Issue #1140 Business by Georgia Today

Issue no: 1140/175

• APRIL 9 - 11, 2019

• PUBLISHED TWICE WEEKLY

In this week’s issue...

FOCUS

ON THE GNTA Find out what the new Tourism Agency Head has planned to develop Georgia's tourism sector

PRICE: GEL 2.50

Weekly Entrepreneurial News @entrepreneur.ge

PAGE 10

NEWS PAGE 2

No Credit, No Party! How to Guarantee Stable Growth ISET PAGE 4

Asian Development Bank Releases Latest Report on Georgia BUSINESS PAGE 5

Ivanishvili Releases Statement ahead of April 9 Memorial Day BY THEA MORRISON

ounder and Chair of the ruling Georgian Dream (GD) party, billionaire Bidzina Ivanishvili, has released a statement evaluating the country's path since April 9, 1989 and summarizing the results. Ivanishvili’s statement reads that 9 April was one of the most tragic days in the history of Georgia, but that the day has become a symbol of Georgia's struggle for freedom and independence. The day which Ivanishvili speaks about this year celebrates the 30th anniversary of the April 9 1989 tragedy, when the Soviet Union's armed forces dispersed a peaceful demonstration in the center of Tbilisi, resulting in 21 deaths, 17 of which were women. The country also marks the 28th anniversary of its independence from the Soviet Union.

“The only force that helped our nation resist the brutality of the Soviet regime and tanks was an unconditional love for our homeland,” the

GD Chair said. Ivanishvili's statement reads that on 9 April 2012, after 21 years of independence, Georgia had “overcrowded prisons, suppressed media, occupied territories and a cynical model of oriental tyranny" and claims that on 1 October 2012, the Georgian people “gained an incredible victory and the violent regime was removed without civil confrontation or a revolution.” “For seven years now, the country has been governed by a policy of rationalism that brought a continuous foreign and civil peace that is unprecedented in the history of independent Georgia,” the statement reads. Ivanishvili also says the authorities that came to power after the October 2012 elections provided a “high standard of democracy and increased the level of political rights.” “It is unimaginable to fall back to the past. The only option is a rational policy, development, and democracy. The irreversibility of the advancement of the Georgian state is based only on the unification of society,” he wrote.

6th Session of Georgia-Bulgaria Economic Cooperation Intergovernmental Commission

BUSINESS PAGE 7

World Bank Predicts 4.6% Growth of Georgian Economy in 2019 BUSINESS PAGE 11 Prepared for Georgia Today Business by

Markets As of 05ͲAprͲ2019

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Bank of Georgia (BGEO LN)

GBP 17.29

+4,6%

+3,2%

GEOROG 04/21

103.58 (YTM 4.89%)

+0,4%

+1,0%

Georgia Capital (CGEO LN)

STOCKS

GBP 10.90

Ͳ1,0%

GEORG 04/21

105.87 (YTM 3.81%)

+0,1%

+0,3%

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

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

BONDS

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GBP 1.96

Ͳ2,3%

Ͳ5,3%

GRAIL 07/22

107.49 (YTM 5.21%)

+0,2%

+0,6%

GBP 15.98

+3,5%

+4,3%

GEBGG 07/23

101.64 (YTM 5.56%)

+1,1%

+2,2%

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CURRENCIES

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70,34

+2,9%

+6,8%

GEL / USD

2,6894

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1 291,76

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+0,3%

GEL / EUR

3,0119

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GEL / GBP

3,5066

+0,0%

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INDICES

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GEL / CHF

2,6882

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FTSE 100

7 446,87

+2,3%

+3,7%

GEL / RUB

0,0411

+0,5%

+1,0%

19 538,30

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GEL / TRY

0,4772

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Ͳ3,9%

DAX

12 009,75

+4,2%

+3,3%

GEL / AZN

1,5827

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DOW JONES

26 424,99

+1,9%

+2,4%

GEL / AMD

0,0055

7 938,69

+2,7%

+4,8%

GEL / UAH

0,1007

+2,3%

+0,2%

168,25

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EUR / USD

0,8916

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+0,8% +1,1%

FTSE 250

NASDAQ MSCI EM EE

0,7670

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SP 500

2 892,74

+2,1%

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CHF / USD

1,0003

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MSCI FM

2 732,43

+0,9%

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RUB / USD

65,3021

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GT Index (GEL)

1 582,68

TRY / USD

5,6260

+1,0%

+4,4%

GT Index (USD)

1 208,13

AZN / USD

1,7001

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MSCI EM

1 085,14

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GBP / USD

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NEWS

@entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you: Erti Kava café’s story began in Mestia two years ago when Tania Merzalia was travelling through Georgia with friends. Admiring and inspired by the country, its mountains and a love of coffee, the girls decided to start a business in Georgia. They had no idea about the marketing, but they took a risk and succeeded; producing well-loved coffee for mountain enthusiasts. A second branch of Erti Kava has been opened in Tbilisi, where guests can choose from 15 different coffees and Georgian teas. The coffee is European, the theme and interior Georgian. The girls now have their sights on Sighnagi and Batumi.

GEORGIA TODAY

APRIL 9 - 11, 2019

Mogherini Calls CoOp Between Georgia & EU a Success Story

Geotoys is a new company on the Georgian toy market producing the eco-friendly wooden toys in accordance with European standards. David Katsitadze had the idea in 2005 and launched a quickly successful company. From the local market, Geotoys is now making its name on foreign markets through international exhibitions and contracts with European brands. Negotiations with the German Goki and Greek Cerious companies are ongoing, while interest has also been expressed from The Netherlands, France and the UK. Test batches have been distributed and the technical equipment of the enterprise renovated for future production. Mariam Sichinava is a photographer and the woman behind the online vintage clothes shop ‘Vintage Gal’. Before the startup, she had successfully collaborated with famous brands like Channel and Urban Outfitter. Sichinava has had photoshoots for the New York Magazine, Weekender and the Australian Vogue. Exploring Parisian vintage shops inspired the photographer to launch her online store, which offers handmade vintage clothing. The company achieved fast success, with customer numbers on the rise and 95% of sales coming from foreign markets. Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on business@entrepreneur.ge

BY THEA MORRISON

ederica Mogherini, EU High Representative for Foreign Affairs and Security Policy, stated that cooperation between Georgia and the EU is a success story. She made the statement ahead of the EU foreign Ministerial, which, according to Mogherini, will discuss cooperation

with the Eastern Partnership member states and preparations for the 10th anniversary of the program. “We have a significant partnership and cooperation with Georgia. We had the opportunity to talk about this in Brussels when we met with members of the Georgian government. The partnership between Georgia and the EU is undoubtedly a success story that will continue in the future,” she said. The Council will exchange views on the Eastern Partnership (EaP) ahead of

the EaP ministerial meeting to be held in Brussels on May 13. The Foreign Ministers will discuss the future of the EaP and review the implementation of the EaP's 20 deliverables for 2020. The Eastern Partnership is a joint initiative of the European External Action Service of the European Union together with EU, its Member States, and six Eastern European Partners governing its relationship with the postSoviet states of Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine.

BUSINESS

GEORGIA TODAY

APRIL 9 - 11, 2019

No Credit, No Party! How to Guarantee Stable Growth BY DAVIT KESHELAVA AND YASYA BABYCH

SET-PI has updated its forecast of Georgia’s real GDP growth rate for the first and second quarters of 2019 and these are the main features of this month’s release:

HIGHLIGHTS • ISET-PI’s forecasted real GDP growth for the first two quarters of 2019 remain at 4.3% and 4.6%, respectively. • Geostat has released its rapid estimate of real GDP growth for February 2019. Their estimated growth stands at 4.6%, while the average real GDP growth for January-February 2019 reached 4.1%. • Based on February’s data, we expect 2019 annual growth to be 4.4% in the worst-case or “no growth” scenario, and 5.5% in the best-case or “average longterm growth” scenario. Our “middle-ofthe road” scenario (based on the average growth over the last four quarters) predicts 4.7% real GDP growth. Based on data from February 2019, our forecast for the first two quarters of 2019 has not changed significantly. The majority of explanatory variables in our model have remained quite stable throughout February. The most meaningful changes were observed in those variables related to the Deposits of Various Maturities in Commercial Banks, Monetary Aggregates, Consumer Credit and the External Sector.

