: NEW ECONOMIC OPPORTUNITIES (NEO) APR 2011 – DEC 2015 CHEMONICS INTERNATIONAL www.chemonics.com The NEO project is designed to improve rural incomes; reduce poverty levels; improve food security; address critical, small-scale infrastructure priorities in targeted communities; enable targeted Internally Displaced Persons communities (old and new) to sustainably maintain their households; and assist communities distressed by natural or other disasters. In 2015 the project will target 10 municipalities and will benefit at least 70,000 households that are considered vulnerable.

RESTORING EFFICIENCY TO AGRICULTURE PRODUCTION (REAP) ACTIVITY IN GEORGIA SEP 2013 – SEP 2018 CNFA www.reap.ge The REAP project increases employment and income in rural areas by providing in-kind grants and technical assistance to small and medium enterprises (SMEs) to support improved agricultural productivity, marketing, and processing. The project facilitates the entry of new agribusinesses and expands the operation of existing SMEs to create new jobs, improve the availability of high-quality inputs and machinery services for farmers, and strengthen markets for agricultural goods and services in Georgia.

DEVELOPING GEORGIA’S AGRICULTURAL ECONOMICS CAPACITY MAR 2014 – JUN 2017 PARTNERSHIP FOR ECONOMICS EDUCATION AND RESEARCH (PEER) www.iset.ge This project builds upon the comprehensive assessment of teaching, training and research needs in the Georgian agricultural sector that

was commissioned by the United Nations Development Program in late 2011. The project will establish a concentration in Agricultural Economics within the International School of Economics at Tbilisi University (ISET) Master’s Program in Economics. Selected second year ISET students will complete courses focused on agricultural market analysis, trade in agricultural goods, and agricultural policy. The project will also establish an Agricultural Policy Research Center at ISET’s Policy Institute. This new center will develop and communicate relevant research, deliver on-demand consulting services, training, policy evaluation and analysis, thus contributing to the project’s sustainability. The project’s aim is to create a pool of welltrained young economists capable of addressing a wide array of issues related to agricultural and rural development policy in Georgia and the region. Several cohorts of well-trained agricultural economists educated through this project will be employed by the Ministry of Agriculture, other public agencies, NGOs, businesses and international organizations concerned with agricultural policy and Georgia’s rural development.

ment, water resource management, an energy trading mechanism and Georgia’s Electricity Market Model of 2015. G4G will strengthen the capacity of Government of Georgia (GOG) institutions to develop, implement, and enforce reforms, and develop the capacity of private sector and civil society actors to engage the GOG on the development, implementation, and enforcement of reforms. Key to the success of G4G will be supporting inclusive and constructive dialogue among government, private sector, and civil society stakeholders. Municipal Infrastructure and Internally Displaced Persons (IDPs) Infrastructure Rehabilitation Project Feb 2011 – Dec 2015 Government of Georgia – Municipal Development Fund (MDF) www.mdf.ge/eng This project aims to develop and rehabilitate municipal infrastructure in certain municipalities affected by the 2008 conflict; upgrade the homes constructed by the Government of Georgia for persons displaced during the 2008 conflict; and redevelop buildings for use as durable housing for IDPs from previous conflicts.

GEORGIA AGRICULTURAL POLICY INITIATIVE (GAPI) JUL 2013 – JUL 2017 U.S. DEPARTMENT OF AGRICULTURE (USDA)

LOAN PORTFOLIO GUARANTEE FOR BANK REPUBLIC SEPT 2005 – SEPT 2015 BANK REPUBLIC

GAPI assists the Georgian Ministry of Agriculture and the National Statistics Office of Georgia to develop an effective agriculture, information system that includes the creation of a policy unit with the capacity to conduct market outlook and agricultural policy analysis. The unit analyzes and disseminates economic information needed by both public and private sector decisionmakers in Georgia.

www.republic.ge USAID extended a Development Credit Authority (DCA) loan portfolio guarantee for lending up to $6,000,000 to Bank Republic to extend commercial credit to the agricultural and non-agricultural sectors, or any activity that contributes to improved technology or increased employment in Georgia. Approximately 50% of loans are extended to the agricultural sector.

