Issue #1156 Business by Georgia Today

Issue no: 1156/183

• JUNE 4 - 6, 2019

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue... Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

Agri Review May 2019: The Sector at a Glance ISET PAGE 4

FOCUS

ON TBILINOMICS Georgia’s Revolutions & Economic Development: from 2004 to Now

BUSINESS PAGE 5

11th Local Economic Development Forum in Tbilisi

PAGE 6

PM: Pension Agency Investment Board Members Selected BY THEA MORRISON

Poti & Anaklia Battle for Deep-Sea Dominance

eorgian Prime Minister Mamuka Bakhtadze stated that Pension Agency Investment Board members have been selected. The PM made the statement while delivering a speech in the parliament last week. Bakhtadze named the members of the board and said that the accumulated pension system is the right way forward and is is used by successful market economy countries. “In the Investment Board are qualified persons, among them the former head of the Finnish pension fund, the former head of the French pension investment fund, the former J.P Morgan Deputy Director,” he said. Continued on page 3 Image source: sowetanlive.co.za

BUSINESS PAGE 7

What is Cyber Camp? BUSINESS PAGE 13

US Open to Negotiations with Iran, Iran Dismisses Offer POLITICS PAGE 12

MIA Says Tbilisi Pride Cannot Take Place Outdoors, Cites Safety Concerns SOCIETY PAGE 12 Prepared for Georgia Today Business by

Markets As of 31ͲMayͲ2019

Price

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Bank of Georgia (BGEO LN)

GBP 16.40

Ͳ2,7%

Ͳ4,9%

GEOROG 04/21

104.14 (YTM 4.44%)

+0,4%

Georgia Capital (CGEO LN)

STOCKS

GBP 9.67

Ͳ0,8%

Ͳ5,2%

GEORG 04/21

105.77 (YTM 3.63%)

Ͳ0,0%

Ͳ0,3%

GHG (GHG LN) TBC Bank Group (TBCG LN)

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

Price

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m/m

BONDS

GBP 2.50

+2,0%

+15,7%

GRAIL 07/22

107.91 (YTM 4.97%)

+0,3%

+0,2%

GBP 16.28

Ͳ1,6%

Ͳ0,1%

GEBGG 07/23

101.93 (YTM 5.47%)

Ͳ0,1%

Price

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CURRENCIES

Price

w/w

m/m

64,49

Ͳ6,1%

Ͳ10,7%

GEL / USD

2,7800

+3,0%

1 305,58

+1,6%

+2,3%

GEL / EUR

3,1080

Ͳ0,3%

+2,6%

GEL / GBP

3,5134

Ͳ0,7%

INDICES

Price

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GEL / CHF

2,7840

+0,3%

+5,0%

FTSE 100

7 161,71

Ͳ1,6%

Ͳ3,0%

GEL / RUB

0,0425

Ͳ1,6%

+1,9%

GEL / TRY

FTSE 250

18 970,25

Ͳ0,8%

Ͳ4,3%

Ͳ0,4%

0,4765

+4,2%

DAX

11 726,84

Ͳ2,4%

Ͳ5,0%

GEL / AZN

1,6405

+0,0%

+2,9%

DOW JONES

24 815,04

Ͳ3,0%

Ͳ6,1%

GEL / AMD

0,0058

+3,6%

+5,1%

7 453,15

Ͳ2,4%

Ͳ7,4%

GEL / UAH

0,1037

Ͳ1,5%

+1,2%

MSCI EM EE

171,25

+1,6%

+1,0%

EUR / USD

0,8954

+0,3%

+0,2%

MSCI EM

998,00

+1,2%

Ͳ7,6%

GBP / USD

0,7916

+0,6%

SP 500

2 752,06

Ͳ2,6%

Ͳ5,9%

CHF / USD

1,0006

Ͳ0,2%

Ͳ1,7%

MSCI FM

2 665,29

+1,6%

Ͳ1,0%

RUB / USD

65,4446

+1,5%

+0,9%

GT Index (GEL)

1 582,68

TRY / USD

5,8391

Ͳ4,0%

Ͳ2,1%

GT Index (USD)

1 208,13

AZN / USD

1,7001

+0,0%

NASDAQ

+3,3%

NEWS

@entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you: Fruit and vegetable chips produce ‘Gemuani’ is set to enter the European market. Director Nana Tordia says they’ll be sending chips and the separate ingredients. Production already has IFS certification and offers unique natural products without additives, so keeping 98% of the vitamins. Negotiations are underway with two international companies. Gemuani is also planning to add a new line in dairy products, meat and fish. The Gemuani factory was launched in Zugdidi Municpality in 2018 and boasts kiwi and hazelnut plantations on its territory. Demand for tatara (thickened and boiled grape juice) products is increasing and France has been added to the list of countries exporting ‘Grape’ company products. Founder David Ramazashvili says that a new factory will be built on 700 sq.m. and is expected to open this autumn. Churchkhela and tatara are among the products of Grape sent for sale in Germany, Austria, the USA and Poland. There are only five products, and due to demand from the USA, tatara with pistachio is set to be added to the assortment. Meet Nana Bigvava, sociologist and political scientist and now tea producer. She started out without agricultural experience in a government project to rehabilitate Georgian tea plantations and went on to set up in Martvili, Samegrelo, growing Black, Green and White tea on 35 hectares. All have received positive feedback. The product is to be launched under the ‘Megruli Chai’ (Megrelian Tea) brand name. The construction of a factory is now underway and is to open in 2020. Bigvava aims to have Georgian tea leading both the local and international markets. Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on business@entrepreneur.ge

GEORGIA TODAY

JUNE 4 - 6, 2019

Philippino Tourist Dies Paragliding in Gudauri BY AMY JONES

Philippino tourist has died in a paragliding accident in Gudauri, reported the Ministry of Internal Affairs. The tourist was paragliding from Gudauri with a guide when they lost control of the paraglider over the Gursky Gorge and fell into the Aragvi River. The guide, from Georgia, survived the accident. The Ministry of Internal Affairs has launched a criminal investigation into the accident. If the guide is found guilty of “causing death by negligence” he could face two to four years in prison.

Photo source - Tripadvisor

Rikoti Tunnel Maintenance Works to Begin on 3 June BY AMY JONES

T Photo source - pia.ge

he Roads Department of the Ministry of Regional Development and Infrastructure of Georgia has announced scheduled maintenance work will be carried out at the Rikoti Pass from 3 - 7 June. Traffic will be restricted from 8 am tomorrow and redirected to a secondary road. The tunnel will be shut to all types of vehicles. The Rikoti Pass is 143 kilometers from Tbilisi on the Tbilisi-Senaki-Leselidze road. The closure will affect people traveling from Tbilisi to the West of Georgia, including Kutaisi and Batumi.

BUSINESS

GEORGIA TODAY JUNE 4 - 6, 2019

International Investment Forum - Kakheti 2019 BY KETEVAN KVARTSKHELIYA

n May 30, the Radisson Collection Hotel, Tsinandali Estate Georgia hosted the International Investment Forum – Kakheti 2019, seeing representatives of the government, diplomatic corps, high-ranking foreign investors, as well as nearly 20 international and over 150 Georgian companies as the participants and attendees. The platform of the International Investment Forum, aimed at introducing the high investment prospective of the region of Kakheti and attracting investors, boasted various panels on different topics of crucial importance, including the economic growth of Georgia and the investment capabilities of the country, the potential of agriculture in Kakheti and opportunities for the tourism and hospitality industries. One of the panels of the forum was dedicated to the investment potential in the field of renewable energy and natural resources of the country. The topic of Georgia’s com-

petitiveness on a local and global scale was also discussed within the frames of the event. The Prime Minister of Georgia, Mamuka Bakhtadze, delivered a speech at the forum accentuating the importance of regional development for the Government of Georgia and the high potential of Kakheti in this regard. "We are placing special emphasis on regional development. We believe that stronger regions define a stronger Georgia,” the PM said, adding that the imprudent economic policy of the past few years had led to the creation of a number of challenges. “According to our estimates, as little as 25% of Kakheti is used, which means that we have enormous economic development resources and, most importantly, inclusive development resources in this most beautiful region," stated the PM. "Kakheti is Georgia's most beautiful region, with a great history and traditions. It is the cradle of wine, and it has made a tremendous contribution to our culture,” the Head of the Government went on, noting also that the progress-

Image source: Enterprise Georgia

ing viniculture of Kakheti, the unique history of the region and its potential in terms of cultivating vegetable crops are

to greatly contribute to the development of the region and to attracting multiple investors.

