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Issue no: 832/21
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• APRIL 5 - 7, 2016
• PUBLISHED TWICE WEEKLY
PRICE: GEL 2.50
In this week’s issue...
ORBI Group and Block Invest to Construct Two Towers Complex on Kazbegi Avenue
FOCUS
PAGE 2
“Fly To Georgia” Program to Dramatically Improve Air Transportation Options to and from Georgia Starting October 1, 2016
ON GREAT RELATIONS
On the eve of Ambassador Beruchashvili's new posting as Georgian Ambassador to the United Kingdom, we spoke to her exclusively about her aspirations for Georgia-UK relations
PAGE 3
ISET PAGE 4
World Bank Optimistic about Launch of 2018-2020 Program in Georgia BY EKA KARSAULIDZE
T
he World Bank has welcomed a four-point governmental reform plan that aims to improve Georgia’s investment environment. Mercy Tembon, the World Bank Regional Director for the South Caucasus, spoke of the launch of the next stage World Bank supporting program in Georgia at a meeting with the Prime Minister of Georgia, Giorgi Kvirikashvili, on April 1. The main theme of the meeting was the current World Bank program, which amounted to USD 1.2 billion in support for Georgia’s eco-
Mercy Tembon, the World Bank Regional Director for the South Caucasus
nomic development. Ms. Tembon stated that the program, covering the years 2014-2017, is currently being implemented satisfactorily and that she is pleased with the Georgian Government’s new four-point reform plan as presented by PM Kvirikashvili in February 2016. The plan includes new tax benefits, infrastruc-
ture schemes, governance reforms and an overhaul of the education system. The PM himself, as well as the local business community, international financial institutions, foreign investors and politicians, positively assessed the reform agenda, highlighting that it would support economic development. When the current program with the World Bank comes to an end, Ms. Tembon hopes to start another program covering the years 20182020. “Before we do this we will undertake a systematic country diagnostic that looks at the constraints on economic law and poverty reduction. We are also hoping to work together with the Government of Georgia and all the development partners to move the agenda forward. We are very optimistic about it,” she stated.
Investment Forum Held in Goderdzi Ski Resort PAGE 6
International Women’s Association to Celebrate 20 Years in Georgia with Charity Gala PAGE 10
New Tourism Campaign Promoting Minsk Set to Launch in Tbilisi PAGE 11 Prepared for Georgia Today Business by
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BUSINESS
GEORGIA TODAY
APRIL 5 - 7, 2016
ORBI Group and Block Invest to Construct Two Towers Complex on Kazbegi Avenue
BY ANA AKHALAIA
Contact: www.edelbrand.ge Phone: 599 461908
G
eorgian construction companies ORBI Group and Block Invest will start building two towers in Tbilisi, Georgia, this summer. At present, the companies are negotiating with the city government for a construction permit. The towers are to be be built on Alexander Kazbegi Avenue on the territory of the former Blood Transfusion Institute building which is currently being pulled down. The company is also interested in acquiring two
other ‘khrushchyovka’-type residential buildings (low-ceiling standard Soviet apartment blocks) in the area and a special group is studying the buildings and negotiating with the residents to that aim. The towers will be built on 120 thousand sq. m. and will be multifunctional with commercial space and a number of hotels and apart-hotels. The total investment of the project is USD 140 million. ORBI Group is a building and development company and was the first company in Georgia to start construction of apart-hotels (hotel-type apartments). It owns aparthotels in Batumi and Bakuriani. Block Invest is also in the process of implementing various hotel projects including Park Inn and Golden Tulip hotels.
City Hall to Establish Contacts with Business Association
BY EKA KARSAULIDZE
R
epresentatives of Tbilisi City Hall organized a meeting with the Business Association of Georgia on April 1. At the meeting, the Mayor of Tbilisi, Davit Narmania, spoke about the current and future plans of the local government. Business representatives also focused on the top problems and challenges that are important for business development as well as for the city. Mayor Narmania emphasized the importance of dialogue with the business community and said that such meetings will now be held quarterly. One of the priority issues at the meeting was the matter of administrative and bureaucratic delays, with business sector representatives highlighting the length of time paperwork takes to be processed. Mayor Narmania noted that the acceleration of the process of issuing licenses and permits is quite possible and that City Hall has every intention of working on this. President of the Business Association of Georgia Giorgi Chirakadze noted that there are many issues to discuss and that it is important for the business community to know the position of City Hall. “Today we discussed important problems such as
transport, infrastructure and more. We were glad to see the interest of City Hall and look forward to their prompt response. It is important for us that there are such meetings and dialogue with the authorities,” Chirakadze said. In particular, Mayor Narmania spoke about a number of projects, including bus stops which can be used to attract advertisers; underground parking; new land for hotel construction and the current state of the city urbanization Master Plan. “Moreover, it is very important to hear business representatives’ views, attitudes and opinions. They can be very helpful to us. We want to be more business-oriented,” the Mayor said. Special attention was paid to construction issues in the city. This was especially true for temporarily ceased projects, which, in the opinion of the business sector, cause a lot of damage to the tourism potential of Tbilisi. Representatives of City Hall suggested that this problem could be solved without waiting for the Master Plan. In addition, for better communication between the Business Association of Georgia and Tbilisi City Hall, Nodar Chichinadze has been appointed to the post of contact person between the two bodies. Thus, when a problem occurs, the business representatives will not have to wait for a quarterly meeting with the City Hall for the problems to be dealt with.