NATIONAL CURRENCY DEPOSITS OF VARIOUS MATURITIES IN COMMERCIAL BANKS The first set of variables with a significant

positive contribution to the real GDP forecast relate to national currency deposits within commercial banks. The stock of total deposits in commercial banks amounted to 22.9 billion GEL by the end of February - 19.5% higher than in the same month of the previous year. The stock of national currency deposits, in particular, grew by a notable 19.3%, while the stock of foreign currency deposits increased by 14.8%. The largest yearly increase was observed for time deposits in the national currency with less than 3 months and greater than 12 months maturity, which, compared to the same month of the previous year, increased by 53.1% and 31.9%, respectively. Additionally, the dollarization rate of commercial bank deposits decreased by 0.2 percentage points compared to the previous month, equaling 62.3% in February 2019. Dollarization deposits reached 74.8% and 53.1% correspondingly for individuals and legal entities. Therefore, the variables related to national currency deposits had a positive contribution to

our GDP projections.

MONETARY AGGREGATES AND CONSUMER CREDIT The other set of variables that had a significant positive effect on our forecast are related to monetary aggregates. All monetary aggregates, including the largest, Broad Money (M3), and the smallest, Narrow Money (M0), experienced significant yearly growth - 18.2% and 10.3%, respectively. Moreover, currency in circulation increased by 13% yearly. It is notable that the National Bank of Georgia (NBG) bought 101.3 million USD of foreign currency reserves in February. Furthermore, the Monetary Policy Committee of NBG met in March and decided to reduce the monetary policy rate by 0.25 percentage points to 6.5% (expansionary monetary policy), which is expected to further increase the money supply in the future. Rapid expansion of monetary aggregates has positively contributed to the growth forecast. As we mentioned in our previous report,

new lending regulations could potentially have a negative impact on shortterm growth predictions. In February 2019, the Total Volume of Commercial Banks’ Consumer Credit increased by only 0.2% monthly and 3.5% yearly. However, the Credit Volume of Commercial Banks' Short-Term Consumer Credits reduced by 1.3% and 59.3% in monthly and yearly terms, respectively (the main driver behind this negative trend being consumer loans in the national currency). Whereas, the Credit Volume of Commercial Banks' Long-Term Consumer Credits increased by 0.3% monthly and 16.4% yearly. Overall, the variables related to consumer credit have had a slightly negative impact on the growth forecast.

THE EXTERNAL SECTOR The final variable which has had an extensive, positive impact on the predicted real GDP growth is related to external sector statistics. Georgian exports continued to expand, increasing by 19.0% yearly in February, while imports developed by only 0.6% annually. Consequently, the trade deficit declined by 9.3% yearly to 376.5 million USD. Moreover, other important external sector variables, such as remittances (10.2% increase) and the number of tourists (5.1% increase) maintained their growth trend, while the number of international visitors reduced moderately by 1.2%, compared to the same month of the previous year. Our model revealed that external sector variables had a significant and positive effect on the real GDP growth projections. Foreign Direct Investment, however, shrunk by 62.3% in the fourth quarter of 2018, compared to the same month of

the previous year. According to the preliminary data, released by the National Statistics Office of Georgia (Geostat), the key reasons behind decreasing FDI were the completion of a pipeline project (implemented by British Petroleum), transferring ownership to some companies from non-resident to resident units, and the reduction in liabilities to nonresident direct investors. Furthermore, the economic sectors chiefly depressing FDI growth were transport and communication (-18.5 ppt), construction (-15.4 ppt), and energy (-11.4 ppt), where the only sectors that positively contributed to growth were hotels and restaurants (+2.1 ppt), and agriculture and fishing (+0.4 ppt). Due to data limitations (FDI statistics are published quarterly with a notable time lag), we are not able to take the FDI data into consideration in our econometric model. Therefore, the notably deteriorated FDI inflow might cause considerable downward pressure on our forecasted values. Our forecasting model is based on the Leading Economic Indicator (LEI) methodology developed by the New Economic School, Moscow, Russia. We constructed a dynamic model of the Georgian economy, which assumes that all economic variables, including GDP itself, are driven by a small number of factors that can be extracted from the data well before the GDP growth estimates are published. For each quarter, ISET-PI produces five consecutive monthly forecasts (or “vintages”), which increase in precision as time goes on. Our first forecast (the 1st vintage) is available about five months before the end of the quarter in question. The last forecast (the 5th vintage) is published in the first month of the next quarter.

Another Gas Explosion in Tbilisi - Georgia’s Deadly Gas Problem BY AMY JONES

n April 7, a gas leak caused an explosion on the 4th floor of a residential building in Digomi Massive, underlining once again the need for stricter gas regulations and improved safety measures in Georgia. The Ministry of Interior has stated that seven people were injured in the incident on Sunday, including a 7-month old child. A 21-year old man is also in a serious condition in hospital with 35% burns as a result on the explosion which also caused part of the apartment building to collapse. This incident comes just months after four people were killed and eight injured after a gas leak caused an explosion on January 16 in the Digomi Massive district in Tbilisi. Over nine people have also died as a result of carbon monoxide poisoning in the capital so far this year. On January 21, two people died from natural gas intoxication in Varketili district, whilst seven died in an incident on Ketevan Tsamebuli Avenue on January 31. Speaking to reporters on April 8, Mayor of Tbilisi Kakha Kaladze said it is necessary to install detectors in residential blocks that will alarm residents in case of a gas leak. He affirmed that an agreement has already been reached with Ministry of the Economy and that regulations should come into effect by the end of the year.

Image source: IPN

Kaladze believes that change must happen on two fronts. Firstly, the appropriate ministries must enforce stricter

regulations and install gas detectors to warn residents of a gas leak. Secondly, citizens should be “more cautious.”

“When the gas leaks, people do not smell it,” he said. “When I know that there is a risk and I live with my family and children,

of course I will pay more attention.” However, the question remains if responsibility for the incidents lies with KazTransGas, the gas provider who supplies gas to Tbilisi. Prior to the deadly gas leak in January, two KazTransGas employees had carried out an inspection on the building. They were arrested following the incident. Following the explosion on Sunday, KazTransGas at first insisted that the leak occurred due to a gross violation of use by the residents. However, a criminal investigation is currently underway at the scene to determine the exact cause of the explosion. Gas leaks in Georgia are often caused by aging and outdated gas pipes and poorly fitted appliances. KazTransGas also reports that many residents remove gas installations from the network despite potential threats. In January, 2381 devices were stolen, whilst this figure stood at 2549 in February, according to KazTransGas. Following gas incidents, politicians and officials are fast to offer their condolences and call for tighter gas regulations. However, the number of casualties has yet to decline. In 2018, there were 16 cases of CO2 poisoning and 13 deaths related to gas leaks in Tbilisi, according to Irakli Bendeliani, Tbilisi’s Deputy Mayor. The death toll this year has already reached the same number in three months alone. Such figures raise the question whether enough is being done by KazTransGas and the government to prevent future leaks and more casualties.

BUSINESS

GEORGIA TODAY APRIL 9 - 11, 2019

Asian Development Bank Releases Latest Report on Georgia

Image source: Asian Development Bank

BY SAMANTHA GUTHRIE

he Asian Development Bank (ADB) annually publishes its Asian Development Outlook report. In its most recent edition, focused on Strengthening Disaster Resilience, the ADB predicts economic growth for Georgia in the next two years. The annual Asian Development Outlook analyzes economic performance in the past year and forecasts performance in the next two years for the 45 economies in Asia and the Pacific that make up developing Asia. The ADB has supported Georgia since 2007 and is one of the country’s largest multilateral development partners, with a history of more than $2.8 billion in loans. The report estimates that Georgia will see a 5% economic growth in 2019, as measured by GDP, and 4.9% growth in 2020, largely attributable to higher investment spending. It also assesses that the development of workforce skills will be essential for helping Georgia further strengthen its business environment and build related infrastructure, which will in turn contribute to the attraction of investments in high-revenue sectors. Higher government investment in public and business-related infrastructure is expected to spark the next two years’ economic growth, along with increases in net exports, consumption, and overall investment. Growth sectors for 2019 include wholesale and retail trade, finance, and construction. High investment will increase growth in the agriculture sector to 2.6% in 2019 and 2.8% in 2020, but, the ADB warns, only “with favorable weather.” “Georgia has proven attractive for foreign direct investments (FDIs) in the region with its businessfriendly environment and increasing integration into global value chains,” said ADB Country Director for Georgia Yesim Elhan-Kayalar, commenting on the release of the report. She continued, “Georgia can reap significant economic dividends by leveraging its fast-developing facilitative infrastructure for economic connectivity within the country and in the region by further diversifying its economy and export base, while addressing skills mis-