Maia Tskitishvili, Vice Prime Minister and Minister of Regional Development and Infrastructure of Georgia also addressed the audience at the event, speaking about the major infrastructural projects that are being carried out in Kakheti, and announced a number of upcoming initiatives. She also mentioned that investments of approximately 2 billion GEL are to be allocated for infrastructure, road development projects in particular, in 2019 alone. George Sharashidze, Publisher of Georgia Today, took to the stage as the moderator of the panel “Investment opportunities in tourism and hospitality,” which covered a number of paramount areas related to the field. Within the scope of the panel, it was announced that a new company is to be launched on the Georgian market. Kerten Hospitality, a major property management company which plans to engage in the country’s hospitality industry and present hotels of interesting and innovative concept in Tbilisi and Kakheti. It was also noted that Kakheti is preparing for the launch of a new airport, which will much increase the importance of the region.

PM: Pension Agency Investment Board Members Selected Continued from page 1 The five candidates were selected by a special Qualifying Commission, however, they need MP approval to finally take the positions. The international competition to select the five members of the Investment Board was announced in March. These members will be responsible for determining the investment policy of the Agency over the next five years, developing an investment policy document to be submitted to the Pension Agency Director for approval, modifying investment policy documents,

quarterly monitoring and evaluation of all pension investment activities, assessing the compliance of investment activities with the investment policy document, and selecting specialized depositors and asset management companies. The annual salary for the given position is set to be $60,000 (GEL 160,000). All the travel costs of the employees will be covered by the Pension Fund. The board members will have to travel to Georgia at least once per year. Their working hours will amount to 72 hours, which makes only 9 working days in total. The chairman of the board will be elected

with a majority of votes. In addition, in order to be selected as a member of the investment board, the applicants must have experience of at least 10 years working in the field of finances, investment, economics, risks management or related sectors. The members of the board are: 1. Timo Viherkenttä, the Executive Officer of the Finnish State Pension Fund, who also worked in the Ministry of Finance in his country. 2. Michael Ridley, an adviser to the Finance Minister of Iceland and former Deputy Director of J.P. Morgan's London representation.

3. Davit Tsiklauri, Chief Financial Officer of the Bank of Georgia until April 2019. He also worked at TBC Bank for a number of years. 4. Olivier Russo, the Director of the Investment Fund of the Pension Agency of France. He also worked at the European Bank for Reconstruction and Development London Branch. 5. Jean-Frederic Paulsen, a former adviser to the Minister of Economy and Sustainable Development of Georgia, Natia Turanava. He was also adviser to Turnava’s four predecessors. The new law on pension reform, estab-

lishing the accumulative pension system, took effect on January 1 this year. Under the law, employees contribute 2% of their pre-tax salary, the employer contributes an amount equal to 2% of the employee’s pre-tax salary, and the government contributes an amount equal to 2% of the employee’s pre-tax salary to each employee’s pension fund. Georgians have access to their pension funds when they reach an official state retirement age – 60 for men and 55 for women. Self-employed people have the choice to participate in the pension scheme, but at 4% personal contribution.

BUSINESS

GEORGIA TODAY

JUNE 4 - 6, 2019

Agri Review May 2019: The Sector at a Glance

n agro insurance program was started in September 2014. The program is subsidized by the state, and eight insurance companies participate in the program. The insurance package covers losses caused by hail, flooding, and storms, as well as by autumn frost (covered only for citrus). Since the beginning of the program, 49.3 thousand farmers (unique beneficiaries) have purchased insurance. The demand was particularly high in 2014 and dropped afterwards due to the reduction of the state subsidy from 90% to 70%, advancements to the program start date in later years, and the introduction of new requirements throughout program implementation. While in 2016 and 2017 there was an increasing trend in the number of insured farmers, in 2018 the number of beneficiaries declined again due to the requirement that the insured land plot be registered in the public registry (Figure 1). In 2018, the highest number of farmers was insured in Kakheti (2.92 ths.) and most farmers insured vineyards (3.66

in the following sub-groups: vegetables (5.6%), fruit and grapes (5.0%) and milk, cheese, and eggs (-3.8%). From an annual perspective (April 2019 vs. April 2018), the prices of food and non-alcoholic beverages increased by 5.9%, contributing 1.82 percentage points to the change in total CPI. In April 2019, the sharpest price changes on an annual basis were observed within the following subgroups: vegetables (25.8%), fish (13.9%) and fruit and grapes (-22.3%).

In April 2019, prices in the category of fruit and grapes increased by 5.0% compared to the previous month. On an annual basis, prices in this group experienced a significant -22.3% decrease. According to GeoStat data, the sharpest annual price decreases were observed for grapes (-40.9%), apples (-36.9%), plums (-34.7%), and lemons (-24.0%). The decrease in fruit prices might be the result of increased production. As the preliminary data on plant cultivation suggest, the domestic production of fruit

Source: APMA, 2019

PRICE HIGHLIGHTS On a monthly basis, the country’s price levels barely changed. The Consumer Price Index (CPI) in April 2019 was 0.2% higher than the previous month. While in comparison to April 2018, CPI experienced a significant 4.1% increase. For food and non-alcoholic beverages, the month-over-month prices increased slightly by 0.7%, contributing 0.21 percentage points to the change in total CPI. The main drivers were price fluctuations

(HS code 08XX) worth 24.5 mln. USD, which is 0.4 mln. USD more than the corresponding value in the previous year. The increase in imports is primarily driven by a 41% gain in hazelnut and other nuts’ imports that already exceeded

Figure 2. Exports and imports of fruit and grapes

and grapes (including citrus) in 2018 increased by 42% compared to 2017 (GeoStat, 2019). On the other hand, trade statistics reveal that both the import value and quantity of fruit and grapes decreased on an annual basis. In April 2019, the quantity of imported fruit and grapes decreased by 21%, from 7.8 thousand tons to 6.2 thousand tons. Within the same period, the import value amounted to 4.9 mln. USD, 5% lower than the 5.1 mln. USD of April 2018. As for exports, the quantity of exported fruit and grapes in April 2019 drastically increased from 0.81 thousand tons to 4.17 thousand tons the previous year. The corresponding increase in export value was 41% (from 3.7 mln. USD to 5.2 mln. USD) (Figure 2).

strong almost threefold growth from 3.5 mln. USD to 9.7 mln. USD. The biggest gains are observed in the fresh apples, pears and quinces (+3.3 mln. USD) and fresh and dried citrus fruits (+0.9 mln. USD) sub-groups, both of which enjoyed a better harvest in 2018 than in 2017.

POLICY WATCH

FRUIT AND GRAPES - IN THE SPOTLIGHT

Figure 1. Number of insured farmers

ths). From the beginning of the program until now, the program has had the highest number of insured farmers from Adjara, and citrus has been the top crop insured. This is not surprising, given that citrus is the leading crop in Adjara.

It appears that the increase in domestic production led to a decrease in prices and imports of fruit and grapes, while exports of fruit and grapes increased. As to international prices, in April 2019, international prices increased on a

Source: MoF, 2019

monthly basis and marked their highest level since June 2018. The Food Price Index, measured by the Food and Agriculture Organization (FAO), increased by 2.5% compared to March 2019. From an annual perspective, we still observe a downward trend in world prices: the FAO Food Price Index decreased by 2.3%, compared to April 2018. Annual price decreases were observed for vegetable oil (-16.7%), cereal (-5.0%), and meat (-0.8%). Whereas, annual prices increased for dairy (5.3%) reflecting increased import demand in anticipation of a tightening in export availability from Oceania due to declined production. In April 2019, sugar prices increased by 3.2% due to firmer crude oil prices that encouraged Brazilian producers to process sugarcane into ethanol for local sale and caused a shortage in Brazilian sugar exports (Brazil is the world’s largest producer of sugar).

