Issue #1004 Business

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Issue no: 1004/107

• DECEMBER 5 - 7, 2017

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

Brutal Street Brawl Claims Lives of Two School Students NEWS PAGE 2

Real Property Sales ISET PAGE 4

Electricity Market Watch GALT & TAGGART PAGE 6

FOCUS ON THE SKI SEASON Goderdzi will be the first to open its doors to skiers this year. Find out more inside

PAGE 3

Bringing Content to Real Estate Development: The Georgia Example

Parliament Approves Increased Budget for Ministries BUSINESS PAGE 7

Regus, New Service Center in Tbilisi

OP-ED BY LJUBOMIR FILIPOVIC

C

onstruction and real estate development can be found on every step in Georgia and the national realestate market seems to be extraordinary vibrant and lucrative. The situation bears a strong resemblance to my native Montenegro in 2008, when a sudden influx of Russian dollars turned what is actually a minuscule country into one huge development site.

Continued on page 8

BUSINESS PAGE 8

PM Opens EU Partnership Conference Hosted by Georgian Parliament in Tbilisi POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets As of 01ͲDecͲ2017

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

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

INDICES

w/w

m/m

BONDS

Price

w/w

m/m

GBP 32.69

Ͳ1,9%

Ͳ7,7%

GEOROG 04/21

107.52 (YTM 4.34%)

+0,1%

+0,3%

GBP 3.40

Price

+0,1%

Ͳ5,6%

GEORG 04/21

112.23 (YTM 3.01%)

Ͳ0,1%

Ͳ0,2%

GBP 15.60

Ͳ4,2%

Ͳ9,6%

GRAIL 07/22

112.10 (YTM 4.79%)

+0,1%

+0,2%

BGEOLN 07/23

104.32 (YTM 5.11%)

+0,7%

+1,1%

Price

w/w

m/m

63,73

Ͳ0,2%

+5,4%

1 280,62

Ͳ0,6%

+0,5%

CURRENCIES

Price

w/w

m/m

GEL / USD

2,7032

+0,3%

+3,5%

GEL / EUR

3,2340

+0,5%

+6,6%

Price

w/w

m/m

GEL / GBP

3,6418

+1,3%

FTSE 100

7 300,49

Ͳ1,5%

Ͳ2,5%

GEL / CHF

2,7730

+0,6%

+6,3%

FTSE 250

19 854,40

Ͳ0,5%

Ͳ2,3%

GEL / RUB

0,0459

Ͳ0,2%

+1,8%

DAX

12 861,49

Ͳ1,5%

Ͳ4,5%

GEL / TRY

0,6898

+1,2%

+0,7%

DOW JONES

24 231,59

+2,9%

+3,4%

GEL / AZN

1,5898

+0,2%

+3,4%

6 847,59

Ͳ0,6%

+2,0%

GEL / AMD

0,0056

Ͳ

+3,7%

Ͳ3,4%

+0,5%

NASDAQ

+5,3%

GEL / UAH

0,0999

Ͳ0,2%

+2,8%

MSCI EM

1 115,94

Ͳ3,3%

Ͳ1,2%

EUR / USD

0,8408

+0,3%

Ͳ2,3%

SP 500

2 642,22

+1,5%

+2,4%

GBP / USD

0,7420

Ͳ1,0%

MICEX

2 105,99

Ͳ2,6%

+1,1%

CHF / USD

0,9762

Ͳ0,3%

Ͳ2,7%

MSCI FM

2 881,83

Ͳ0,4%

+0,6%

RUB / USD

58,8951

+0,8%

+1,2%

GT Index (GEL)

1 582,68

Ͳ

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TRY / USD

3,9139

Ͳ1,0%

+2,6%

GT Index (USD)

1 208,13

Ͳ

Ͳ

AZN / USD

1,6982

Ͳ0,0%

Ͳ0,1%

MSCI EM EE

160,38

Ͳ1,7%

2

NEWS

GEORGIA TODAY

DECEMBER 5 - 7, 2017

Georgia: 577 New HIV/ AIDS Cases in 2017

BY THEA MORRISON

T

he 11-month statistics of 2017 revealed that 577 new cases of HIV / AIDS have been detected in Georgia.

The information was released by the Center for Infectious Diseases, AIDS and Clinical Immunology on World AIDS Day, annually marked on December 1.

There are currently 6711 cases of HIV / AIDS registered in Georgia. Among the patients, 5,013 are men and 1,698 women. The majority of infected people are from 29 to 39 years old.

The Center reports that the first case of AIDS in Georgia was observed in 1989 and, by 2017, the number of HIV / AIDS patients (including registered and unregistered) is now suspected to have reached 12,000. According to the latest data, AIDS has developed in 3,648 patients, while 1,339 people have died from AIDS in Georgia since 1989.

“At present, 4,018 patients are undergoing proper treatment, among them 48 are children. Despite the fact that the country has avoided a large scale epidemic of AIDS, the number of HIVinfected individuals is growing annually,” the AIDS center of Georgia said.

The Center believes that in order to reduce the spread of the decease, all people should undergo a simple test and, if positive, begin treatment.

The AIDS Association has started a campaign with the motto: "Let's examine everybody, treat everyone and defeat the AIDS epidemic in Georgia.”

Tengiz Tsertsvadze, the Head of the AIDS Center, says the statistics are alarming in men, adding that cases of new

Brutal Street Brawl Claims Lives of Two School Students

BY THEA MORRISON

infections resulting from sex have increased from 5% to 25% over the last ten years.

“44% of men were infected during sex and 43% were infected as a result of drug addiction. Every fourth man who has had sexual relations with other men has AIDS,” Tsertsvadze said.

