facebook.com/ georgiatoday
Issue no: 876/43
• SEPTEMBER 6 - 8, 2016
• PUBLISHED TWICE WEEKLY
PRICE: GEL 2.50
In this week’s issue... Sparklabs Founder on Georgia, the "California of the Caucasus" PAGE 2
Georgian Pension Reform – an Experiment in Libertarian Paternalism?
FOCUS
ON AGRICULTURE
Prior to stepping down, Agriculture Minister Otar Danelia sums up a term of achievements
PAGE 9
Economy Minister Claims Georgia’s Tourist Numbers Up 17% Since January BY THEA MORRISON
M
ore than 4 million tourists have visited Georgia during since January 1, Vice Prime Minister and Minister of Economy Dimitry Kumsishvili reported on Friday. Kumsishvili added that the number of tourists visiting the country had increased 17.4 percent since the start of the year He also said the National Statistics Office of Georgia had registered 5.9 million foreign visitors arriving in Georgia since January 1, a 7 percent year-on-year increase. Continued on page 2
ISET PAGE 4
5-Star Hotel Planned for Georgia’s Kakheti Region PAGE 5
ProCredit: Living Green Finance PAGE 7
New Geopolitical Reality in the South Caucasus & The Georgian Dilemma
POLITICS PAGE 12 Prepared for Georgia Today Business by
Markets As of 02ͲSepͲ2016
STOCKS Bank of Georgia (BGEO LN) GHG (GHG LN) TBC Bank Group (TBCG LN)
COMMODITIES Crude Oil, Brent (US$/bbl) Gold Spot (US$/OZ)
INDICES
Price
w/w
m/m
w/w
m/m
GBP 29.32
+2,6%
+9,4%
GEOROG 04/21
105.25 (YTM 5.45%)
Ͳ
+1,1%
GBP 2.95 +15,7%
Ͳ4,8%
GEORG 04/21
112.24 (YTM 3.94%)
+0,2%
+0,9%
GRAIL 07/22
112.31 (YTM 5.27%)
+0,2%
+0,7%
BGEOLN 07/23
102.88 (YTM 5.49%)
+0,1%
+2,2%
GBP 11.38
+6,3%
na
Price
w/w
m/m
46,83
Ͳ6,2%
+12,0%
1 325,21
+0,3%
Ͳ2,8%
BONDS
CURRENCIES
Price
Price
w/w
m/m
GEL / USD
2,2870
+0,1%
Ͳ2,7%
GEL / EUR
2,5469
Ͳ0,5%
Ͳ3,3%
Price
w/w
m/m
GEL / GBP
3,0483
+1,6%
Ͳ2,8%
FTSE 100
6 894,60
+0,8%
+3,7%
GEL / CHF
2,3363
Ͳ0,0%
Ͳ4,0%
FTSE 250
18 016,45
+0,5%
+5,6%
GEL / RUB
0,0350
Ͳ0,8%
Ͳ0,3%
DAX
10 683,82
+0,9%
+5,3%
GEL / TRY
0,7749
+0,1%
Ͳ1,3%
DOW JONES
18 491,96
+0,5%
+1,0%
GEL / AZN
1,3499
Ͳ0,1%
Ͳ8,0%
5 249,90
+0,6%
+2,2%
GEL / AMD
0,0048
Ͳ
NASDAQ
Ͳ2,0%
MSCI EM EE
127,53
Ͳ1,1%
+3,7%
GEL / UAH
0,0858
Ͳ4,3%
Ͳ9,5%
MSCI EM
899,61
Ͳ0,2%
+2,6%
EUR / USD
0,8964
+0,4%
+0,6%
SP 500
2 179,98
+0,5%
+1,1%
GBP / USD
0,7522
Ͳ1,2%
+0,5%
MICEX
2 003,77
+1,7%
MSCI FM
+0,5%
+4,8%
CHF / USD
0,9809
+0,3%
2 565,61
Ͳ0,5%
Ͳ0,1%
RUB / USD
65,1577
+0,9%
GT Index (GEL)
842,35
+5,6%
Ͳ0,0%
TRY / USD
2,9512
Ͳ0,1%
Ͳ1,3%
GT Index (USD)
725,46
+5,3%
+2,4%
AZN / USD
1,6800
+0,4%
+4,0%
Ͳ2,5%
2
BUSINESS
GEORGIA TODAY
SEPTEMBER 6 - 8, 2016
Sparklabs Founder on Georgia, the "California of the Caucasus" BY NINO GUGUNISHVILI
S
tartup Georgia is a part of the State’s Partnership Fund, implemented with the support of the Ministry of Economy and Sustainable Development of Georgia and Georgia’s Innovation and Technology Agency. At the end of August the winners of a competition for funding were announced. Experts from the US’ Silicon Valley chose 20 winners from the 150 applications. One member of the jury, Nat Jacobson, co-founder and partner of Sparklabs Global Ventures and a former Facebook Executive, wrote on his blog of his experience while in Georgia. “Georgia has been described as the California of the Caucasus and it is not difficult to see why. The country has an 8000-year-old tradition of wine-making, and is a culinary party zone surrounded by amazing lush green mountains,” Jacobson wrote. He went on to openly share with his readers that at first he had no high expectations, but was pleasantly surprised with what he discovered in Georgia. From the Georgian traditional supra, to “natural mountain water that you can sip off a cliff,” and the Tech Park, “an amazingly designed modern building, sort of Finnish design meets Georgia, located in a lush forest.” He even noted the fact that “most Government buildings are glass structures in order to radiate transparency.” The Sparklabs founder seemed genuinely impressed with the country’s developments, client-oriented and fast public services, and the government itself that, in his opinion, is “in many ways…a model for how a government should operate:
supporting entrepreneurs, fast, efficient and most importantly, focused on serving its people.” Jacobson said he was happy to see the enthusiasm and energy of Georgian entrepreneurs, and was positively surprised with both the creativity and pitches.
“The reward of getting out of your own comfort zone and connecting with other entrepreneurs around the world is something I can never get enough of,” he said. The award ceremony of the project felt very emotional, he noted, with every participant- be they winner or loser- happy for each other, something
that is difficult to find in Silicon Valley. “I found a very warm, hospitable and passionate people serious about making a difference, improving Georgia and putting Georgia on the map. The passion, talent and its entrepreneural government give it all the necessary components to make a dent in the world.”