7.0 mln. USD in the first four months of the current year (compared to 5.0 mln. USD in January-April 2018) (Figure 3). This gain completely offset the effects of increased domestic production of fresh apples, pears and quinces in 2018 compared to 2017, which in turn decreased the demand for imports and resulted in a 3.5 mln. USD drop of the respective fruits’ imports in the last four months. The increase in hazelnut and other nuts’ imports is caused by a 24% decline in hazelnut production in 2018 (from 21.4 to 16.3 thousand tons) compared to 2017. The slashed production of hazelnuts affected exports, too. Hazelnut and other

"CCTV7" will shoot a TV Series about Georgia The Minister of Environmental Protection and Agriculture Levan Davitashvili hosted the Deputy Director of the Central Agricultural Broadcasting Television School and TV Center Wen Chengui and other representatives of TV company "CCTV7". A Memorandum of Cooperation was signed between the two parties, under which possibilities for further cooperation were discussed by the Chinese and Georgian parties. CCTV-7 is a Chinese free-to-air television channel, owned by China Central Television. It will shoot a TV series about Georgia’s oldest agricultural traditions. For more information follow the link: http:// mepa.gov.ge/En/News/Details/9475/ A new project has been launched for the development of cattle breeding in Georgia On May 28, 2019 the project “Safety and Quality Investment in Livestock – Georgia” was launched in Georgia. The new project is being implemented in partnership with the US Department of Agriculture, the Georgian Farmers' Association, Land O`Lakes International Development, and Michigan State Uni-

Figure 3. Trade in Fruit, Grapes, and Nuts

TRADE HIGHLIGHTS In April 2019, Georgia’s agricultural exports (including food) equaled approximately 50 mln. USD, almost 22% of the total Georgian export value. When comparing this indicator to April 2018, there was no change in absolute terms. As for imports in April 2019, Georgia’s agricultural imports equaled 90 mln. USD, which is more than 15% of all Georgian imports. Year-over-year (compared to April 2018), agricultural imports were down by 10 mln. USD approximately. According to GeoStat trade data, from January through April of 2019, Georgia imported edible fruit, nuts, and grapes

nuts’ exports plunged to 13.6 mln. USD in January-April 2019 (versus 23.2 mln. USD in January-April 2018) and this is the only sub-group in the edible fruit, nuts, and grapes category where exports are down for the past months. While disregarding the hazelnut and other nuts sub-group, so far in 2019, exports showed

versity in order to improve food safety and quality standards in the cattle milk and meat industries in Georgia. This is a five-year project with a budget of 14.5 million USD aiming to strengthen the Georgian livestock sector. For more information follow the link: http:// mepa.gov.ge/Ge/News/Details/9503

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BUSINESS

GEORGIA TODAY JUNE 4 - 6, 2019

Poti & Anaklia Battle for DeepSea Dominance

Image source: ADC

BY SAMANTHA GUTHRIE

his week, a new wave of dramatic accusations and rumors swept over the Black Sea coast of Georgia. On Thursday, May 30, Minister of Economy and Sustainable Development Natia Turnava announced that a key permissions document for the new deep-sea port in Poti has been annulled, less than a month after it was granted, and just a day after that information was made public. Turnava explained that the document in question was not a construction permit, but laid out the preconditions for land use of the project. It was issued by the Construction and Technical Supervision Agency of the Ministry of Economy, without, said Turnava, agreement “with any member of the government or with me, personally.” She claims that the Agency head violated ministry procedures when issuing the document, leading to its cancellation and the corresponding dismissal of the Head of the Agency from his position. The denial of the permissions document may indicate that the plan to expand Poti to be a deepsea port will not move forward, but the managers of Poti, APM Terminals, have not commented on the future of the project, and say they have not received official notification of the permit denial. For the past several months, rival investors and developers have been locked in an administrative and political battle for control of Georgia’s deepsea port market. The plan for a deep-sea port in Anaklia, located about 70 km north of Poti by car, just south of the border with occupied Abkhazia, has been discussed since Soviet times. The Georgian government awarded the Anaklia Development Consortium (ADC), a joint venture of TBC Holding and Conti International, the contract to develop the Anaklia deep-sea port in 2016. The project is estimated to cost $2.5 billion. APM Terminals Poti was against the Anaklia project from the beginning, arguing that Georgia did not have a need for a deep-sea port, but in the last six months, they changed tack, and instead began moving to develop deep-sea capacities in their own port. Anaklia Development Consortium saw the movement as a threat to their project, and accused the government of making politically motivated decisions. On May 21, a meeting was held between ADC, government representatives, and international financial institutions – EBRD, ADB, AIIB and OPIC to discuss the funding of the deep-sea port in Anaklia, negotiating eight investor requirements laid out in March. After the meeting, it was announced that a deal had nearly been reached and seven of the eight requirements had been fulfilled. The final requirement, on the subject of cargo transportation insurance, is still being discussed. The Georgian government also continues to insist that the private

sector take a larger role in the development, pushing ADC to find private investors. During her announcement of the annulment of the permission for Poti deep-sea port on Thursday, Turnava affirmed her ministry’s support for Anaklia, saying “we have repeatedly stated that Anaklia port is of strategic importance for us. This project enjoys unprecedented support from the government, including 300 million GEL of infrastructure, 70 million GEL for buying back privately-owned land plots and an additional 100 million GEL in funding.” She called on ADC to not “look for excuses” but to focus on meeting their obligations to find a private investor to complete the project within the planned timeline. On Friday, Prime Minister Mamuka Bakhtadze echoed Turnava, saying “Society is tired of listening to various conspiracy theories about Anaklia. Nobody will get any benefit from talking about non-existent barriers.” He emphasized continuing government support for and investment in the project, and repeated that ADC should focus on bringing the private sector into the project. “What is needed for the realization of a strategic project when there is such support from state institutions? The simplest thing is needed – fulfilment of liabilities by private companies,” said Bakhtadze. One of the primary shareholders of ADC is Mamuka Khazaradze, a high-profile businessman and owner of TBC Holding, who was recently embroiled in allegations from the government of financial crimes conducted in 2008. Khazaradze fought back, saying the accusations were unsubstantiated and meant only to tarnish his reputation – evidenced by the fact that no charges have been brought against him or anyone else allegedly involved in criminal conduct. He took to social media to speak out against what he claims are more unfair practices against his company. On Facebook on May 29, Khazaradze shared a post from ADC, with the caption “The Anaklia Project is on the verge of being terminated!!!” The ADC post explained that the consortium and its investors were “shocked” by the fact that, during their May 21 meeting, the government representatives present did not mention that Poti had been granted a greenlight to move forward. He continued, “and the parties involved in the Anaklia Port project consider that if the government does not take immediate and radical action on this matter, the Anaklia port project will be suspended.” Just hours after the angry Facebook post, Turnava announced that Poti’s greenlight had been revoked. Levan Akhvlediani, the CEO of the Anaklia Development Consortium, says he believes “the recent developments as well as the fact that the permit, issued on May 2, has been kept secret until now makes it clear that there are forces in the country as well as outside it, who are willing to take deliberate steps to hinder the Anaklia port project,” but rejects the ideas of a government-wide conspiracy against his company.

BUSINESS

GEORGIA TODAY

JUNE 4 - 6, 2019

Georgia’s Revolutions & Economic Development: from 2004 to Now

BY ERIC LIVNY

he makers of Georgia’s Rose Revolution gained their place in history by using radical deregulation and a strategy of "zero tolerance" to crush the criminal gangs and restore trust in state institutions. Yet, having failed to shift to more inclusive and less brutal policies and institutional arrangements, Mr. Saakashvili and his associates suffered a painful political defeat in October 2012 at the hands of Bidzina Ivanishvili's Georgian Dream coalition. Going forward, Georgia's policy challenges remain to strengthen its democratic governance and justice systems, reduce social gaps, and perform a complicated geopolitical balancing act: pressing ahead with Euro-Atlantic integration while not losing the Russian/Eurasian market. * * * Following the collapse of the Soviet Union, the Georgian nation went through a process of rapid dis-investment and de-industrialization. It was forced to shut down industrial plants, sending scrap metal abroad, and workers into subsistence farming. Hunger has never become an issue thanks to the country’s moderate climate and good soil conditions, yet inequality and associated political pressures rapidly reached catastrophic dimensions, unleashing cycles of violence, undermining the political order and inhibiting prospects of economic growth. United by a clear vision and knowledge