Health Minister David Sergeenko stated that the Infectious Disease and AIDS Center's infrastructure is in poor condition, and has promised the construction of a new clinic will start soon.

“The land has already been acquired in Digomi district. The design works are almost complete and the new clinic will open within two years," Sergeenko said.

Leader of the parliamentary Georgian Dream (GD) majority, Archil Talakvadze, said that the Government, Parliament, civil society and the healthcare sector will prioritize putting an end to the HIV / AIDS epidemic in Georgia.

“Georgia has very good conditions to join and fulfill the global challenge and promise - End the AIDS Epidemic. We believe the AIDS treatment and prevention-related services should be in line with the Hepatitis C program. This will help to detect and treat AIDS cases more effectively," he said.

T

wo 16-year old schoolboys from Tbilisi Public School 51 were brutally killed during a street brawl in the city center on Friday.

One boy died at the scene while the second was taken to hospital. The next day he also died.

Avtandil Imedadze, Head of the Republican Hospital, said one of the 16-year-old teenagers injured in the conflict sustained brutal injuries in the chest and abdomen, thought to be stab wounds.

“Emergency services fought to save the patient. However, his condition was critical and we were unabe to save him,” the doctor added.

Witnesses claim the conflict started in the school toilet, after which the group of students moved to Khorava Street, where the conflict grew larger.

The police have launched an investigation into the case under Article 109 of the Criminal Code of Georgia that envisages premeditated murder.

Interior Ministry reports that one suspect, born in 2001, has already been arrested, while the second alleged culprit has been identified and is being tracked down.

"The fight against violence is our main task and we will do everything to protect society, especially juveniles,” the Ministry stated.

On Sunday, Georgian citizens gathered at public school 51 and lit candles in solidarity of the deceased students’ families. The participants of the rally demanded a timely and effective investigation into the case.

President of Georgia, Giorgi Margvelashvili, stated that recent developments show that the youth are becoming more aggressive and violent. The President called upon citizens, especially young people, to think carefully about their behavior.

"I would like to express my condolences to the families of the deceased. We are all shocked and saddened by such a tragedy. We need to think about who we are and what kind of society we want to live in,” he added.

Georgian Prime Minister Giorgi Kvirikashvili also offered his condolences to the families, saying he was deeply concerned by the news.

Minister of Education and Science of Georgia, Mikheil Chkhenkeli, posted on Facebook: “The Ministry, in collaboration with other state agencies and the public, will do everything to prevent such possible tragedies," he wrote.

NEWS

GEORGIA TODAY DECEMBER 5 - 7, 2017

3

Winter Season to Open at Goderdzi Ski Resort Next Week

Photo source: goderdzi.com

BY THEA MORRISON

L

ocated in the highlands of Adjara, Georgia, Goderdzi ski resort, first established in 2015, is to officially open to this season’s visitors from December 11.

Goderdzi is located in a unique climate zone in Adjara, on the Goderdzi Pass,

just 100 kilometers from the Black Sea coast and 2000 meters above sea level.

It is three times larger than Georgia’s other well-known mountain resorts Gudauri and Bakuriani.

The resort will be opened by the Adjara government, Ministry of Finance, Economy Ministry, Mountain Resorts Agency and Goderdzi Resort jointly.

This year, a 1761-meter internal road was built for snowmobiles.

There are two slopes at the resort, a

Gondola lift, and cottages and guest houses. The Ministry of Finance and Economy of Adjara says that the cottages can accommodate 72 visitors and the hotel can house 30 people.

Last year, the Government of the Autonomous Republic of Adjara announced that Goderdzi ski resort would be developed to become a year-round recreation center of international standards.

The resort development strategy, elaborated by Georgian and foreign

specialists, was launched this year.

According to the strategy, the resort development area will cover 633.45 hectares and will be able to receive over 7,000 visitors at any one time. Moreover, the Adjaran government is to allocate GEL 4 million for infrastructural projects in the area.

The new regulation plan of the resort envisages the addition of two new cable ways and a number of new ski slopes.

The plan also envisages arrangement

of a ‘Goderdzi Subalpine Garden’ near the Goderdzi Pass, spread over 10 hectares of land and containing a natural lake, spring and waters.

The opening of Goderdzi this winter will be followed by the Gudauri and Bakuriani ski resorts opening during the week of December 11-17.

Tetnuldi (Svaneti) and Mitarbi (Bakuriani), two of the most popular Georgian ski locations, will start to officially operate mid-December.

4

BUSINESS

GEORGIA TODAY

DECEMBER 5 - 7, 2017

Real Property Sales

A

fter hitting an alltime high in JUN-17, the Georgian real property market slowed down in JUL-17 (-13.8% compared to the previous month (MoM)), but gradually recovered during the next two months: AUG-17 (+6.5% MoM) and SEP-17 (+3.8% MoM).

Despite the slowdown, with a total of 24 848 property sales, the GEO market in the third quarter (Q3) 2017 grew by 0.7% compared to the previous quarter, and 5.9% against Q3 2016 (YoY).

40.1% of all registered transactions took place in the capital.

TBS’s share of total transactions remained stable, except for peak seasons in other regions of the country.

Ajara, with 11.9%, and Kvemo Kartli, with 9.1% shares in total

sales, respectively, remained in the top 3 busiest regions. Q3 2017 YoY growth in total transactions was mostly driven by growth in the Tbilisi market (+8.4%), while outside the capital, the market grew by 4.2%.