BUSINESS
GEORGIA TODAY APRIL 5 - 7, 2016
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EXCLUSIVE: Ambassador Beruchashvili on a Mission to Widen UK Engagement BY KATIE RUTH DAVIES
T
amar Beruchashvili, Georgian diplomat and former Georgian Minister of Foreign Affairs, is about to take on her first diplomatic posting as the new Georgian Ambassador to the UnitedKingdom(UK).GEORGIATODAY sat down with her beforehand to discuss her plans. “I am honoured and delighted,” the Ambassador says. “I believe the UK is a destination where I can fully utilize in whole my two decades of experience in diplomacy, international relations and international trade.” Her CV is certainly impressive, as she served as Minister of Trade and Foreign Economic Relations from 1998 to 2000 and State Minister of European Integration in 2004. She can also claim to have been personally engaged in the establishment of the Wardrop Dialogue in 2014 with David Lidington, which was named in honor of Sir Oliver Wardrop - Britain’s first Chief Commissioner of the Transcaucasus in Tbilisi in 1919-1921. The annual Dialogue between the UK covers various issues including European and Euro-Atlantic integration, security, trade, economic development, energy, cyber-crime, and on-going bilateral cooperation. “It’s very much a strategic platform to further intensify our bilateral relations, set our priorities and identify the directions we have to work in,” Ambassador Beruchashvili says. Such issues as those above will take up the majority of the Ambassador’s focus once she begins her four year posting
this week. “I’ll be primarily representing the interests of Georgia in the UK with the aim of strengthening Britain’s support for Georgia’s European and Euro-Atlantic integration priorities, widening and deepening relations and advancing bilateral cooperation at all levels, especially in the economic, defense, security and cultural policy fields.” With her small “but efficient and wellconnected” embassy team in London, established partner organizations such as the British Georgian Chamber of Commerce (BGCC), British Georgian Society, British Council Georgia, Georgian National Tourism Association (GNTA) and others, Ambassador Beruchashvili has already begun work towards an increased number of cultural exchange events and business forums. The first such event ’WHERE EUROPE MEETS ASIA: GEORGIA25’ will take place on Aprill 11 -16 and is presented by the Georgian National Book Center in association with Maya Jaggi, Artistic Director, with support of the Georgian Embassy. The cultural feast of writers and films in London will bring a number of contemporary Georgian writers and their British counterparts together as part of a discussion on the present, past and future of Georgia. It is the first in a series of events connected to the 25th anniversary of the restoration of independence of Georgia, the second of which will be the visit of Georgian Prime Minister Giorgi Kvirikashvili to London May 11-12 for the Anti-Corruption Summit organized by British Prime Minister David Cameron. “Georgia has a lot to say about its experience and achievements.” the Ambassador says. We asked her about the relationship
between the UK and Georgia. "Great Britain and Georgia are developing genuinely close relations based on friendship and common values. The UK sees Georgia as a key international security partner and regional democratic role model. As UK Foreign Secretary Philip Hammond wrote on Twitter after meeting the leadership of Georgia, the UK is a strong supporter of Georgia’s sovereignty and territorial integrity. Our political relations with the UK are excellent, but there is a solid potential to add more substance and value, particularly to improve businessto-business and people-to-people ties,” says the Ambassador. “Beyond the political aspects, I would highlight the assistance received from the UK government under the Good Governance Fund set up by the British Prime Minister in 2015. The Fund supports country development and the building of diplomatic institutions and civil society.” More specifically, the 4 million pounds
received so far from the Fund has been used by Georgia, as per the agreement, to help Georgia make a success of the EU DCFTA, attract more investment, including through improving consultation between business and the government, and technical support in niche sectors, such as agri-business. It also considers improving strategic communication, enhancement of the capabilities of Georgia’s civil service and institutions, and supporting an independent media. “We highly value active cooperation in the fields of culture and education in the framework of different programs (Chevening, John Smith, Hansard, Mansion Scholarships) that have already contributed to the professional development of young Georgians,” the Ambassador says. In 2015 the UK became the second largest investor country to Georgia. According to the Statistics Office of Georgia, investments exceeded USD 198 million, a record amount for the last twenty years.
“2016 marks 20 years of fruitful partnership with British Petroleum (BP). This partnership really put Georgia on the global energy map and showcases us as a solid, reliable, international partner in transporting the rich resources of the Caspian into Europe and beyond. In the new stage of cooperation with BP, through the expansion of the South Caucasus Pipeline (SCPX - total budget of USD 2 billion), roughly USD 400 mln will be spent in Georgia, representing the single largest foreign direct investment (FDI) in the Georgian economy. The so-called Southern Gas Corridor initiative, of which SCPX is a part, will play a major role in ensuring energy for the entire region.” “We also enjoy partnership with the Ministry of Defense and Security,” Ambassador Beruchashvili says. “Thanks to the advice from the UK and the assistance of British Government Adviser on Security and Crisis Management Issues, Sir Garry Johnson, we can count the recent opening of the Situation Room [the Georgian analogue of the successful British model – the National Situation Room of State Security and Crisis Management Council of Georgia] among our serious achievements.” “The timing of my taking on this new position is very important as Georgia is in the process of active implementation of the framework of the European Union Association Agreement whose most significant component, the Deep and Comprehensive Free Trade Areas (DCFTA), I believe, will attract UK and international investors to explore the new opportunities Georgia has to offer and will definitely facilitate business-tobusiness contacts.” Continued on page 5
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BUSINESS
GEORGIA TODAY
APRIL 5 - 7, 2016
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.
