Issue #942 Business by Georgia Today

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Issue no: 942/76

• MAY 2 - 4, 2017

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

FOCUS ON ENERGY

We look into Georgia's energy security strategy & developments in the sector

PAGE 4&6

Discover North America, Africa & Asia with the Turkish Airlines Sales Festival NEWS PAGE 2

Georgia’s Energy Security in a Nutshell ISET PAGE 4

Electricity Market Watch GALT & TAGGART PAGE 6

PASHA Bank Partner of Int’l Business Forum in Batumi BY TAMZIN WHITEWOOD

n May 22-23, the International Business Forum is to take place in Batumi, an event organized by consultancy company “IBF” and supported by PASHA Bank. The main topic of discussion will be Leadership. As such, experience in this area was the main criterion when choosing the right

Georgian Wine, Food & Poliphonia PAGE 8

speakers for the event. Each of the six presenters is a leading authority in the field they represent: Pierluigi Collina – six times FIFA "Best Referee of the Year" and member of the UEFA Referees Committee; Marshall Goldsmith - an American leadership coach and author of several management-related books, one of the world’s mostinfluential business thinkers for the past ten years according to Thinkers50; Kevin Gaskell - Former CEO at Porsche and Lamborghini; Sean Fitzpatrick - rugby legend, former captain of the

New Zealand national rugby union team All Blacks, founder and CEO at Front Row Leadership; Dananjaya Hettiarachchi - the 2014 World Champion of Public Speaking, HR expert and trainer; and John King – co-author of the #1 New York Times bestseller “Tribal Leadership” and a motivational speaker. Attendance of up to 800 delegates from 14 countries is expected, amongst them representatives of small, medium and large enterprises, including startups, government and media. Continued on page 2

Behind the Scenes at Teach & Learn with Georgia PAGE 10

OPEN LETTER on Unfair Dismissal & Alleged TaxDodging PAGE 11 Prepared for Georgia Today Business by

Markets As of 28ͲAprͲ2017

STOCKS Bank of Georgia (BGEO LN) GHG (GHG LN) TBC Bank Group (TBCG LN)

COMMODITIES Crude Oil, Brent (US$/bbl) Gold Spot (US$/OZ)

INDICES

Price

w/w

m/m

GBP 36.00

+2,7%

+12,5%

GBP 3.55

Ͳ2,1%

GBP 16.25

+5,6%

+8,3%

Price

w/w

m/m

51,73

Ͳ0,4%

+0,8%

1 268,28

Ͳ1,3%

+1,3%

Price

w/w

m/m

GEOROG 04/21

105.45 (YTM 5.22%)

+0,2%

GEORG 04/21

BONDS

111.08 (YTM 3.82%)

+0,2%

+0,3%

GRAIL 07/22

110.45 (YTM 5.41%)

+0,1%

BGEOLN 07/23

101.05 (YTM 5.80%)

+0,0%

Ͳ0,1%

CURRENCIES

Price

w/w

m/m

GEL / USD

2,4450

+1,7%

+0,2%

GEL / EUR

2,6640

+3,3%

+0,9%

Price

w/w

m/m

GEL / GBP

3,1665

+2,8%

FTSE 100

7 203,94

+1,3%

Ͳ1,9%

GEL / CHF

2,4573

+1,8%

Ͳ0,0%

FTSE 250

19 615,36

+1,3%

+3,5%

GEL / RUB

0,0429

+0,9%

+0,2%

DAX

12 438,01

+3,2%

+2,4%

GEL / TRY

0,6885

+4,2%

+3,2%

DOW JONES

20 940,51

+1,9%

+1,2%

GEL / AZN

1,4239

Ͳ0,8%

Ͳ0,6%

6 047,61

+2,3%

+2,9%

GEL / AMD

0,0050

NASDAQ

+4,2%

MSCI EM EE

150,67

+4,3%

+0,7%

GEL / UAH

0,0921

+2,2%

MSCI EM

977,96

+1,7%

+0,8%

EUR / USD

0,9178

Ͳ1,6%

Ͳ0,7%

SP 500

2 384,20

+1,5%

+1,1%

GBP / USD

Ͳ1,1%

Ͳ3,8%

MICEX

2 016,71

+3,7%

Ͳ0,8%

CHF / USD

0,9946

Ͳ0,2%

+0,2%

MSCI FM

2 608,39

+0,2%

+0,7%

RUB / USD

56,9280

+0,5%

Ͳ0,2%

GT Index (GEL)

1 133,22

+0,0%

TRY / USD

3,5517

Ͳ2,4%

Ͳ2,9%

GT Index (USD)

931,07

Ͳ0,6%

+3,2%

AZN / USD

1,7000

+1,3%

Ͳ0,3%

0,7722

NEWS

GEORGIA TODAY

MAY 2 - 4, 2017

North PASHA Bank - Partner Discover America, of Int’l Business Africa & Asia with the Turkish Forum in Batumi Airlines Sales Festival

urkish Airlines is offering its passengers the chance to travel to Montreal, Toronto, Havana, Atlanta, Boston, Washington, Houston, New York, Los Angeles, Miami, Chicago, San Francisco, Bishkek, Guangzhou, Beijing, Tokyo, Hong Kong, Bang-

kok, Seoul, Phuket, Seychelles, Mauritius, Cairo, Antananarivo, and Tel Aviv with special fares. Round-trip flights are available from Tbilisi to the above destinations with fares starting at EUR 217 for passengers traveling between October 1 2017 and March 31 2018, provided that tickets are

issued between 25 April-16 May 2017. This special offer is all inclusive (all taxes, fees and surcharges) and subject to availability (due to limited seat capacity). Detailed information available on turkishairlines.com. Fares may vary in sales offices and travel agencies.