The Georgian Dream's efforts to achieve inclusivity have often been rushed, resulting in a considerable waste of public resources

that the broad popular mandate will not last forever, Georgia’s Rose Revolutionaries gained their place in history by taking unprecedented steps to crush the criminal gangs and restore trust in state institutions. First, they took vigorous steps to convict mafia bosses, gangsters, petty criminals, and drug dealers, pushing crime out of Georgia’s borders and bringing the country’s prison population to world record levels (per capita). To perform this task, the criminal justice system was re-engineered to presume guilt – not innocence, – subjecting its victims to lengthy pre-trial detention periods and masterfully using the plea bargaining mechanism and pliant courts to extract confessions and money. Second, they stripped the Georgian state of any imaginary functions it pretended to be performing, using massive layoffs to reduce and renew state bureaucracy (including, famously, the entire traffic police force), slashing taxes, regulations and whole agencies in charge of their “enforcement”. Third, they created a corruption-proof public administration system reducing the bureaucrat to a robot undertaking simple automatic routines with very little room for discretion or judgment. With the legal repression system in full swing, applying a signature has become the Georgian bureaucrat’s nightmare. The strategy of “zero tolerance” in handling crime, corruption, tax evasion and non-payment was a key factor in the Rose Revolution’s success – in just a few years – to overcome the failed state predicament. And what a great success it was! The young Georgian generation no longer knows how to give or take bribes; their older siblings and parents are now used to paying their taxes and bills in full and on time. No Georgian would ever miss a utility payment. Even the share of bad loans in Georgia’s banking system remains extremely low despite the great difficulties experienced by Georgian households (and businesses) in the wake of Lari devaluation. And then, of course, there are the smiling and professional traffic police and street-level bureaucrats that have become symbols of Georgia’s new statehood. * * * Surprisingly for many, however, Georgia’s Rose Revolution reforms did little to close social gaps. Between 2007 and 2011, the share of people living under the poverty threshold grew by 43%. Equally alarming were the official unemployment statistics, particularly for the young (in

the 20-24 age bracket). To this date, Georgia has failed to engage the majority of its working age population in the formal sector of the economy. The Georgian Dream coalition rode to a surprise electoral victory in October 2012 on waves of popular protest against legal abuses by the Saakashvili administration and its lack of willingness to deal with economic disparities. Dizzy from global fame, the makers of Georgia’s Rose Revolution became the victim of their own success. They did not realize, at least not in time, that the brutal system they have created had to be gradually dismantled, giving way to a more humane and inclusive set of institutions. The result was a painful political defeat in October 2012 and public disgrace; emigration (and new political careers!) for some, and prison terms for others. Three key elements on Bidzina Ivanishvili’s government agenda were to reset Georgia’s brutal justice system, reduce yawning social gaps, and restore economic relations with Russia while at the same time pressing ahead with EuroAtlantic integration. In line with this agenda, one of the first steps taken by the new government involved a comprehensive reform of the justice system, starting with a large-scale amnesty to reduce prison population to more “normal” levels, limiting the use of pre-trial detention and plea bargaining mechanisms by the prosecution (thus restoring the “presumption of innocence” principle); and, last but not least, granting greater independence to the judiciary. Second, the new Georgian administration tried to act on its electoral promise to spread the benefits of growth to Georgia’s poor who until 2012 had been left out of Georgia’s modern economy. Key “inclusivity” measures undertaken in the first three years of Georgian Dream coalition rule included free healthcare, free access to publically-provided school readiness programs, increased pensions and social benefits, as well as a spate of subsidies thrown at rural dwellers (mostly, subsistence farmers). Third, the new government took energetic steps to advance the European integration agenda by accelerating the implementation of harmonization measures across a broad spectrum of policy areas from migration and visa regulation, to labor markets, to TV advertising and excise taxes on alcohol and tobacco. Negotiations on the Association Agreement (AA) with the EU have been com-

pleted in record time, allowing for the AA to be signed on 27 June 2014; by October 2015, it has been ratified by the European Parliament and by 25 out of the 28 EU Member States. The Deep and Comprehensive Free Trade Area (DCFTA) agreement, committing Georgia to non-trivial economic and institutional reforms in exchange for greater access to the EU, went into force on 1 September 2014. On March 9, 2016, quoting “the successful implementation by the Republic of Georgia of all the benchmarks set in its Visa Liberalisation Action Plan”, the European Commission proposed “to allow visa-free travel to the Schengen area for Georgian citizens holding a biometric passport.” In parallel, Ivanishvili’s coalition was successful in its bid to mend fences with Russia. By June 2013, the informal Karasin-Abashidze dialog resulted in the re-opening of the Russian market for Georgian wine, mineral water and “low phytosanitary risk products” (such as tea, laurel, dried fruit, nuts, citrus, grapes, apples, pears, etc.). As if competing with the EU, in May 2014, Russia lifted restrictions on “high risk” agricultural products, triggering a round of foreign and domestic investment in Georgia’s production and processing capacities. With most travel restriction removed, 925,000 Russian tourists visited Georgia in 2015 (14% up from 2014); more than 1mln are expected to arrive in 2016.

TAKING STOCK From “revolutionary justice” to rule of law. There is little arguing in Georgian society and politics in about the need to follow conventional rule-of-law principles. What is still not fully appreciated today is that some of the zero-tolerance policies, which survived the Rose Revolution days, could and should be relaxed today thanks to the tremendous and irreversible cultural changes Georgia has gone through since 2003! For example, giving customers a few weeks to settle their bills (while charging penalties and interest!) will not run the risk of spawning a culture of nonpayment as long as the new rules are clearly communicated and enforced. Likewise, the zero-tolerance and zerodiscretion practice of subjecting businesses to maximum allowable penalties and freezing their bank accounts in every case of (suspected) tax evasion are clearly counterproductive in today’s realities. It may be that giving tax auditors some discretion in dealing with delinquent taxpayers (and subjecting their decisions

to court review) would marginally increase corruption risks and reduce tax collection (in the short run). However, the benefits of doing so (in terms of the improved business climate, investment, business activity, and, ultimately, tax revenues) clearly outweigh any such risks. Growth and equity. Ultimately, it is up to each society to decide – politically – what is a fair distribution of resources and how much it is willing to lose in economic efficiency in order to achieve it. In the process of doing so, it is important to consider that providing the poor with a minimum level of income and access to social services, such as healthcare and education, reduces the number of resources available to the private sector. Hence, an obvious tradeoff. So far, the efforts by the Georgian Dream government to achieve inclusivity have often been rushed, resulting in considerable waste of public resources, and most importantly, in little improvement in the lot of Georgia’s poor. A related concern is whether or not the generous social outlays could be sustained from the fiscal point of view, given the competing needs to accelerate investment in public infrastructure and reduce the tax burden on businesses. Between Europe and Eurasia. Implementing the DCFTA with Europe while maintaining economic exchanges with the Russia-led Eurasian Union will be a daunting balancing act, politically, economically and diplomatically. The EU will undoubtedly provide technical assistance and funding to offset some of the harmonization costs. At the same time, Georgia may have to deploy every diplomatic tool at its disposal to reduce the risk of Russia’s retaliation for joining a competing trading block. There are many reasons for Georgia to be closer to Europe, as laid out in Zurab Zhvania’s passionate speech at the European Parliament. However, dipping into the deep (and comprehensive) FTA with the EU without careful consideration of national economic interests may backfire. If the costs of AA/DCFTA agreements exceed their benefits, Eurasia may come back with a vengeance. Economically, as well as politically.

ABOUT THE AUTHOR: Eric Livny is Founder and President at Tbilinomics Policy Advisors and Chair of Economic Policy Committee at the International Chamber of Commerce (ICC Georgia).

BUSINESS

GEORGIA TODAY JUNE 4 - 6, 2019

11th Local Economic Development Forum in Tbilisi We have many good examples of how the private and public sector can work together and implement important projects for the city and the country. The representatives of the business sector will discuss how many interesting projects have been implemented through such efforts.” Kaladze also affirmed his administration’s openness and readiness to address the key challenges of the city. “No one is happy with how our city has developed over the past 20-25 years. With urban development we have serious problems and [our strategy] needs to be adjusted. Concrete steps have already been taken

Image source: Tbilisi City Hall

BY SAMANTHA GUTHRIE

n Friday, May 31, the 11th Local Economic Development Forum was held in Tbilisi at the newly renovated Sheraton Grand Metechi Palace Hotel. The forum, which began in 2007, was organized by the Tbilisi City Hall Economic Development Service. This year the theme was ‘Strong Economy – Strong City,’ following the previous forum’s theme ‘Progressive Cities.’ Participants of the forum included government representatives, private sector business leaders, representatives from international financial institutions,

and sector experts. Tbilisi Mayor Kakha Kaladze opened the forum with an address to the crowd, thanking the attendees for being “very supportive in helping us respond to the challenges that people are worried about today.” The forum began with a session on Urban Development Strategy, as, said Kaladze, “It is impossible to evaluate the economic potential of the city without the unified context of urban development.” He continued, “Tbilisi has undoubtedly great economic potential, but in order for it to be properly used, we need to make evidence-based decisions and share successful experiences. Such Forums encourage this. The development of economic cooperation between the public and private sectors is the precondition for economic development.

in this direction. We have adopted a general plan that is a document of strategic importance on which the city’s proper development should be based. I understand that what has been damaged and spoiled is difficult to correct at this point, but the main thing is to work now correctly, and avoid mistakes in the future. Therefore, the involvement of experts sharing the experience of international financial organizations is very important. We are actively cooperating in the fields of urban planning, transport policy, and ecology to fix the existing situation,” said the mayor. Among topics discussed were issues

of urban development and modern trends that are being debated and tested in some of the most innovative and successful cities around the world. Heads of international financial institutions also made remarks, including World Bank Regional Director for the South Caucasus, Mercy Tembon; European Bank for Reconstruction and Development, Regional Director for the Caucasus, Catarina Bjorlin Hansen; Director of the Asian Development Bank Mission in Georgia, Yesim Elhan-Kayalar; and the European Investment Bank Regional Head for the South Caucasus, Maciej Czura.