“Fly To Georgia” Program to Dramatically Improve Air Transportation Options to and from Georgia Starting October 1, 2016 BY ERIC LIVNY
A
s reported earlier, the recent deal struck by Georgian PM Giorgi Kvirikashvili and Wizz Air CEO Owain Jones led to a decision by the company to start – in September 2016 – base operations in Kutaisi and launch new twice or thrice-weekly service from Kutaisi to Berlin, Munich, Milan, Dortmund, Larnaca, Sofia and Thessaloniki. To follow up on this breakthrough development, the government has just unveiled plans to further expand the range, and dramatically reduce the cost of, regular direct flights between the TAV-operated Shota Rustaveli Tbilisi airport and destinations in Western Europe, North America, China, India and Japan. The new “Fly to Georgia” program was presented and discussed at a roundtable involving Georgian and international tourism industry stakeholders, PM Kvirikashvili, Minister of Economic and Sustainable Development Dimitry Kumsishvili, Minister of Finance Nodar Khaduri, and head of the Georgian National Tourism Agency Giorgi Chogovadze. The central element of the new program are rebates of up to $500 per passenger arriving in Tbilisi from selected high value destinations. The formula for calculating the size of the rebate will be based on
Chart 1: Seasonal fluctuations in arrivals by air and hotel occupancy rate in Adjara
the cost of the ticket and the amount of money spent on Georgian goods and services. According to Minister Kumsishvili, the main presenter at the event, “the government’s purpose is to attract high-end tourists who tend to spend relatively large amounts of money on hotels, restaurants, shopping and entertainment. In this way, “Fly to Georgia” will boost local producers and service providers in
the low season.” The rebates will be offered from September 30 till June 1 of each year, a period during which Georgia’s entire hospitality industry maintains very large spare capacity. To easily account for the amounts of money spent by individual tourists, together with small bottles of Georgian wine, passengers will be handed a special “Spend in Georgia” credit card, to be issued by Georgia’s major commercial banks in partnership with the government. The cards will also provide discounts for purchases at participating businesses. Alternatively, tourists could record their purchases using an easy-to-install “Discover Georgia” iPhone or Android app providing, as additional services, survival Georgian vocabulary, Georgian-to-English
visitors strain Georgia’s infrastructure without contributing almost anything to its economy. The truck drivers among them pay a fee of 250GEL per trip. Most others eat a khachapuri". Another concern for Georgia, according to Chogovadze, is the fact that only 764 thousand visitors arrived by air in 2015. These are typically tourists who stay and spend in Georgia. However, even within this group, only 334 thousand were high value tourists from North America, Western Europe, Asia and the Middle East. Tourists from these regions are indeed the main target for the “Fly to Georgia” program. Finally, a major problem addressed by “Fly to Georgia” is the extremely high concentration of foreign arrivals in a very short period around July and August, with another smaller peak in the ski season. While creating seasonal jobs and bringing foreign currency, such a sharp seasonal peak in mass tourism carries many negative externalities by straining the environment and creating congestion. The highly pronounced seasonal pattern also negatively affects the hospitality industry by reducing incentives to invest in physical capital and skills (which remain idle or underemployed for up to 10 out of 12 months). To increase Georgia’s attraction as an offseason touristic destination, the government also plans to invest in water and mud spa resorts such as Tskaltubo, Borjomi/Bakuriani, and Akhtala. The experience of Sairme, a spa resort brought back to life in 2012 through a Public Private Partnership involving the World Bank and a private Georgian business, suggests that this sector has tremendous all-season potential, provided Georgia’s air transportation options are improved. Having developed master plans and marketing “teasers”, the government is currently on the lookout for foreign and domestic
Table 1: Size of rebate per passenger arriving to Tbilisi from selected destinations in Western Europe, North America and Asia.