World Bank Approves EUR 47.2 Mln for Georgia BY NINO GUGUNISHVILI

Continued from page 1 “We are happy to see the increasing number of business events held in Georgia that bring together local and international delegates from various sectors,” said Anano Korkia, Head of PR and Marketing at PASHA Bank. “PASHA Bank always tries to support projects of this kind. The invited speakers will share their most interesting and relevant experiences with the attendees. We are glad to be one of the partners of the forum”.

“This unique forum will bring together world class speakers, business leaders, government officials, startups and representatives of media,” said Guga Kobakhidze, founder of IBF. “With leadership the main topic, we did our best during the selection process of each speaker and we expect they will share their best knowledge and practice with the delegates”. The International Business Forum will take place on May 22-23 in Euphoria Hotel Batumi. Detailed information and tickets are available at: ibf.ge.

Education Ministry to Prohibit Unhealthy Food in School Canteens BY THEA MORISON

eorgia’s Minister of Education and Science, Alexander Jejelava, says that unhealthy food will no longer be sold in school canteens and calls on school administrations to remove all unhealthy food from their school buffets. Jejelava said that monitoring will be carried out in every school in order to eliminate the sale of unhealthy food in Georgia’s educational institutions. “We will also hold a special information campaign in schools to transform them into healthy institutions. This is our priority,” he said. The news comes as a delight to many a parent. “My daughter is in the first year at a Georgian school,” said Katie Davies, one parent who was happy to hear of the new regulation. “She and her friends just recently started buying the various sug-

Photo source: edu.aris.ge

ary ‘juices’ the canteen sells, even when I ask her not to. I’m very happy to hear that this will be nipped in the bud and that Georgian schools will be following the good examples presented in western educational institutions. It definitely raises my hopes for the future of the education system here- every little counts!” Georgia’s Ministry Education and Science released a statement regarding the issue, saying that a recommendation has been implemented which envisages the prohibition of snacks, sweets and fizzy drinks sold in school buffets. “Unhealthy food products are readily available for pupils in schools, threatening their health,” the statement of the ministry reads. The ministry believes that the standards of healthy food should be raised in every school in the country, both private and public institutions. “Healthy food can help children to concentrate better and will facilitate their ability to more easily learn during lessons,” the statement reads.

he World Bank’s Board of E xe c u t i ve D i r e c t o r s approved the Second Programmatic Inclusive Policy Operation Project (DP02) for Georgia, in Washington DC, on April 28. The DP02 will aim at supporting the Georgian government to improve fiscal oversight of public institutions, advance budgeting and the framework for civil service reform, as well as improve the coverage and quality of social services and strengthen the monitoring of outcomes. Within the project framework, the World Bank approved financial resources of EUR 47.2 million to Georgia, coming from an EBRD flexible loan.

Minister of Finance of Georgia, First Vice Premier, Dimitry Kumsishvili, met with Cyril Muller, World Bank Vice President, during his working visit to the US last week, where the parties dis-

cussed the reforms realized by the Georgian Government within the DP02. An investor in Georgia since 1992, the World Bank’s capital investment in the country amounts to $2.27 billion.

Voyager Ltd on Board as Gulf Air GSA in Georgia

ulf Air, the Kingdom of Bahrain’s national carrier, has appointed Voyager Ltd as its General Sales Agent (GSA) in Georgia to represent the airline and sell Gulf Air services and products on its behalf. With direct flights between Bahrain International Airport and Shota Rustaveli Tbilisi International Airport starting from June 22, Voyager Ltd will facilitate ticket sales from/to Tbilisi and beyond, across the Gulf Air network. “Tbilisi is our latest addition to the Gulf Air network and we are happy to appoint one of the best travel agencies in Georgia as our GSA,” said Ahmed Janahi, Gulf Air Chief Commercial Officer. “With their expertise and history in the Georgian market, Voyager Ltd will help Gulf Air to establish itself. Voyager was

the first company that worked closely with the GCC market to promote Georgia as an attractive travel destination for travellers from the region and we are looking forward to the support that their experience will bring to our operations”. “It is an honor and privilege to represent Gulf Air in the Georgian market,” said Mariam Kvrivishvili, General Director at Voyager Ltd. “This truly is an important step for the development of Georgia’s tourism sector, as well as for the promotion of the country’s travel potential across Gulf Air’s network. I strongly believe that the partnership between Gulf Air and Voyager Ltd will develop dynamically and further support the achievement of mutually beneficial goals set forth by both companies”. Gulf Air will operate three weekly direct flights to/from Shota Rustaveli

Tbilisi International Airport, catering to leisure travellers from the GCC, MENA, Indian Subcontinent & Far East regions starting from June 22. Bahrain’s national carrier operates double daily flights or more to 10 regional cities, providing seamless connectivity for passengers travelling across its network via its efficient Bahrain International Airport hub. Voyager Ltd Taktakishvili Str., 10, Tbilisi TEL +995 322 400808/400909 OPEN: Mondays to Fridays 10:00 – 19:00, Saturday & Sunday – 11:00-16:00

BUSINESS

GEORGIA TODAY

MAY 2 - 4, 2017

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economic growth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists.

Georgia’s Energy Security in a Nutshell BY LEVAN PAVLENISHVILI & NORBERTO PIGNATTI

istening to discussions in professional circles and among policy makers, one can easily notice that the topic of energy security is often used as a reason to justify certain decisions or point out the problems existing in the sector. Energy security is frequently associated with energy “independence” - a condition that only few countries in the world can claim to have achieved. This leads the public to understand energy security in a very narrow sense, associated with the share of energy produced within the borders of the country, and with the diversification of supply. In reality, the concept is far wider, covering not only issues of self-sufficiency and/or diversification of supply, but also energy pricing and the environmental impacts of energy consumption. International organizations and economic literature provide different definitions for energy security. Larry Hagues (2011) summarizes those definitions, identifying three dimensions along which the energy

security of a country should be assessed: (i) availability (supply), (ii) affordability (cost) and (iii) (environmental) acceptability. Understanding the concept of energy security properly is very important for the formulation of energy policies and decision making on energy issues. For most household and industrial processes, different energy sources are usable interchangeably. So, to assess the level of energy security of a country it is important to: 1) consider energy sources as part of the country’s energy portfolio; 2) evaluate the impact of each energy source on each of the dimensions of energy security discussed above. Therefore, the first step to understanding how “energy secure” Georgia is would be to familiarize ourselves with the country’s energy mix [see below].