For Q3, 2017 TOP 3 regions by sales in Georgia were: Tbilisi (9 ,958 units, 40.1%) Ajara (2,951 units, 11.9%) Kvemo Kartli (2,262 units, 9.1%) For Q3, 2017 TOP 3 districts by sales in Tbilisi were: Saburtalo (2,416 units, 24.3%) Vake (1,795 units, 18.0%) Samgori (1,028 units, 10.3%)

RESIDENTIAL PROPERTY PRICES In Q3 2017, both Sales Price Index (SPI) and Rent Price Index (RPI) for residential properties reached an all year maximum in Aug-17.

SPI increased by 30.9% MoM (+19.4% YoY), and RPI increased by 19.9% MoM (+16.2 YoY). In Sep-17, both indices dropped below the Sep-16 level.

During Q3 2017, Average Sales Price (ASP) varied between USD 755 and USD 804 per sq.m, and Average Rent Price (ARP) varied between USD 6.41 and USD 7.68 per sq.m.

A significant drop for ASP was recorded in Jul-17 (-13.2% MoM, -13.0% YoY). Despite swiftly recovering in AUG-17, ASP remained below 2016 levels for the rest of Q3. In SEP-17, ASP in TBS reached USD 804 (-1.3% MoM, -6.5% YoY) per sq.m, and ARP dropped to USD 6.41 (-16.6% MoM, -8.1% YoY) per sq.m.

In Q3 2017, the most expensive and cheapest districts of TBS were, by ASP: Mtatsminda (USD 973) and Gldani (USD 518); by ARP: Mtatsminda (USD 8.52) and Gldani (USD 4.40).

COMMERCIAL PROPERTY PRICES In AUG-17, SPI for commercial property dropped drastically. RPI, on the other hand, remained relatively stable. SPI declined to 0.686 (-20.1% MoM, -17.7% YoY), while RPI fell to 1.044 (-5.2% MoM, +27.0%YoY). In SEP-2017, both indices recovered, albeit with SPI finishing the quarter below the SEP-16 level.

During Q3 2017, ASP for commercial properties varied between

10 Galaktion Street

USD 1,014 (AUG-17) and USD 1,106 (SEP-17) per sq.m, with ARP between USD 9.75 (SEP-17) and USD 10.08 (JUL-17) per sq.m.

Except AUG-17, ASPs in Q3 2017 remained above ASPs in Q3 2016, while ARPs stayed below ARPs in Q3 2016.

Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge

6

BUSINESS

GEORGIA TODAY

DECEMBER 5 - 7, 2017

The Galt & Taggart Research team comprises Georgian and Azerbaijani finance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fixed income corporate research.

For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at gt@gt.ge.

Electricity Market Watch FOR GEORGIA TODAY BY MARIAM CHAKHVASHVILI

S

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

ENERGY SECTOR CHANGES AHEAD The Ministry of Energy is to be merged with the Ministry of Economy. The natural resources management component of the Ministry of Environment will also be consolidated under the Ministry of Economy. The merger process will begin after approval from Parliament. It is expected that certain responsibilities of the current Ministry of Energy (e.g. annual balance and market rules) will be transferred to GNERC, the regulatory body, as is the case in most European countries.

A draft energy law was prepared by

Energy Community secretariat experts within the EU4ENERGY program. The draft envisages the implementation of a day-ahead market for electricity trading, adoption of the institute of a power supplier, creation of a system services trading platform, and the unbundling of licensed activities, among other issues. The draft law does not as yet offer a solution to the most challenging question: how to integrate the existing PPAs into the day-ahead market without causing major distortions.

Full implementation of the changes drafted in the document will require about two years after final approval.

REVISIONS IN TARIFFS AND TARIFF METHODOLOGIES GNERC has recalculated WACC components for each type of utility. As a result, the weighted average cost of capital (WACC) was increased from 13.54% to 16.40% for electricity generation, transmission, and distribution activities and was set at 13.54% and 15.99% for natural gas and water supply services, respectively. WACC is used by GNERC to guarantee licensed companies a reasonable return on investment and incentivize cost reduction. Another significant change in the tariff methodology was extending the tariff period for electricity distribution and transmission companies from one to three years. Notably, for

natural gas distribution and water supply activities, the WACC methodology was adopted recently, for tariff years 2017-2018.

Tariffs were revised upward for Khrami 1 and Khrami 2 HPPs, as a result of the GEL depreciation against the Japanese Yen and US Dollar. Both HPPs have longterm tariffs in place until 2025. The tariffs are subject to revision once every three years, based on the USD/GEL exchange rate, and annually, based on the JPY/GEL rate (only for Khrami 2).

The revisions amounted to an 18-20% increase in tariffs, based on the year, for 2018-2024. Notably, as the highest regulated tariff on the market, the tariff of Khrami 2 HPP serves as the reference price for the deregulated market. Unless any further changes take place, the price that ESCO will pay deregulated HPPs for balancing electricity will increase from 9.4 tetri/kWh to 11.25 tetri/kWh through end-2018.

ELECTRICITY CONSUMPTION AND GENERATION – OCTOBER 2017 Domestic consumption increased 7.2% y/y in October 2017 and 8.8% y/y in 10M17.

The main driver of growth in October was a 61.7% y/y increase in direct consumption, driven by a 94.3% y/y increase in Ltd Georgian Manganese usage, which contributed 5.6 percentage points to overall growth.

Consumption of distribution companies was up by a modest 3.5% y/y: consumption by Energo-Pro Georgia subscribers, including former Kakheti Energy Distribution subscribers, increased 5.1% y/y, while Telasi consumption was up by only 0.6% y/y, albeit from a very high base in October 2016 (+24.9% y/y). The Abkhazian region’s electricity usage was down 4.2% y/y, also from a high base (+24.0% y/y), and accounted for 14.4% of domestic consumption.