Ticket cost Above $1,000 $500-999 Up to $500
Amount spent on Georgian goods and services More than $1,500
$1,000-1,499
$500-$1,000
$ 500 $ 400 $ 300
$ 300 $ 200 $ 100
$ 100 $ 75 $ 50
and English-to Georgian voice translation, maps and information on nearby hotels, restaurants, museums, as well as entertainment and sightseeing options. Negotiations are currently underway with major European, North American and Asian carriers scrambling to enroll in the program. Up to 10 carriers will be selected, based on available estimates of potential impact on passenger traffic and income from tourism. Among current frontrunners are American Airlines, British Airways, Air France, Japan Airlines, Air China and Fly Emirates. Speaking via video, American Airlines’ CEO Doug Parker noted that “like many of the other reforms Georgia has implemented, “Fly to Georgia” reflects very refreshing thinking, completely out-of-the-box. The American public has considerable appreciation for Georgia’s pro-Western stance and its stellar record in anti-corruption reforms. By reducing the cost of travel, “Fly to Georgia” will help translate this appreciation into actual tourism and investment figures. We, as the largest American carrier, will be honored to serve as a bridge connecting the Georgian and the American people.” Giorgi Chogovadze presented GNTA’s analysis of the Georgian tourism and hospitality sector, which underpins the “Fly to Georgia” program. According to him, 2015 was an excellent year for the industry, after a temporary slowdown in 2014 caused by a global slump in travel and tourism, on the one hand, and Georgia’s ill-timed experimentation with restrictive visa policies, on the other. Chogovadze reported that, in 2015, "the total number of international arrivals has set a new record of almost 6mln. However, only 2,23mln of these were genuine tourists, that is people who spent at least one night in Georgia. The vast majority of arrivals are transit visitors from neighboring countries with which Georgia has a land border. These transit
investors interested in the sector. PM Kvirikashvili emphasized that "Fly to Georgia" complements the efforts of Georgia’s hospitality industry investors. According to him, “in the coming year or two, Georgia will see the opening of more than 60 additional hotels with a total extra capacity of almost 40,000 beds. These include 5-star international brand hotels such as Intercontinental, Hilton Park Inn, Rixos and Hyatt in Tbilisi; Radisson Blue in Tsinandali, and Crowne Plaza and Babylon Tower in Batumi. These investments will greatly benefit from a steady flow of tourists from Western Europe and North America.” The only person who seemed to have any concerns about the new government initiative was Minister of Finance Nodar Khaduri. While others were singing praises, Nodar was quietly calculating the cost of “Fly to Georgia” for Georgian taxpayers. Assuming that the number of international arrivals from premium destinations stays at the current level of about 300 thousand, the cost of rebates may reach $70mln. He was not able to immediately assess whether or not the program will generate sufficient bang for the buck. “Georgia should take this risk,” responded PM Kvirikashvili. “Having regular transport connections with developed countries will provide us with a perfect opportunity to strengthen our businesses and create jobs. Also, money is not the only criterion for judging the merits of this program. It is as much about the economy as it is about building cultural and social links with Europe." ____________________________________ The author is president with the International School of Economics at Tbilisi State University and ISET Policy Institute, and advisor to the Georgian Minister of Economic and Sustainable Development
BUSINESS
GEORGIA TODAY APRIL 5 - 7, 2016
5
EXCLUSIVE: Ambassador Beruchashvili Plans Announced to Export on a Mission to Widen UK Engagement Georgian Agricultural Products to Saudi Arabia Continued from page 3
One of the Ambassador’s key priorities is to activate commercial interests in Georgia. The road is already paved to this aim, with sixteen new businesses having been registered in Georgia during the first two months of 2016 in cooperation with UK citizens, bringing the total to 622 such enterprises set up since 1996. The country’s open economy and geographical location are the main factors encouraging UK citizens to start businesses in Georgia. In this regard the Ambassador’s planned business forums and ‘roadshows’ will further promote Georgia as a favorable investment destination. Her embassy will be putting the spotlight on Georgia’s “strategic attractive geographic location as a hub in the region and demonstrating that concrete projects like Anaklia Deep Sea Port are set to develop the Silk Road route and make a difference in the region.” She will be building on the achievements of the previous ambassadors and using the established networks and around 1500 dedicated Georgian Diaspora to better exploit the advantages of the British capital- a “political, financial and economic powerhouse.” The Ambassador is confident her trade and economic background will be an asset in the success of the tasks she has set her team. “In general, ratings assessments of doing businesses and reforms in various fields can prove Georgia is a success story in the region and we need to do more promotional activities to make Georgia better known in the UK at different levels- from business to academic and civil society.” Twinning is one area to better promote to British society. Tbilisi is Twinned with Bristol, and Kutaisi with Newport. Few people know this and the Ambassador plans to further activate these
links. “There’s huge potential- an entire audience to attract and inform through business and cultural events and more targeted activities. This year in Georgia is the 850th birthday of the famous Georgian poet Shota Rustaveli, and in the UK the significant fact of the 400th anniversary of Shakespeare’s death. We plan, together with UK Ambassador to Georgia, H.E. Alexandra Hall Hall and the British Council, to link these two geniuses - Shakespeare and Rustaveli.” “A rich, diverse and unique culture is another serious asset to promote Georgia with. In the field of Cultural Cooperation, the Embassy will be further facilitating contacts between Georgian and UK cultural environments to use culture to bring people together – through the exchange of artists, musicians, performers and even museum curators. I also want to use my academic background to forge stronger educational ties between the two countries and to encourage many more student exchanges.” Georgia is already up-and-coming as an attractive destination for UK tourists, with statistics showing visits to Georgia up by 20% last year compared to 2014. “Georgian landscapes, seaside, mountains and cultural heritage must be promoted. The GNTA is engagedwe aim to activate contacts with tourism businesses here and arrange journalist tours to advertise and popularize ourselves- cuisine, wine routes; wine tourism is very fashionable now. Georgia has a lot to present.” She fully expects the International World Tourism Organization Congress on Wine Tourism, taking place in September, will allow Georgia to get the message across. She hopes airlines such as British Airways will be among those listening. “I’ll be lobbying British Airways to return. Since they withdrew from Tbi-
lisi in 2013 there has been increased interest in our country as a viable commercial destination.” Talking of withdrawals, our discussion turns to the up-coming Referendum and I ask her whether she thinks the British public will vote to break from the European Union. “It’s an exercise in democracy but I still believe the UK will stay. As a person who has worked over 20 years on Georgia’s European agenda, I want to see the EU strong, secure and prosperous. I can’t imagine that being the case without the UK. A so-called ‘Brexit” would shake the EU to its core and has the potential to set off a chain reaction in times of increasing Euroscepticism. I believe there are not only strong trade and economic reasons for the UK to stay in the EU, but that the UK is critically important for the EU to play a global role. At the same time, the British have the ability to make Europeans more economically liberal and more invested in a trans-Atlantic relationship. I believe the EU is a project not complete without Georgia and the UK, and the UK should have a special seat at the table where European decisions are made.” The Ambassador concludes our talk with an important message: “There is a plethora of connections between Georgia and the UK. There is political readiness on both sides to activate greater cooperation and to work towards the future Georgia deserves. Georgia is committed to irreversibly follow its European and Euro-Atlantic path, further strengthen its democracy and continue to be an active international security partner. We are already a success story in the region but we need more support and engagement from our Western partners. The UK has a special role in this regard. Engaging that support is my mission for the next four years.”