Georgia has proven attractive for FDIs with its business-friendly environment and increasing integration into global value chains

Stronger private sector involvement in training for entrepreneurship would help, as would efforts to encourage more women to enter business match in the labor market.” Inflation is expected to peak at 3.2% this year before tapering off in 2020 to 3%. If inflation can hold at or below 3% through 2020, the National Bank of Georgia is likely to begin gradually reducing its interest rates. The ADB has expressed concern for Georgia’s high credit growth rate, which it expects to decrease during the forecast period due to further regulation of the credit industry and rising standards of creditworthiness. Credit growth is estimated to be 13% in 2019 and 12.5% the following year. The report explains the importance of FDI in Georgia as a source of capital, due to low domestic investment and limited personal savings. Since 2005, the national FDI rate has nearly tripled. However, the ADB highlights, most FDI coming into Georgia is spent on existing, labor-intensive activities. The ADB would prefer to see more FDI going to more complex sectors of the economy with higher value added, such as manufacturing. One reason given for the difficulty of attracting FDI to Georgia is a shortage of qualified workers. In the vein of increasing investment in building a strong, well-educated workforce, the ADB insists that “stronger private sector involvement in training for entrepreneurship would help, as would efforts to encourage more women to enter business.” The ADB cautions that there are several risks that may drag the positive outlook of the forecast down, namely “external shocks and escalating trade tensions, tighter credit, rising global interest rates, difficulties in financial markets, or reduced capital spending.” Growth could in fact be higher than predicted, though, if key trade partners such as Azerbaijan and the Russian Federation improve their economic performance. ADB’s key development priorities in Georgia include fostering inclusive and sustainable economic growth, reducing poverty, enhancing regional connectivity, and improving public service delivery. ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.

BUSINESS

GEORGIA TODAY

APRIL 9 - 11, 2019

Proving Friedman Wrong: CSR Misunderstood & Why Georgia Needs It BY KATIE RUTH DAVIES

good company respects the law, respects and looks after its employees, respects and looks after the society in which it works, and respects and looks after the environment in which it exists; in short, it employs a good Corporate Social Responsibility (CSR) strategy. Milton Friedman, an American economist who received the 1976 Nobel Memorial Prize in Economic Sciences, once said, “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits…” Modern business practices as well as societal and legislative demands are proving him wrong in his assessment of the purpose of a business. Transparency, accountability, reliability and green policy are the buzzwords here. Let’s have a look at them in more detail.

WHY DO GEORGIAN COMPANIES NEED A CSR STRATEGY? For a start, it’s part of the country’s responsibility to the European Union Association Agreement, signed in June 2014 and entering into force on July 1, 2016. The Association Agreement aims to deepen political and economic relations between the EU and Georgia, as well as through the creation of a Deep and Comprehensive Free Trade Area (DCFTA). By removing customs tariffs and quotas and by comprehensively approximating trade-related laws and regulations to the standards of the European Union, the Agreement offers Georgia a framework for boosting trade and economic growth in order to facilitate the country’s progressive integration with the EU single market. Various EU VIPs have commented that Georgia is well on the way, but still “needs to do more.” Yet it is not only up to the government to pull the country out of its dark past, but for private entities to help through a unified commitment. CSR is one aspect of this. In a CSR Study carried out in 2017 by Cone, a Porter-Novelli company with 40 years’ experience advocating for CSR in business, the following results were recorded: • 63% of Americans are hopeful businesses will take the lead to drive social and environmental change moving forward, in the absence of government regulation; • 78% want companies to address important social justice issues; • 87% will purchase a product because a company advocated for an issue they cared about and 76% will refuse to purchase a company’s products or services upon learning it supported an issue contrary to their beliefs. That was America, though, and Geor-

gian customers are only now waking up to the realization they can (and should) demand more from the companies whose products they buy or services they use. This awakening has come with the increase in competitiveness and, while the numbers would surely be lower should the above study be carried out here and now in Georgia, awareness and demands are growing and companies need to be ready. By implementing a responsible CSR strategy, companies will find that they are building trust in their products. By being transparent, environmentally friendly and by making a valid contribution to society’s progress, educated customers will be more inclined to choose those companies’ products over a competitor’s, and foreign investors will be more drawn to those companies putting into practice the responsible strategies seen in the West.

HOW CAN YOU DO IT? Too often, we hear “I’m too small a company, I can’t afford to spend out on charities” or “I’m too small to fix all the problems in Georgia. What difference can I make?” This is where the great CSR Misunderstanding is seen. First to the affordability. CSR is about ACTION, not MONEY. In the minds of many company owners/directors, “doing good” involves raising money for charity, organizing events or giving material items (like books, equipment or clothes) to select organizations. It can be expensive and time-consuming. But “giving” can also come in the form of giving away knowledge- which takes only time, not money. Why not offer trainings for local women or youth in your field of specialization- pro bono? It costs you nothing but time. Offer your office space out-of-hours to social projects that couldn’t otherwise afford their own. Adapt your services to accommodate the hard of hearing, blind or those with other disabilities. Feel free to plant trees, but if you’re a financial organization, why not instead (or also) give a loan to a responsible agricultural business for a more sustained environmental impact? If you manufacture products, you might think of looking into reducing or redesigning your packaging, or the product itself, to be more eco-friendly: less plastic means fewer resources used in the making, while recyclable packaging means you are taking responsibility for your environment. How you label the product also comes within the frames of CSR: be transparent about what goes into your product- the good and the bad. Customers will value your honesty and that you’re offering them the chance to make an informed choice. And be aware that from March 1, new rules of product labeling entered into force in Georgia, envisaging more protection of consumers’ rights by better informing them about the foodstuffs they are buying. Or how about cutting your energy costs and rethinking your waste management

policy in the office? A big company might give $5,000 to charity but spend thrice that on energy consumption. Reduce the number of lights used or replace old bulbs with energy-efficient variants; ask employees to use their own cups rather than paper or plastic when drinking water or coffee; offer initiatives to employees who use public transport or carsharing to get to work every day; and recycle instead of throwing away your office waste. Tissue Paper is a company that collects and recycles paper and creates new products with it, donating 0,15 GEL to the Borjomi Forest reforestation project for each kilogram of paper collected from volunteer companies- you could give them a call and get your own paper-recycling contribution going. Second to the size of your CSR strategy vs the plethora of social problems that need ‘solving.’ The thought of all that needs to be done to move Georgia forward and improve the lives of its citizens can be overwhelming. That said, another CSR Misunderstanding is that doing any good at all is “enough.” That’s not to say that getting your employees to donate

blood or collect clothes for the local old people’s home or give toys and books to the local kindergarten or school is a bad thing. Far from it. But these are often “one-off” actions, while the point of having a CSR strategy is just that- it must be part of the Company Strategy. The daily workings of the company should revolve around not only money-making, but on “doing good” in some form, in a sustainable way with long-term goals. Your CSR strategy should not only have an external outlook but an internal one too. This is where your employees come in. We already mentioned how your employees might be encouraged to ‘act’ by recycling and (re)considering their resource consumption, but you can do much to improve your company’s image by adjusting your work methods to generate greater employee satisfaction. We’re not expecting companies to “go Google,” but the Google policy could be used as an ultimate goal. Again, it’s not all about money, though workers should naturally be paid their worth. First, who are you employing? Aim to be an ‘equal opportunities’

employer (in gender, age and physical abilities), as this will certainly catch the eye of foreign investors as well as locals. The healthy environs they work in are important- a clean, organized and functional workspace is vital, allowing free movement and an ease of communication between employees of all levels. Workers have lives beyond the company, and this should be recognized, embraced and encouraged for their mental and physical health as well as their productivity. If a new parent is able to work from home, why not? If there is a gym nearby, why not give employees time or incentives to use it?