A 10.7% y/y decrease in hydro and 6.0% y/y decrease in thermal generation resulted in an 8.6% y/y decline in domestic supply. The decrease in hydro generation was due largely to a 27.3% y/y drop in Enguri/Vardnili generation, from a high base in Oct-2016 (+44.8% y/y).

Generation of other regulated HPPs was also down 11.6% y/y. Deregulated HPPs

were the only group of HPPs posting an increase in Oct-2017 (+38.3% y/y), solely due to the addition of sizable HPPs (Dariali, Khelvachauri, and Shuakhevi) to the group.

Gardabani CCGT and Mtkvari Energy operated at full power for almost the entire month, while the other three thermal power plants were mostly on standby.

The GC fee was down 16.5% y/y to USc 0.7/kWh. The reason behind the decrease was higher consumption, which serves as the base for GC payment allocation.

The new wind power plant accounted for 0.7% of total electricity supply.

ELECTRICITY IMPORTS AND TRANSIT Growth in demand coincided with a drop in domestic supply, creating the need for electricity imports, which came from Azerbaijan. Electricity imports reached 157.1 GWh, which was 20.7% below the planned level, and accounted

for 15.9% of total electricity supplied to the grid, compared to 1.8% in October 2016. Electricity transit from Azerbaijan to Turkey through Georgia declined 88.6% y/y to 14.9GWh, while electricity exports were negligible (0.11 GWh) in October 2017.

ELECTRICITY PRICES IN GEORGIA AND TURKEY The average import price remained at USc 5.2/kWh (+0.1% y/y). However, the high share of imports in the electricity supply mix resulted in an increase in the wholesale electricity price to USc 5.5/ kWh (+18.0% y/y). Electricity traded at the wholesale price through the market operator accounted for 25.8% of total electricity supplied to the grid in October 2017, with the rest traded through bilateral contracts. Average monthly market clearing price in Turkey decreased 2.9% y/y to USc 4.6/kWh in October 2017.

BUSINESS

GEORGIA TODAY DECEMBER 5 - 7, 2017

Photo source: Agriculture Projects Management Agency of Georgia

Laurel Processing Factory Opens in West Georgia

BY THEA MORRISON

A

new laurel processing factory, The Georgian Laurel LTD, has started operating in Vani, Imereti region, western Georgia.

The factory was built within the frames of the United Agro Project, initiated by the State. The Deputy Minister of Agriculture, Giorgi Chkheidze; Ioseb Khakhaleishvili, Deputy Governor of Imereti; and Mamuka Kvaratskhelia, Director of the Agriculture Projects Management Agency looked around the enterprise and were introduced to the manufacturing process of laurel last Saturday.

Financial support for establishing the enterprise was carried out within the framework of the “Agri-

cultural Production Processing and Co-financing Project of New Enterprises ". $597,482 was invested in the new factory, with $239,000 of that co-financing from the State.

The laurel factory produces 236 tons of local laurel leaf per year and employs 53 people. The company uses only Georgian products and already exports the product abroad.

The United Agro Project was launched in 2013 and since then a total of 165 new and 750 acting factories have been financed from the state budget.

In particular, eight new factories have been opened in Imereti region and 75 have been expanded.

Agriculture Projects Management Agency reports that the United Agro Project was designed for longterm development of agriculture with the aim of increasing competitiveness and to promote the stable growth of high quality products.

Parliament Approves Increased Budget for Ministries

BY NINO GUGUNISHVILI

F

ollowing the changes in the state budget recently approved by the parliament of Georgia, Georgian ministries are to receive increased financing.

Georgian media sources report that the budget of the Ministry of Economy and Sustainable Development is set to grow by GEL 106 million, to be used for the construction of the new Business House, Kutaisi Airport, and for infrastructure development of the mountain resorts throughout Georgia.

The budget for the Ministry of Agriculture of Georgia is to increase by 65 million, with GEL 30 million to be used for amelioration, and GEL 30 to be used for defeating Asian stink bugs.

The Ministry of Regional Development and Infrastructure budget wll increase by GEL 30 million,

with GEL 16 million to be used for water supply system rehabilitation, GEL 9 million for solid waste project implementation and GEL 5 million to be assigned for road infrastructure improvement.

Financing considered for Sports and Youth will see GEL 10 million allocated for sports infrastructure construction and development, while the budget considered for the Ministry of Energy is up by GEL 65 million, with GEL 50 million for gasification projects and GEL 15 million for joint financing of projects from donor organizations for the year 2018, a lower sum than previous years.

The budget considered for the Ministry of Internally Displaced Persons from Occupied Territories, Accommodation and Refugees will grow by GEL 15 million, in order to improve the living conditions of the internally displaced persons.

The Fund for projects to be implemented in the regions of Georgia is to be raised by GEL 24 million.

7

8

BUSINESS

GEORGIA TODAY

DECEMBER 5 - 7, 2017

Regus, the World's Largest Provider of Service Offices, Opens New Service Center in Tbilisi ADVERTORIAL

R

egus, international provider of service offices worldwide, this autumn entered the Georgian market. The company offers a comfortable and ideal working environment welladapted to consumer needs, on Freedom Square in Tbilisi, the most prestigious, active and dynamic part of the capital city (2 Leonidze Street, Business Center Tabidze 1, 4th Floor).

Regus meets the demand for a flexible and agile working environment for all types of business. Newly renovated A-class offices, flexible and simple terms of payment, modern IT infrastructure, meeting rooms, a shared working space, administrative services, and access to 3,000 business centers of Regus worldwide: all of which are important for the successful operation of small, medium

You do your business, we’ll provide the comfort and major business companies.