ENERGY

STRENGTHENING EXTENSION AND ADVISORY SERVICES ACTIVITY (SEAS) IN GEORGIA OCT 2013 – OCT 2015 UNIVERSITY OF ILLINOIS AT URBANACHAMPAIGN

Georgia has implemented reforms in the energy sector resulting in increased power supplies nationwide. Nonetheless, energy services still do not meet the country’s needs. USAID projects help facilitate investment to, improve natural gas transmission infrastructure to increase the availability of gas for households and key economic development zones, and improve electrical power transmission through constructing new power lines, while promoting increased energy efficiency.

www.meas-extension.org The Strengthening Extension and Advisory Services Activity (SEAS) program supports the Georgian Ministry of Agriculture (MOA) in the development of a public agricultural extension and advisory service system. SEAS provides technical advisors who work closely with the MOA in developing and implementing multi-year strategies to enhance the capacity of the Ministry’s leadership and relevant field employees to provide effective agricultural extension and advisory services. The Activity contributes to USAID’s higher level goal of improving agricultural productivity and rural incomes through more effective delivery of information on best management practices to farmers throughout the country.

CURRENT PROGRAMS: GEORGIAN NATIONAL ENERGY AND WATER REGULATORY COMMISSION (GNERC) PARTNERSHIP PROGRAM SEPT 2010– SEPT 2015 NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONS (NARUC)

GOVERNING FOR GROWTH IN GEORGIA (G4G) ACTIVITY AUG 2014 – AUG 2019 DELOITTE CONSULTING LLP The purpose of the G4G activity is to improve Georgia’s economic governance and leadership in the areas of the business enabling environ-

www.naruc.org This project fosters the exchange of experience and information between the U.S. and the Georgian National Energy and Water Supply Regulatory Commission. The project improves regulatory practices, strengthens the regulatory authority, supports the transition toward European-oriented market mechanisms, and incentivizes the utilities to improve service to customers.

BLACK SEA TRANSMISSION PLANNING SEP 2010 – SEP 2015 U.S. ENERGY ASSOCIATION (USEA) www.usea.org This project analyzes the existing high voltage networks from a regional perspective to develop technical rules, guidelines, and network infrastructure assessments to accelerate integration of clean and innovative energy technologies.

POWER AND GAS INFRASTRUCTURE PROGRAM (PGIP) MAY 2010 – SEP 2015 GOVERNMENT OF GEORGIA (GOG) PGIP assists the Government of Georgia to undertake strategic interventions in gas and power infrastructure aimed at enhancing the energy security of the country. Ongoing projects support Georgia’s power transmission company to upgrade control and protection switchgear equipment in substations.

ELECTRICITY TRANSMISSION UPGRADE, RECONSTRUCTION AND OPERATION NOV 2013 – JUL 2015 GEORGIAN STATE ELECTROSYSTEM (GSE) In order to support the strengthening of Georgia’s power infrastructure, USAID procured substations and stringing equipment for GSE.

ENVIRONMENT A clean and healthy environment is important not only to protect natural resources for future generations, but also for the health, agricultural livelihoods, and employment opportunities of Georgians today. USAID’s programs support environmental education and the sound management and protection of Georgia’s natural endowments to ensure the longevity and sustainable use of its forests, lands, and water systems mitigating impact on our global climate.

CURRENT PROGRAMS: INSTITUTIONALIZATION OF CLIMATE CHANGE ADAPTATION AND MITIGATION IN GEORGIAN REGIONS APR 2012 – OCT 2015 NATIONAL ASSOCIATION OF LOCAL AUTHORITIES OF GEORGIA (NALAG) http://www.nala.ge This project integrates environmental and climate change considerations into policy priorities of local authorities. The project is establishing special commissions on climate change, the environment, and sustainable agriculture within local government administrations to ensure the effective implementation of a broad range of statutory functions by local authorities related to natural resource management, land use and sustainable development.