GETTING BACK WHAT YOU GIVE CSR should be systematic, like breathing. It should not be “extra work”- it should be part of how the company, and the employees within that company, function. It should encompass the concept of sustained responsibility. There are an increasing number of regulations being introduced in Georgia, some, sadly, introduced without forethought or pre-education, such as the limited-coverage inspectorate for workplace safety, but the heart and desire for change for the better is there. That said, all companies should ultimately aspire to be better than the law- for the economy, for society and for the environment. CSR can play a huge role in your company’s success by boosting public image and esteem, elevating employee and customer loyalty, increasing your competitiveness on the local and international markets, and helping you to catch the interest of international investors. In short, CSR is about giving, with the realization that what your company will ultimately get back will be threefold, if not more. With thanks to the Center for Strategic Research & Development of Georgia (CSRDG), working to promote responsible CSR within the frames of the EU project ‘Georgian Civil Society Sustainability Initiative.’

BUSINESS

GEORGIA TODAY APRIL 9 - 11, 2019

6th Session of Georgia-Bulgaria Economic Cooperation Intergovernmental Commission

Image source: Ministry of Economy and Sustainable Development

BY SAMANTHA GUTHRIE

he 6th session of the Georgian-Bulgarian Intergovernmental Commission for Trade, Economic, Scientific and Technical Cooperation was held this past week in Sofia, Bulgaria. The meeting was chaired by Giorgi Kobulia, Georgian Minister of Economy and Sustainable Development, and Bulgarian Minister of Transport, Information Technologies and Communications, Rosen Jeliazkov. The Commission discussed the ongoing and planned reforms in the economies of the two countries, the steps taken in the field of bilateral cooperation, as well as the prospects for cooperation in areas such as trade, transport, agriculture, innovations, technology, and more. The Georgian side emphasized the importance of the transportation sector for bilateral economic cooperation. To fulfill Georgia’s vision of itself as a transport hub, a corridor between Asia and Europe, cargo must move from Georgia’s Black Sea port cities across the Black Sea into a European country on the other side – Bulgaria or Romania. “We agreed that we should study and decide how to make maritime traffic between Georgia and Bulgaria more efficient and more frequent than today. This will help us attract additional cargo,” said Kobulia. The Commission also discussed restoring direct flight routes between Georgia and Bulgaria, which will help develop the respective tourism industries and increase bilateral business relationships. Kobulia also emphasized the significance of the memorandum of understanding, signed between the Chambers of Commerce of Georgia and Bulgaria and the Ministry of Economy’s ‘Produce in Georgia’ program and an equivalent program in Bulgaria.

“This MoU will give our businesses the opportunity to deepen dialogue with each other. We plan to conduct a business forum in 2019,” said Kobulia, summarizing the commission meeting. He continued, “In the field of business interaction, we see great potential for the development of textile manufacturing, in which Bulgaria has great experience. Joint ventures could be established. We also see great potential in the manufacturing of furniture, which is also very strong in [Bulgaria] and I think Bulgarian and Georgian companies jointly working together will enable us [both] to enter the export markets more easily. Third – agriculture. For example, a technical cooperation document has been signed for the production of essential oils. Georgia was a major producer of this product in the past, but this sector has disappeared. Bulgaria is now one of the countries with the strongest technical expertise [in producing essential oils] and we have expressed our desire to restore the production of essential oils in our country.” Kobulia called his visit to Bulgaria and the 6th Commission meeting “overall, very successful.” The 5th session of the Georgian-Bulgarian Intergovernmental Commission for Trade, Economic, Scientific and Technical Cooperation was held in Tbilisi in February 2016. During that meeting, officials from both Georgia and Bulgaria signed several bilateral agreements, agreed on sectors of cooperation, and planned to pursue joint investment projects. Then-Minister of Economy of Georgia Dmitry Kumsishvili emphasized the countries’ deepening relations in the sectors of trade and investment, transport, energy, environmental protection, agriculture, tourism and intellectual rights protection. The countries’ national railway companies signed a memorandum of cooperation to share experience regarding railway transport. The issue of restoring direct flights was also raised at the 5th session of the Commission three years ago.

BUSINESS

GEORGIA TODAY

APRIL 9 - 11, 2019

On Innovation, Coffeehouses & Georgian Supras BY ERIC LIVNY AND LEVAN BZHALAVA

y attracting professionals from different walks of life, coffeehouses offer a great space for (sober) intellectual exchanges and innovation, much of which is about connecting ideas from seemingly unrelated fields. Though not alcohol-free, the Georgian supra also played a role in forging the country’s national identity and affecting the ways in which knowledge and ideas traveled across Georgian society. Yet, over the last couple of decades, the supra may have been losing some of its ‘systemic’ qualities, becoming, instead, an occasion for over-indulgence in food and alcohol. * * * According to Steve Johnson (a popular American science writer and media theorist, the author of Where Good Ideas Come From), coffee and coffeehouses were a significant contributor to Europe’s scientific and industrial revolution. The first coffeehouses opened in London in 1650, and quickly mushroomed all over Europe. The coffeehouse had two major positive effects. First, it provided a healthy alternative to water (heavily contaminated) and alcohol (heavily abused at the time). And, second, as more and more intellectuals switched to coffee, the coffeehouse offered a great space to enjoy sober (and, presumably also sober-minded) exchanges of ideas. Meetings between people from different social backgrounds and fields of expertise (e.g. artisans, travelers, merchants and scientists) provided strong stimuli for innovation, much of which, argues Johnson, is about connecting ideas from different and seemingly unrelated fields. For example, Johannes Gutenberg invented the printing press by using the wine press as an inspiration (even before the advent of coffeehouses!). Institutions such as coffeehouses (or modern-day bars) are a very important element of innovation systems in any society. Orhan Pamuk’s My Name Is Red describes how, back in 1623, coffeehouses were banned by the Ottoman rulers in Istanbul (where they flourished well before their European equivalents). This may well have been a factor – or a symptom – of the empire’s gradual decline.

ing managerial implications. One can safely bet that supras were effectively used as a “Georgia’s Got Talent” competition to discover (and train) future leaders. Second, the positive (flattering) nature of supra toastmaking may have played a role in overcoming frequent internal divides. Third, one should not neglect the educational (wisdom sharing) aspect of the classical supra toastmaking tradition. Yet, over the last couple of decades, the Georgian supra may have been losing some of its ‘systemic’ qualities, becoming, instead, an occasion for overindulgence in food and alcohol. As a result, modern day supras do not provide as much space for interesting conversations and ‘knowledge diffusion’. “Why is music so loud at Georgian supras?” asked Levan Gigineishivili, a professor at Ilia State University, on a recent TV show. “Maybe we have nothing to say to each other”, was his own answer.

THE GEORGIAN SUPRA: AN EXPRESSION OF GLUTTONY OR A MECHANISM OF KNOWLEDGE DIFFUSION?

KNOWLEDGE DIFFUSION: FACE-TO-FACE OR THROUGH THE INTERNET?

How do Georgia’s institutions and cultural norms perform in terms of supporting knowledge diffusion and innovation? Do they make us smarter or not? An interesting case in point is Georgia’s unique feasting tradition, the supra. Certainly not alcohol-free, the supra played a central role in forging the country’s national identity, affecting the ways in which knowledge and ideas traveled across the Georgian society. Several aspects of the Georgian supra are worth highlighting. First of all, the manner in which the tamada (the head toastmaster) of the supra is selected and how he manages the supra has interest-

In today’s interconnected world, professional and personal exchanges can be greatly facilitated by social media and other means of distance communication. Though face-to-face meetings and physical proximity still matter for real friendship (and even its Facebook variety), some types of knowledge can be easily communicated and ‘diffused’ worldwide through the internet. Scientists and engineers can nowadays work on joint projects while sitting on different sides of the Atlantic (or Pacific, for the matter). This, in turn, has significantly accelerated the pace of technological change. Still, not all types of knowledge can be

effectively exchanged through the Internet. It is relatively easy to share ‘codified’ knowledge that can be written down in the form of books, articles or manuals. All it takes is attaching a file and pushing the send button. In contrast, one cannot write down and transmit an intuitive understanding of how a system (organization or society) works. This type of ‘non-codified’ (or tacit) knowledge can only be acquired through personal contact and experience. The fact that physical proximity still matters for knowledge spillovers has been recently established by Laura Bottazzi and Giovanni Peri (Bocconi University and University of California-Davis, respectively). Bottazzi and Peri looked at data on patent applications and R&D expenditure (or employment) across Europe to establish the role of physical distance in knowledge diffusion. What they find is that positive knowledge spillovers are limited to regions located within 300km from each other. Given Georgia’s modest size and many opportunities to socialize at weddings and funerals, Bottazzi and Peri’s findings suggest that we, Georgians, should not be facing any bottlenecks in knowledge diffusion. Moreover, most of us (certainly those young and educated) are spending a lot of time on Facebook, potentially making use of the latest advances in communication technology to share and learn from each other. Yet, what is it that we are sharing and learning from each other? According to available data, the main discussion topics on Georgian social networks are sports, religion, politics and gossip. Of course, people also post and discuss their own pictures, gadgets they bought, as well as places they visited and dined at. These

exchanges hardly play any role in real ‘knowledge diffusion’. Hardly any of them translate into new ideas or technologies.