Economy Minister Claims Georgia’s Tourist Numbers Up 17% Since January Continued from page 1 The majority of visitors came from EU members Latvia, the Czech Republic and Hungary. The number of travellers arriving from Russia, Israel, Kazakhstan, Iran, Jordan and Saudi Arabia also increased significantly. Kumsishvili credited the substantial growth in the tourism industry to an online campaign launched by the National Tourism Administration. “During the last eight months, more than 200 articles, blogs, and TV shows about Georgia were published and screened for an international audience,” he said. He was also quick to point out that 172 new hotels began operating in the last year, hinting that the ruling Georgian Dream coalition should be given full credit for expanding Georgia’s hospitality industry by overseeing the construction and opening of 508 new hotels since 2013. “More than half of the existing hotels in Georgia were created by our government. This is the result of our hard work,” Kumsishvili said while adding that an additional 60 hotels will be built in the next year. In addition to building new hotels throughout the country, Georgian Dream claims a new terminal at the Tbilisi Airport will be finished by no later than 2017. The party hopes this will boost the local economy by providing hundreds of temporary and full-time jobs. The construction of a new terminal would be a significant boon for Georgia’s tourism industry, which still relies on relatively small Soviet-era airports in Tbilisi, Batumi and Kutaisi to service international travellers.
BUSINESS
GEORGIA TODAY SEPTEMBER 6 - 8, 2016
3
Construction on Georgia’s First Wind Plant Enters Final Stage Turography Contest Announced by GNTA & SOCAR Petroleum Georgia BY NINO GUGUNISHVILI
BY TAMAR SVANIDZE
G
eorgia’s first wind power plant – the first wind farm in the Caucasus region – is entering its final stage of construction, Georgia’s Energy Minister Kakha Kaladze announced. A subsidiary of the Georgian Energy Development Fund and Georgian Oil
and Gas Corporation is in charge of the USD 35 million Kartli Wind Power project in the Gori and Kareli municipalities in central Georgia. “The Gori site will support the government’s strategy to foster low carbon generation and cover the country’s seasonal demand for power during the winter period,” Kaladze said. The European Bank for Reconstruction and Development (EBRD) allocated USD 24 million to the project, or 70 percent of the total cost of the project, with the remaining 30 percent paid by
the Georgian Energy Development Fund. “We first signed on to take part in the construction at the beginning of 2016. This is the first project of its kind in the Caucasus. Gori is one of the most attractive places in the world regarding wind energy,” EBRD regional director Bruno Balvanera said. Norwegian company Meventus, a leader in the wind power industry and a key advisor to the project, recommended a six-turbine scheme for the site with a designed capacity of 20.7 MW.
A
Turography contest has been announced by the Georgian National Tourism Administration (GNTA) and SOCAR Petroleum Georgia with the aim of introducing and motivating travelogue writers who can share their stories and discover the many unique places that exist throughout the country. “We are putting into effect various projects to ensure a dynamic flow of foreign tourists to Georgia,” said George Chogovadze, Head of the GNTA. “At the same time our goal is to strengthen and stimulate local tourism. We’re delighted to witness considerable growth
in both directions in our country. It is vitally important to support private sector and in this case SOCAR Petroleum Georgia, that, with this new project, will enhance local tourism development.” The first prize winner will get a two person, five day tour package to Borjomi and Samtskhe -Javakheti staying in the best hotels and including sightseeing of Sapara, Rabat, the Green Monastery, Zarzma, and Vardzia. The second prize winner will get a professional Canon camera. Winners of the contest are to be announced on September 15, 2016 The contest is open to anyone eager to share their personal experience of traveling through Georgia. Potential participants are invited to the site: www. turography.ge to upload their stories. Closing deadline, September 7, 2016.
4
BUSINESS
GEORGIA TODAY
SEPTEMBER 6 - 8, 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.
Georgian Pension Reform – an Experiment in Libertarian Paternalism? BY MAKA CHITANAVA AND YASYA BABYCH
F
rom October 1, 2017, a private retirement savings system will be launched in Georgia as part of a broader pension reform. This reform has been discussed by Nino Doghonadze and Yaroslava Babych in Decent Income in Old Age: Georgian Dream or Reality? on the ISET Economist. Today, we will focus on one very interesting aspect of the reform – the “opt-out” principle and its implementation in the Georgian realities.
WHAT’S IN THE “OPT-OUT”? The proposed private retirement savings system is based on the “opt-out” principle, according to which all hired employees are automatically enrolled in the system, but have the opportunity to optout, should they wish to do so. In this sense, the libertarian ‘freedom of choice’ virtue is maintained – employees have the right to stay in or leave the system. At the same time, employers will not enjoy the same freedom – once a worker decides to stay in the system and pay his/her defined contribution (2% of the nominal salary), employers have no choice but to match it.
WHY “OUT” AND NOT “IN”? The “opt-out” principle can be a very powerful tool for policy makers to nudge citizens to make better choices. • First, it uses people’s natural inertia to encourage saving. Behavioral economics suggests that people tend to stick to defaults, i.e. the pre-selected options, and are usually too “lazy” to switch to anything else. The “opt-out” principle is thus a sneaky way for the policymakers to encourage desirable choices. Madrian and Shea (2001) studied the power of default options and inertia in case of savings behavior by employees in a large US corporation. They find that, controlling all other variables, the switch from active to automatic enrollment dramatically changed the savings behavior of employees. • Second, automatic enrollment may generate the so-called “endowment effect” (a situation when a person’s valuation of a good increases once s/he comes to own it). Once a person is already in the private pension system, s/he will tend to value it more than before. Thus, thanks to automatic enrollment, individuals who may otherwise not have enrolled may be convinced to stay in the system. If these behavior economics ideas are proven right in Georgia, the “opt-out” principle could go a long way towards solving the problem of low private savings in the country. Age
18-33 34-49 50-65
Depend on pension 7% 14% 28%
Depend on relatives 5% 12% 19%
Source: Wikimedia/Commons
WILL “LIBERTARIAN PATERNALISM” SAVE GEORGIAN WOULD-BE-PENSIONERS? The proposed “opt-out” principle is an example of the so-called libertarian paternalism – a policy which affects people’s behavior while at the same time respecting their freedom of choice. The term was coined by Richard Thaler and Cass Sunstein in their 2003 American Economic Review article. According to the authors, the “opt-out” principle is paternalistic in the sense that "it tries to influence choices in a way that will make choosers better off, as judged by themselves". Indeed, for many young (and not so young) people, old age seems to be something that is far and away. Students or young adults do not usually think of retirement savings as their top priority because they find it difficult to imagine their old age or because they have unrealistic expectations about their sources of income in retirement. Gently nudging such forever young optimists to increase retirement savings may be in their own interest. In this respect it is interesting to look at the results of a recent survey which ISET helped conduct. The table provides data on how people in three different age groups view potential sources of their retirement income.