ENHANCING CAPACITY FOR LOW EMISSION DEVELOPMENT STRATEGIES (ECLEDS) CLEAN ENERGY PROGRAM SEP 2013 – SEP 2017 WINROCK INTERNATIONAL http://www.winrock.org Enhancing Capacity for Low Emission Development Strategies (EC-LEDS) is a flagship U.S. government-led effort that assists countries in developing and implementing LEDS. The program enhances partner country efforts by: 1) providing targeted technical assistance; and 2) building a shared global knowledge base on LEDS. This assistance supports the implementation of incentives and financing to generate alternative economic development practices. Regional programs also support this growth through expertise in modeling energy efficiency, green production marketing and other widely accepted practices. Mayors who are signatories to the EU Covenant of Mayors commitments will receive preference for assistance to implement lower emission development.

WASTE MANAGEMENT TECHNOLOGIES IN REGIONS (WMTR) MAR 2014 – MAR 2018 INTERNATIONAL CITY /COUNTY MANAGEMENT ASSOCIATION (ICMA) www.icma.org The Waste Management Technologies in Regions activity will improve policy formulation and strategic planning related to waste management at national and local levels in Georgia; enhance the capacity of targeted municipalities to establish and sustainably manage waste facilities and services; and support the development of Georgia’s recycling sector. It will develop remediation plans for old and illegal landfills, which will improve management on thousands of hectares of biologically rich areas. The activity will help reduce environmental pollution, improve sanitation and human health, and increase the quality and quantity of recycled products.

USAID INTERAGENCY AGREEMENT WITH THE U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE OCT 2013 – OCT 2016 U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE USAID in partnership with U.S. Forest Service (USFS) will provide technical assistance for natural resource management to Georgian government agencies, including the Ministry of Environmental Protection, Forestry Agency, Ministry of Agriculture, and environmental NGOs. USFS technical assistance will include training and advisory services on sustainable forest management with resulting benefits for biodiversity, economic development, governance and institution building objectives.

CMYK

FINANCIAL HEADLINE NEWS & ANALYSIS

FINCHANNEL.COM | 16 NOVEMBER, 2015

US Business in Georgia

Weekly Market Watch ECONOMY Trade deficit down 9.7% y/y in 10M15, excluding one-offs

According to GeoStat’s preliminary figures, the trade deficit in October 2015 decreased 16.3% y/y to US$ 427mn, as exports fell 30.9% y/y to US$ 188mn, while imports were down 21.4% y/y to US$ 615mn. As a result, in 10M15, exports decreased 24.4% y/y to US$ 1.8bn, imports fell 14.8% y/y to US$ 6.0bn (excluding donated c-hepatitis medicine imports of US$ 318mn in 10M15), and the trade deficit decreased 9.7% y/y

to US$ 4.1bn. Therefore, the adjustment in imports was instrumental in the elimination of external imbalances, easing pressure on GEL. Detailed statistics will be available on November 24, 2015.

Property registration up 0.3% y/y and company registration down 15.0% y/y in Oct2015

Property registration (commercial and residential real estate) increased 0.3% y/y (-5.2% m/m), reaching 46,516 units in October 2015, according to National Agency of Public

Source: Official data *Preliminary results of census, previous data is subject to recalculation ** As of 10M15

Registry. Notably, a sharp increase in primary properties (+26.6% y/y, 20.5% of total) fully compensated a decrease in secondary property registration (-4.8% y/y, 79.5% of total). Company registration de-

Source: GeoStat, preliminary estimate for 2Q15 Note: 3Q15 figure based on rapid estimates

creased 15.0% y/y (-4.6% m/m) to 3,681 units in October 2015. Out of newly registered companies, 96.8% were business legal entities, while 3.2% comprised nonentrepreneurial (non-commercial) legal entities.

Source: Rating agencies

Ease of Doing Business # 24 (regional leader) Economic Freedom Index # 22 (mostly free) Global Competitiveness Index # 66 (improving trend) Source: World Bank, Heritage Foundaition and World Economic Forum

Source: NBG Note: Index growth means appreciation of exchange rate, decline means depreciation of exchange rate.