Everything is close to the Regus Business Center: high-class hotels, cafes, restaurants and shops, creating the ideal environment for both work and leisure.

“We are happy that our global network has broadened and a new service center has opened in the capital of Georgia, where businesses and business persons will be able to receive Regus services,” said Rusudan Chakvetadze, Regus rep-

resentative in Georgia. “An ideal working environment, easily accessible location, broad range of administrative services, flexible and simple payment terms: this is the Regus offer to local and foreign business people and companies. We aim to make their working space more comfortable, so they can enjoy the services they need without wasting time or money”.

Regus business center is an ideal dropin location for business persons who typically move from one meeting to another during the day. It also provides an ideal environment for business visitors to Tbilisi. The Center fully satisfies the service office standards and is the best opportunity for business visitors who want to operate on the Georgian market without additional administrative procedures and investments, under

simple and flexible payment terms.

“The Georgian economy has been developing quickly of late and the business environment has changed, making Georgia a more comfortable location for domestic and foreign businesspeople and investors,” Chakvetadze noted.

“Regus is represented in more than 1,000 cities worldwide, Tbilisi among them, with a modern, flexible and comfortable working environment. Regus has immense experience in providing top services to customers, be they large multinational corporations, small and medium size businesses or independent consultants. Regus has gained two million loyal customers worldwide over the past 30 years, and deservedly so”.

Founded in Brussels, Belgium, in 1989, Regus is based in Luxembourg and listed on the London Stock Exchange.

Bringing Content to Real Estate Development: The Georgia Example Continued from page 1 But there is an important difference.

While Montenegrin NATO and EU aspirations halted further Russian investments, it seems these very same aspirations have had a different effect, boosting investor’s interest in Georgia.

It seems that Georgia played safe with more reliable foreign investment.

The Georgian Government seems ready to support this development boom with massive state-funded infrastructural investments in highways, railways and urban development sites. Real-estate development in Georgia is in fact so Omni-present, massive and impressive that one simply has to stop, take a breath, and ask will Georgia soon experience the same problem faced by so many urban centers in Europe: low occupancy rates caused not by low quality apartments or bad infrastructure, or even expensive real estates, but by something much more damaging to investors: lack of urban content?

INFUSING SOUL IN BRICK AND MORTAR Not long ago, developers behind the HafenCity property in Hamburg realized quality apartments and fresh sea breeze will not be enough to motivate potential buyers to move in with them.

Something else was necessary and the answer was to enrich. Together with traditional real estate baits, quality office and residential areas, they needed to bring culture and leisure, tourism and retail facilities to their community. And it has paid off for

the HafenCity.

Quality development projects, like King David, Lisi Lake etc., are not rare in Tbilisi, but they seem to be employing traditional real-estate marketing strategies.

A strategy conveying messages perhaps too familiar: comfortable living and contemporary office space. Surprisingly or not, but just like their peers in Europe, Georgian buyers seem far from being satisfied with this approach.

HOW TO SELL NOWADAYS? Successful development was never an easy job; the skill of creating a perfect and, more importantly, appealing mix of luxury and leisure apartments and condominiums, different retail and hospitality facilities, and restaurants together in the right proportions, borders alchemy.

The necessity of attracting buyers led developers to uncharted lands, where their sites require small city-like management skills, and even resemble management of a theme park.

The art behind a successful modern development project

seems to be in the ability to resolve a conflict between the need to create a place that entertains residents and a place that makes retailers richer. The main challenge seems is in how to successfully navigate between architecture, psychology and economy and create a community. And that, as many Tbilisi developers start to realize, requires a lot of planning and strategy, collaboration and cooperation with partners previously unusual in the real-estate industry.

NEW WORLD, NEW PRACTICES In the States, this mission impossible is being accomplished with mixed success through an unusual partnership between non-profit organizations and real estate developers. In an effort to solve this urban planning riddle in their community, my colleagues from Scottsdale, Arizona, formed the Scottsdale Gateway Alliance. The organization advances investment and revitalization opportunities in the Southern Scottsdale Community and along the McDowell Road Corridor. They have managed to transform Southern Scottsdale from a place you wouldn’t like to find yourself in during the daytime, let alone at night, into a humming, vibrant neigh-

borhood everybody wants to move into.

To say Tbilisi developers are unaware of this would not be true.

Companies like the Adjara Group seem

to be spearheading the urban development revolution in the Caucasus. Their “Fabrika” (Factory) Project is already attracting young talent from across the region by offering employment opportunities and a chance for a career start in a fast-developing company, an offer not that many millennials can refuse.

Adjara Group is investing heavily in urban neighborhood development across Georgia’s capital city, creating hot spots millennials flock to.

The Georgian Government seems to have recognized these private sector efforts and supports them with very liberal policies on visas and residence permits, allowing talent acquisition not only from neighboring countries but from Europe, too. It comes as no surprise that digital nomads and nomad capitalists around the world are increasingly considering Tbilisi as their next business destination, generating in turn increasing foreign currency revenues for Georgia.

FUTURE OF CONTENT IN REAL-ESTATES Enriching real-estate with content appealing to buyers is truly a cross-sector cooperation project, able to take cityliving to new, exciting heights. It could play a vital role in countries experiencing negative effects such as the emigration of the talented and skilled. It could also be an answer to a problem both Europe and Georgia are too familiar with: an aging population. As we are all headed towards a silver economy, dominated by the 50+ generation, investors can benefit by providing the right content to financially potent buyers.