Rent out Save or real will save estate in bank 22% 17% 19% 9% 9% 6%
Source: 2016 survey, done in cooperation with ISET
Will work in Do not retirement know age 23% 26% 27% 18% 26% 12%
Among people who are very close to retirement (50-65) nearly half (47%) realistically assess that they will depend on relatives or on meager state pensions. In the youngest (18-33) age cohort, however, only 12% thought that they would depend on relatives or on publically-provided retirement benefits. Young Georgians optimistically plan to live on income from real estate rental (22%). They are also optimistic about their ability to save – 17% are planning to live off bank savings as compared to 9% and 6%, respectively, among those in the 34-49 and 50-65 age brackets. These results suggest that Georgia’s young adults have rather unrealistic expectations as to their ability to generate retirement income from alternative sources, justifying a paternalistic action by the government.
THERE IS NO SUCH THING AS A FREE LUNCH The libertarian “opt-out” principle comes at a price. In particular, it puts the entire pension reform at risk of failing to achieve its stated objectives if the majority of Georgians do indeed opt-out. What may force people out of the pension scheme? • Low income. Clearly, in order to save, one has to have sufficient income to at least cover the current household expenses. If your salary is not enough to live on, the “opt-out” principle will not work. In this case the reform will cover only a small portion of employees with high incomes who may already be saving today. The Saving Behavior Assessment Survey in Georgia, conducted by ACT in 2011, showed that low income is the major obstacle for saving (70% of respondents).
According to this study, an individual whose family’s monthly income exceeds 700 GEL is 2.9 times more likely to be saving than an individual whose family income falls short of 700 GEL. This study was focusing on general savings, but its findings are very relevant for analyzing retirement savings as well. • High unemployment. With unemployment standing at 12.4%, according to the latest available data (2014), Georgian employers have much more market power than their employees. The latter may opt-out of the system in order not to compromise their position at work. This is more likely to happen in lowproductivity sectors and in small and medium size enterprises, which account for 36.9% of all hired employment in Georgia. Thus, the opt-out principle may not work for a very large portion of hired employees. Using the market power to “force” employees to opt-out of pension schemes is a problem in many developed countries, where this behavior is dis-
couraged with high fines levied on employers. The Georgian Government is planning to introduce such fines and sanctions, but it is not clear whether such sanctions will be effective. Employers may use subtle methods to pressure their employees: discrimination at work or unfair dismissal may be hard to link to a person’s pension scheme choices. Employees are also quite likely to selfcensor their behavior in order not to create problems for employers. • Burden of contributions. Obligatory employer contribution may be perceived as a tax levied on labor. Economic theory tells us that no matter who pays the tax, the tax burden is inevitably shared by both parties. Who will bear more of the burden and who will bear less of it will depend on labor supply and demand elasticities. Following this logic, we can expect that low skilled workers will bear a higher share of the burden by taking pay cuts and or being forced to opt-out of the pension scheme. • Trust towards the national currency. According to the ATC study, stability of the national currency was another important consideration in the savings behavior for 69% of respondents. Last year’s devaluation of the Georgian Lari definitely caused many depositors to shift their money to dollar-denominated accounts. As pension savings will be held in GEL, a lack of trust in the national currency may prove a serious obstacle for the proposed pension reform scheme. Finally, the degree of trust in the management of the new pension system will also be a key factor. A question in the ACT study about institutions preferred as potential deposit insurers can be used as a proxy for the level of trust people have in the government, at least when it comes to pensions. In the survey, 24% of respondents preferred to have a large Georgian bank as the deposit insurer, 21% preferred insurance offered by a foreign bank, 20% by the Georgian Government, and 12% by the National Bank of Georgia. Based on this evidence we can say that as many as one fifth of the Georgian people still tend to trust the government with their savings, but it is not at all clear that this level of trust will be sufficient to overcome all other obstacles and help people stay in the pension system. This is a question that the policy makers still need to answer. Of those Georgians who save, only 6% are saving for retirement.
Source: Saving Behavior Assessment Survey in Georgia, February 2011
BUSINESS
GEORGIA TODAY SEPTEMBER 6 - 8, 2016
5
New Restaurant Keti’s Bistro Opens on Chovelidze Street BY NINO GUGUNISHVILI
K
eti Bakradze, who represents the new generation of Georgian chefs, founder and owner of the ‘The Dining Room’ in Vake, has recently opened her second restaurant ‘Keti’s Bistro’ offering guests a delicious variety of food. Also host of a new and popular TV show ‘Keti’s Culinary Adventures’ (channel Rustavi 2), Keti is ambitious enough to fearlessly experiment with different flavors and tastes, adding something unique and slightly different to almost any recipe. Her culinary preferences range from traditionally Georgian to European. She says she tries not to follow the rules while cooking and never makes any dish exactly the same. Back in 2008 she opened her first restaurant The Dining Room, having in mind a concept of a cozy ambiance; a place that would make you feel as if you had been there before. This no doubt explains its current popularity among locals and tourists alike. As a former co-owner of Atelier 10’ managing a show room of some of Georgia’s most famous fashion designers, Keti was afforded great travel opportunities, finding inspiration in the countries and cultures she visited. This time, in Keti’s Bistro, the chef decided to do something different from her Dining Room and according to the reviews, she has succeeded so far.
FOR SALE: BMW – 321 model Date of issue 1936
PRICE 10.000 USD Keti often cooperates closely with the Georgian Culinary Academy, which she considers a very important institution in that it gives a chance for young Georgian chefs to develop to such a level that they find themselves in high demand both within the country and abroad.
According to Keti, the evolution of customer and client is visible nowadays. The attitude has changed a lot. A person deciding to dine out is much savvier and willing to take a risk; and eager to follow Keti into any adventure she creates, which she does with both passion and gusto.
5-Star Hotel Planned for Georgia’s Kakheti Region
BY THEA MORRISON
A
5-star Radisson Blu Hotel of international standard will be in built in Tsinandali, a village in eastern Georgia’s Kakheti region. The hotel will be constructed near the former home of Alexander Chavchavadze, a 19th-century Romantic poet, aristocrat, and general. He is widely considered one of Georgia's greatest literary figures. The estate is situated close to the regional capital Telavi, 79 kilometers east of Tbilisi. The Kakheti region is the
heart of Georgia’s viticulture, with hundreds of small and large-scale vineyards scattered throughout the countryside. The USD 30 million investment project between the Partnership Fund and the Silk Road Group was signed in Tsinandali on Sunday at an event dedicated tothe230thanniversaryofChavchavadze’s death. The Partnership Fund will contribute USD 10 million to the hotel while the Swiss-registered Silk Road Group will fund the remaining USD 20 million. The 120-room hotel will have conference halls, indoor and outdoor restaurants, as well as a spa, pool and fitness club.