Source: NAPR

FIXED INCOME Corporate Eurobonds: Bank of Georgia Eurobonds (GEBGG) closed at 5.1% yield, trading at 104.1 (+0.2% w/w). GOGC Eurobonds (GEOROG) were trading at 101.5 (+0.4% w/w), yielding 5.8%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 105.4 (-0.4% w/w), yielding 6.7%. Georgian Sovereign Eurobonds (GEORG) closed at 107.2 (-0.1% w/w) at 5.3% yield to maturity.

WEEKLY MARKET WATCH EXCLUSIVELY PROVIDED TO THE FINANCIAL BY GALT & TAGGART

EQUITIES Bank of Georgia Holdings (BGEO LN) shares closed at GBP 18.70/share (-2.04% w/w and -3.66% m/m). More than 211k shares traded in the range of GBP 18.42 – 19.15/share. Average daily traded volume was 44k in the last 4 weeks, less than in the previous month. FTSE 250 Index, of which BOGH is a constituent, has lost 2.28% w/w and lost 0.72% m/m. The volume of BOGH shares traded was at 0.54% of its capitalization. TBC Bank (TBCB LI) closed the week at US$ 8.60 (+1.78% w/w and

Source: Bloomberg

-3.37% m/m). More than 154k GDRs changed hands in the range of US$ 8.20 – 8.80/GDR. Average daily

traded volume was 24k in the last 4 weeks, more than in the previous month.

700mn (US$ 291.9mn) with an average yield of 7.5%. Certificates of deposit: NBG sold 183-day, GEL 20mn (US$ 8.3mn) certificates of deposit, with an average yield of 10.33% (down

by 3bps from previous issue). Certificates of deposit: NBG sold 183-day, GEL 20mn (US$ 8.3mn) certificates of deposit, with an average yield of 10.33% (down by 3bps from previous issue).

Source: Bloomberg

MONEY MARKET Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL

Source: Bloomberg

Source: NBG *As of latest auction

Source: NBG

WEEKLY MARKET WATCH EXCLUSIVELY PROVIDED TO THE FINANCIAL BY GALT & TAGGART Investments (or any short-term transactions) in emerging markets involve significant risk and volatility and may not be suitable for everyone. The readers of this document must make their own investment decisions as they believe appropriate based on their specific objectives and financial situation. When doing so, such recipients should be sure to make their own assessment of the risks inherent in emerging market investments, including potential political and economic instability, other political risks including without limitation changes to laws and tariffs, and nationalization of assets, and currency exchange risk.

GALT & TAGGART Address: 79 D. Agmashenebeli Avenue, Tbilisi 0102, Georgia Tel: + (995) 32 2401 111 Email: gt@gt.ge

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HEADLINE NEWS & ANALYSIS

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US Business in Georgia

Georgian Real Estate Management The Green Building, 6 Marjanishvili Street, 0102 Tbilisi

15 Lubliana Str.

Tel: 251 00 01 Fax: 253 00 44 info@zarapxana.ge www.zarapxana.ge

37 Chavchavadze Ave. Tel.: 291 30 26; 291 30 76

FINANCIAL

Tel: 243 30 77, Fax: 243 30 79 www.firstbrokerage.ge E-mail: info@firstbrokerage.ge

1 Brother Kakabadze Str. Tel: 292 29 45; Fax: 292 29 46; tk@mcdonalds.ge

Tel: +995 322 380802 info@lucapolare.com www.lucapolare.com LucaPolareOriginal

La Brioche Addr: Batumi, Georgia, Parnavaz Mepe №25

Tel.: 260 15 36 info@piazza.ge, www.piazza.ge

Fragola 3 Tabidze Str. 2 Kazbegi Ave. Tel: 570 10 33 19

fragola.cafemail@gmail.com 4 Freedom Square, Tel: +995 32 254 70 30 Fax: +995 32 254 70 40 tbilisi@citadines.com