The 50+ remain independent and healthier for longer, driving the demand for customized senior housing, typically starting with barrier-free, easyto-access apartments close to medical centers, dining, shopping, and recrea-

tion facilities.

In Tbilisi, a city of many theaters, museums and music venues, projects like “Fabrika” can save their artistic capital by preventing commercial interest from prevailing over the city’s aspiration to be a cultural and arts center of this part of the world, rather than just becoming another soulless economic hub.

Back in Montenegro, one of the larger international real estate developers, the Stratex Group, is already tapping into this market by developing projects tailormade for people 50+. The group owner, Neil Emilfarb, recently formed a successful art community infusing the soul of his real estate developing project, Dukley Gardens, into the seaside town of Budva.

In an effort to create content for their residents and attract new buyers, Stratex helped turn a publishing and digital project “Age of Happiness” into a two-week arts and music festival. The project kicked-off five years ago by Jacob Weiner, an Israeli entrepreneur with long track of successful international media projects. The festival attracts people over 50 to explore their limits and add new quality to their lives and has no less than four million followers from around the globe. Every autumn, more than 400 “seniors” from more than 30 countries flock to Montenegro to listen to the lectures, concerts, attend art workshops and practice yoga, dance, or just enjoy conversations with like-minded people, making the festival one of the best examples of enriching real-estate with content.

An example Georgian and urban developers across the world looking to attract buyers could take a cue from.

Ljubomir Filipovic is a Montenegrin entrepreneur, consultant and activist. Former Vice-Mayor of Budva, member of the political bureau of the Assembly of European Regions and UEF Brussels federal committee member.

BUSINESS

GEORGIA TODAY DECEMBER 5 - 7, 2017

9

WHERE.GE Launches Travel Web Portal at Otium Restaurant now have online access to www.where. ge, the recently launched travel website, unique in content, design and more importantly, service: tourists can receive 24/7 assistance from Where.ge travel specialists, book hotels, arrange trips across Georgia and receive qualified recommendations based on double-checked travel information”.

From ever-expanding listings to detailed recommendations, reviews and guest blogs, Where.ge has everything you need to know; whether you’re just visiting or have been here for years and are ready to discover something new. Check out their exclusive weekend guides for what’s on in the capital and their daily recommendations for the best places for you to GO, STAY, EAT, DRINK and BUY.

BY KATIE RUTH DAVIES

L

ast week the Georgia Today Group presented its latest tourism and informative product, the Where.ge web portal, at an exclusive event in the luxurious Otium restaurant.

The event saw numerous Georgian celebrities, foreign business persons and tourist sector representatives in attendance. Music was provided by the Black Sea Sound duo and catering was provided by mgroup, presenting its delicious new menu.

Certificates of appreciation and gifts were given to the representatives of

businesses most often recommended by the Where.ge magazine’s guest writers.

The deserving winners were: WHERE TO GO: The Mountain Resorts Development Company and the Agency of Protected Areas WHERE TO STAY: Crowne Plaza Borjomi WHERE TO EAT: mgroup WHERE TO DRINK: gVino and gVino Underground WHERE TO BUY: Tbilisi Mall, East Point Mall, Aromatique and the TeletiSene Cheese Factory The Where.ge magazine has been on the market for over a year and is the leading English language tourist publication, offering bi-monthly tips for where to GO,

STAY, EAT, DRINK and BUY in and around Georgia. The addition of a dailyupdated online presence allows the Where. ge brand to reach out to a larger audience wishing to discover Georgia.

“By meeting the demand for an essential travel guide about Georgia, we do our best to contribute to the development of the Georgian travel industry and to the development of the Georgian economy, as tourism plays a significant role in the development of our country,” said George Sharashidze, Publisher of Where.ge. “Our team of experienced foreign and Georgianborn journalists offers its own best sights, hotels and guest houses, restaurants and cafes, bars, and stores, with an often amusing narrative coming from the experience

of having lived and travelled here for many years. The team behind WHERE magazine hopes to inspire many generations to learn more about Georgia and enjoy their stay here in such a way that they’ll want to come back for more! To achieve this ambitious mission, travelers

Abraham Sam Thomas, Yes, I would love spend the rest of my life with you.

You have now been officially announced as the only lifetime partner to the awesome Stef Moreira Co.!

Can’t wait to have the agreement signed.

10

BUSINESS

GEORGIA TODAY

DECEMBER 5 - 7, 2017

The Importance of CSR Discussed at Multi Stakholder Forum of the forum. Participants were given practical advice on how to embed responsible workplace practices into company HR/CSR strategy and operations. Indeed, both Martin Neureiter, President of CSR Company International (Austria), and Lukas Bakos, Managing Director of Maxman Consultants (Slovakia), had valuable nuggets of information to share with participants.

“Sustainability is an approach to creating value that sustains or enhances the systems and resources upon which that value depends. Increasing social responsibility contributes to a “virtuous cycle” where each action strengthens the organization and the community, encouraging sustainable development,” Neureiter said.

Mr. Bakos went on to urge participants to, “Make responsibility attractive. No matter if you’re HR, in CSR or an NGO, engage those heroes to show off. You need to find the people who can be perceived as role models; who are able to focus on the best thing, who are the givers, who can run or manage their busi-

BY MATE FOLDI

O

n November 30, Tbilisi’s Courtyard Marriott hosted the Multi Stakeholder Forum, ‘Corporate Social Responsibility and Labor Issues,’ organized by the Center for Strategic Research and Development of Georgia (CSRDG).