According to the Head of the Partnership Fund, David Saganelidze, the hotel will promote tourism development for Georgia’s wine industry. “This will be the first branded hotel in the Kakheti Region… able to service tourists who want to visit this brilliant, ancient region,” Saganelidze stated. Georgia’s Economy Minister, Dimitry Kumsishvili, attended the signing ceremony and noted that similar projects are critical to the development of the country’s regions. The new hotel is scheduled to open in early 2018 and will create more than 200 jobs in the Telavi district.
CONTACT PERSON 557 12 38 90
6
BUSINESS
GEORGIA TODAY
SEPTEMBER 6 - 8, 2016
The First Georgia International Maritime Forum to Promote Georgia Maritime Potential BY NINO GUGUNISHVILI
T
he first Georgia International Maritime Forum (GIMF) is to be held on September 12-16 in Batumi, under the patronage of Prime Minister Giorgi Kvirikashvili. The Forum aims to position Georgia as a Maritime nation; a reliable, strong partner that shares common values with the global international maritime community. We had a chance to speak to Captain Mamuka Akhaladze, Director of the Maritime Transport Agency of the Ministry of Economy and Sustainable Development of Georgia, IMO Maritime Ambassador to Georgia, Master Mariner, and AFNI, IFSMA.
CAPTAIN AKHALADZE, HOW DID THE IDEA OF THE GIMF COME ABOUT? WHAT ARE YOUR EXPECTATIONS? The idea of organizing the International Maritime Forum in Georgia belongs to the First Vice Prime Minister, Minister of Economy and Sustainable Development of Georgia, Dimitry Kumsishvili. He introduced it in his speech at the 29th Assembly of the International Maritime Organization (IMO) while talking about the recent reforms in the Georgian Maritime industry and their positive outcomes. It was there that 170 member states of the IMO were invited to attend the Forum in Batumi. On September 12-16, Georgia’s maritime gateway, Batumi, will become a meeting point for the major international maritime, shipping and financial institutions, with discussion topics ranging from commercial operations of ships, to technical regulations and environmental safety standards for the seas, with high-profile guests from 140 countries attending. Such events are of crucial importance for positioning Georgia as a maritime country to the wider international audience. In order to be considered as a country of high investment potential, with possibilities
to develop the maritime industry and services, for our seafarers to be in demand on international markets, and for the Georgian flag to be more attractive for foreign ship owners, such initiatives and projects as the International Maritime Forum need to be held regularly.
CAN YOU TELL US ABOUT THE REFORMS IN THE INDUSTRY IN RECENT YEARS? There are numerous significant achievements that I would like to underline: First of all, the European Union resumed acceptance of certificates of competency for Georgian seafarers. For the first time in Georgian history, the Georgian Maritime flag is finally off the black list and the competitivness of the country’s tonnage has increased on the world market by quality ships. The Maritime Transport Agency (MTA) of Georgia has been successfully audited (EMSA) (IMSAS), has commenced a quality management system, and has implemented customer oriented services. The Maritime legislaton base has been improved and updated. MTA offers a 24/7 service to ship owners. Ship registration fees have been reduced. The Agency issues new documents for seafarers that are safe from forgery. We’ve also created a state electronic database for seafarers. The fees for certifications are 50% lower. MTA has signed memorandums of understanding with 46 countries. The administrative building of the Agency was relocated to the country’s maritime center, which enabled us to plan our activities duly and effectively. MTA staff consists of highly qualified personnel, offered professional trainings periodically. The Agency is using any available platorm to promote Georgia as a country for potential financial investment. The Maritime Rescue Coordination Center unit, responsible for dealing with oil spills at sea, is equipped according to current standards. The Agency is ready to react to perform necessary sea rescue operations 24/7. At the same time, MTA introduced modern systems for vessel traffic service in the ports. And these are just our success stories since 2012. I
Captain Mamuka Akhaladze, Director of the Maritime Transport Agency of the Ministry of Economy and Sustainable Development of Georgia
would also like to mention that MTA’s future plans are largely centered on promoting Georgia’s Maritime flag, through increasing the number of Georgian vessels on the international Maritime scene. It is also a top priority for our agency to provide the highest quality education to our seafarers. Another very important issue is ensuring safety at sea.
WHAT CAN YOU SAY ABOUT OUR COUNTRY’S RELATIONS WITH THE IMO? HOW DO YOU THINK MUTUAL COOPERATION WITH THE IMO CAN BE DEEPENED? Georgia has been a member of the IMO since 1993. I’m honored to be IMO’s Maritime Ambassador in Georgia. Since 2010, Georgia has received invaluable support from the organization through its expertise and consultancy, together with assistance in providing professional educational training to Agency staff members. The fact that the IMO secretary general is attending our Forum and that the working sessions of two of the global projects realized under the aegis of IMO (Global Maritine Energy Efficiency Project) and the meeting of Black and Caspian Sea administration officials, on the topic of Maritime policy formation and implementation, speaks for itself. Georgia tends to be a leader on a regional level, being the only country regionally involved in the GloMEEP, project, which concerns implementation of Maritime energy- efficiency on the national level.
WHAT CAN GEORGIA OFFER INTERNATIONAL PARTNERS? WHAT NEEDS TO BE DONE TO PRESENT IT MORE EFFECTIVELY AS A RELIABLE AND STRONG PARTNER? The Georgian Maritime industry plays a crucial role in the economic development of our country. Georgia historically is a part of the Silk Road transport corridor and among one of the oldest Maritime countries in the world. As Georgia’s unique geographical location gives it an important transit status, Georgia has the potential to become a Maritime center for the Black Sea region. Intergovernmental agreements and belateral memorandums are expected to be signed during the Forum, together with some very important meetings to be held with the representatives of leading foreign maritime companies. Yet it is crucial to make Georgian legislative and tax systems more flexible for international shipping companies, thus bringing finacial investments to the country.