13, Rustaveli Avenue.; Tel.: 2 779 200 www.TbilisiMarriott.com tbilisi.marriott@marriotthotels.com

4, Freedom Square, Tel: 2 779 100 www.CourtyardTbilisi.com courtyard.tbilisi@marriotthotels.com

Because life is about living

45a M.Kostava St., 0179 Tbilisi, Georgia; 16 Meskheti str.Borjomi Tel:(+995 32) 2 292292 E-mail: borjomi@rixos.com www.Borjomi.rixos.com

Radisson Blu Iveria Hotel Rose Revolution Square 1 Tel.: 240 22 00; Fax: 240 22 01 info.tbilisi@radissonblu.com radissonblu.com/hotel-tbilisi

Betsy’s Hotel 32-34 Makashvili Street, 0108, Tbilisi, Georgia

Tel.: 293 14 04, Fax: 299 93 11 info@betsyshotel.com www.betsyshotel.com

GEORGIA PALACE HOTEL

275 Agmashenebeli Ave., Kobuleti, Georgia Tel: 2242400 Fax: 2242403

Tel.: (+995 32) 219 11 11 www.hotelcoste.ge

Tel: +995 422 229000 E-maill: info.batumi@ sheraton.com www.sheraton.com/batumi

Radisson Blu Hotel Batumi 1, Ninoshvili str., Batumi Tel/Fax: 422255555 info.batumi@radissonblu.com radissonblu.com/hotel-batumi

26 May Square Tel: 2300099 E-mail: info@hi-tbilisi.com www.hi-tbilisi.com

Divan Suites Batumi Address: Jordania/Z. Gamsakhurdia Str. 8/15 (422)255 522 bulents@divan.com.tr

6 Kavsadze Str. Tel: 2 25 15 45 2 55 44 55 www.lottravel.ge

E-mail: info@gph.ge, www.gph.ge

13 Shavteli Str. Tel: 2439494 info@ambasadori.ge www.ambasadori.ge

Hotel “O. Galogre” 8, Vakhtang Gorgasali Str. Batumi, Georgia Tel: +995 422 27 48 45 info@hotelgalogre.com www.hotelgalogre.com

Tel: 31 99 99 hotel@tifilis.ge addr: #9 Grishashvili Str.

Best Western Tbilisi № 1 Kheivani street 12/13; Tbilisi, Georgia Phone: (+995 32) 2 24 23 21; Phone: (+995 32) 2 24 23 22 E-mail: reservation@cronpalace.ge

Addr: 11, Apakidze str. Tel.: 2 300 777

4 Freedom Square Tel: 2988 988, Fax: 2988 910 E-mail:gmt@gmt.ge, www.gmt.ge

LE MARAIS 5 Chavchavadze Ave. The tickets are available at tbilisi international airport freedom square 4 courtyard marriott hotel, 1st floor

Tel: 2400 400; 2400 040

32 Abashidze Str. Tel: 222 40 83

Tel.: 222 44 17 577 22 99 22 plasticsurgerygeo.com

For advertising please contact: Address: 1/3 Melashvili Street 6000 Batumi,Georgia | +995 422 225790 www.batumiworldpalace.com info@batumiworldpalace.com

577 741 700 marketing@finchannel.com

BUSINESSTRAVELCOM HOTEL AND AIRTICKET BOOKING: 2 999 662 | SKY.GE

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FINANCIAL HEADLINE NEWS & ANALYSIS

FINCHANNEL.COM | 16 NOVEMBER, 2015

US Business in Georgia

Time Is Right for a US-Georgia Free Trade Agreement Continued from p. 15

recently signed an agreement with Microsoft to respect intellectual property rights. The deal, worth $20 million, is unique in the region, and is just the beginning of a series of measures aimed at intellectual property protection that could open up the country for ICT sales and investments in research and development. Business opportunities that would follow an U.S. Georgia FTA also move significantly beyond Georgia’s borders. Georgia’s economic and strategic importance as a transit route for oil and gas supplies has never been so important – the country offers the only route from the Caspian Sea to Europe that does not go through Russia. A BP-led consortium is in the process of tripling the capacity of gas that is transported across the country, with a pipeline upgrade that represents a $2 billion investment in Georgia alone. As important as Georgia is in the energy transportation world, the country is not only valuable as a transit route for oil and gas. A ‘New Silk Road’ transit route is quickly emerging between Europe