AND WHAT ABOUT EDUCATION AND CRITICAL THINKING? In addition to an adequate social milieu and institutions, such as coffeehouses, where ideas could be exchanged, innovation requires a serious investment in education. And this is an area where Georgia has seen very little progress after the almost complete collapse of all state institutions in the early years of independence. Georgian youth remain uninterested in science, as is clearly illustrated by the low rates of enrollment in natural and exact sciences. Moreover, Georgia’s general education and private tutoring systems are designed to get (at least some) children over the hurdle of national university entrance tests, not properly educate them or stimulate their interest in science and technology. Neither do our schools do a good job at encouraging intellectual curiosity and critical thinking (see our Outsmarting Laziness: The Most Evil Giant of All Giants). We should also question the role of the most influential social institution in today’s Georgia, that of the Georgian Church. Although the Georgian Patriarch Ilia II often speaks on the merits of analytical thinking, for many rank-and-file priests the teaching of Christianity implies indoctrination. People are taught not to question or critically examine what they learn in church. While it is hard to imagine how one can become a good physicist without questioning the laws of physics, these simple-minded servants of God apparently believe that one can be a good Christian without ever questioning anything Jesus said.

It is quite interesting how some other religions operate in the critical thinking and innovation department. For example, knowledge created by Buddhist monks is currently in great demand in many parts of Western Europe. There are numerous iPhone applications teaching people how to do yoga, how to engage in different types of meditation, or how to practice love and compassion. Furthermore, Buddhist monks cooperate with neuroscientists in an effort to advance our knowledge of the brain. Some results from this research have led to important changes in organizational practices. For instance, meditation has been introduced in many R&D institutions in order to encourage creativity and innovation performance. The Georgian Church certainly has the potential to become an agent of social change, particularly when it comes to education. It commands enormous respect and enviable financial resources, yet for the moment these resources are not put to good use. Georgian Patriarch Ilia II often says that a scientist is a friend of God and an illiterate person is a slave of God. In order for the new Georgian generation to be friends rather than slaves of God, we need better education and R&D systems. And, perhaps, not as many new churches and monasteries.

ABOUT THE AUTHORS: Eric Livny is Founder and President at Tbilinomics Policy Advisors and Chair of Economic Policy Committee at the International Chamber of Commerce (ICC Georgia). A graduate of Max Planck Institute of Economics, Levan Bzhalava is currently a Research Fellow at Mälardalen University, Sweden, focusing on innovation and entrepreneurship.

BUSINESS

GEORGIA TODAY APRIL 9 - 11, 2019

Electric Car Manufacturing Factory to Be Built in Kutaisi BY THEA MORRISON

eorgia is to have an electric car manufacturing factory in Kutaisi, western Georgia. Changan Corporation, the largest electric car manufacturer in the world, will construct its production factory in Georgia. Strategic partners of Changan Corporation include Volvo, Volkswagen and Ford. The production capacity of the plant will be 40,000 cars a year, out of which 50% will be designated for the domestic market, while 20,000 cars will be exported to the European Union (EU). The information was released by the Prime Minister of Georgia, Mamuka Bakhtadze, on April 6, at a presentation of the first industrial business group – Aigroup. The holding, comprising such companies as Aienergy, Aicar, Aipower and Aiproduction, is setting up operations on the Georgian market as the first industrial business group not only in Georgia, but in the Caucasus, and is to launch a variety of eco-friendly projects and investments in a comprehensive manner. In addition, the holding is responsible for the Car Sharing concept, installation of electric chargers and solar energy panels in the capital of Georgia, Tbilisi. A Memorandum of Understanding was signed a few days ago between Aigroup and the Changan Corporation, which is of Chinese origin with a track record of 157 years in the industry.

The memorandum will lead to the production of the first electric cars under a Georgian trademark, which will be released by the end of the year. The Prime Minister stated that from 2020, Georgia will be able to supply the market with electric cars. Several countries had expressed keen interest in hosting the enterprise and Georgia had to beat strong competition. The Head of Government of Georgia thanked the decision-makers and contributors to the initiative for choosing Georgia and added that it is planned to manufacture four types of electric cars, ones that will be affordable to citizens of Georgia. “It is a national idea…which will always be funded with a quarter of the State Budget in Georgia, targeting youth, education and a knowledgebased economy. And we are presenting a project which is a specific example and assurance of making Georgia successful in the 21st century,” Bakhtadze said. The PM noted that while environmental problems exist in the country, the authorities have a plan to combat the challenges and make Georgia a leader in terms of the Green Economy concept, presented by him in July 2018. “The Green Economy concept will be a driving force of the national economy. I have always claimed and wish to repeat that Georgia has two assets: firstly, our people and secondly, our unique nature… We have to preserve our nature for future generations and make it sustainable for their benefit,” he said. President of Georgia Salome Zura-

Image source: iloveqatar.net

bishvili and Mayor of Tbilisi Kakha Kaladze also attended the presentation. The Mayor explained the Car Sharing concept whereby electric cars will be located on different streets of Tbilisi and by using a special application, peo-

ple can use the cars and then leave them at any location. Kaladze also presented solar panels, which will be located on the streets, for charging the electric cars. "Today, the world is developing in the

direction of green energy and, of course, our country must be no exception. We are implementing a very important project and anyone in the near future will have the opportunity to use these electric cars," said the Mayor.

BUSINESS

GEORGIA TODAY

APRIL 9 - 11, 2019

The Entrepreneurial Philosophy of GNTA Head Mariam Kvrivishvili BY TAKO GVAZAVA, ENTREPRENEUR MAGAZINE

eet the Head of the Georgian National Tourism Administration (GNTA), Mariam Kvrivishvili, a bold risktaker and innovative female who was unafraid to step out of her comfort zone to contribute to the strategic development of her country. Having moved from the private sector to the public service to face new challenges, she now has to pull Georgian tourism into a new stage of dynamic development.

OLD EXPERIENCE NEW CHALLENGE Mariam has had ten years of fruitful activity in the field of tourism, a very solid and varied experience which includes aviation, tour operating and running a hospitality business in both the public and private sectors. Before becoming the Head of the National Tourism Administration, she was the managing partner of the big tour operator ‘Voyager,’ served as the regional manager of the airline FlyDubai in Georgia, and years ago held office as Deputy Head of the National Tourism Administration in the marketing direction. She also worked at Adjara Group in the tourism field. Heading the GNTA turned out to be a great challenge for her and this became her main motivation for taking on this responsible position. Mariam believes that, besides being a big responsibility, this sphere offers numerous opportunities and says it is an honor for her, together with her team, to be able to implement projects in this sector to help her country move forwards.

THE FIRST STEPS AND MANAGEMENT STYLE The first step she took after being appointed as Head of the GNTA was to

analyze what information they had, then organize meetings with private sector representatives. Her main principals as a manager are teaming up and implementing modern management approaches. She tries to break down any hierarchy in the Administration to allow each employee to get involved in the decision-making process and have direct access to the managers. "It's important for me that the GNTA become more dynamic, creative and fruitful, because tourism itself is all about emotions and interesting experiences."

BEING A FEMALE LEADER She says there is a big difference between female and male leaders, and breaking the stereotypes is “everyone’s job” when they hold leadership positions, be it in the private or public sector. "Unfortunately, in our reality, women are more likely to hold back their capabilities, though this stereotype is far from new. It’s good to see more women these days taking on leading roles. It's important for me that people who are able, strengthen their support for having more women involved in decision-making and social processes.” Mariam herself started working at the age of 18 and believes that her career was “a very difficult and long path,” where, as a woman, she had to do double the work and make twice the effort to get respect.