BUSINESS
GEORGIA TODAY SEPTEMBER 6 - 8, 2016
7
ProCredit: Living Green Finance BY KATIE RUTH DAVIES
F
irst off, I’d like to say I’m not writing this article as any part of a paid advertisement (though I was taken to Thessaloniki early summer to hear the information live- but I wrote other fascinating articles to cover that privilege!). I’m writing this because I am truly impressed by the mind-set and working practise of ProCredit Bank, as described by their top and middle management and clients, and I would like to bring them as an example of how your business can become greener in both thought and deed. “When you do business, do you think about the environment? Or resource management? Or the impact of climate change on your business?” asks Borislav Kostadinov, chairperson of the supervisory boards of the ProCredit banks in Albania, Bosnia and Herzegovina, Kosovo, Macedonia and Serbia and member of the Management Board of ProCredit Holding, the mother company of ProCredit Bank in Georgia. Good questions. I can answer “yes,” but at the same time I must admit to rather too much inaction in implementing change in my own working environment. Motivation is the key factor, of course. In my office, as well as in most businesses, the desire to be more environmentally responsible, and the demand for it to be a permanent fixture, must come not only from management but also from staff and customers. ProCredit Bank is no different. “The main impulse for doing green finance, and for “living” it the way we do, comes from our shareholders. For
us and our shareholders, responsibility for the environment is an integral part of social responsibility,” said Kostadinov. “Take our key strategic shareholder, Zeitinger Invest which emerged from IPC, for example. When IPC was launched in the early 1980s, the initial focus of its consultancy work was on what was then called alternative energy. Another private sector shareholder is the DOEN Foundation, whose stated aim is ‘to contribute to the transition of a green and innovative economy where inspiring entrepreneurs contribute to a better world for the people and the planet.’”
Borislav Kostadinov, chairperson of the supervisory boards of the ProCredit banks in Albania, Bosnia and Herzegovina, Kosovo, Macedonia and Serbia and member of the Management Board of ProCredit Holding, the mother company of ProCredit Bank in Georgia
EVERYDAY BARRIERS So, your thoughts and ideas are starting to have green tinges? But everyday issues still seem to make those ideas hard to realize, right? So what exactly are we up against? Kostadinov suggests “shorttermism,” incomplete knowledge, misunderstandings, and lack of confidence in economic recovery. “Short-termism is often the single most powerful force swaying the hand of the decision-makers in banking,” he says. “But if you’re short-sighted, the stealthy and creeping nature of environmental risk will escape your attention. Its complexity, interconnectivity, its randomness; the sudden and disproportionate impact it could have on your operating context. It is intuitively clear that if you operate in a country or in an industry with high energy intake, high resource consumption and high pollution, you will likely be at a disadvantage compared to your competitors operating in an environmentally-sound setting.” Set to make a difference, in 2011 the ProCredit Group decided to institutionalize its approach to “green-ness,” aiming to develop and implement a com-
prehensive Environmental Management System aimed at reducing the environmental impact of the ProCredit banks. IPC was given a mandate to advise the Group how to institutionalize the green concept and together they built up new structures and defined new processes. “We established Environmental Management Units at both the Group and Bank level. We created committees, wrote procedures – and our competitors probably thought we were crazy, because this was the peak of the crisis for Eastern Europe,” Kostadinov says.
MAKING IT STANDARD In order to reduce its impact, ProCredit has done something any company can do- implemented in-house energy and resource efficiency measures which apply to both technology and behaviour, mak-
ing green activities part of its internal standards and procedures. By educating staff on the importance of green thinking and by investing in infrastructure and efficient equipment, the process of change is made easier. Over to Kostadinov: “The most significant resources used by us are paper, electricity, and fuel for transportation. Printing optimization projects started at most of our banks some years ago, with significant results, and improvements are still ongoing, as our ultimate aim is to have paperless banking operations. Technical upgrades, multifunctional printing equipment, streamlining and automation of processes, and a series of internal awareness-raising campaigns for staff have led to further decreases in paper consumption. In 2015, the ProCredit banks consumed 29 percent less
paper than in 2014. Energy is another main resource we consume. In 2015, the total energy used by the ProCredit banks decreased by 15 percent compared to the previous year. This was achieved by installing new or renovated heating and ventilation systems, efficient inverter air conditioners, LED lighting etc., and by making improvements to the building envelope. I would like to emphasize that, in addition to reducing our overall greenhouse gas emissions, the measures we have taken also result in substantial cost savings.” So my little office is looking a little better: energy-saving light bulbs switched off when not in use (check), new PVC windows ensuring minimal heat loss and used in good balance with the air-conContinued on page 8
8
BUSINESS
GEORGIA TODAY
SEPTEMBER 6 - 8, 2016
ProCredit: Living Green Finance Continued from page 7 ditioning (check), two clearly marked exits (check),… but the bin is still full of waste paper (even though we do print on both sides) and there are magazines piled up around the office. Hmm. ProCredit would have a few words to say… “We are seeking to work with forward looking entrepreneurs and require that our borrowers comply with the relevant rules and regulations regarding environmental protection as well as health and safety standards. We are very well aware that social and environmental factors have material relevance for our own risk
management at an institutional level,” says Kostadinov.
PRACTISE WHAT YOU PREACH & GREEN LOANS Many banks, when addressing “greenness,” often focus on environmental and social issues at the transactional level in order to mitigate credit risk or reputational risk. ProCredit, however, takes their environmental responsibility one step further and will actually reject loan applications if the activity seeking funding is harmful to the environment or if the applicant fails to manage the environmental risks correctly. Yet for those facing a “rejected” stamp from ProCredit, there is still hope: “Our approach implies engaging in dialogue with our clients and incentivising them to reduce the environmental impact of their activities,” Kostadinov says. “We do our best to share our observations.” And it’s working. “Over the last few years we have been steadily building up our green portfolio. So far we have disbursed green loans totalling almost half a billion Euro,” he says. By the end of June 2016, the Group’s green portfolio amounted to EUR 296 million, with around 10,000 outstanding credit exposures. The lion’s share of these loans – 71% of the total amount– was granted to finance investments in energy-saving measures. Frequent investments by ProCredit include energy efficient space heating, ventilation systems, heating and cooling processes, lighting systems and transport; and renewable energy technologies, primarily in solar water heating technologies, photovoltaic installations, mini
hydropower plants, wind power turbines and biogas and biomass applications. One example of a client that has invested in energy efficiency is the Georgian company Bedegi, a ProCredit client since 2003 and a manufacturer of high quality building materials. “ProCredit Bank Georgia disbursed a Green Loan to finance Bedegi, a project that was environmentally friendly in a dual sense: the installation of energy efficient machinery to produce insulation blocks, which themselves help to improve energy performance and minimize the cost of heating and cooling the buildings constructed with them,” Kostadinov says. Looking back to my office, I again see that for any business the success of an environmental management system ultimately depends on the staff and their attitude towards the environment. That means continuous staff training, internal awareness-raisingandin-houseexpertise-aspects which are central components of the ProCredit business philosophy. Maybe it should be central to yours, too.