and Asia - Georgia is supporting the development of this route through a heavy investment in port, road and rail infrastructure. The recent Tbilisi Silk Road Forum, which was held earlier this month, , saw over 500 companies from 34 countries, including the US, visit the country to investigate ways of utilizing Georgia’s location and trade-route potential. Offering a ‘force-amplifier’ to these benefits, Georgia signed the Association Agreement, including a Deep and Comprehensive Free Trade Agreement (DCFTA), in June of last year. The DCFTA will give Georgia free-trade access to the EU for its goods and services. This further enhances Georgia’s attractiveness for businesses that want to gain access to the EU market and will make Georgia a more comfortable place for Western countries to set up businesses with a view to other regional markets. An FTA with Georgia is also unlikely to create any significant new competition for U.S. companies. Manganese makes up more than 80 percent of U.S. imports from Georgia. This is mined and processed in Georgia by a U.S. company and does not

Invitation to Participate in the Sales Procedures Announced by the Embassy of the Republic of France in Georgia on the Sale of 3933 sq/m Land Plot Located in the Center of Tbilisi

compete with U.S. producers. Politically, opening negotiations on a FTA would send a signal of continued material support for Georgia at an extremely important time. Georgia’s track record of reforms to fight corruption and improve the business environment has been widely acknowledged. In a region where human rights and rule of law are often ignored, Georgia has remained a rare bastion of democratization, Westernization and transparency. Entering into discussion about a Georgia-U.S. FTA would acknowledge this success. At a time when Georgia is at risk, this FTA negotiation would also provide a platform for revitalized bilateral engagement and a mechanism to encourage increased U.S. commercial engagement in the region. It would open up opportunities for U.S. companies and boost the argument for Westernization, just when Georgia needs it the most.

The Embassy of the Republic of France in Georgia has announced a Sales Procedures on the sale of land plot located adjacent to the Rustaveli Avenue at 4 Khazina St., Tbilisi, Georgia. The land plot has the following characteristics: cadastral code – 01.15.04.007.010; total area of the land plot - 3933 sq/m. The land plot qualifies as type 2 recreational zone with the following coefficients: K1= [0,2], K2=[undefined] and K3=[Undefined]. Please, take into account that the Sales Procedures n will be conducted in accordance with the Rules for Submission of Offers available on the web-page of the Embassy: ambafrance-ge.org, or by e-mail request at contact.tbilissiamba@diplomatie.gouv.fr. The interested Parties shall submit their Expression of Interest in a form and to the addressee(s) envisaged in the Rules for Submission of Offers.. In case of additional questions, please, contact [the consul or hes representative] at the following e-mail [contact.tbilissi-amba@diplomatie.gouv.fr] or call at [(00 995 32) 272 14 90] from Monday to Friday from 9:30 AM till 12:30 PM.

This article first appeared in The HILL magazine, a nonpartisan American political newspaper published in Washington , D.C. Since 1994. Williamson is president of the American Chamber of Commerce in Georgia.

The Expression of Interest shall be submitted to the Contact Person indicated above no later than 15th of December 2015.