AVAILABILITY Natural Gas is clearly the most important source of energy for Georgia, representing more than 40% of all energy supplied. It is also the least diversified energy source. Roughly 99% of gas used in Georgia is imported from two sources: Azerbaijan and Russia. In coming years, Georgia is expected to be increasingly dependent on imports from Azerbaijan.

As the Minister of Energy recently stated, imports from Russia are costlier, thus in the future the country might switch to 100% imports from Azerbaijan. Challenges and relative merits of this development are discussed in a previous blog. Just as with natural gas, oil products such as petrol and diesel are also 100% imported. In this case, however, supplies are more diversified. Representing more than 27% of the country’s energy mix, oil products are imported from more than 6 countries (Romania, Bulgaria, Greece, Azerbaijan, Turkmenistan, and Kazakhstan), ensuring the supply portfolio is also diversified across different regions of the world (Europe and Central Asia). Furthermore, oil products are globally traded commodities; unless new (unexpected) constraints to imports emerge, access to new suppliers can be expected to remain fairly easy to achieve. The most secure energy source from the point of view of availability is definitely electricity, considering that roughly 70-80% of its generation comes from local hydropower. The current (relatively low) share of hydropower in the Georgian energy mix (roughly 15% of total energy consumed) could be increased if a larger fraction of the hydro potential of the country was utilized (the recently published “Georgia’s Energy Sector Development Strategy 2016-2020” estimates that only around 20% of economically feasible hydropower potential is utilized). This is particularly promising, as electricity can substitute for most household and industrial demands for energy, enhancing reliability and security of supply.

harm. In case the impact is more global, or of irreversible nature, the situation is more complex both in terms of quantification of damages and of identification and compensation of the victims. Failure to have polluters compensating the victims amounts to subsidizing the most polluting resources. From these considerations should be clear that achieving a precise measure of these impacts (and of the environmental acceptability of alternative energy sources) requires conspicuous efforts to assess and monetize pollution impacts. Looking at Georgia’s current energy mix, the most environmentally harmful energy source is definitely coal, due to its largest CO2, sulfur dioxide and nitrogen oxide emissions. The biomass resource, whose importance might be underestimated by the energy balance, is traditionally a renewable source of clean energy. However, firewood consumption in rural areas poses a large threat to the environment, as its sustained consumption can lead to deforestation. Thus, in the case of Georgia, biomass cannot be considered as secure source of energy. Mainly used in transportation sector, fuel is an increasingly challenging environmental problem for the urban air quality of Georgia. Although emissions from natural gas are relatively smaller compared those of other fossil fuels, natural gas is still one of the major sources of pollution. This is due to large share of natural gas in total energy supply of the country. From an acceptability point of view, the most secure source is undoubtedly hydropower, with more localized environmental impacts, which can be mitigated over time.

AFFORDABILITY

WHAT HAVE WE LEARNED?

Affordability is also a crucial dimension to consider when comparing different energy resources. Decisions of households and industries about what energy source to use for wide variety of purposes - from heating to producing electricity - finally boils down to their relative costs. Although different amounts of energy resources are needed for various applications, one can compare energy prices by converting sources in Tons of Oil Equivalent (TOE). Making this conversion for the highest retail prices for different resources shows that one TOE of electricity costs 2,498 GEL, one of natural gas costs 537 GEL, and one of petrol costs 2,546 GEL. Thus, from an affordability perspective, natural gas is the most secure source of energy, followed by electricity and oil products. However, this analysis may be misleading. For one, relative costs also depend on the efficiency with which energy sources are used. For example, using gas to generate electricity equivalent to a TOE in a low efficiency thermal power plant (with estimated 35% efficiency) will not cost 537 GEL, but rather 1,534 GEL, reducing the relative advantage of natural gas versus electricity generated with hydropower. Another important point relates to the structure of the market. Subsidies, taxes and regulations can significantly affect the ranking. Therefore, rigorous research of cost and price formation process on energy markets is required to be able to compare relative prices and obtain a clear picture of energy security from the energy source affordability perspective.

Even though, as we have mentioned, an appropriate analysis of energy security issues would require a much more thorough and complex analysis, we can draw some very important lessons from our relatively simple analysis. Developing electricity generation potential from hydropower definitely appears to be an energy security enhancing strategy for the country, according to all indicators. While in the short run the substitution of natural gas and oil products with electricity generated by hydropower is unlikely, recent technological trends – such as the increasing competitiveness of electric vehicles and the decreasing costs of storage capacity – indicate the substitution of less secure sources with hydropower might be soon increasingly feasible. Even the problem of the high relative price of electricity with respect to gas (which might be much less sharp if we consider the current expansion of gas networks and its expected impact on consumer tariffs), in fact can be attenuated by increasing the generation capacity of hydropower plants and by reducing the amount of electricity obtained through other sources (like gas-powered thermal power plants). Finally, an additional contribution to the phasing out of the least “secure” energy sources might also come from the increased utilization of other (renewable) energy sources. Overall, the future for Georgia’s energy secure looks relatively bright.