BY ANA AKHALAIA
G
eorgian agricultural products, including fruit and vegetables, mineral water, fish and sheep, may be exported to Saudi Arabia. Minister of Agriculture Otar Danelia presented the development strategy and main direction of the export of 21 agricultural products in 2015-2020 to the delegation of Saudi Arabia’s Ministry of Agriculture. The main focus of the meeting was the potential of agricultural trade and economic cooperation possibilities between the two countries. The Minister stated that the diversification of export markets is a priority for Georgia, cooperation with Saudi Arabia being an important aspect of this. “Saudi Arabia is one of the largest markets. It will be a significant point for our country’s economy and agricultural development to promote Georgian agricultural product export to this market,” said Min-
Otar Danelia, Minister of Agriculture
ister Danelia. “This is the preparatory visit for my Saudi Arabian counterpart’s arrival and the signing of a Memorandum of Understanding is being planned in terms of agriculture.” During a one week visit to Georgia, the Saudi delegation visited the National Food Agency, Research Center and the laboratories of the Ministry of Agriculture where they were introduced to their activities. They also visited regions of Georgia and inspected factories, farms, demonstrative lands and experimental farms.
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BUSINESS
NBG: Georgia Has $15 Billion Foreign Debt
GEORGIA TODAY
APRIL 5 - 7, 2016
Investment Forum Held in Goderdzi Ski Resort BY ANA AKHALAIA
BY EKA KARSAULIDZE
T
he gross external debt of Georgia amounted to USD 15 billion as of 31 December 2015, 107 percent of the last four quarters Gross Domestic Product (GDP), says the National Bank of Georgia. During the fourth quarter of 2015 the gross external debt of Georgia increased by USD 357.0 million. Out of that a USD 441.1 million increase was due to transactions. The National Bank of Georgia (NBG) also published the numbers on public sector external debt- USD 6.0 billion, 43.3 percent of GDP. Of this, the debt of the general government amounted to USD 4.4 billion or 31.5 percent of GDP. External liabilities of the NBG amounted to USD 219.2 million- 1.6 percent of GDP. Moreover, the bonds and loans of public enterprises were cor-
respondingly USD 782.5 million, 5.6 percent of GDP, and USD 650.3 million, 4.7 percent of GDP. Banking sector external debt amounted to USD 2.9 billion or 21.1 percent of GDP. The external debt of other sectors stood at USD 4.4 billion or 31.8 percent of GDP, while USD 3.0 billion, or 21.5 percent of GDP, consisted of intercompany lending. 94.7 percent of the gross external debt of Georgia was denominated in foreign currency. The NBG stated that the net external debt of Georgia amounted to USD 9.4 billion, 67.3 percent of GDP, as of 31 December 2015 while net public sector external debt was USD 3.5 billion, or 25 percent of GDP. The NBG explained the gross external debt statistics were harmonized with a balance of payments and included external debt of the public sector (general government, public corporations and the national bank) and the private sector (banking and other sectors).
A
n Investment Forum was held in Goderdzi ski resort, Georgia, organized by the Ministry of Economy and Sustainable Development and Mountain Resorts Development Company. The Forum was opened by the Minister of Economy, Dimitry Kumsishvili, who introduced the resort’s investment potential to more than 60 participant local and foreign businessmen. According to Kumsishvili, a development strategy for Goderdzi has already been prepared which includes spatial planning and restoration of the access road to the resort. Within the general development plan, the number of available beds at the resort is expected to increase to 3,500, so generating more employment possibilities and bring significant income. The resort currently has seven residential cottages as well as a hotel and administrative center. The final plan is for the Goderdzi resort to be ultimately able to receive 7,000 tourists simultaneously.
Minister of Economy Dimitry Kumsishvili at the Investment Forum in Goderdzi
“The resort officially opened on December 5th, 2015. It is already April and yet the skiing slopes are still in good condition and ski lovers can enjoy themselves to the full,” said Minister Kumsishvili. “We are holding negotiations with investors and locals to reach a number of important agreements this season in order to start the construction of hotels,” he added. Goderdzi Resort is located at 2,366
meters above sea level and is a two hour drive from the popular seaside resort town of Batumi, Georgia. It boasts an 8 km ski run and two kinds of ski lift: gondola and bubble. Already visited by Australian, Austrian, German, English, Russian and Ukrainian tourists, the resort was funded with 23 million GEL from the state budget and an allocation of EUR 10.9 million for ski lifts from the Austrian government.
BUSINESS
GEORGIA TODAY APRIL 5 - 7, 2016
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Wooden Educational Eco Toys to Be Exported to Europe As the company director stated, the demand for their toys is quite high on local and export markets, but due to low production, the toys are sold only in brand stores and are 20-30 per cent cheaper than imported high-quality wooden toys. Child development-oriented wooden toys are ecologically pure, including materials, paints and packaging. Geometrical figures for construction or with letters of the alphabet are aimed at development of virtual-spatial perception and imaginative skills, as well as analytical skills. Geo Toys, located in Tbilisi and currently employing 12, was founded in autumn, 2015, with USD 35,000 being invested at the outset.