BUSINESS
GEORGIA TODAY SEPTEMBER 6 - 8, 2016
9
Georgia’s Agricultural Minister Summarizes Achievements Prior to Leaving Post TBC Bank Holds Media Seminar BY NINO GUGUNISHVILI
O BY TAMAR SVANIDZE
G
eorgia’s Minister of Agriculture, Otar Danelia, on Monday presented a summary report to the Prime Minister and members of the Cabinet, ahead of his leaving to compete as a majoritarian candidate in Samegrelo, western Georgia, prior to the October 8th Parliamentary Elections. During his final report as acting Minister, Danelia summed up his implemented works and ongoing projects. “150 new and 700 expanded enterprises, and more than 1,600 agricultural cooperatives were established in Georgia during my term,” he claimed,
adding that around 23,600 hectares of land plots were insured during 2014-2016 within the agricultural insurance reform. Georgia’s Prime Minister, who attended the report hearing, emphasized that despite his successes there are still challenges facing the country’s agricultural sector. "This field is very important for the country in terms of economic development. It also carries important social significance, since more than half of our population is employed in the agriculture sector,” the Prime Minister noted. The report presentation was further witnessed by Diplomatic corps accredited in Georgia, NGOs, and donor organizations.
The United Nations Development Programme (UNDP) and the Government of Georgia in August pledged to invest Euro 2.63 million (GEL 6.8) into a project aimed at assisting rural development in Georgia’s western Adjaria region on the Black Sea The Ministry of Agriculture of Georgia, in partnership with the United States Agency for International Development (USAID), launched a new ‘Growth in Georgia’ project to support the rural population
n September 2, at Rooms Hotel Tbilisi, TBC Bank held a seminar for Georgian media representatives on the topic of the Stock Exchange. The first part of the introductory seminar focused on TBC Bank achieving the London Stock Exchange Premium listing, with presentations made by Vakhtang Butskhrikidze, CEO of TBC Bank and Giorgi Shagidze, Deputy CEO of TBC Bank. The second part of the seminar covered the work and mission of TBC Capital - presented by Avtandil Gigineishvili, Head of TBC Capital and Former Managing Director of Jefferies International, and Temo Cheishvili, a former team member at world- leading banks: Barings and ING, together with Vasil Revishvili, a former team member of Pictet Asset Management, one of the
leading Swiss financial groups, who made a presentation on the investment fund recently created by TBC. While speaking about the importance of being in the premium listing of the London Stock Exchange (LSE), both Butskhrikidze and Shagidze underlined the crucial impact of this fact for the country and its economical development. Entering the premium listing is not only beneficial to the Banks and their clients and customers, but also has a strong positive impact on Georgia’s image internationally. Two of the country’s major banks, TBC and Bank of Georgia, are listed on the LSE, which for TBC means that over 100 investors are either collaborating already or plan to do so in the future, “a result of the hard work that TBC Bank has carried out over its years of existence,” the TBC representatives said. During his presentation, Gigineishvili explained the necessity of developing the capital market in Georgia, with TBC Capital having a major objective and role in fostering the process.
10
BUSINESS
GEORGIA TODAY
SEPTEMBER 6 - 8, 2016
Britain’s New Ambassador Starts Mandate in Georgia
B
ritain’s new Ambassador to Georgia, Justin McKenzie Smith, arrived in Tbilisi on Thursday to take up his role. McKenzie Smith will fully assume his Ambassadorial duties once he presents his Letters of Credence to the Georgian President and to the Georgian Ministry of Foreign Affairs. “It is a pleasure to be in Georgia and an honor to be appointed as Her Majesty’s Ambassador. I have been fortunate to visit Georgia several times in the past. I am delighted now to have the chance to live and work here,” Justin McKenzie Smith said.
Prior to his appointment as British Ambassador to Georgia, Mr. McKenzie Smith worked in a range of roles in the British diplomatic service. His most recent post was as Deputy Head of Mission and Director for Trade and Investment at the British Embassy in Mexico City. Previous overseas postings include Moscow and the UK Mission to the United Nations in New York. In the Foreign and Commonwealth Office in London, Mr McKenzie Smith worked on issues relating to Eastern Europe, Central Asia, the EU, OSCE, human rights and the media.
Agile Spirit Military Drills in Southern Georgia BY NICHOLAS WALLER
S
ome of the US military’s most hi-tech combat equipment appeared in Georgia for the second time in less than six months, as combat exercises with the Georgian Armed Forces and other close allies began in the small South Caucasus nation’s southern Samtskhe-Javakheti region on Friday. The US’ European Command ferried
armored vehicles, artillery pieces, amphibious assault vehicles and Humvees across the Black Sea from NATOmember Bulgaria to take part in the exercises, code-named Agile Spirit. The two-week exercises are taking place at a firing range close to the town of Akhaltsikhe, with personnel from the US, Georgia, Bulgaria, Latvia, Romania and Ukraine. The focus of the training will include live-fire exercises, with the participation of Georgian tanks and US armored vehicles, as well as drills with anti-tank
guided TOW missile systems. Agile Spirit was originally a joint USGeorgian military exercise that began in 2011. In 2015, the combat drills were expanded to include other NATO members and NATO-associated countries. This year’s exercise is the first to include units from the elite US Marine Corps. Agile Spirit 2016 is the second major military exercise to be held in Georgia. US, UK and Georgian forces took part in the Noble Partner drills in May at Georgia’s Vaziani military base – home of NATO’s training center in the country.