ACCEPTABILITY Environmental impacts associated with the consumption of energy resources can impose large costs on society. Non-irreversible local pollution and environmental degradation from energy resource use are relatively easier to address through direct compensation of those suffering from additional costs, or ensuring needed funding for mitigating

BUSINESS

GEORGIA TODAY

MAY 2 - 4, 2017

The Galt & Taggart Research team comprises Georgian and Azerbaijani finance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fixed income corporate research. For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at gt@gt.ge.

Electricity Market Watch BY MARIAM CHAKHVASHVILI

ector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agriculture, Wine, and Real Estate sectors in Georgia. As part of our energy sector coverage, we produce a monthly Electricity Market Watch, adapted here for Georgia Today’s readers. Previous reports on the sector can be found on Galt & Taggart’s website - gtresearch. ge.

NON-RESIDENTIAL SECTOR LEADS ELECTRICITY CONSUMPTION GROWTH IN 2016 Electricity consumption by the residential sector, which accounted for one-third of the electricity supplied by distribution companies, was down 1.6% y/y in 2016. The rest was consumed by non-residential subscribers, whose usage was up 12.5% y/y in 2016 and contributed 5.2 percentage points to the overall 6.2% increase in Georgia’s electricity consumption. The key drivers of growth were new commercial entities added to the distribution grid. Telasi posted the largest increase (+28.7% y/y) in the non-residential sector, followed by Energo-Pro Georgia (+5.7% y/y) and Kakheti Energy Distribution (+2.9% y/y). Commercial users have the right to purchase electricity via bilateral agreements, but most of them prefer to go through the distribution companies, largely because of existing price regulations.

NET METERING INITIATIVE GAINS FOLLOWERS Eight users across various regions in Georgia (0.15MW total capacity) have taken advantage of the net metering mechanism, introduced in the legislation last year. Based on changes in legislation, energy consumers are allowed to install micro power plants (less than 0.1MW of installed capacity)thatuserenewableenergysources (mainly solar panels) to meet their own energy needs and supply surplus energy to the DSOs (Telasi, Energo-Pro, or Kakheti Distribution). The amount of energy consumed and supplied will be netted on an

annual basis for settlement with the DSO. According to a recent initiative, revenues generated by supply of electricity from micro power plants will not be subject to taxation. Successful implementation of the initiative should support development of the sector.

TPPS CONSUMED LESS NATURAL GAS IN 2016 Natural gas consumed by TPPs was down 19.5% y/y in 2016, while electricity generated by TPPs decreased by only 6.0% y/y. Commissioning of the more efficient Gardabani combined cycle power plant at the end of 2015 was the main driver of this improvement. Gardabani CCGT accounted for half of TPP-generated electricity in 2016, partially substituting for the less efficient Mtkvari TPP and Tbilsresi blocks, which operated at full capacity in previous years.

ELECTRICITY CONSUMPTION AND GENERATION – MARCH 2017 Domestic consumption increased 8.4% y/y in March 2017, with distribution companies driving the growth. Consumption of distribution companies increased 8.2% y/y: consumption was up 7.7% y/y by Telasi, 8.5% y/y by Energo-Pro, and 7.3% y/y by Kakheti Energy Distribution. The Abkhazian region’s electricity usage was up 6.8% y/y, while consumption by eligible consumers was up 12.4% y/y. Electricity exports were negligible. Electricity transit from Azerbaijan to Turkey amounted to 4.0 GWh in March 2017, down 84.1% y/y. The large reduction in transit was largely the result of lower transit capacity due to the high level of electricity imports. Total electricity supply from domestic sources was down 12.2% y/y, while imports more than doubled (+133.6% y/y) in March 2017. Only half (51.7%) of domestic consumption needs was met by hydro generation; the rest was satisfied by thermal (17.9%) and imported (29.6%) electricity, while the newly built wind power plant accounted for 0.8% of total electricity supply.

UNFAVORABLE HYDROLOGICAL CONDITIONS NEGATIVELY AFFECTED HYDRO GENERATION The main reasons for the change in the electricity supply mix were bad hydro-

logical conditions affecting most HPPs and a decreased water level in the Enguri dam due to the HPP’s 10-day closure in February. Total hydro generation decreased 21.7% y/y, with generation down 34.6% y/y by Enguri/Vardnili and 21.6% y/y by other regulated HPPs. Despite bad hydrological conditions, deregulated HPP generation was flat (+0.4% y/y), mainly due to the addition of Dariali HPP (108.0MW), Khelvachauri HPP (47.5 MW), and other new HPPs (9.4MW) to this group at the end of 2016. The drop in hydro generation was partially compensated by TPPs, which posted a significant increase (+26.5% y/y), albeit from a very low base in March 2016 (-56.2% y/y). Only one TPP, the Gardabani CCGT, operated at full power for the entire month, while other TPPs mainly provided reserve for the system. The guaranteed capacity fee was down 59.0% y/y to USc 0.34/kWh, with guaranteed capacity provided by each of the five sources for the entire month.

ELECTRICITY IMPORTS AT A HISTORICAL HIGH The share of electricity imports in total electricity supply was at a historical high of 29.6% in March 2017. More than half of the imported electricity came from Azerbaijan (56.8%), with the rest imported from Russia (27.0%) and Armenia (16.2%). 61.6% of the Abkhazian region’s consumption was satisfied by Enguri/Vardnili generation, while the rest was met through imports from Russia via the Salkhino line.

ELECTRICITY PRICES IN GEORGIA The average price of imported electricity in Georgia was USc 3.9/kWh, up 38.0% y/y from the fully subsidized price of USc 2.8/kWh in March 2016 (-57.7% y/y). The main reason for such low prices in the last two years was the subsidized price of electricity imported from Russia (via the Salkhino line) to meet the Abkhazian region’s continuously increasing demand. Wholesale market prices in Georgia increased 48.5% y/y to USc 5.1/kWh33.8% of total electricity supplied to the grid in March 2017 was traded through the market operator, with the rest traded through bilateral contracts. The increases in the price and share of balancing electricity were due to the high level of imports in March 2017.