Georgia’s Partnership Fund to Restore Borjomi Romanov Palace BY ANA AKHALAIA
G
eorgia’s Partnership Fund is to restore a famed 19th century Romanov Palace in the country’s mountain resort town Borjomi. The Ministry of Economy and Sustainable Development opted to transfer the rights of the palace to the Fund in order to oblige it to carry out extensive restoration work on the estate, with the goal of turning the complex into a national park. “We wanted to transfer the palace to an investor for long-term use. I’ve talked to 50 different investors, but couldn’t reach a final agreement because the operation costs were too high. Some of the investors suggested we build a new hotel on the palace grounds, but this was impossible because the site has the status of a national cultural monument and additional new construction is banned,”
said Economy Minister Dmitry Kumsishvili. The Minister said the ministry hopes that after the extensive restoration, the historic palace will become a main tourist attraction in Borjomi. The palace is technically public property, despite its official cultural status. Former Georgian President Mikheil Saakashvili used the site as summer residence before fleeing the country in 2013. Built by Russian architect Leontin Benua in 1892-1895 on the order of the Romanov dynasty’s Tsar Nicholas II, the residence was a favorite retreat for the royal family and later a main attraction for tourists coming to Borjomi from across the Soviet Union. One of its more famous patrons during this time was infamous Georgian-born Soviet leader, Joseph Stalin. The government established the Partnership Fund in 2011 and owns 100 per cent of the fund and as well assets exceeding 5 billion GEL.
BY ANA AKHALAIA
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eorgian company Geo Toys plans to increase production of its wooden educational eco toys for children and export them to the neighboring and southern European countries. Director of the company, Davit Katsitadze, stated that USD 200,000 will be invested in production and while the company is mostly focused on the local market at present, they have already started working on the relevant certificate for the future planned export. “Negotiations are underway in terms of re-equipping the enterprise. Most likely, we will be able to expand by September and the Georgia-produced wooden toys will appear on the broader market shortly after,” said the Director.
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BUSINESS
GEORGIA TODAY
APRIL 5 - 7, 2016
S&P Publishes Georgia’s Banking Industry Risks Report BY ANA AKHALAIA
A
merican financial services company Standard & Poor’s (S&P) Ratings Services has published a new report on the key risks for the Georgian banking system. S&P is a division of McGraw Hill Financial that publishes credit ratings, financial research and analysis on stocks and bonds. The company aims at bringing transparency and comparability to financial markets worldwide. Through ratings and research it assists investors and other institutions to manage risk. According to the report ‘Banking Industry Country Risk Assessment: Georgia’ (BICRA), Georgia's economic risk trend as stable. Georgia's economy has successfully absorbed a number of external shocks, and demonstrated its ability to adjust to external challenges. However, the economy is in a correction phase, and credit costs are expected to remain a high 2.7%-3.0% of average gross loan book over the next 12 months. The industry risk trend for Georgian banks is stable. The banking sector's risk appetite will remain aggressive, mostly driven by a high share of foreign-exchange lending, and the heavy reliance on external funding will continue. Georgia remains a low-income country,
with GDP per capita at about USD 3,242 in 2015. The Georgian economy remains volatile and highly sensitive to developments in domestic politics on the back of the general elections, which are due in autumn 2016. Real GDP growth is expected for Georgia to average about 3.0% over 2015-2018. Dollarization in the economy is high, and therefore constrains monetary policy efficiency. Approximately 60% of deposits are in foreign currency and the IMF estimates 90% of foreign currency borrowings are unhedged. The banking sector's credit costs increased in 2015 and may remain elevated throughout 2016. Banking services in the Georgian economy are underpenetrated, with privatesector credit to GDP amounting to only about 50% (2015 estimate), higher than
in Azerbaijan (37%), Kazakhstan (34.1%), and Uzbekistan (13.9%), but lower than in Russia (61.6%). Georgia's low financial intermediation corresponds to generally low wealth and, consequently, low debt service capacity among the population, seen in low GDP per capita and the still-high unemployment rate of 14.75% in 2015. Household leverage remains low, but on an upward trend, increasing to an estimated 26.1% of GDP in 2015, from 12.5% in 2011. Demand for credit in the corporate sector is volatile and highly sensitive to political and economic uncertainty in Georgia. It is positive that the banking sector's exposure to the real estate and construction sector accounts for less than 10% of the system's total loan book. Major borrowing industries are trade, energy, food production, and agriculture.
The Georgian banking industry compares well with those of regional peers in terms of governance and transparency. This stems in part from most banks' ownership by foreign investors, including the two largest, Bank of Georgia and TBC Bank (both listed on London Stock Exchange), which encourages higher standards of information disclosure and facilitates prudent corporate governance. Georgia is the only country in the region where the outlooks on all the banks are stable, both for bank-specific reasons and because of a relatively stable macroeconomic environment.