The forum’s objective was to demonstrate the importance of corporate social responsibility (CSR) in ensuring the effective implementation of international labor standards, in meeting the requirements of the EU Association Agreement and other international treaties. Moreo-

ver, an overarching goal was the raising of the issue of CSR in general, sharing of experiences of European countries, and the consequent stimulation of discussions among stakeholders.

More than 150 representatives from various businesses, civil society organizations, government, international organizations, as well as independent experts were present at the event. The latter presented on important issues like the protection of labor standards, the improvement of working conditions, and the importance of meeting international standards.

“The Development of CSR has a positive effect on the development of the country. It is viewed as a mechanism for growth of economic competitiveness,

ness in responsible way [then let them be] heroes for others.”

Leila Khoperia was the moderator, while speakers included: Eka Urushadze, Executive Director of CSRDG; Iza Jgerenaia, Ministry of Health, Labor and Social Affairs of Georgia; Ia Tikanadze, Head of FES Georgia, Friedrich Ebert Stiftung; Arad Benkö, Austrian Ambassador to Georgia; Rudolf Michalka, Ambassador of Slovak Republic to Georgia; Zakaria Shvelidze, Tbilisi State University, Labor Law Expert: Labor Standards and Labor Issues Related to Employee Rights in EU-Georgia Association Agreement: New Challenges and New Opportunities; Eter Maturely, Deputy Chair of the Trade Union of Georgia: Role of Trade Unions in Protecting Labor Rights in Georgia; Archil Bakuradze, JSC MFO Crystal, Executive Chairman; and Mari Nadaraia, APM Terminals Poti, Head of Administration and CSR. The events of the day were supported

by Friedrich Ebert Stiftung, and the Ministry of Health, Labor and Social Affairs of Georgia.

solving of social and ecological problems, attracting of investment, and achievement of sustainable development goals,” said Leila Khoperia, Head of CSRDG’s CSR program. “CSR is a relatively new, but rapidly developing concept in Georgia. Protection of labor rights is one of the main topics of CSR, which involves the physical, psychological and social well-being of employees. The EU Association Agreement, which significantly focuses on labor rights, is one of the strongest incentives to improve labor standards in the country”.

A masterclass, ‘How to be a responsible employer,’ focusing on CSR and labor standards, intended for representatives of medium and large companies operating in Georgia, followed hot on the heels

TBC Shows Hotels & Preference Hualing Tbilisi Hosts Watersports Championship Petre Otskheli

BY LIZA NADIBAIDZE

O

BY LIZA NADIBAIDZE

F

or the 110th birthday of Petre Otskheli, one of the founders of Georgian modernism, an exhibition of 30 of his restored works is now on display in TBC Gallery. During the opening of the exhibition on November 30, some of his other works were shown, including his masterpiece “prtosani mghebavi”. The pieces are kept in the Art Palace museum and have only left that institution twice before: once being sent to an exhibition in Paris, and a second for a London tour.

Most of Otskheli’s restored works are sketches of stage costumes that are being shown to the wider audience for the first

time. It was noted that during restoration of Otskheli’s works, a number of unknown sketches had been discovered on the reverse of framed pictures. During the exhibition, students were given a chance to draw reflections of Petre Oskheli’s works in virtual reality.

Mamuka Khazaradze, one of the founders of TBC Bank, and Minister of Culture, Mikheil Giorgadze, spoke at the opening ceremony. “The best results come from the government and private sectors working together,” Khazaradze and Giorgadze agreed.

“This is a unique painter,” Khazaradze said, noting that they intend to take the selfsame exhibition abroad, while Minister Giorgadze thanked TBC Bank for realization of the project and spoke about further opportunities in the sphere.

n December 3, the Tbilisi open championship in swimming was held at the “Be Pure” recreation center under the brand of Hotels & Preference Hualing Tbilisi, in Tbilisi Sea New City. This recreation center is the largest in indoor swimming pools among 5-star hotels, and the pool length is 25 meters. The tournament was organized by the Georgian Watersports Federation and saw boys aged 7 to 12, and girls aged 6 to 11, competing.

More than 100 children took part in the championship, from both Tbilisi and Rustavi swimming pools. There were 78 prize winners and the judges were members of the republic category of referee board.

The boys’ winners were Giorgi Gogoladze, who took first place in the category of butterfly, and Nika Jijiashvili, who came second place in the same category.

In the category of girls, the first two places were taken by Keso Aghvliani and Elizabeth Bitsadze in glitter swimming.

As many swimmers had requested it, the decision was made to host the tournament for the second time and it will be held in future at the end of each year with the aim of popularizing swimming as a sport, and to teach young adults the importance of a healthy lifestyle. It also aims to find talented children and encourage and support them.

POLITICS

GEORGIA TODAY DECEMBER 5 - 7, 2017

11

PM Opens EU Partnership Conference Hosted by Georgian Parliament in Tbilisi

BY NINO GUGUNISHVILI

A

two-day international Parliamentary conference entitled ‘EU and Partners: Embracing Diversity for Stronger Unity’ opened in Tbilisi on Monday, with representatives from 17 EU member countries, EU candidate member states and Eastern Partnership member countries participating.

The conference, centered on the process of European integration, was opened by the Prime Minister of Georgia Giorgi Kvirikashvili, and Chairman of Parliament of Georgia, Irakli Kobakhidze.

“It’s a great honor for me to address the participants of this very important conference,” the PM said in his opening speech, as he thanked the European Integration Committee of the Parliament of Georgia, UNDP and the Delegation of the European Union in Georgia for organizing the event. “Today’s meeting is significant as it unites EU member states, EU candidate countries, representatives of European Parliament and Eastern Partnership member countries, together with renowned experts and civil society representatives in one place. This

diversity brings a unique chance to share experiences and discuss cooperation possibilities, alongside ways of solving problems and challenges that the European Union faces today,” the PM noted.