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BUSINESS

GEORGIA TODAY

MAY 2 - 4, 2017

Georgian Wine, Food & Polyphonia INTERVIEW BY NINO GUGUNISHVILI

est known as the owner of wine producer Pheasant’s Tears and a talented and energetic businessman well versed in the Georgian ‘tamada’ traditions, John H. Wurdeman first discovered Georgian polyphonic singing when he decided to relocate to Georgia back in 1995. Before coming up with the idea of winemaking and opening a restaurant in Sighnaghi, he and his Georgian wife Ketevan traveled around the country collecting traditional music and creating paintings, since, apart from being a successful winemaker and restaurateur, John is also an artist with a graduate degree from the Surikov Institute in Moscow. We met with John in his latest restaurant, the cozy Poliphonia, at 23 Amagleba Street, Tbilisi, to talk about wine, Georgian food and two exciting upcoming events: a unique tasting to be held at Poliphonia restaurant on May 5, where guests will have the chance to compare eight different regions of Georgia through wine, cuisine and polyphony, and Zero Compromise, a tasting of natural wines presented by the wine growers themselves, on May 12, from 11am to 5 pm. “We opened Poliphonia on my birthday on the December 4,” John told us. “It took us months to get ready, but it was an idea we’d had for quite a while. I was always interested in the notion of authentic polyphony. There’s always a more polished version you get from academic choirs, and the kind of polyphony that was heard in soviet times was a lot more theatrical, closer to European music rather than the real root of the culture. While I was travelling from village to village collecting songs to record and document, I discovered that the food in the villages wherever I went- in Guria, Svaneti, Imereti, Kakheti and Tusheti -was amazingly vibrant when made in the family home: their own cheese, their own bread, their own wine. And then to come back to Tbilisi and see that most of the restaurants had more or less the same 20 dishes on the menu and the wine had nothing to do with the wine Georgians really love to drink,” he says. He decided to open a winery in 2007, and a restaurant in Sighnaghi the following year, in order to have a place to

showcase his discoveries. “In wine, you have minerality, acidity; you have food qualities and the tension between them; the vibration between them is what makes the wine exciting. When you’re building a dish, you also need the same kind of tension,” he explains, comparing the creation of wine and cuisine with the tonal art of polyphony. “My friends and I always had the problem that you could find our wines in Paris or Tokyo, but not in Tbilisi, because we only had small amounts and most of the commercial restaurants were not interested in such a limited supply. So, we decided to tell a story and make a presentation but it was a challenge for us to show wine writers and wine importers our work as we’d go to Tbilisi and there was nowhere to taste our wine. That’s why we started gVino Underground five years ago. It’s owned by six wine makers and is more of a bar than a restaurant, offering small tasters to accompany the wine. The downside was that when people got hungry, they would go to other restaurants nearby, some of which had good food but no sensitive wine list. That gave birth to our Azarpesha.” Poliphonia and Azarpasha are restaurants owned by John and his business partners Nino Mamulashvili and Luarsab Togonidze. John heads the kitchen in Poliphonia, while his wife leads the kitchen in Azarpesha. The philosophy and criteria in each of their restaurants is, according to John, that they prefer “wild” food- local and organic, natural and seasonal. In Azarpesha, there’s a bit of fusion, with cuisine from the empires that invaded Georgia: Arabic, Persian, Greek, Roman and Turkish, but they also have ancient Georgian

Very few cultures have a national cuisine with so much diversity in food and wine

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recipes, alongside recipes from Georgian villages that are lesser known. Some of the dishes are very traditional but unusual and some are totally new. In all three restaurants, the idea is not to promote Georgian wine, but to promote natural wine and Azarpesha and gVino Underground have hundreds of such wines on their list. “The idea of Poliphonia is to have a very short menu and wine list that can change very dynamically and quickly,” John tells us. “While each restaurant has its own direction, the main philosophy is the same. And Poliphonia features live music on Saturdays- we have lots of regulars who appreciate polyphonic singing”. We move on to discuss the upcoming festivities, which are open to the public. “The event on May 5 is a kind of explanation what I wanted to do with polyphony. We’ve discussed how climate and landscape influences wine but sometimes we have to remember that there’s also a history. There’s a reason why Adjarians are different from Kakhetians, or Svanetians are different from Imeretians, and very few cultures have a national cuisine with so much diversity in food and wine. There’s an interesting element in wine and food pairings. People do it all over the world, but here we’re taking eight different regions of Georgia: a dish from that region, a wine, and a polyphonic song, to compare, for example, the way Imeretians cook, the style of wine they make, and the way they sing in polyphonic music. The whole idea of the event is to understand that even in Georgia, as a small country, the way that Georgians feel and express themselves from region to region is very different.” The second event, Zero Compromise, to be held on May 12, is a natural wine fair to present winemakers who grow their vineyards without chemicals, and without adding anything to the wine during the winemaking process. “It’s about taking a risk to get something real, a real transparent journey in a glass back to the vineyard,” John says. “When we did this two years ago, there were so few natural growers that we were able to fit into gVino Underground. There are around 65 - 70 natural growers now; things are changing, with more young people and females making wine. So, we’ll be dividing them between the three different restaurants in Sololaki, all within walking distance from each another. For 25 GEL, people will get an all-inclusive ticket to the three restau-

rants, a glass with a logo of Zero Compromise, a glass holder and a map that shows how to get to the three locales, as well as a list of the growers. We didn’t want to separate growers by region, so in each place there will be a little Imeretian, Gurian, Kartlian, Kakhetian and Meskhetian. And all three restaurants will be serving small bites of food so that people can also get a feel for the different kitchens of the restaurants, and to help them get through the tasting alongside over 30 wine importers and wine writers from around the world. We’ll only sell 400 tickets [from the restaurants on the day], making it ‘first come first serve’. The beautiful thing is that it gives people both visiting Georgia and

living in Tbilisi an opportunity to speak one-on-one with the ones who make the wine,” John says, adding that he hopes to hold the event annually. Natural wine is the fastest growing niche in the international world wine market today. Bloomberg estimates that by 2020, five percent of the world’s wine market is going to be only natural wine. “Quality is the most important thing. At the end, it has to be a great wine. There’s a big demand right now, with natural wine makers often selling out. I hope the tendency will grow. The only thing we can do to compete is in quality. And that five percent may sound like a small amount, but for Georgia it’s huge,” John concludes.