PEER BICRA SCORES S&P’s assessment of Georgia's economic
resilience reflects higher risks than for other countries in the same BICRA group, owing to Georgia's relatively low wealth, high external vulnerabilities, and political uncertainty. At the same time, Georgia, being in a correction phase, finds the risk of economic imbalance now lower than for its peers. Georgia has a better institutional framework than its peers because of the proactive approach of the previous government in reducing corruption and opening the banking sector up more to external investors. At the same time, Georgia's system-wide funding as weaker than that of its peers highlights the country's reliance on external funds and its narrow and shallow domestic capital markets.
SUMMARY SCORES FOR SOME OF GEORGIA'S PEERS ARE PRESENTED BELOW
BUSINESS
GEORGIA TODAY APRIL 5 - 7, 2016
9
Newly Launched Pro-Privacy Social Network Topishare in Tbilisi Offers Free Organic Reach own Kingdoms where they can advertise for free, having a direct conversation with the target audience. “Within Topishare's viral landscape, even nonregistered users can reach and engage with a business’ Social Kingdom - they can Like, comment, and more,” Rotem says. “It’s the perfect advertising strategy.” And if the business wants, it can advertise for-pay in other Kingdoms, which individual users place under the appropriate topics. Social network Topishare has only just been launched
BY INGE SNIP
T
he monkeys jump from tree to tree, a snake enjoy a bath in the communal pool, and an iguana checks out their every move. At the same time, Rotem, Hila, and Yair are working hard on their laptops setting up the new pro-privacy social network, Topishare, where organic reach isn’t limited by algorithm. This was two years ago and based in the deep jungles of Costa Rica, where the trio had initially moved to escape the fast-paced tech world– in vain, it turned out. Now, the international entrepreneurs are based in Tbilisi, and launched the beta version of the platform on March 3rd. The idea for Topishare grew out of frustration with the current social networks. “Years ago I ran an online jewelry store. Although people seemed to love the pieces, it was hard for them to find me. It was then that I realized that only 2% of the people who Like your page on Facebook see what you post,” says Rotem Peled, Founder and Chief Operating Officer (COO). And not only that, the paid advertisements on Facebook may give you ‘Likes’, but zero engagement because they are often fake. “With ‘Like’-farms in the Philippines to fake profiles from Cameroon, you spend money on getting your business out there, but instead get fake profiles Liking your page,” Rotem explains. And the inability to share by topic, as you do on
a forum, was missing as well: everything gets lost in the cluttered newsfeed. Although forums such as Reddit are great, the personal connection, as with social networks, is lost. Other concerns Rotem has with social networks is that they collect and sell your personal information, and things you post, to advertisers; and that just didn’t feel right. That is why at Topishare you can share whatever you like, with whom you like, the way you like it. “I thought to myself, what if there was a world where social media was more about connecting with people who share your interests, and less about how many ‘Likes’ you can get. And where you are the one in control of your privacy and content, and not some faceless company in Silicon Valley that sells your data to the highest bidder,” Rotem says, explaining the idea behind Topishare. Topishare is a place where individual users, businesses, and the Topishare team are all equal. For the individual user, Topishare’s mission is to declutter newsfeeds by enabling the user to share content with like-minded people in Social Kingdoms. The team do not collect or sell your data, as for advertising purposes this is not necessary: advertisements are topic-based and as a result target the right audience. And Topishare wants the user to be able to profit from their content – instead of the social networks – meaning users can earn with quality-content posts, or by deciding from the pool of advertisers which advertisement goes where. For businesses, it is similar. They can create their
but the amount of users is growing by the day. Rotem hopes to become a solid alternative to the giants Facebook, Twitter, Instagram, and others: “We want Topishare to be a social topical kingdom for people worldwide who just want to have a conversation or a discussion, or share something about themselves, without all the added baggage that comes with most social networks.” And who doesn’t want to do that, while being able to profit from it themselves? You can register on www.topishare.com or contact inge@topishare.com with any questions.
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GEORGIA TODAY
APRIL 5 - 7, 2016
Women’s Association to Celebrate Alcoholic Beverage International 20 Years in Georgia with Charity Gala and Tobacco Prices to Increase Steadily in 2016 BY KATIE RUTH DAVIES
O
BY ANA AKHALAIA
A
lcoholic beverages and tobacco prices will steadily increase over the course of 2016, according to the National Statistics Office
of Georgia. Prices for alcohol and tobacco products rose 14.0 per cent year-on-year in March, with tobacco registering the highest growth rate at 19.9 per cent. Healthcare prices have risen 10.2 per cent since March 2015, with medical product, appliance and equipment prices increasing 18.7 per cent and outpatient services growing 11.6 per cent.
Prices for food and non-alcoholic beverages rose 2.3 per cent in the same period, with fruit (13.4 per cent) as well as oils and fats (8.5 per cent) registering the highest price hike. Prices for restaurants and hotels jumped 7.1 per cent, while furnishings, household appliances and maintenance prices rose by 6.7 per cent between March 2015March 2016. Vegetable prices decreased by 9.6 per cent year-on-year in March. Public transportation prices dropped 3.6 per cent and the purchasing prices for automotive vehicles slid 11.1 per cent over the same period. According to the state statistics service, the overall year-on-year inflation in March 2016 sits at 4.1 per cent.