PRIORITIES A lot is being put on the Georgian private sector when it comes to tourism development, and that includes the right bilateral communication. "It's important to listen carefully and to understand what the private sector feels and thinks, then, based on this information, to make future plans together. By doing this, we’ve almost fixed our 2020-2025 agendas," she says. The new chief has high expectations of the private sector and asks them to speak up and communicate more effectively with the GNTA about their activ-

ities, issues and needs in order for the right steps forward to be made. Under Mariam’s leadership, the role of the GNTA has changed; it has become more functional, the main goal being promotion of private sector development and increasing the motivation of more people to become successful start-uppers for the benefit of tourist sector development. A particular challenge facing Georgian tourism is the service sector, as there is a need for improvement of services to accompany the rapid growth of tourism development. Training is needed not only for guides, but also for those working in family-style guesthouses. In 2019, the government announced the planned retraining of 51,000 Georgian residents, from which 11,000 will be trained directly under the auspices of the Ministry of Economy and Sustainable Development of Georgia, and the GNTA will retrain about 1500. Within the framework of the budget, the State will fully fund the training, including at the regional level, boosting the knowledge and skills much needed in the tourism sector. Special events are planned to increase tourist flows from neighboring and developed countries. In this regard, the GNTA has developed several strategies. Increasing the number of visitors received from neighboring countries is a significant challenge, however, the main goal is to diversify the market so that Georgia’s tourism development is not only dependent on one region or country. Further, they have already begun working with airlines in numerous EU countries to negotiate adding direct flights. Special emphasis is being put on America, China, Japan, India and similar regions, with the aim to place Georgia as one of the most attractive tourist destinations within the next few years. "In my opinion, the main priority of the Georgian tourism sector is the creation of more employment countrywide, the involvement of a larger part of the population in the tourism field, and

greater mobilization of small, medium and large businesses in attracting new investments,” Mariam says. “The next challenge is infrastructural development: arranging municipal roads, arranging cultural sights and so on. We also need to increase the service level; to diversify products and encourage the emergence of niche products; separate business, leisure and medical tourism; and tighten the focus of marketing campaigns so as to create specialized, specific marketing content for target audiences. I think all these directions are equally important and necessary."

ENTREPRENEURSHIP She considers the role of entrepreneurship as very important for the field of tourism, and the involvement of local or small and medium entrepreneurs in this area is essential. "Even a Georgian carpet can be seen as a source of tourism revenue," Mariam notes. "The state-run Enterprise Georgia plays a significant role in the promotion of entrepreneurs and start-uppers and it counts among the most successful projects of the Ministry of Economy. The GNTA was also involved in the fruitful promotion of entrepreneurs and creative society within the frames of this program. "There are many who think that what they do has no connection to with tourism. Our role is to show that tourism is also their sphere and to show that, for example, if they work in the medical direction, they can develop within the framework of medical tourism." More opportunity, more employed people and a greater chance of doing business – these are the main goals and motivation of the new GNTA head.

BELIEVING IN YOURSELF Mariam stepped out of her private-sector comfort zone to implement innovative and large-scale projects that are important for the country. But she says she sees it as her civic responsibility. Her role is a busy one, as much of the

strategic development of the country depends on her activities, and, she says, it is necessary to “step boldly.” For Mariam, her job is a unique opportunity to carry out large-scale projects and contribute to the tourism development history of her country. "The risk was high; leaving a 10-year career, the partnership, risking my reputation; but I believe I made the right choice." She believes more in being in the right place at the right time than she does in luck; that capabilities are given to people at a particular moment, and they must be used. She has such an approach to what life throws at her and believes in hard work and continual self-development and education. "Many times, I've experienced that the more you believe in your idea, the greater the chances are to get it done. More – it’s impossible not to succeed. Maybe not today, but in a couple of years the idea will be fulfilled. You should use your abilities in the right place at the right time to reach that goal."

THE KEY TO SUCCESS Mariam says that today's ruthless, competitive environment offers success only to good, hard-working and mobilized people. "Work, willpower, the right time and place, and purpose and determination create success. It is also very important to take on social responsibility and promote one another, because the strength and development of a person is directly proportionate to the society around him/ her." Mariam advises that start-uppers, young entrepreneurs and people who are just starting work, first understand exactly what they want out of life. And if they have no answers to this question today, then they should aim to learn, get a variety of experience, come to the idea and then settle short, medium and long-term goals as to how to achieve their ultimate ambition. All of this implies working on yourself, learning and then working some more!

BUSINESS

GEORGIA TODAY APRIL 9 - 11, 2019

World Bank Predicts 4.6% Growth of Georgian Economy in 2019 BY THEA MORRISON

Image source: forbes.com

he recent report of the World Bank (WB) - Europe and Central Asia Economic Update - reads that this year the Georgian economy is expected to grow by 4.6%, 4.8% in 2020 and 5% in 2021. The WB says Georgia’s economy expanded by 4.7% in 2018, driven by strong exports of goods and tourism services and robust private consumption and investment. “Supported by rising investment and prudent economic management, the economy is projected to grow by 4.6% in 2019,” the report reads. It also mentions that real GDP growth is projected to slow to 4.6% this year as external demand weakens and the National Bank of Georgia (NBG) tightens measures to encourage responsible lending. “While newly introduced measures in the banking sector are expected to slow credit growth and private consumption, they will strengthen the resilience of the sector and its ability to sustainably support the economy,” the report reads. The outlook says that inflation will remain low, anchored by the credible monetary policy of the NBG. “Fiscal operations will continue to shift from current to capital expenditures in the medium-term, while efficiency improvements will create some additional fiscal space for higher capital spending. Public debt is projected to stabilize around 43% of GDP by 2020,” the report reads.

The bank added that national poverty rate, at 21.9% in 2017, will return to a declining trend as economic growth remains robust and translates into higher incomes. “Economic expansion will lead to more employment and income-generating opportunities for those at the bottom of the income distribution. Increases in pensions and social assistance in 2019 (also planned for future years) will help reduce poverty further,” the WB outlook reads. Regarding risks and challenges in Geor-

gia’s financial system, the report says Georgia will remain vulnerable to regional developments and the risks associated with a sharp decline in export demand or a reduction in remittance inflows. “While the Russian economy has withstood external shocks and the Turkish economy has begun to stabilize, a fresh round of disturbances in either economy could undermine Georgia's prospects for tourism and investment, complicate access to financial markets, and negatively impact economic growth,” the report reads.

However, the outlook also reads that with its stable business environment, Georgia is well placed to attract investors from neighboring countries due to stable operating environment. The report also reads that economic growth in the Europe and Central Asia region slowed to 3.1% in 2018, and is projected to decline to 2.1% in 2019, amid slowing global growth and uncertain prospects. “Europe and Central Asia are vulnerable to global uncertainty, and face several long-term challenges, including

aging populations, declining productivity, weakening investment, and climate change. The good news is that there is a range of policy options available to boost growth and mitigate these challenges,” said Cyril Muller, World Bank Vice President for Europe and Central Asia. He added that countries should “close investment gaps, improve governance, participate more in global value chains, and ensure more people have access to financial services including bank accounts and digital payments.”

BUSINESS

GEORGIA TODAY

APRIL 9 - 11, 2019

Ivane Matachvariani on Financing Education Matchavariani stated that according to the growth of the country’s GDP in 20202022, the total budget of the education sphere will reach 3.4 billion GEL. “Various studies demonstrate that we have a low indicator in the general education direction on both the regional and global scale. This means that the functions of schools need to be fundamentally revised. More independence should be provided in the knowledge obtained at school and the school certificate should be given much more importance,” he said. The Minister focused on the importance of improving school infrastructure, augmentation of the qualification of teachers and provision of teachers with the relevant salaries. “Construction of new schools, as well as the modernization of current infrastructure, is vital, necessitating major finances. These expenses are envisaged in the budget. The number of pupils per class is certainly one of the major components and it is of crucial importance to establish modern standards in this regard. It is also significant to interest youngsters and motivate them in terms of starting work at schools in future. The profession of a teacher has to be one of the most popular in the country. That is why implementation of these components is the key for the success of these reforms,” Matchavariani concluded.