BUSINESS

GEORGIA TODAY

JUNE 4 - 6, 2019

Save The Date: 4th Tourism & Hospitality Conference 4th Tourism and Hospitality Conference within Welcome to Georgia! National Tourism Awards

n June 18, the 4th Tourism and Hospitality Conference within Welcome to Georgia! National Tourism Awards will take place at the Radisson Blu Iveria Hotel, Tbilisi. The conference will include: • Four Panel discussions, including thematic presentations from the top market suppliers and field experts, about challenges and opportunities in the Tour-

ism and Hospitality Industry: – First Panel – Governmental presentations on challenges and perspectives / statistics; – Second Panel – Old and new rules of Hospitality; – Third Panel – Responsible Tourism and Sustainability; – Fourth Panel – Georgia and the World - Raising Awareness. • B2B Meetings with all the key rep-

resentatives of industry; • A detailed presentation about the 5th Anniversary of the Welcome to Georgia! National Tourism Awards competition year of 2019! The Fourth Tourism and Hospitality Conference within Welcome to Georgia! National Tourism Awards is a unique platform for representatives of the industry. The conference aims to consolidate representatives of the industry, govern-

ment officials, international and local experts and media. The conference is the best way to exchange information, communicate and catch up with the latest trends and challenges in the Tourism and Hospitality sphere and Georgian business in general. Don’t miss your chance! Join us at the 4th Tourism and Hospitality Conference within Welcome to Georgia! National Tourism Awards. Project supported by: the Ministry of

Economy and Sustainable Development of Georgia, Tbilisi City Hall and Partnership Fund, Co-organizers: Georgian National Tourism Administration and Bank of Georgia. Project’s Independent Auditor – “BDO in Georgia”, General Sponsor – Alliance Group. For registration and a detailed agenda, please visit the project’s social media networks and/ or website www.awards-tourism.com

Livo.ge – A New Statement on the Georgian Real Estate Market BY KETEVAN KVARATSKHELIYA

ivo.ge is the latest initiative of TBC Bank. The project, launched on the basis of the Allproperty.ge platform, was presented to the wider audience on May 30 at Stamba Hotel. Based on TBC Bank’s strategy to facilitate the lives of its customers, Livo.ge is set to be a new statement on the Georgian real estate market. Tornike Gogichaishvili, Deputy CEO of TBC Bank, took to the stage to brief attendees about the new project. “At the end of the last year, we became partners with a very interesting real estate platform, Allprpoerty.ge,” stated Gogichaishvili. “We promised to offer our clientele a new platform, totally based on the real estate ecosystem.” He went on to accentuate the strategy and main goals of the Bank. “Technological development and digitalization are happening at a fast pace in the modern world. Customers are becoming more sophisticated, and we’re seeing an increasing number of demands for facilities and appropriate services. In addition, time is of paramount importance today. All of this catalyzed our decision to develop in the digital direction, aiming to ease the lives of the customers by launching this platform,” said Gogichaishvili. Giorgi Chumashvili, founder of Livo.ge, also addressed the audience. He explained the meaning of the real estate ecosystem, stating that the innovative Livo.ge plat-

form is the first ecosystem in this sphere in Georgia. Chumashvili also noted that this is one of the most complicated fields in terms of digitalization and focused on the hard work of the platform team in creating the Livo.ge platform, designed for purchasing or selling real estate more easily and accessibly. “This is the beta version of our new project, thorough which we wanted to

present a totally new platform, new ecosystem, new brand book, as well as a new navigation system,” Chumashvili said, going on to emphasize the main principles of the initiative. “Saving customers time and money are the main values of the ecosystem.” “On the base of Allproperty.ge and with the help of TBC Bank, we managed to carry out this difficult project and make

it real. I want to congratulate all Georgia on this achievement,” Chumashvili said. The founder of the platform then moved on to an explanation of the more technical details, outlining the process of assessing a property as one of the most difficult processes. “We give customers and vendors a unique chance to use our property assessment service and within 24 hours, or 6

hours (upon request), to get a certified assessment, enabling them to save time, learn the exact market price of the property and make decisions in accordance with that price,” noted Chumashvili. The price of the service is set at 39 GEL and will be available countrywide, including major cities, villages, as well as in the highlands of Georgia. The launch of the Livo.ge platform comes from a desire to make the Georgian real estate market stronger and more transparent. As Livo.ge is a totally customer-oriented platform, it is to offer 3D-tours. These will be filmed with a unique camera, from one of the most outstanding startups in Silicon Valley and the most popular tool on the US real estate platforms, which will enable all interested individuals to see the property in the very best way online, saving time and enabling faster decision-making. Chumashvili also spoke about the involvement of TBC in terms of the operation of Livo.ge. “Despite the partnership between TBC Bank and Livo.ge, we are open to all banking institutions, not limiting the clientele in terms of choosing the most suitable bank for them to take a loan from,” he said. In addition, he noted the ongoing negotiations with Google to present the exact locations of properties, which is of vital importance, and added that the Livo.ge team is sparing no effort to ensure secure transactions for customers. “We are open to all kinds of feedback to make our platform more sophisticated,” concluded the Livo.ge founder.

BUSINESS

GEORGIA TODAY

JUNE 4 - 6, 2019

Russia Wins a Landmark Dispute in the World Trade Organization Panel, Russia did not invoke its national security interests just to avoid its obligations because the Russia-Ukraine conflict affected the security of its borders and thus, Russia had the right to protect its security interests at the borders.

MG LAW OFFICE

he World Trade Organization (the WTO) is a Genevabased international organization with 164 members representing 98 percent of global trade. The idea of the WTO is to promote free trade between nations and ensure that global trade flows within the rules that exist under the framework of the WTO. One of the main functions of this organization is to resolve traderelated disputes between its members. On April 5, 2019, the WTO rendered a landmark ruling in the dispute Russia Measures Concerning Traffic in Transit (DS512), which will have a big impact on the current international trade environment. In short, the dispute was related to Russia’s ban on transit of goods from Ukraine through the territory of Russia, which was imposed after the 2014 Crimea annexation. The ruling in this dispute is significant as it was the first time when a WTO panel examined the responding party’s assertion that the deviation from the international trade rules is justified on its essential security interests. This article first, provides the factual background of the dispute, second, it provides important parts of the ruling, and finally, the article analyses the impact of this decision on the Section 232 steel and aluminum tariffs imposed by the United States.

FACTUAL BACKGROUND The dispute concerned various measures, which were imposed by Russia on transit by road and rail through the territory of Russia after the annexation of Crimea in 2014. Ukraine argued that since January 1, 2016, Ukraine had not been able to use road or rail transit routes across the Ukraine-Russia border for all traffic in transit destined for Kazakhstan. Also, since July 1, 2016, traffic in transit by road and rail from Ukraine, which was destined for Kazakhstan and the Kyrgyz Republic, was not permitted to transit across Russia at all for particular

IMPACT OF THE RULING

Image source: Fabrice Coffrini/AFP via Getty Images

categories of goods. Russia responded that the challenged measures were taken “[i]n response to the emergency in international relations that occurred in 2014 that presented threats to the Russian Federation’s essential security interests.” Russia argued that any state has the sole discretion to determine its national security interests and adopt the measure that it considers necessary for the protection of such security interests. For Russia, once a state claims that a dispute involves a national security matter, a WTO panel cannot review and adjudicate on this claim.