n 16 April 2016 the function suite of the elegant Funicular will play host to a charity gala celebrating 20 years of the International Women’s Association (IWA) in Georgia. The IWA Georgia was started in 1996 by a group of expatriates and Georgian women living in Tbilisi. The first aim of the IWA is to help expats living in Georgia, introduce them to Georgian culture, and establish bridges and good friendship among different cultures. In doing so, as an organization, the IWA aims to contribute to Georgian society by developing and supporting social assistance projects. The ‘Black Tie’ Gala on April 16th, which will feature live entertainment, including performances from a number of talented IWA members and the exceptional IWA choir, is set to benefit the NGO ‘Child, Family, Society’ for disabled children under 6 years of age. “Our CPC (Community Projects Committee) carefully determined, with the IWA as a whole, to support a special pro-
Gulnara Biblieishvili (the tallest), Founder and Head of ‘Child, Family, Society", with specialists, Head of the kindergarten (left) and IWA representatives (right) during a visit to Marneuli
gram run by an NGO called ‘Child, Family, Society,’" Simay Gumrukcu, Vice President and Head of the IWA Fundraising Committee, told GEORGIA TODAY. “All proceeds from this Gala will be donated to this program.” ‘Child, Family, Society’ is a union of parents of children with disabilities which protects the rights of the children and their families. It was founded in 1998 by Mari Biblieishvili and her sister Gulnara. In the frame of the USAID program ‘Reading for a Better Future,’ the NGO ‘Child, Family, Society’ established a pilot-project of an early intervention center in Marneuli for pre-school children with hearing and visual disorders. The municipality of Marneuli and the kindergarten administration provided a
space in the building of the kindergarten free of charge. Renovation of the space, the furniture and also training and developing methodology for specialists (psychologists, gesticulation teachers, speech therapist, occupational and intervention therapist), was provided by USAID. There are seven groups of children in the kindergarten in Marneuli, including disabled children (around 200 children in total). Proceeds from IWA’s 20th anniversary Gala will help by providing special literature and toys for children with hearing and visual problems, as well as outdoor playground facilities. The concept is that, by playing together with kindergarten children, disabled children can better prepare themselves to integrate in future schools. In all its projects, the IWA supports women, children and the elderly who are at risk due to poverty, poor health and other disabilities. Speaking of the up-coming Gala, Ms Gumrukcu said, “As in all IWA activities, we would like this event to benefit the community while also giving us another chance to enjoy each other's company.” For more information about the IWA, go to http://www.iwa.ge/
10 Galaktion Street
Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge
For further information about the Gala or to purchase tickets, please contact IWA Event Manager Feyza Yozgat on 514710007 or Svetlana Henderson 577440755
BUSINESS
GEORGIA TODAY APRIL 5 - 7, 2016
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Georgia to Re-launch Wine Route Project BY ANA AKHALAIA
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eorgia’s National Tourism Administration agency is set to re-launch a national wine route project aimed at documenting and evaluating the country’s countless numbers of wine cellars. The project includes adding new wine tourism facilities to the electronic database, as well as installing directional and road signs for the individual wine cellars. The agency will also reach out to small family-owned wine cellars and provide courses on the history of Georgian wine and wine-tasting methods, as well as basic skills on accounting, financing and foreign language skills.
Promotional materials such as wine routes maps and guides will be distributed for free on the agency’s Website and at tourism information centers across the country. Information boards will be placed at the entrance of the each munici-
pality and include a map of the region’s wine cellars and local grape varieties. The Georgian government and USAID first launched the Wine Route Project in 2011. Road signs for about 50 wine cellars were installed in the Kakheti, Kartli and Imereti regions during the first two years of the program. According to the Wine Route Project, a foreign language-speaking expert should guide a tourist to a traditional Georgian marani, or wine cellar, where the host will present high-quality wine and facilities for tasting. Tourists will have the option of choosing a marani via the Internet, prior to their visit. Georgia will host the first global conference on wine tourism in autumn 2016 under the auspices of the UN’s World Tourism Organization.
New Tourism Campaign Promoting Minsk Set to Launch in Tbilisi BY NICHOLAS WALLER AND ANA AKHALAIA
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new advertising campaign promoting the Belarusian capital Minsk as a tourism destination will be launched in Georgia’s capital Tbilisi later this month, Minsk’s information and tourism center said in a statement released on 29 March. A series of prominent billboards will be installed in various parts of Tbilisi and feature Minsk’s main sites, including the city’s ice hockey arena, the remnants of its tsarist-era old city and Stalinist city gates. Minsk has long flown under the radar as a tourist destination. Few historical monuments exist in the city, as the advancing Red Army destroyed 80 per cent of its antebellum architecture in
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the closing months of World War II. The Soviet government later rebuilt the city as a showcase of Stalinist architecture, with wide boulevards and garishly ornate stone buildings. Under Belarus’ five-term President Alexander Lukashenko, Minsk has been best known as a living museum of Soviet life, complete with a still-functioning KGB and dozens of monuments to Bolshevik luminaries Vladimir Lenin and Felix Dzerzhinsky.
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Lukashenko recently said in a meeting with his Georgian counterpart, Prime Minister Giorgi Kvirikashvili that both countries need to take bold steps towards strengthening economic and tourism ties. According to statistics by Georgia’s National Tourism Administration, 2,037 Belarusian citizens visited Georgia during the first quarter of 2016. Georgia is a top tourism choice for Belarusians, mainly due to the former’s popularity as a resort destination in the Soviet Union and visa-free access for citizens of Belarus. Minsk city authorities have partnered with Georgia’s tourism agency to install tourism posters around the Belarusian capital, promoting Georgia as a holiday destination. A similar advertising campaign will take place in Latvia’s capital, Riga, with posters of both Minsk and Tbilisi appearing on its streets.
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