BUSINESS

GEORGIA TODAY MAY 2 - 4, 2017

Adopt a Tree for 10 GEL: Restore Georgia’s Rating Worsens in Freedom of Borjomi Forest Campaign Press Report 2017

BY NINO GUGUNISHVILI

BY THEA MORRISON

n April 25, a massive social campaign to restore Borjomi forest was begun with the aim of uniting companies in Georgia to help fully restore the Borjomi National Park by planting 750,000 trees by August 8, 2017. Borjomi National Park is one of the largest in Europe, with a variety of unique plants and rare trees. Agadgine.ge is a new campaign initiated by the Business Information Agency (BIA) and Treepex Startup aimed at restoring the areas of Borjomi Forest severely burned during the 2008 August War. A 950-hectare area consisting of pine and leafy forest was damaged, with 250 hectares completely destroyed. Over the years, the ecological situation has become increasingly difficult as the damaged areas are not renewing themselves naturally, leading to the risk of landslides and floods. The local population has lost social benefits and economic revenue from the forest and the air quality has also worsened considerably, causing a threat to the health of individuals living or holidaying in the area. The only hope is human intervention. The first-of-its-kind in Georgia campaign offers both individuals and companies the chance to adopt trees, which will be planted and cared for during the first five years of their lives. Companies that contribute to the restoration of an area of forest will have that area named after the company. The restored area and number of trees within will be clearly visible on a map which will also display the company's logo. The map can then be integrated with the company's own

T Burned Forest of Borjomi: "During the war between Russia and Georgia, in August 2008, the territory of Borjomi National Park was bombed by Russian aircraft several times, which caused a forest fire. This photo was shot a couple of months later, spots of new grass burst through the ashes. Nika Tsiklauri

website and social media platform and the donor company will then be recognized on the BIA platform as a company with an active CSR policy. A calculator will count the emissions absorbed by the trees planted, a certificate proving tree planting and forest restoration will be given, and the progress of each tree will be monitored and sent to donors during the first five years. At time of going to press, 4,512 of the planned 750,000 trees have been adopted. The “deadline” for this massive restoration is August 8 of this year—the anniversary of the war that damaged the area. One eager participant in forest restoration this year is PASHA Bank. “In 2016, we decided that in 2017 PASHA Bank would actively participate in green projects, and we’ve made a number of seri-

ous steps in that direction,” said Anano Korkia, the marketing manager of PASHA Bank. “One of the first things we did was to plant 2017 Georgian pine trees in Borjomi-Kharagauli Park, towards the rehabilitation of the burned forest. It was a symbolic New Year gift for our partners. This project was important both in terms of rehabilitation works and in terms of raising awareness about the problem. We hope that more private sector representatives will join this generous initiative.” The website is currently only in Georgian but there are plans to have it translated into English soon. At present, with help from a Georgian speaker, it is very easy to fill in your personal or company details and adopt a tree. Go to: aghadgine.ge/ka

he Freedom House organization released a report named “Freedom of the Press 2017-Press Freedom's Dark Horizon,” in which Georgia’s ranking has worsened, though it is said to have the freest media environment in the Caucasus region. The Freedom of the Press report assesses the degree of media freedom in 199 countries and territories, analyzing the events and developments of each calendar year. Each country and territory receives a numerical score from 0 (the freest) to 100 (the least free), which serves as the basis for a status designation of Free, Partly Free, or Not Free. Georgia received 50 points and was ranked 102nd, which means that it remains in the category of partially free countries. However, Georgia’s ranking was better in 2015 - 96th (49 points) and 2014 - 93rd (48 points). Based on the points, Georgia is ahead of Eastern European states including Belarus, Ukraine and Moldova. “Global press freedom declined to its lowest point in 13 years in 2016 amid unprecedented threats to journalists and media outlets in major democracies and new moves by authoritarian states to control the media, including beyond their borders,” the report reads. The organization says that out of 199 countries and territories, 61 were rated Free, 72 as Partly Free and 66 as Not Free. “Only 13 percent of the world’s population enjoys a Free press, that is a media environment where coverage of political news is robust, the safety of journalists

is guaranteed, state intrusion in media affairs is minimal, and the press is not subject to onerous legal or economic pressures,” the document reads. The world’s 10 worst-rated countries and territories in terms of media freedom were Azerbaijan, Crimea, Cuba, Equatorial Guinea, Eritrea, Iran, North Korea, Syria, Turkmenistan, and Uzbekistan. Among the countries that suffered the largest declines were Poland, Turkey, Burundi, Hungary, Bolivia, Serbia, and the Democratic Republic of Congo.

Photo source: Freedom House

BUSINESS

GEORGIA TODAY

MAY 2 - 4, 2017

Behind the Scenes at Teach & Learn with Georgia INTERVIEW BY KATIE RUTH DAVIES

each and Learn with Georgia (TLG) is a progressive education movement initiated by the previous Georgian government and administered under the Georgian Ministry of Education and Science. It recruits native English, French, German and Chinese language speakers to co-teach alongside local teachers in public schools throughout Georgia. TLG aims to improve Georgia’s nationwide foreign language proficiency in an effort towards further participation in the global community. GEORGIA TODAY spoke to Program Manager Tea Vakhtangadze who began her TLG career as a regular co-teacher, working alongside a TLG volunteer, in 2011.