“This year marks the 60th anniversary of the European project; the success of this unprecedented idea brought peace, success, stability and prosperity to the European continent, while neighboring states expressed their willingness to be a part of this joint effort. The fundamental principles of the European Union today are as timely as ever, especially for us, for partner countries of the European Union, for whom the integrity of the European Union is as important as for its member countries”.

“For all of us, our goal is to maintain a unified, strong Europe which, if the appropriate conditions are there, is ready to open its doors for Georgia and other European countries. The power of transformation of the European Union and its foreign policy based on values became the pillars for the modernization of Georgia, an integral part of our internal and foreign policy with an aim to build a democratic, developed, European state,” the PM went on, also noting that implementing bilateral and multilateral cooperation formats are very important for European integration.

He highlighted that Georgia’s success was recognized at the recent Eastern Partnership Summit, where firm support towards Georgia’s European integration was declared.

20 new goals were set for EU integration by 2020, together with Eastern Partnership countries.

“Georgia values the new possibilities of further cooperation with our partners, and we will try to use this potential to strengthen democratic institutions in our country, improve governance; and through harmonizing with European Union’s legislative standards, ensure better living standards for our citizens,” Kvirikashvili said, underlining that successful implementation of the Association Agreement and DCFTA are top priorities of the Georgian government.

The PM also spoke about Georgia’s participation in the EU’s peace missions, as well as the existing situation in Georgia’s occupied territories, where the rights of citizens have been massively violated.

As Kvirikashvili said, Georgia, too, is facing hybrid threats and propaganda, and the only thing that can oppose it is the consolidation and better involvement of the international society.

He pointed to the planned transformation of the Parliamentary model in the country, and noted that close cooperation between the Government and Parliament plays a vital role in the process of European integration.

“Due to existing problems, we often forget the uniqueness of the European Union project, which remains the best example of regional integration and cooperation between the nations, which is why, despite internal or foreign challenges, Georgia firmly stands on the road to European integration.

I hope that with discussions like the one held today, through sharing our experiences and with the involvement of legal and executive institutions, we’ll achieve the goal and create a stronger, peaceful, united Europe,” the PM concluded.

Rule in Russia Being Further Centralized OP-ED BY EMIL AVDALIANI

W

atching the internal developments of Russia facilitates our understanding of the Russian interior/exterior policies. The tendency shows that Russia is on course to become a more centralized state, where all is controlled and directed from the center. The last vestiges of even ritual autonomy/ independence seem something which they aim to block/restrict.

Months ago, I wrote about the non-continuation of the power-sharing agreement between Moscow and Kazan, the capital of the oil-rich region of Tatarstan. At present, the region still enjoys the rights of autonomy, which includes having its own president. That Moscow is set on a definite course of diminishing Tatarstan’s ability to act of its own is well seen in the Kremlin’s intentions to restrict perhaps the biggest asset the region has had so far: the freedom to instruct the Tatar language in schools.

On November 29, the Tatarstan ProsecutorGeneral, Ildus Nafikov, said that children in the region's schools will study Tatar for two hours a week on an optional basis and with written parental consent. That essentially means that Tatar language classes are no longer mandatory in Russia's Tatarstan region.

This goes against what Tatarstan President Rustam Minnikhanov said on November 8, that Tatar language classes would remain mandatory but be scaled back from six to two hours per week.

The problem of Tatar language classes flared up after Russian President Vladimir Putin said in July that people must not be restricted in their choice of whether to learn a tongue "that is not their mother tongue". Putin also ordered state prosecutors to figure out whether such was happening in Russia’s “ethnic” regions where indigenous, nonRussian ethnic groups are represented.

Following Putin's statement and order, Russianspeaking parents publicly demanded that the schools in the ethnic regions scrap mandatory courses of local tongues.

This caused a wave of protests across several of Russia’s ethnic regions. In Bashkortostan, people protested and demanded that the Bashkir language be kept as the state language i.e. mandatory in schools.

It was announced that the leader of Russia’s Komi region suspended cancellation of mandatory Komi-language classes. This latter news somewhat contradicts what happened in Tatarstan, but nevertheless should not be seen as a final decision.

This could be seen as an example of rising Russian nationalism, but nationalism which can be easily contained if it is not necessary politically.

Thus, it could be argued that the issue with ethnic languages overall falls into the wider internal developments inside Russia. The case of Tatarstan fits into the wider processes unfolding in Russia under Putin. Centralization of power in Moscow has already been at full steam in the last several years. As Putin gears up for his next presidential term, the central government wants near total control over all the regions; any opposition must be stamped out and control over regional economic assets must be in Moscow’s hands. The case of Tatarstan, although some think it only symbolically important, is nevertheless an example of modern Russia further tightening control as the Kremlin feels more pressure from abroad and within about Putin’s rule.

Various indications show that Russia seems to be gearing up for the worst. Over the past two years, laws were introduced limiting internet freedom and the work of foreign and local NGOs. Putin also created a powerful National Guard of up to 300,000 troops, essentially under his control, to snuff out future resistance. Further limits have also been placed on regional governments to solidify the Kremlin’s control over remote regions. Then come talks on possible limits of foreign media outlets operating in Russia.

I have written before that modern Russia is quite different from what it was ten years ago. It is crucial to watch Russia’s internal processes so as to forecast the trajectory of Russia’s development not only in terms of what is happening inside the country, but also how this influences the Kremlin’s foreign policy.

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