Tax Inspection With a Human Face? Continued from p. 16

came under fire and were publically vilified for tax avoidance in the UK may have reduced their appetite for tax minimization. Thus, when in May 2013 grassroots movements, such as UK Uncut, staged sit-ins at 40 Starbucks branches, what followed was a series of lengthy explanations by the company’s global CFO, and a decision to pay corporate tax in the UK (for the first time since 2008). We do not manipulate anything, anywhere, insisted the company, but we listen to our customers. A more elegant method to exploit reputational considerations of businesses is presented by Fair Tax UK. Instead of naming and shaming companies for tax avoidance, Fair Trade provides positive stimuli for socially responsible and ethical behavior. Companies are awarded Fair Tax Mark if they cooperate with Fair Tax experts and meet basic criteria of tax reporting, tax payment and transparency. The incentives for applying for Fair Tax Mark are reputational. Ed Mayo, Secretary General of Co-operatives UK puts it well: “All it takes is for consumers, people who are taxpayers themselves, to back the companies that pay what they owe”. Fair Tax found widespread support in the UK as over 50 MPs endorsed the idea. SSE, a British supplier of energy, phone and broadband services, became the first FTSE100 company to apply and qualify for Fair Tax Mark in 2015.

Table 1. Average Treatment Effect on the Treated (ATT) Estimates Treatment

Group A (not paying taxes)

Group B (filing incorrectly)

#obs

All #obs

ATT

#ATT

Moral treatment

103

44.71*

64.48*

-18.10

Telephone treatment

136

58.20*

100

67.24*

14.80

Notes: * indicate significance level at 1% level In Georgia, the FINANCIAL has a practice of recognizing businesses for success in areas such as corporate social responsibility (CSR). It might as well be time to recognize those Georgian corporations that contribute their fair share to the society and thus put consumer pressure on those who practice dodging. The Fair Tax UK team will be happy to help us get started.

APPEALING TO TAXPAYERS’ MORAL NORMS: LESSONS FROM NORWAY… A recent randomized field experiment conducted by Kristina Bott, Alexander Cappelen and Erik Sørensenin from the Norwegian School of Economics demonstrates yet another possibility to increase the citizens’ tax morale. Based on reports from foreign tax authorities, the Norwegian Tax Authorities (NTA) established that at least 51% of income earned outside of Norway in 2011 never reappeared on Norwe-

gian tax returns, and around 20,000 tax residents were classified as tax evaders in this fiscal year. In collaboration with NTA, the NHH team conducted a nationwide randomized field experiment to study the reasons for tax evasion, and the relative importance of the probability of detection and moral motivation. Shortly after sending the pre-populated tax returns for 2012, the NTA mailed eight different treatment letters randomly assigned to people in the pool of tax evaders. A key finding was that self-declared incomes for 2012 were significantly increased by letters containing a moral argument for paying taxes (including visual aids highlighting the government sponsorship of public services, health, education and scientific research) or a reference to the fact that the tax authorities know that this person has previously misreported. Further, the team found that moral motivation mainly works on the intensive margin (increasing the amounts of self-reported income), whereas the probability of detection works also on the extensive margin, increasing the share of in-

dividuals self-reporting any positive amount of income.

…AND GEORGIA These and other results have been recently presented at the workshop “How to Increase Tax Compliance – New Tools and Insights from Behavioral Economics” organized by the Joint Research Centre of the European Commission in Kyiv. The workshop was attended by Giorgi Tabuashvili, head of the Georgian Revenue Service (RS), and ISET Policy Institute’s Lasha Lanchava. Inspired by what he heard, Mr. Tabuashvili came up with the idea to engage international experts and Dr. Lanchava in piloting and testing the effectiveness of different communication strategies targeting potential tax avoiders in Georgia. Two communication treatments were tried and evaluated: A moral appeal letter that highlights the importance of tax compliance for funding vital public projects such as police, healthcare, education, pensions, etc. (moral treatment);

Telephone communication by an RS agent informing taxpayers that they had been selected for monitoring and assistance with filing their tax returns properly (telephone treatment). In line with the literature on tax evasion, these treatments were applied to two different categories of taxpayers: those who did not pay taxes at all (Group A), and those who paid but are likely to have filed their taxes incorrectly (Group B). To estimate the causal impact of the intervention on voluntary tax payments it was necessary to make sure that those contacted either by mail or telephone (treatment group) are more or less similar to those who did not receive any communication (control group). In principle, the best way to assure such similarity is to randomly assign people to treatment and control groups. Since randomization could not be performed in this case, to establish proper controls for each type of treatment, Lanchava established control groups using the so-called Propensity Score Matching (PSM) procedure. This statistical technique uses observable characteristics (such as age, number of family members, average income of family members, and value of taxable wealth) to match taxpayers that have not been treated to similar ones among the treated. The results of the experiment are shown it Table 1 which summarizes the average effects of the two treatments on the treated (ATT).