HOW HAS THE PROGRAM CHANGED SINCE ITS BEGINNINGS? The TLG program is now more streamlined, with fewer volunteers than in previous years. We have more specific guidelines and goals for all the participants in the program (volunteers, co-teachers, school staff, etc.), guiding the way the interaction with schools, volunteers and communities occurs. We try to assess and monitor the entire process much more carefully than in previous years. There are also more teacher trainings and more frequent monitoring trips to the regions to observe lessons during the school year.

WHAT CHALLENGES HAVE YOU FACED? A reduction in the number of foreign teachers has been the biggest challenge- and attracting qualified personnel. We addressed this problem by contacting university departments directly, by building relationships with German, French, American, Canadian, and British universities and organizations in order to interest qualified applicants. We also used French and German job sites for native language teaching overseas. We regularly update our Facebook and website pages with interesting posts, information, small projects, and regular updates on the progress of the academic school year. We are trying to build up a stronger presence online. There have also been communication problems across cultural lines. To try to overcome such issues, we now more carefully choose schools and home placements, selecting families and schools that show the strongest interest in working constructively with our TLG volunteers. And we created specific modules in our training sessions which look at intercultural communication issues. For many volunteers, the reality of the socio-economic situation in the regions can come as a shock. When choosing placements for TLG volunteers, we take into consideration their personal preferences (such as mountainous regions, or places which might have more favorable climates for them, etc). Despite some placements not having the best home facilities, the place might still have something else of great interest for volunteers, such as it being a historic location or one of scenic beauty. To overcome the issue of foreign language proficiency with local teachers, we organize regular training and testing for local teachers participating in the program. All this is organized to help them to pass Teacher Professional Development exams and advance in their teaching careers. At times, there are scheduling issues- with the local foreign language teachers having limited availability to work within the frames of the program. The TLG program supports and encourages volunteers to help local teachers correct this imbalance by contributing their time after school to help with lesson planning, to seek out and attract teaching resources for their lessons which might otherwise be lacking, and also to hold language clubs or competitions (such as spelling bees), thereby making the teaching experience in the rural schools more productive and increasing the overall motivation of pupils. We conduct monitoring twice a year. In order to do this more effectively, we are continuously updating indicators and instruments to more accurately get a picture of how the program is succeeding in schools and what the level of involvement, enjoyment, and effectiveness is.

HOW WOULD YOU SAY THE PROGRAM HAS IMPROVED? We’ve made changes to the volunteer teacher selection process: namely, restricting target countries, making sure that the native language is English, German or French (as required), and ensuring that par-

ticipants definitely come with previous teaching experience. We broadened the program to include Chineselanguage volunteer teachers in 2013 and have been focusing on teachers' professional development in the regions since that year, as well as training both volunteer teachers and Georgian co-teachers together since 2014. We started narrowing the kind of contract we offer to volunteers, schools and host families to one full academic year only (i.e. no more half-semester contracts) and enacting new criteria in the selection of appropriate schools (since 2015). We also aim to increase the exposure of the volunteer teachers in their communities and schools: volunteers are being given new requirements to work alongside at least three co-teachers and to hold lessons for at least 25 hours per week. We have also established more regular testing of Georgian foreign language teachers.

HOW HAS THE PROGRAM AFFECTED THE LOCAL COMMUNITIES AND SCHOOLS? By improving foreign language skills, mostly in listening and speaking. We have regular training and testing for local teachers to help them pass Teacher Professional Development exams and advance in their teaching careers. Local teachers have mentioned in their feedback to us that communication with the TLG volunteers greatly helped them overcome barriers in their speaking and listening skills. We get consistent reports that lessons are more interesting and engaging for the students. In addition, competitions are organized which raise the motivation of students and teachers, for example, encouraging participation in an American-based international video competition held by the Smithsonian Institute, which focuses on interviewing a tradition-bearer in English by young students. This competition focused on connecting tradition in Georgia with modern technology. Students appear more interested in the learning of foreign languages as a direct result of our TLG volunteers’ efforts. The communities in the villages where TLG volunteers are placed also become more open and exposed to foreigners through this placement process, usually exchanging their cultural and culinary traditions.

WHAT ARE YOUR FUTURE PLANS FOR TLG? We want it to grow steadily and with increased quality control. We’d also like for every public school in Georgia to be given a fair and equal chance to work alongside a native-speaking volunteer. We also want to increase the involvement of French and German volunteers to make our program multi-purpose and meet the changing expectations of Georgian schools and pupils. We want to give them the opportunity to be involved in the larger world through this direct contact with TLG volunteers.

A TEACHER’S PERSPECTIVE: 24-year-old Californian (US) Natalie Taylor has been a TLG volunteer English teacher at Martkopi School No 1 since September 2016. Martkopi is one of the biggest villages in Georgia, boasting a population of 7,000, while the school accommodates around 600 students up to grade 12. “TLG has been an interesting experience. Teaching in the village is very hard. I like living here but the laid-back lifestyle can be frustrating,” says Natalie, who won’t be renewing her contract as she plans to move into the NGO sector. TLG teachers earn 600 GEL a month and pay 200 of that to the host families, which covers full board accommodation. “I lucked out with my host family,” Natalie tells us. “I can cook for myself if I want, and the eldest daughter speaks excellent English. Other TLGers aren’t so lucky. The students I work with are for the most part passionate and interesting, but they cheat a lot in exams. And while some older students are good at English, I had to give up the 11th grade group which doesn’t even know the English alphabet. That apathy extends to other subjects, too- I’ve no idea how they’ll pass their final exams and they have no aspirations to leave the village. The girls get married early on, the boys hang around drinking. The teachers here are overworked and underpaid but there’s only so far that excuse can go and I’ve had issues co-ordinating work with one teacher. The director doesn’t speak any English but is very responsive to my ideas. My four middle-aged co-teachers speak ok English, but things often get lost in translation, so my focus is on inspiring the students rather than the teachers, because I can reach the students more easily”.