THE RULING The Panel stated that it could review Ukraine’s claim and examine whether the deviation from the global trade rules was justified on a national security grounds. In short, the Panel opined that whether or not the challenged ban was imposed “in time of war or other emergency in international relations” could be determined objectively, and the Panel agreed that the ban was indeed enforced

during the conflict between Russia and Ukraine. As for essential security interests, the Panel stated that any WTO member has the right to determine its national security interests and adopt any measures that it considers necessary for the protection of such interests provided that the principle of good faith is adhered to. As the emergency between RussiaUkraine involved a border-related conflict, for the Panel it was enough to conclude that Russia had the right to adopt the challenged ban and protect its security interest at the borders. The Panel considered that mere political or economic differences between WTO members are not sufficient to establish an emergency in international relations as it is normal that states encounter political and economic instabilities with each other. For the Panel, an emergency in international relations is mainly related to armed conflict. The Panel concluded that there was an emergency in international relations, because in 2014-2016 “relations between Ukraine and Russia had deteriorated to such a degree that they were a matter of con-

Theme & Program of Caspian Energy Forum Tbilisi 2019 Changed

he 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of AzerbaijanGeorgia relations in the field of economy and energy, - said First Deputy Chairman and Chief Executive Officer of the Caspian European Club, Telman Aliyev. The Caspian Energy Georgia company is the organizer of the Caspian Energy Forum Tbilisi – 2019. The event sponsor is PASHA Bank Georgia. The forum will be held with the support of the Government of Georgia, Embassy of the Republic of Azerbaijan to Georgia and the Caspian European Club. Over 300 delegates from 30 countries will attend the Forum in Tbilisi, among them the heads of the government agencies of Georgia and Azerbaijan, representatives of diplomatic and international missions accredited in Georgia, as well as heads of large diplomatic international companies and international financial institutions. Plenary thematic sessions will be held at the

forum. Participants will have additional opportunities to work and associate during coffeebreaks and a business lunch. “As agreed with the officials of Kvemo-Kartli region, a CEO Lunch in Marneuli will be organized for the executives and representatives of the Caspian European Club member companies interested in cooperation with this region,” Aliyev said. The Caspian European Club, which brings together more than 5,000 member companies and organizations from 70 countries around the world, was established in June 2002 with the support of the largest oil and gas companies working in the Caspian-Black Sea region and with the active involvement of the Caspian Energy International Media Group. His Excellency Mr. Ilham Aliyev, President of the Republic of Azerbaijan, is the founder and First Chairman of the Caspian European Club. For more information, please refer to: www.caspianenergy.net; www.caspianenergy.org

cern to the international community”, including the General Assembly of the United Nations. The Panel also concluded that the challenged ban was imposed in time of the deteriorated relations between Russia and Ukraine. As for the question of what a state can do during an emergency in international relations, the Panel opined that a state decides itself if during such an emergency, its essential security interests are at stake and whether any action is required to protect such security interests. For the Panel, “essential security interests” include interests relating to the protection of a state’s territory and population from external threats. Because of the fact that such security interests may vary, it is left to a state to decide what it considers to be its essential security interests. However, this power is limited by its obligation of good faith. After reviewing the facts of the case, the Panel deemed that the 2014 emergency situation between Russia and Ukraine involved armed conflict as recognized by the United Nations and thus, Russia’s essential security interests were present. Also, for the

After rendering this ruling, an important question that arises is what effect this decision may have on the ongoing Section 232 steel and aluminum tariffs imposed by the United States. As it happened, in March 2018, the United States imposed a 25% tariff on imported steel and 10% on imported aluminum. The imposition of the tariffs was based on Section 232 of the Trade Expansion Act of 1962, which authorizes the President of the United States, through tariffs or other trade remedy means, to adjust the import of goods from other countries if it deems the quantity threatens its national security. The United States’ Section 232 tariffs were responded by retaliatory tariffs from other WTO Members including the European Union and Canada. Currently, the United States has a number of disputes at the WTO arising out of its Section 232 tariffs brought by the European Union, China, India, Canada, Mexico, Norway, Russia, Turkey and Switzerland. The Panel Report in Russia – Traffic in Transit goes against the United States’ position that the invocation of national security interests cannot be subject to review by a WTO panel. It will be interesting to see how the United States will justify its imposition of tariffs as a national security matter. *** MG Law Office, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Irakli Sokolovski, Ana Kochiashvili, Tamar Jikia and associates Ana Chikovani, Elene Samadbegishvili, and Mariam Kalandadze is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we highlight significant issues which may impact businesses operating in Georgia.

BUSINESS

GEORGIA TODAY JUNE 4 - 6, 2019

What is Cyber Camp? ADVERTORIAL

yber Security Camp is a unique, eight-day intensive teaching program offered by the Scientific Cyber Security Association. The primary audience of the Cyber Camp is school and university students. The main goal of the project is to prepare young cyber security specialists and to popularize the cyber security field among the young community. The intensive program of the cyber camp is made up of

the main cyber security subjects and additional topics. The camp is organized by SCSA in association with Cyber Secure Central. The program contains a solid module of practical work. One of the most important activities is a cyber security competition, where each participant team presents their own project. There are many different sport and fun activities in the frame of the cyber camp’s program.

GENERAL INFORMATION The camp will be conducted in English, Georgian and Russian.

Highly qualified personnel with international counselor certificates are involved. The best students will have an opportunity to receive paid internships. Learn how cyber attacks are carried out. Learn how to defend yourself from cyber attacks. Learn programming. University or school students can participate. Rest and have fun. Get a certificate from the Scientific Cyber Security Association. Get presents from project partners.

PACKAGE INCLUDES: • Transportation • Hotel with 3-times meal + snack • Teaching program - lectures • Logic games • Field trips • Sport activities GUIDE: MAKSIM IAVICH (Cyber Security Expert, Professor of Computer Science, Founder and President of Scientific Cyber Security Association) Maksim is a distinguished cyber security academic and practitioner, heading the Cyber Security Department at Caucasus University, and has been named

Sponsored by cybersecurecentral.com A Global Central Station for Cyber Security Security Services • HR Management • Education • Web Development • Digital Marketing • Mobile App Development

‘The Best Young Scientist of the Year’ by the Shota Rustaveli National Foundation in his homeland of Georgia. Internationally, Maksim is known as a prominent speaker at global cyber security and hacking conferences. In 2018, Maksim was the keynote speaker at Defcamp9, one of the biggest hacking conferences in Europe. He is certified in cyber security by international universities such as Stanford and Maryland. Maksim is involved in various, international scientific cyber security projects as a key researcher, and is a highly skilled cryptographer and software penetration tester.

POLITICS

GEORGIA TODAY

JUNE 4 - 6, 2019

US Open to Negotiations with Iran, Iran Dismisses Offer BY AMY JONES

ecretary of State Mike Pompeo said on Sunday that the Trump administration is prepared to open disussions with Iran’s clerical leaders with “no preconditions.” “We are prepared to engage in a conversation with no preconditions,” stated Pompeo, speaking at a news conference in Switzerland held with the Swiss Foreign Minister Ignazio Cassis. “The American effort to fundamentally reverse the malign activity of this Islamic Republic, this revolutionary force, is going to continue,” he added. Iran has dismissed the offer as “wordplay” masking the US’ hidden agenda. The President of Iran, Hassan Rouhani, considers the offer of talks to be a sign of Iran’s strength. “The enemies sometimes say they have conditions for negotiations with Iran… but in recent weeks they said they have no conditions,” said Rouhani. “They threatened us as if they were a military superpower, but they say they do not seek a war,” he added. He also underlined that it was the US’ choice to restart negotiations and resume compliance with the 2015 nuclear deal. “The side that left the negotiating table and breached a treaty should return to a normal state,” read his comments on the Iranian government website. Tensions between Iran and the US have drastically increased over the past month after the US tightened Iranian sanctions at the beginning of May. As a result, many countries have stopped importing Iranian oil. Military confrontation between the two countries has become a real possibility. The Trump administration ordered

1,500 additional troops to the region to counter “Iranian threats” and revised its military policy towards the country. Although Trump reportedly told his aides that he wants to avoid war, “his foreign officials are pressing him to amplify a maximum pressure campaign against Iran that relies on sanctions and shows of military force,” reported the New York Times. Pompeo’s comments come less than a

week after Trump said he was hopeful that Iran would be willing to come to the negotiating table last Monday. However, some experts believe that talks of negotiations do not represent a softening for either side. “We’ve been watching both Iran and the United States in the past several weeks and months ratchet up the pressure and then walk back from their very stern and aggressive positions towards

each other,” said Zein Basravi, an Al Jazeera reporter from Tehran. Whilst they may no longer be headed towards war, “the questions Tehran’s leaders and strategists are asking themselves is what the talks with the United States might actually be about. Iran has said over and over again that it will not renegotiate a nuclear deal,” Basravi continued. The US State Department has set Iran as a priority over the past year due to

what it calls its “expansionist foreign policy.” In 2018, Pompeo demanded 12 things from Iran, including dropping their support of political groups and militia in surrounding Arab countries and releasing American prisoners. With the US deploying bombers and warships to the Middle East last month, the move towards negotiations is a positivesign.Nonetheless,thesituationbetween the two countries remains very tense.