As can be seen, the moral and telephone treatments had a positive and significant impact on tax payments by individuals in group A (those who have not been paying taxes) – by about 64 and 67 GEL, respectively. Interestingly, neither treatment had any significant effect on those in group B. The immediate takeaway from this is that the moral and telephone treatments work on the extensive margin, affecting those who do not pay taxes at all. One additional observation is that the effect of moral treatment is as good as telephone communication – the two treatment effect estimates are statistically indistinguishable. These results provide support for a national strategy aimed at increasing voluntary tax compliance in Georgia. Communication interventions of the kind evaluated in our pilot are cost effective and not overly intrusive. Given that communication is costly, our policy recommendation for the Revenue Service would be to focus on Group A taxpayers only. Finally, there might be scope for the Georgian Orthodox Church – by far the most respected public institution in the country – to play a role in elevating the tax morale of the Georgian churchgoer population by more forcefully preaching the message “Render unto Caesar the Things that Are Caesar’s”. This message may go down particularly well if Caesar – the Georgian tax inspector, in our case, – learns behavioral economics and acquires a human face.

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US Business in Georgia

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Advertiser: AG Capital. Contact FINANCIAL Ad Dep at marketing@finchannel.com

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US Business in Georgia TSISKVILI

LITERATURULI CAFÉ

Red Café Bistro & Cafe

4, Besiki Str. 22, Abashidze Str. Tel: 222 02 76

Tel: 2 519 966

# 71 Vazhaphavela Ave. Tel: 2201 211 info@redcafe.ge

Beliashvili Str. Tel: 253 07 97

Belle Ville

PREGO

PICASSO

84, Barnovi Str. Tel: 225 22 58

French - European barrestaurant Pleasant and cozy atmosphere High quality service, live music every day

15, Erekle II. Tel: 293 14 11 25, Tarkhnishvili Str. Tel: 225 25 16

4, Vashlovani Str. Tel: 298 90 86

26, l.Kiacheli Str. Tel: 293 65 53

DISCOVERY

Espresso Bar “RESPUBLIKA”

/24

37, Kostava Str. Tel: 298 37 67

2, MarjaniSvili Str. Tel: 2 999 723

Book Corner

13b, Tarkhnishvili Str. Tel: 223 24 30 contact@bookcorner.ge

Entree 13 Taktakishvili Str. 20 Rustaveli Ave. 19 Petriashvili Str. 7 Pekini Str. 78 Chavchavadze Ave. (Bagebi) 86 Aghmashenebeli ave.

16, Marjanishvili Str. Tel: 555 003151 www.facebook.com/RespublikaEspressoBar

VERA STEAKHOUSE

40, Chavchavadze Ave. Tel: 229 42 30

SIANG-GAN

Tel.: 599 21 53 83

CAFE CINEMA

Addr: 3 Vekua Street. (Trade Center GTC) Tel.: 2 93 61 38

41, Gamsakhurdia Str. Tel: 237 96 88

ENGLISH TEE HOUSE

5, Marjanishvili Str. Tel: 294 16 20 32, Paliashvili Str. Tel: 222 11 09

Literary cafe “MONSIEUR JORDAN” V. Gorgasali st.,17 Tel.: 275-02-07

Prospero’s Books

34, Rustaveli Ave. Tel: (+995 32) 2923 592

For advertising please contact: 577 741 700 marketing@finchannel.com

BUSINESSTRAVELCOM HOTEL AND AIRTICKET BOOKING: 2 999 662 | SKY.GE

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US Business in Georgia

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FINANCIAL

16 NOVEMBER, 2015 | FINCHANNEL.COM

Advertiser: The FINANCIAL. Contact FINANCIAL Ad Dep at marketing@finchannel.com