Armenian Government Eyes Changes to Controversial Tax Reform Bill BY NICHOLAS WALLER
T
he Armenian government is discussing the possibility of making major changes to a controversial tax reform bill that was passed by the country’s parliament in June. If passed, the bill would increase the income tax for those with a monthly salary over USD 250 from 26 percent to up to 33 percent, while decreasing the income tax for those earning USD 4,200 or more from 36 percent to 33 percent, and from 24.4 percent to 23 percent for those earning less than USD 250, RFE/RL reported. Armenia’s main opposition parties and several deputies from the ruling Republican Party have joined forces with business owners in opposing the
ROUTING
TBILISI - ISTANBUL ATATURK AIRPORT
ISTANBUL ATATURK AIRPORT - TBILISI TBILISI - ISTANBUL SABIHA GOKCEN AIRPORT ISTANBUL SABIHA GOKCEN AIRPORT - TBILISI BATUMI - ISTANBUL ISTANBUL - BATUMI
Armenian Prime Minister Hovik Abrahamyan discusses amendments to tax bill. Photo: RFE/RL
bill, saying that it would profoundly cripple the private sector by hindering the growth of small and medium-
FLIGHT NUMBER
TK 379 TK 387 TK 383 TK 386 TK 382 TK 378 TK 381 TK 381 TK 380 TK 391 TK 393 TK 390 TK 392
WEEK DAYS
EVERYDAY
EVERYDAY 1/2/4/5/6/7 3 EVERYDAY 1/2/4/6/7 1/3/4/5/7 1/2/4/6/7 1/3/4/5/7
DEPARTURE
ARRIVAL
02:35 06:35 22:55 01:40 18:10 21:15 04:25 05:05 19:40 10:35 20:15 06:25 16:20
04:05 08:05 00:30+1 04:55 21:30 00:30+1 05:50 06:30 22:55 11:40 21:20 09:20 19:20
sized businesses. In response to the openly hostile pushback by the bill’s opponents, Prime
10 Galaktion Street
Minister Hovik Abrahamyan has vowed to amend the bill ahead of its second reading in September.
Abrahamyan added that if the amended bill passes in its second reading, the reforms would be gradually phased in over a period of three to five years. Tax collection remains a thorny issue in Armenia despite significant improvements in recent years. The total amount of tax revenue collected in the country still only accounts for one-fifth of Armenia’s Gross Domestic Product – far behind its neighbors Georgia, Turkey and Azerbaijan. A deep-rooted culture of tax evasion and systemic corruption contribute to the country's poor track record when it comes to tax collection. In its June report, the IMF sharply criticized Armenia’s government for not doing more to crack down on those who avoid paying their taxes and advised President Serzh Sargsyan’s government to implement major structural reforms that include higher tax collection.
Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge
BUSINESS
GEORGIA TODAY SEPTEMBER 6 - 8, 2016
11
Dechert OnPoint: Georgia to Foster Innovations through New Legal Framework
D
echert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associate Irakli Sokolovski and associates Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.
INTRODUCTION On 22 June 2016 the Parliament of Georgia adopted the Law on Innovations (the “Law”), a piece of legislation that aims to create national innovation ecosystems to facilitate social and economic development. These ecosystems are based on knowledge and innovation, facilitating the application of technologies developed by other countries and spreading intellectual property and technologies developed in Georgia in order to increase the competitiveness of all fields of technology, science and economics. In particular, the Law Government involvement in the innovative sector, provides for several types of infrastructure to support innovation and regulates related intellectual property issues, among other things. This edition of OnPoint brings light to the major aspects of the new Law while providing an overview of the new tools and institutions that it introduces.
GOVERNMENT INVOLVEMENT The Law introduces two key state bodies tasked with aiding the development of innovation: the Innovation and Technology Agency (the “Agency”) and the Research and Innovation Board (the “Board”). As an advisory body of the Government of Georgia (the “Government”), the Board has been charged with coordinating the creation of the State Strategy of Innovations and its submission to the Government. The Government approves the State Strategy of Innovations and defines the bodies in charge of implementing the strategy. Other functions of the Board include coordinating the development of national and regional innovation ecosystems between state bodies as well as the state, private, educational and scientific sectors and reporting to the Government regarding innovative activities. Operating in the form of a legal entity of public law under the Ministry of Economy and Sustainable Development of Georgia, the Agency has been assigned to support innovation. It will work to commercialize research work, stimulate the application of innovations and provide various incentives for innovation.
INFRASTRUCTURE According to the Law, state bodies or other persons may establish various infrastructure hubs to promote innovation. The range of types of infrastructure defined by the Law include Scientific/ Technological Parks, Business Incubators, Business Accelerators, Technology Transfer Centers, Industrial Innovation Laboratories (FabLab) and Innovation Laboratories (ILab), and Innovation Centers. Scientific/Technological Parks are expected to provide infrastructure and professional services to universities, scientific/research establishments and other interested parties, facilitating cooperation between such parties to foster innovation. Business Incubators provide workspace, administrative assistance and other technical support to persons carrying out innovative activities (the “Subjects”) for a limited period of two years. The Subjects shall be selected for this purpose on a competitive basis. A Business Accelerator mainly focuses on providing a workspace to the Subjects, developing and refining their business ideas and business models and making certain investments on their behalf as necessary. The beneficiaries of this kind of support from Business Accelerators should also be selected via a competitive process. The Law also concerns the services that other types of infrastructure should provide to competitively-selected businesses. Such services include the transfer of innovations, business modelling, concept development, financial support, trainings and establishment of employment platforms, among other things. According to the Law, the Government, Agency, scientific/research and educational institutions or other interested persons may undertake or participate in co-financing innovative projects, activities or infrastructure on transparent, impartial and public financing basis.
the patent within a reasonable time; of (ii) the uses of the patent do not meet health and safety requirements.
CONCLUSION In sum, the Law intends to promote Georgia’s knowledge and innovation economy via the establishment of a number of new mechanisms. Legislators aim to provide various instruments to establish complex infrastructure and support education and sciences. While the practical aspects of the Law are still to be tested, the Law itself provides a promising set of tools for persons working in the innovation sector. *** Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific cir-
cumstances for your business. Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice. Dechert Georgia is the Tbilisi branch of Dechert LLP, a global specialist law firm that focuses on core transactional and litigation practices, providing worldclass services to major corporations, financial institutions and private funds worldwide. With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit www.dechert.com or contact Nicola Mariani at nicola.mariani@dechert.com.