SOCIETY

MIA Says Tbilisi Pride Cannot Take Place Outdoors, Cites Safety Concerns BY THEA MORRISON

fter meeting with the Tbilisi Pride, a non-governmental organization organizing the event with the participation of the LGBTQI community, Georgia’s Ministry of Internal Affairs stated the planned parade should not take place outdoors, due to safety concerns for its participants. “The representatives of the Ministry explained to the Tbilisi Pride organizers that it is impossible to carry out activities in the places they requested, taking into consideration the risks associated with the safety of persons involved in the process. The MIA offered Tbilisi Pride other alternatives for the gathering that would be more secure for the participants,” the MIA statement reads. The organizers of the event say they offered the Ministry two alternative routes, and neither of them was Rustaveli Avenue or the territory of the Government Administration, [the traditional

places for demonstrations and rallies] but security guarantees were not received from the MIA. The ministry instead suggested they hold the event in a club or at the stadium. Giorgi Tabagari, one of the organizers of the event, says it is unimaginable that the Tbilisi Pride march take place in a closed space. He added that the LGBTQI society had done their best to avoid any tensions and provocations on May 17, the International Day against Homophobia, choosing not to hold any demonstrations. Tabagari says “it is regrettable the government does not reciprocate.” Georgian NGOs also commented on the issue, saying the state does not recognize homo / bi / transphobia as a systemic problem and does not carry out a consistent policy to eliminate it. “Against this background, mobilization of homophobic, xenophobic and ultraright populist groups is increasing in public and the online space. Taking into consideration the high level of homo / bi / transphobia in the country, the LGBTQ community has refrained from

marking May 17 in the last two years and emphasizes that the state and law enforcement agencies only try to hide the fundamental problems this community faces in everyday life,” the NGOs said. The organizations call on the MIA to secure the right to the peaceful assembly of participants of the planned Tbilisi Pride week in the public space and take adequate measures to ensure the safety of participants at the peaceful assembly. LGBTQI activist Nino Bolkvadze sent an open letter to the Catholicos-Patriarch of Georgia, Ilia II, asking for “help and assistance on a hard way.” The letter reads that sexual minorities want to be recognized by others. “We are neither monstrous nor demons,” Bolkvadze writes. We want others to understand that the similaritie between us are much greater than the differences. We share the experiences of other societies and see that the gap between us can disappear.” The activist says LGBTQI people need to come out and be seen. “It is impossible to live when people

Image source: Twitter

around us hate us… Please help us and understand us on this difficult path,” the letter to Patriarch reads. The first pride event in Georgia, Tbilisi

Pride, will be held June 18 - 23. The event hopes to raise awareness and spark healthy conversation about the LGBTQI community in Georgia.

SOCIETY

GEORGIA TODAY JUNE 4 - 6, 2019

SOS Children’s Villages of Georgia Celebrates 30 Years Protecting the Rights of Underprivileged Children

he Association of SOS Children’s Villages of Georgia to celebrate its 30th birthday, hosted an outdoor event, which also honored the International Day for the Protection of Children and aimed to raise awareness of the needs of underprivileged and socially vulnerable children. The association members emphasized the importance of government institute and business sector participation in solving the issues faced by said children. Media and representatives of the business sector attended the event. Under the scope of the celebration, a tour was organized, with guests invited to learn about the crucial projects that are enforced by SOS Children’s Villages of Georgia countrywide. Programs of alternative care and family strengthening have seen success in the past few years. Alternative care programs aim to help abandoned or underprivileged children and youth shape a better future. The organization gives them a chance to form strong bonds and relations in a close-to-beinga-family environment, and to show their interests, talents and abilities. Aside from this, the Association of SOS Children’s Villages of Georgia helps children get an education, deepen their practical knowledge and become confident members of society. Today’s research shows that in Georgia, 238 children and youngsters are currently benefiting from alternative care. “Every child is entitled to the right to be raised in a caring family. However, when it is impossible to bring up a child with his/her biological family, it becomes crucial to look for alternative care for these underprivileged children. It is exactly for this reason that we offer an environment much like family – a caring and safe environment,” states the coordinator of the program. “We are celebrating the birthday of the association. This date happens to be the International Day for the Protection of Children. We decided to invite representatives of the private sector along to encour-

age them to farther participate in our projects and take our side in caring for underprivileged and socially vulnerable children, reinforcing their families and ensuring their well-being. We wish to help more children, more families and make their unity stronger,” says Maco Chopikashvili, Manager of Attracting Funds for the Association of SOS Children’s Villages of Georgia. “The Association SOS Children’s Villages of Georgia has protected the rights of underprivileged children for 30 years now,” said Executive Director of SOS Children’s Villages of Georgia, Zviad Berdzenishvili. “It’s also important to know that the international organization that we’re a member of, SOS Children’s Villages International, has recently turned 70. I call on the business sector and society: your participation is crucial. We are much in need of new friends.” The project of making families stronger aims to aid socially vulnerable children by helping their parents to raise their children in a secure and caring environment. The organization pays close attention to strengthening the support of families. The focus group for the project are children under 18 and their parents who, for various reasons, are in need of aid. Today, 1024 children throughout the country are benefiting from the family strengthening project. SOS Children’s Villages International is an international organization represented in 133 countries. SOS Children’s Villages of Georgia is a nonproduction, noncommercial legal entity which has its own regulation and administration. The Association acts according to the regulations and principles as ruled by the international organization. The Association of SOS Children’s Villages of Georgia has worked throughout Georgia since 1989. The organization aims to protect the rights of abandoned children or those at risk of abandonment by offering alternative care, help the socially vulnerable children, support them and integrate them into society.

SOCIETY

GEORGIA TODAY

JUNE 4 - 6, 2019

State Language as a Means of Civic Integration

Image Source: religion.geo.gov.ge

BY GABRIELLE COLCHEN

ast Friday, a conference entitled ‘State Language for Civic Integration and Human Capital Development in Georgia’ took place in Rooms Hotel, Tbilisi. The Georgian President Salomé Zurabishvili opened the conference and emphasized the importance of the Georgian language that unites the state, society and minorities. She explained that language is the basis of identity; it is what reflects the culture of a nation. “The Georgian language and culture have to flourish beyond the borders,” the President said. The event was organized by the Administration of the President of Georgia, the Ministry of Education, Science, Culture and Sport of Georgia, the Office of the State Minister of Georgia for Reconcili-

ation and Civic Equality and the LEPL Zurab Zhvania School of Public Administration. The discussions gathered representatives of the Georgian government and civil society, who emphasized the importance of the state language for civic integration and the strategies of state institutions for teaching this language to national minorities. Knowledge of the state language is a real and specific challenge for minorities living in Georgia. “Georgia has always been a multi-ethnic country," stated Mariam Jashi, Chairperson of the Education, Science and Culture Committee of the Parliament of Georgia. “It is very important for each minority to be able to speak Georgian.” Ketevan Tsikhelashvili, State Minister of Georgia for Reconciliation and Civic Equality, agreed: “It is only by knowing the state language that each citizen can fully achieve self-realization as a person and a citizen.”

Lia Gigauri, Deputy State Minister of Education, Science, Culture and Sport of Georgia, explained that language is a priority for the government because it is the basis for equality between citizens. “To provide everyone with equal social and economic opportunities, they first need to learn the state language,” she said. “It is impossible to speak about equality in a country in which not everyone speaks the state language. Knowing Georgian enables people to access higher education and to find jobs. What is important is also to build a country around tolerance and the integration of minorities. In Georgia, there are Azeri and Armenian minorities who have huge abilities and potential and represent a strength for the country. They need to be able to develop these capacities and feel part of Georgia. We must all build our nationhood together.” In sum, knowing the state language is especially challenging for minorities living in Georgia and efforts have to be made to enable everyone to learn Georgian, so as to be able to access education and jobs. No less important is the need to understand the Georgian culture, be fully part of Georgian society and reach personal stability and self-fulfilment through language. Another challenge is the protection of the state language in the occupied territories of South Ossetia and Abkhazia. These are regions that are suffering from Russification and which are losing their own language as well as the use of the Georgian language. Most speakers emphasized this issue and the need to concentrate efforts in these regions. In terms of progress and initiatives

supporting the state language, the government representatives presented a number of projects aiming at better access to education. Irine Abuladze, Deputy Minister of Education, Science, Culture and Sport of Georgia, stated that 6% of the GDP should be directed towards education. She explained that some programs exist that provide free language classes to people, as well as programs training language teachers. She said that the language of instruction should be Georgian, particularly from pre-school to upper-secondary school, and that “bilingual programs would be especially welcomed for minorities that want to keep their mother tongue as well as learn Georgian.” Finally, the richness of the Georgian

language was emphasized by Giorgi Alibegashvili, Chairperson of the State Language Department, who reminded those gathered that UNESCO had put the Georgian language and its three scripts on the list of Intangible Cultural Heritage of Humanity. A Memorandum of Cooperation for implementing joint projects and activities aiming at the delivery of the State language and Literature among ethnic minority representatives was signed at the beginning of the meeting. The signatories were the Office of the State Minister of Georgia for Reconciliation and Civic Equality, the State Language Department, the LEPL Zurab Zhvania School of Public Administration and the National Parliamentary Library of Georgia.