TRANSLATED BY KETEVAN KVARATSKHELIYA

unding of the sphere of education will gradually increase to 6% of the total GDP of our budget by 2022, stated Ivane Matchavariani, the Minister of Finance of Georgia at a briefing held after the governmental session on April 4. The Minister noted that as a result of the government initiative, a project of changes has been prepared for the legislation about the budget, according to which it is obligatory to prepare and approve a governmental budget project in such a way that the funding of the education system is not less than 6% of the total GDP for the upcoming year. Matchavarinani also stated that education is set as the major priority for the government. “The budget for 2022 should be set in a way that 6% of the GDP is spent on the education sphere. In order for funding to reach this value, it is important to increase financing gradually. The financial assistance for the education sector will reach 2 billion GEL by 2020, 2.5 billion GEL by 2021, while it will exceed 3 billion GEL by 2022. General, preschool, and professional education will represent the main directions of the reform. The budget for higher education and sciences will also be increased,” noted the Minister.

How Festivals Boost a Country's Image & Economy Tarmo Noorma organizes the annual Viljandi Folk festival in Estonia and at the Academy explained how the festival grew from 200 visitors the first year to 25,000 in 2012. It is now the main folk festival in the world and is a successful example to other festivals. He explained that he always makes sure that people who buy tickets enjoy the best experience possible and that the musicians are perfectly welcomed so that they are in a good position to give quality concerts. Bianka Soe works for the Telliskivi Creative City which is a former Estonian industrial complex that was transformed into a place that welcomes festivals, cul-

BY GABRIELLE COLCHEN

n April 4, the conference of the ‘Creative Entrepreneurship Academy 2019’ was held in Rooms Hotel’s Lolita seminar room. The theme was the impact of festivals on the local economy. The event was organized by Creative Estonia, Creative Caucasus and Creative Georgia. Festivals are great boosters for the local economy. They bring culture to the local community and build a new image of the city as dynamic, young and attractive for talents. They also provide work

to local companies such as hotels or restaurants by bringing large numbers of visitors. The panel of presenters gathered five guest speakers from Estonia, who came to talk about the success and challenges of the creative economy in their own country. Then, representatives of Georgian festivals talked about their own experiences. Different subjects were addressed, including branding, financing and space management. The main challenges encountered when organizing festivals were noted to be finding a stable source of funding, reaching an audience, dealing with weather conditions, facing competition and managing unexpected situations.

tural events, restaurants, stores and more. She described how people were able to re-dynamize a place that had been abandoned. The 25,000 meter-square space now welcomes more than a million people each year. Among the Georgian speakers was Michael Maisuradze, who came to talk about the 4GB festival that will happen in May, a very important electronic festival staged each year since 2011 in Tbilisi. Nino-Ana Samkharadze presented the annual Kolga Tbilisi Photo festival where, for five days in May, Tbilisi will host photo exhibitions from local and international artists in different places

Image source: Creative Georgia Facebook page

throughout the city. It is one of those rare high-quality festivals that people can enjoy for free. Other guests presented the Sou festival, Tbilisi International Festival of Theater, Tbilisi Architectural Biennale, the Blues Fest and CinéDOCTbilisi, all very inspiring cultural events set to happen again this year and that participate in making Tbilisi and its surroundings a growing cultural hub. Such festivals attract a young and dynamic population to the city, educate people and more than anything, make arts reachable for anyone. Georgia needs to put more emphasis on events of this type and in diverse cities.

BUSINESS

GEORGIA TODAY APRIL 9 - 11, 2019

British Writer Andrew Jefford Presents Georgian Wine in Japan

ndrew Jefford, a well-known British wine writer, held a Georgianwineseminar"Why Georgian Wine Is Important" within the exhibition "Georgia-Homeland of Wine" in Tokyo. Andrew Jefford spoke about the importance of Georgian wine, the varieties of Georgian vines, the appellation of origins of Georgian wines and the varieties characteristic to Georgian regions. The English writer emphasized the importance of Georgian wine, noting that Georgia had introduced a new category: Qvevri wine. The following wines were presented at the seminar attended by Japanese wine experts: "Tsinandali 2016" (Tsinandali Old Estate), "Khikhvi, Qvevri 2017" (Shalvino), "Mtsvane, Qvevri, Iberiuli 2016" (Shumi), "Krakuna, Qvevri, 2015” “Winery Khareba”, “Tavkveri 2016” (Chateau Mukhrani),”Qvevri, Saperavi 2017 "(Teleta / Orgo)," Tamada, Grand Reserve, Red Saperavi 2014 "(GWS).

Andrew Jefford has visited Georgia several times. In his own assessments, he describes Georgian wine as "high quality" and says he considers wine to be the most important product of Georgia. "Who can refuse to taste the wine of the country that is the homeland of wine and has eight thousand years of wine history?" Jefford asks. Jefford 's event was held with the support of the Georgian National Intellectual Property Center "Sakpatenti". The project "Georgia – Homeland of Wine," organized by the National Wine Agency and Association "Georgian Wine" is implemented by Sony Music Communication and the company TOPPAN partnership. The exhibition combines unique archaeological exhibits and modern technologies, the concept of which is based on the uniqueness of Georgian wine culture. Exhibition "Georgia – Homeland of Wine" was opened on March 10 in "Terrada Warehouse" and will last until May 7.

Georgia Harnesses European Expertise in Rural Development

eading experts and policymakers from Georgia and European Union (EU) member states gathered in Tbilisi on 8 April to take part in the international conference “Rural Development Policy 2020+. Translating European practice into Georgian reality”. With a focus on rural development policy and practice, the Conference aims to assist the Government of Georgia in developing its second national sevenyear Rural Development Strategy. The Conference was opened by the President of Georgia Salome Zurabishvili. Levan Davitashvili, Minister of Environmental Protection and Agriculture of Georgia, addressed the participants of the event with welcome remarks. “Georgia has made notable progress since 2016 when the country’s first Rural Development Strategy was adopted,” Davitashvili said. “The Government of Georgia has introduced a new vision of rural development grounded on the best EU practices in this field. In the next seven years, we will focus on promoting local entrepreneurship and employment and increasing people’s engagement in the rural development process.” "We are proud to be part of Georgia's progress in rural development and look forward to continuing working together with all key ministries to improve employment and living conditions of the rural population in Georgia. European experience implemented in Georgia has dem-

onstrated the benefits of a bottom-up approach in rural areas, empowering local people to take the development of their communities into their own hands," Carl Hartzell, Ambassador of the European Union to Georgia, said. “Rural development can help unlock the biggest socio-economic challenge facing Georgia, namely that farmers make up 43% of the workforce yet produce just 8% of the GDP,” noted Louisa Vinton, Head of the United Nations Development Program (UNDP) in Georgia. “The new strategy will aim to narrow this gap by helping to make Georgia’s farms more professional and competitive, creating new non-farm jobs in rural areas and improving living conditions for rural communities.” The Rural Development Conference 2019 was attended by officials and experts from EU Member States, including Markus Hopfner, Deputy Director General of the Federal Ministry of Sustainability and Tourism of the Republic of Austria; and Dr. Lászlo Sandor Vajda, Former Chief Negotiator for EU accession on behalf of the Ministry of Agriculture of Hungary. The discussions at the Conference focused on rural development policies and institutional arrangements, as well as on the ways of adapting successful European practices to Georgia’s realities. The Rural Development Conference 2019 was organized by the Ministry of Environmental Protection and Agriculture of Georgia with the assistance of

the EU in cooperation with UNDP. The Conference is part of the EUR 179.5 million in EU assistance that Georgia is set

to receive under the ENPARD program between 2013 and 2022. This support aims to promote rural development

policies and create economic opportunities for the rural population outside of agriculture.