BUSINESS

GEORGIA TODAY MAY 2 - 4, 2017

OPEN LETTER on Unfair Dismissal & Alleged Tax-Dodging BY ANNA ONOPRIENKO

n April 2016, Andrew Henderson, who is from the US, contacted me via Facebook asking if I would be interested in working for his company in Georgia. Prior to accepting the job at Andrew's company, Nomad Capitalist, I was working as a Coordinator for the Foundation Relations department at the World Wildlife Fund in Washington DC, where I was very happy and satisfied with my salary. However, ever since I first came to Georgia for an internship at GFSIS in 2012, it had been my dream to live and work in Tbilisi again. I first had a Skype interview with Andrew's girlfriend, Gabriela Deniewska (a former Nomad Capitalist employee) and later with Andrew. A few weeks after the interview, I received an offer of employment as the "Director of Immigration Georgia". I signed a contract valid until February 2017, with the possibility of extension. Nomad Capitalist is a consulting company that helps clients primarily from America and Western Europe move their business and residency for tax reduction, immigration and investments. Nomad Capitalist in registered in Hong Kong, however they also registered a branch in Georgia in 2014. Andrew knew how easy it was to open a company in Georgia and to apply for residency, so he took advantage of the system to use Georgia as one of the countries from which to operate his business. Originally, I thought I would be helping bring more foreign investment into Georgia and helping Georgia to progress through these investments in the country's development. The initial duties listed in the employment contract were: general research of business processes, interacting with clients, working with real estate agents and developers in Georgia, assisting the company in locating new revenue sources, leading client tours in Tbilisi and to personally promote immigration and investment in Georgia. However, when I arrived in Georgia at the end of July 2016, I realized that my job was more about helping foreigners save money on their taxes - some-

times in ways that seemed questionable. I was also expected to be on-call to pick up Andrew's mail, call Andrew's internet provider and handyman, arrange taxis for Andrew and his girlfriend (on weekends, too), call the veterinarian, and other duties unrelated to the tasks listed in my contract. I was basically working as his personal assistant, in addition to the original job description. Furthermore, previous clients would often email me with questions that I was not trained to answer, as they were past clients working on residency outside of Georgia. Andrew was not always clear regarding how to handle these inquiries. Something I found surprising about Andrew was his affinity for collecting passports from around the world. I know that he applied for Georgian citizenship while I was still at Nomad Capitalist. I also worked on helping Andrew apply for Comoros Islands citizenship, which he later received. It is unclear whether he is still a US citizen. Even though Andrew travels frequently, his primary residence is in Georgia, and I can only assume that he has Comorian citizenship for tax shelter purposes. Another concern arose early in my employment at Nomad Capitalist - my first salary of $1,500 was paid in cash. I was also surprised that I was getting paid in dollars instead of Georgian Lari, as companies in Georgia are legally obligated to pay salaries in GEL. Furthermore, when clients paid Andrew for the services he performed in Georgia, that money was always paid into foreign bank accounts - never to his Georgian company. For example, when clients paid $15,000 for the service of obtaining Georgian citizenship, that money was transferred to either the US, Hong Kong or Singapore bank accounts that Andrew owned. When Andrew paid his Georgian lawyers who handled the clients, instead of paying the law firm directly, he paid the lawyer to his personal bank account. I believe that all of this was done to avoid paying corporate and personal income taxes on Georgian territory. On October 17, 2016, Andrew came to my co-working space at Vera Loft and told me that it “had been nice to know me,” but he would “prefer to do the job on his own”. Andrew told me not to come into work the next day and that I would

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get paid for the full month of October. There had never been any warnings from him or any indication that he planned on firing me. I was shocked and humiliated, since he was not even respectful enough to give me 30 days' notice. When I emailed Andrew and his accountant Dan Cadieux asking how Nomad Capitalist was going to compensate me for breaching the contract, which was legally binding for at least 3 more months, they offered me an additional $750 and a positive reference letter. Since I still didn't know what I had done to deserve getting fired so abruptly, in November I sent Andrew a letter asking for further details regarding why he had dismissed me. Cadieux responded: "Andrew and I have discussed your letter, along with our corporate lawyer, and we are unable to provide you any additional information. We wish you all the best in your future endeavors." When I informed Andrew that I would take the matter to court, he tried to prove that I was a remote employee of the Hong Kong company and not the Georgian company. But how could that be the case, when my job required me to live in Georgia? I dealt with Georgian legislature and public services when working with clients applying for Georgian residency. Andrew had registered Nomad Capitalist in Georgia, but it seems that he wanted the work done through his Hong Kong company to avoid paying taxes in Georgia. I had left everything in the US to pursue this dream of living in Georgia. Instead, I was fired from my job in a humiliating way and also discovered that I was working for a company that is not operating in Georgia in an entirely legal manner. Andrew Henderson's actions were unfair to our contract for a guaranteed term of employment and also unfair to the legal system of Georgia, a country with already very generous business laws. I decided to write about my experience to warn others about Nomad Capitalist, and to invite the Georgian authorities to look into the company's business practices. GEORGIA TODAY tried to contact Andrew Henderson for comment but received no response. The case, according to Ms Onoprienko’s lawyer, who we did speak to, is ongoing in the Georgian Court.

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