INTELLECTUAL PROPERTY RIGHTS The Law regulates the intellectual property rights attached to innovations. In particular, it grants intellectual property rights to inventions created by employees or recipients of orders during the course of employment or contractual obligations within a project funded by the Agency to the employer or the client, unless otherwise agreed in the employment contract. The Law requires indication of the inventor’s name when a patent is registered for an innovation. The Law defines new terms such as Innovation and Commercialization of Innovation. Innovation covers not only innovative products but also innovative processes, organizational innovations and innovative marketing schemes. The commercialization of Innovations entails innovation that in practical use has positive economic or social effects. According to the Law, a share of revenue from the commercialization of intellectual property rights shall belong to the inven-
PUBLISHER & GM
George Sharashidze COMMERCIAL DEPARTMENT
Commercial Director: Iva Merabishvili Marketing Manager: Mako Burduli
GEORGIA TODAY
tor. However, it’s left up to the Government to elaborate the rule of establishing the amount and granting such guaranteed share to the inventor. In some cases, where the Government has provided financing, the relevant Government agency or authorized legal entity may require a share of the revenues for seven years following the financing; that share should not exceed 5% per annum. Patent holders may be required to license out certain Government-funded patented innovations to other applicants chosen by the Government. If the Government and patent holders fail to agree on the license transfer, the Law allows the Government to deliver a decision on issuing a license to another beneficiary following the established procedure. However, the Government may only exercise this authority granted by the Law if: (i) the patent holder does not use
EDITORIAL DEPARTMENT:
Editor-In-Chief: Katie Ruth Davies
Journalists: Tony Hanmer, Tamar Svanidze, Zviad Adzinbaia, Beqa Kirtava, Meri Taliashvili, Eka Karsaulidze, Zaza Jgarkava, Maka Bibilashvili, Karen Tovmasyan, Dimitri Dolaberidze, Maka Lomadze, Tim Ogden, Ana Akhalaia, Robert Isaf, Joseph Larsen, Will Cathcart, Vazha Tavberidze, Nugzar B. Ruhadze
Photographer: Giorgi Pridonishvili Layout: Misha Mchedlishvili Webmaster: Sergey Gevenov Circulation Managers: David Kerdikashvili, David Djandjgava
ADDRESS
1 Melikishvili Str. Tbilisi, 0179, Georgia Tel.: +995 32 229 59 19 E: info@georgiatoday.ge F: GeorgiaToday ADVERTISING & SUBSCRIPTION
+995 595 279997 E-mail: marketing@ georgiatoday.ge
Reproducing material, photos and advertisements without prior editorial permission is strictly forbidden. The author is responsible for all material. Rights of authors are preserved. The newspaper is registered in Mtatsminda district court. Reg. # 06/4-309
12
POLITICS
GEORGIA TODAY
SEPTEMBER 6 - 8, 2016
New Geopolitical Reality in the South Caucasus & The Georgian Dilemma BY DR. VAKHTANG MAISAIA
T
his August delivered new geopolitical shifts in the regional security dimension of the South Caucasus and Caspian Basin areas by launching a new geopolitical long-distance race. On 7-8 August, a tripartite summit was held in Baku where Azerbaijan, Iran and Russia focused on regional security arrangements in the South Caucasus, trying to force yet another step towards making progress regarding the Caspian Sea legal status disagreements among the littoral states. The longest talks were given by the leaders of Russia and Iran and very soon the results were at hand. On the second day of the Summit, Turkey’s President Erdogan paid an official visit to Sankt-Petersburg and entered into more long-standing bilateral negotiations with the President of Russia, whom he now considers as his “best friend.” And somewhat unsurprisingly, all this was followed by another highlevel micro-Summit between Iran and Turkey – Erdogan and Rouhani in Tehran to discuss concrete aspects of relations between the nations, as well as regional security issues. This “tripartite” geopolitics has already endorsed some kind of new paradigm for regional security development in the South Caucasus and has already had a big impact on processes taking place in the Middle East, namely in Syria. It seems
that the regional hegemonic actors - Russia, Iran and Turkey are settling on common geopolitical interests, thus trying to harmonize their energy security and pursuing joint efforts to cope with international terrorism. In reality, it also translates into fostering their efforts on South Caucasus regional geopolitics against USA involvement in the region. Despite the fact that Turkey is thought to be a part of the Western community, at least being a Member State of NATO and being granted Associate Membership status-quo since 1963, the incumbent Turkish authority is seeking to downplay its own “selfish great game,” reorienting its geopolitical priorities from West to East, clashing with some EU memberstates in the process, for instance, with Germany and Austria. It is blatantly obvious that Turkey is to an extent reconsidering its relations with the USA due to the results of the failed coup (according to Belgian information agency EurActiv.com, the US started transferring nuclear weapons, around 20 tactical nukes, from Turkey into Romania following the failed coup of July 2016, when Incirlik’s Air Force base power was cut and the Turkish government prohibited US aircraft from flying in or out). More concretely, lately the Turkish Minister of Foreign Affairs even threatened that Turkey could withdraw from NATO if the Alliance did not provide more necessary assistance to his country (according to British newspaper ‘Daily Express’). A new regional security agenda is evolving: the Moscow-Ankara-Tehran
geopolitical axis is not a myth but a reality. What and how the regional powers reached a “geopolitical consensus” on various drastic topics is a real question for international society to ponder. The Baku Summit was a prelude for further strategic partnership between Iran and Russia, stabilizing relations between Azerbaijan and Iran and making positive what is already more than a “warm” political relationship between Azerbaijan and Russia. In short, these are the missions the Baku Summit seems to have accomplished: • Institutionalize a framework for setting up an informal grouping of Iran, Azerbaijan and Russia and seeking to combine their interests toward Caspian Sea legal problems, and pursuing the identification of common interests toward energy security provisions. The next Summit will be held in Tehran and
•
President Hassan Rouhani has proposed to invite all other actors to engage in the regional security discussions; Promoting the new geo-economic project “North-South” transporttransit corridor for transposing goods and merchandize from China and South East Asia towards Western Europe under the aegis of the “Silk Road” project, worth USD 22 billion and launched by China in 2010. The corridor provides opportunities for involved parties (Iran and Russia) to directly transfer all cargos via their territories to the EU member-nations via the shortest land routes, and for Azerbaijan it gives an opportunity to get the craved status of so-called “Transit Hub” for disseminating cargo in a “North-South” direction meaning Georgia and Armenia
are to be ousted from the “Silk Road” program. • Fostering Iran-Russia strategic cooperation on a bilateral basis. The cooperation has transformed into a concrete geostrategic project. Iran and Russia set up a new formal military alliance for the Middle East with the involvement of the Assad regime, Iraq, Iran and Russia against ISIS and the JabhatFatkh-ash-Sham coalition (created lately). As for the Russian-Turkish relations, after the Sankt-Petersburg bilateral Summit, the parties agreed to promote a common geopolitical agenda, including the construction of gas undersea pipeline “South Stream-2,” capable of delivering more than 60 billion cubic meters of gas to the EU market and to Turkey itself. In addition, the development of another important mega-energy project has been discussed- the construction of a nuclear reactor worth USD 20 billion in the southern part of Turkey. Moreover, Turkey officially offered its apologies for the Russian jet incident of last year and reached an agreement, including a secret memorandum, on combating terrorism and coordinating joint efforts to fight ISIS. Considering all the above-mentioned, it stands to reason that Georgia is entering a “geopolitical deadlock” and will soon face a serious dilemma at the regional security level. Hence, the situation is grave and only the further development of the Euro-Atlantic foreign policy can help them to escape said “deadlock”.