ETHNO GASTRONOMY

migiana as well as mortadella. A culinary show, with the participation of Italian chef Stefano Boselli, took place in the evening. The event, organized by the Italian

Embassy of Georgia, was organized as a result of cooperation with the ICE-ITA, Italian Trade Agency and the help of numerous partners and sponsors.

The Distinguished Italian Lifestyle, Creativity, Fashion Shows & Exhibitions: An Italian National Celebration TRANSLATED BY KETEVAN KVARATSKHELIYA

he Embassy of Italy to Georgia marked the National Republic Day of Italy on June 3 and introduced a great number of surprises to guests gathered for the celebration in the Silk Factory Studio. “There were numerous activities launched within the scope of one evening showing off the Italian love of life. The Italian National Celebration was a celebration of the values of democracy and freedom and the recognition of their importance, as well as mark of the progress of relations with Georgia. This celebration was an introduction to the Italian lifestyle: beauty, taste and crafts on show for our Georgian friends,” said Ambassador of Italy to Georgia, Antonio Bartoli. The guests were offered a real celebration of Italian creativity:

EXHIBITIONS ‘Tour around Italy:’ a photo exposition presented by the ANSA Agency, describing the Italian style, technologies, cuisine

and beauty of nature; ‘50+! Il Grande Gioco dell'Industria:’ an exhibition run by the Museimpresa Association presenting the history of design, told with iconic items from the contemporary brands; ‘I Borghi più belli d'Italia:’ an entire photo gallery of small towns and settlements; and a photo exhibition of projects granted the Italian Architecture Prize for contemporary buildings and urban landscapes. In addition, there was a multimedia exhibition open for visitors at the Georgian National Museum called ‘Immagica,’ boasting five centuries of Italian art, from Giotto to Canova.

FASHION The latest fashion trends were on display at a fashion show organized with the cooperation of CNA Federmoda and the Centergross Consurtium (having a freight turnover worth EUR 5 billion), presenting the real kaleidoscope of beauty, elegance, color and textile.

MUSIC Tamar Alibegashvili, prominent soprano, sang the national anthems while Mario Stefano Pietrodarchi and the Tbilisi State Chamber Orchestra played the melodies of Ennio Morricone, Nino Rota and Nicola Piovani.

Along with a multiplicity of delicacies, world-renowned Italian products were presented to the audience: prosecco, par-

SOCIETY

GEORGIA TODAY JUNE 4 - 6, 2019

Georgian LGBTQI+: Story of the Wrong Tactic OP-ED BY ARCHIL SIKHARULIDZE, SIKHA FOUNDATION

n May 17, international society witnessed the celebration of the so-called “Family Day” in Tbilisi. Representatives of the Georgian Orthodox Church, with many members of local society, marched from the city center to the Holy Trinity Cathedral of Tbilisi (“Sameba”), where they expressed devotion to traditional family values. This totally overshadowed another important event, International Day Against Homophobia, Transphobia and Biphobia that was publicly commemorated by only a few. Representatives of human rights

Liberal groups should have persuaded society that IDAHTB was never about disrespecting traditions but rather about giving members of the LGBTQI+ community the chance to defend their rights

groups and the LGBTQI+ community, afraid to organize a public event on this date, only dared to rise the “rainbow” flag, but had it quickly removed. Instead, they spoke of holding the first Tbilisi Gay Pride march with some other activities, such as concerts, in late June, but these aspirations were shattered when the Ministry of Internal Affairs of Georgia officially informed them last week that due to the high possibility of violence, they could not guarantee the safety of pride participants should a public march take place. Instead, they suggested a closed venue, such as the stadium. Various local and international analysts expressed their dissatisfaction to see the direction of rights and freedom of sexual minorities in Georgia so significantly derailed; derailed so much that in comparison with previous years, representatives of these groups are again being forced into a corner. And while, undoubtedly, the Georgian Orthodox Church has played its role in shaping this state of affairs, it is obvious that supporters of the so-called “liberal values” made a few unforgivable lapses that crucially contributed to the victory of “Family Day”.

A CLASH OF NARRATIVES To be fair, both events appear pretty artificial to the state. International Day Against Homophobia, Transphobia and Biphobia wasn’t presented to local society until 2012 when the LGBTQI+ movement tried to celebrate it for the first time, while Family Purity Day (full name: "Family Strength and Respect for Parents") was established by the Georgian Orthodox Church and, in particular, by the spiritual leader Ilia II, to counter attempts by some INGOs and NGOs to re-think traditional concepts of “love”, “marriage” and “family”. We may argue that there was factually no firm demand from general Georgian society to introduce either of these. As it stands, as Georgian historian Nukri Shoshiashvili argues, these are initiatives by two totally different institutions that aim to pursue the right to control, develop existing and create or shape new politi-

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cal, cultural and social narratives. Consequently, by offering these holidays, supporters of “modernity” (liberals) and “traditionality” (conservatives) have clashed for this privilege and initiated a fierce rivalry for the hearts and minds of Georgian society. Due to its historic achievements and contribution to building-up the Georgian state and nation, the Georgian Orthodox Church was, by default, in a superior position; it held and still holds an important position in the daily lives of regular Georgian citizens. Hence, representatives of the so-called liberal groups should have carefully planned and structured their policy and tactics to outmaneuver these rivals and persuade local society that International Day Against Homophobia, Transphobia and Biphobia was never about abandoning and/or disrespecting traditions bur rather about giving an opportunity to members of the LGBTQI+ community to speak up and defend their rights and freedoms. Unfortunately, defenders of “moder-

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GEORGIA TODAY

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Editor-In-Chief: Katie Ruth Davies

Journalists: Tony Hanmer, Zaza Jgarkava, Maka Bibilashvili, Dimitri Dolaberidze, Vazha Tavberidze, Nugzar B. Ruhadze, Samantha Guthrie, Amy Jones, Thea Morrison, Ana Dumbadze, Ketevan Kvaratskheliya Photographer: Irakli Dolidze

nity” opted for an irrational and blunt policy that has suffered dramatic defeats again and again to date.

THE BLITZKRIEG TACTIC There is only one term that can define the policy pushed by LGBTQI+ movements and its supporters – a blitzkrieg. These groups hoped that an absolute political back-up from American and European institutions/agencies, in combination with an extremely high financial in-flow, would provide them the necessary tools to announce a new political, social and cultural reality; a reality that no one would dare to challenge. They hoped for a fast victory but were deceived by their own false perceptions and assumptions. Undoubtedly, political and financial guarantees from the country’s strategic partners are significant but are not conclusive. Georgian society has developed its own agenda over the years, transforming into a crucial political actor whose trust and devotion must be gained; it cannot be achieved solely by referring to the West as a trademark as was done in the past. Recent surveys make it obvious that these groups significantly lack internal legitimacy and are mistrusted by the majority of Georgian society. Thus, their attempts to pursue a harsh and blunt policy that disregards existing political, social and cultural realities, including the Georgian Orthodox Church, led to a dramatic opposite chain reaction. Instead of building a safer and freer environment for the LGBTQI+ community, society became even more dangerous and intolerant. Georgian society aspires to become part of the European family but there are some “red lines” that it is not ready to cross. We should also speak about the highly destructive and thoughtless behavior of some representatives of the liberal movement too, who, it seems have become so arrogant, selfish and self-confident due to external political and financial backing, that they don’t even bother to try and foresee or care about the consequences of their statements and steps. For example, Irakli Vacharadze, who chaired the leading LGBTQI+ organiza-

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Georgian society aspires to become part of the European family but there are some “red lines” that it is not ready to cross tion ‘Identoba’ was keen to officially and publicly verbally insult the Georgian Orthodox Church and its spiritual leader, Ilia II; further, to label and threaten everyone who opposed his (Irakli’s) ideas and approaches. Other associated speakers had and still have a tendency to unmindfully pursue harsh rhetoric, including by labeling those against them as pro-Russians, “enablers” of Kremlin propaganda and ideology- all things that only serve to worsen the situation. The history of the celebrating International Day Against Homophobia, Transphobia and Biphobia in Georgia is probably one of the best examples of an incorrect tactic that led to dramatic consequences and an absolutely opposite chain reaction. Political and financial support from abroad made Georgian activists both arrogant and unable to critically assess their capabilities. They opted for a straightforward and blunt policy that they were unable to factually implement. As a result, the Georgian Orthodox Church easily outmaneuvered them and took the majority of hearts and minds of Georgian society. Unfortunately, this further complicated the lives of the LGBTQI+ community in the country; and it will not change unless liberal forces re-think their approaches and push for a more sophisticated policy.

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