BUSINESS

GEORGIA TODAY

APRIL 9 - 11, 2019

Georgia to Run with the World for the 6th Time on May 5 have a chance to check their results on the official website. There will be two local winners – one male and one female, who will choose the country they will run in 2020. The registration of participants started on January 30, 2019 and will last until May 2 through the website www.wingsforlifeworldrun.com. The entry fee in Georgia is 30 GEL. All the money will be transferred to the Wings for Life foundation, which carries out research projects and clinical trials for spinal cord treatment. All the donations are transferred to the Foundation through the EMS (European Merchant Services) system. The Nature and Neuroscience Magazine published a study supervised by the Swiss scientists Gregory Korton (EPFL and CHUV/Unil) and Jacqueline Bloch (CHUV/Unil) in December 2018. The research brought together three patients with severe spinal cord damage, all of whom were ultimately given the ability to walk unaided. At the first stage of the research, wireless implants were installed in their spinal cords which were connected to their paralyzed leg muscles to provide electric stimulation. In order to control the electric stimulation, the scientists created a device like a wrist-watch that reacted to the owner’s voice to activate or deactivate the stimulator according to need. Following several weeks of work, the three patients had ‘control’ of their leg

TRANSLATED BY KETEVAN KVARATSKHELIYA

he 6th Wings for Life World Run, the largest charity event in sporting history, is to kick off on May 5, at 15:00, at the turn to Lopota Lake on the Telavi-Kvareli Highway.

The Wings for Life World Run is a unique charity marathon which brings together professional sportsmen, casual joggers and wheelchair users aged 18+. The World Run has no restrictions, no defined running distance or time and no traditional finish line. Half an hour after the race starts, a moving finish line, the ‘Catcher Car’ will start chasing runners along the course, gradually accelerating the speed from 14 km/h to 34 km/h. In

comparison with previous years, the ‘Catcher Car’ will speed up every half an hour (15:30-14 km/h, 16:00-15 km/h, 16:30-16 km/h, 17:00-17 km/h, 17:30-18 km/h, 18:00-22 km/h, 18:30-26 km/h, 19:00-30 km/h, 19:30-34 km/h). When the car “catches” a runner, the time is marked and they have finished the race. The results of the run will be controlled from the city of Salzburg, Austria. The participants and their supporters will

muscles. Five months of exercise later and they were able to walk totally unaided. The next stage of the research is to use the electric stimulator at the early phase of nerve damage, where there is a higher chance for the restoration of health. The Wings for Life World Run’s popularity and success is in no small part thanks to the World Run Ambassadors. Famous sportsmen will have the role of Ambassadors this year: Maia Azarashvili, the winner of the Seoul Olympiad prize in sprint (the Sports Director of the event); Rezi Rogava, basketball player; Varlam Liparteliani, silver winner of the Rio Olympics; Olympic Champions Vladimer Khinchegashvili (wrestler) and Lasha Talakhadze (weightlifter); racing drivers Mevlud Meladze and Data Kajaia; Iva Tsiklauri (skier); Vasil Lobjanidze, rugby player; Irma Khetsuriani, wheelchair fencer; Henri Kuprashvili, swimmer; amateur joggers Giga Dzuliashvili, and Tamar Gelashvili. Aside from sportsmen, there are Ambassadors from other fields: Giorgi Baqradze, intellectual; Elene Kalandadze and Achiko Guledani, musicians; TV hosts: Mariam Vashadze, Alexander Lortkipanidze, Irakli Kakabadze, Irakli Gaprindashvili, Nika Grogolia; public figures: Keti Khatiashvili, Ninutsa Makashvili, Mirian Jejelava, Merab Dukashvili; Nino Goguadze, fitness instructor; Mari Nakani, photographer and others.

QUICK FACTS ABOUT THE WORLD RUN 2018 • 7,000 participants were registered for the World Run in Georgia in 2018; • The World Run was held on 200 locations in 66 countries in 2018. 100,000 participants covered 934,484 kilometers in total; • Nina Zarina (47,45 km) and Alexander Cheburkin (74,728 km) were the local winners of the World Run 2018. They will run in Australia in 2019; • Aron Anderson, who covered 89,58 by wheelchair and Vere Nunis (53,78 km) were the global winners last year; • The winners of different countries ran in Georgia in 2018: Giorgi Shekrelidze from Georgia (35,43 km), Sebastian Hallmann from Germany (68,47 km), Veysi Aslan from Turkey (57,51 km), Iosha Zakrzhevki from Poland (52,26 km), Iana Khmeleva – the winner of Kakheti 2016 (34,95 km) and Anatoli Oleinikov – the winner of Kakheti 2014-2015.

Direct Seoul-Tbilisi Flights to Resume in May

Photo source - Korean Air

BY AMY JONES

he South Korean airline Korean Air will resume its direct flights connecting Tbilisi with the South Korean capital Seoul from

May 30.

The charter flights arrive and depart from Tbilisi International Airport. Korean Air ran chartered flights on the Seoul-Tbilisi route for the first time in May 2018. Multiple airlines are opening new routes to Georgia this year. Air France conducted its first direct flight to Paris on March 31 and Smartlynx Airlines will launch charter flights between Tallinn and Batumi this summer.

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GEORGIA TODAY APRIL 9 - 11, 2019

ICI Paris Launches New Perfume on the Georgian Market

Ivane Matchavariani Welcomes New EBRD Regional Director TRANSLATED BY KETEVAN KVARATSKHELIYA

he Minister of Finance of Georgia Ivane Matchavariani held a meeting with Matteo Patrone, Managing Director of the European Bank for Reconstruction and Development (EBRD) and Catarina Bjorlin Hansen, new Regional Director of EBRD for the Caucasus Thursday.

Matchavariani congratulated Hansen on her appointment to the new position and wished her future success. He also expressed hope that under her leadership, the EBRD regional office will continue its active collaboration with both the public and private sectors of the country. The new Regional Director noted that Georgia has an important role and high potential for progress. She also stated that further integration into the global economy is an essential precondition for it and that the EBRD will continue contributing to the development of Geor-

gia through increasing investments and by supporting new reforms. At the meeting, the parties discussed the ongoing projects carried out with the assistance of the EBRD. In addition, the representatives of the bank noted that the EBRD will support Georgia in a number of spheres, including education, transport, infrastructure and power engineering. Hansen officially assumed her role on April 1. She replaces Bruno Balvanera, who has been named EBRD Managing Director for Central Asia.

Georgia’s Finance Minister Does Not Support Tightened Lending Regulations BY KETEVAN KVARATSKHELIYA

BY THEA MORRISON

eorgia’s Finance Minister Ivane Machavariani says the National Bank of Georgia (NBG) should revise the recently imposed banking regulations which tightened the process of issuing loans. “I did not support the initiative on imposing bank regulations of such a large scale and I do not support it now,” he said. “I hope that the National Bank will revise these regulations if necessary. It’s a bit early to assess the effects of these regulations, but its effect on the construction sector, for example, is easy to see,” he said, adding the regulations should be softened as much as possible. Last week, Georgia’s Minister of Economy and Sustainable Development Giorgi Kobulia said that the government is not going to soften the banking regu-

lations, according to which banks are not allowed to give their clients loans without studying their solvency. "These regulations are adequate and serve to protect the people from taking loans without realizing the possible consequences,” he stated. The minister added consultations are

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underway with the NBG regarding the issue. The new banking regulations took effect in Georgia on January 1, 2019 meaning that people will not get loans from banks if there are no solid guarantees that they will be able to pay it back on time.

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

CI-Paris, one of Georgia’s leading perfume shops, has been putting the quality of products as among their major values since 1995. It has now launched a new fragrance of the prominent Hermes brand for its Georgian clientele: ‘Un Jardin sur la Lagune,’ which is set to mesmerize customers with a marvelous blend of scents. It was developed by perfumer and Hermes’ esteemed ‘nose,’ Christine Nagel. While working on the fashion house’s new fragrance, the sixth in the ‘Le Jardin’ range, Nagel found her inspiration in a secret hidden garden with an intriguing name: The Garden of Eden, located on the Venetian island of Giudecca. However, as it is permanently closed to the public and has as such obtained almost a mythical status, Nagel had problems getting in!

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After numerous denials to her request for permission to enter the prominent garden, the perfumer directly addressed the president of the foundation in ownership of the Garden of Eden, explaining the reasons for her desire to visit. Her request was granted and Nagel was allowed to walk into the garden and work on the fragrance. The perfumer recalled the working process, which started on a cold winter’s day, and the difficulties she had to face. However, she also focused on the wonderful plants she had a chance to discover in the Garden of Eden. Nagel spent over 18 months translating multiple scents from the surrounding lagoon and the greenery found in its vicinity, transforming them into a single perfume: a sophisticated blend of jasmine, magnolia, Madonna lily and orange blossom, offset by woodier notes. The perfumer noted that creating this fragrance meant giving new life to the ‘mysterious’ garden and enabling travelers to finally discover its treasures.

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