Issue #1150 Business

Issue no: 1150/180

• MAY 14 - 16, 2019

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

FOCUS

ON 10 YEARS OF THE EAP

The PM heads to Brussels to celebrate Georgia's progress as one of the Eastern Partnership six

Image source: neweasterneurope.eu

PAGE 5

Justice Minister: There Is No More Ill-Treatment of Prisoners

Georgian Economy Strong, Inflation Low, Short-term Consumer Credit Declines ISET PAGE 4

On the Success of the ‘Georgia - Homeland of Wine’ Exhibition in Tokyo BUSINESS PAGE 7

Georgian Women’s Path to Leadership

BY THEA MORRISON

G

eorgia’s Minister of Justice, Thea Tsulukiani, has said that the illtreatment of people in the country’s penitentiary institutions is now “something of the past.” The Minister made the statement after the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment (CPT), an anti-torture committee of the Council of Europe, published a positive report on Georgia.

The Minister stated at a special press-conference that the legislative changes that have been implemented under the current government are positively evaluated in the report, which is based on the CPT delegation’s visit to the country on September 10-21, 2018.

Continued on page 15

BUSINESS PAGE 10

Handling Frozen Conflicts: the Economic Angle BUSINESS PAGE 12

Mtatsminda Elections: A Look beyond the Numbers Image source: Shutterlock

POLITICS PAGE 14

Charlie Chaplin in Tbilisi CULTURE PAGE 15 Prepared for Georgia Today Business by

Markets As of 10ͲMayͲ2019

Price

w/w

Bank of Georgia (BGEO LN)

GBP 17.00

Ͳ0,2%

Ͳ2,1%

GEOROG 04/21

103.67 (YTM 4.75%)

+0,0%

+0,1%

Georgia Capital (CGEO LN)

STOCKS

GBP 9.99

Ͳ0,5%

Ͳ7,3%

GEORG 04/21

106.07 (YTM 3.56%)

Ͳ0,0%

+0,1%

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

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

Price

w/w

m/m

BONDS

m/m

GBP 2.22

+0,9%

+8,8%

GRAIL 07/22

107.45 (YTM 5.16%)

Ͳ0,1%

Ͳ0,2%

GBP 17.00

+5,1%

+7,5%

GEBGG 07/23

101.86 (YTM 5.50%)

Ͳ0,1%

Ͳ0,0%

Price

w/w

m/m

CURRENCIES

Price

w/w

m/m

70,62

Ͳ0,3%

Ͳ1,5%

GEL / USD

2,7432

+1,4%

+1,8%

1 286,05

+0,5%

Ͳ1,7%

GEL / EUR

3,0801

+1,8%

+1,4%

GEL / GBP

3,5654

+0,1%

+1,1%

INDICES

Price

w/w

m/m

GEL / CHF

2,7112

+2,1%

+0,9%

FTSE 100

7 203,29

Ͳ2,4%

Ͳ2,9%

GEL / RUB

0,0420

+1,0%

+0,2%

FTSE 250

19 366,80

Ͳ1,7%

Ͳ0,6%

GEL / TRY

0,4582

+1,0%

Ͳ3,4%

DAX

12 059,83

Ͳ2,8%

+1,3%

GEL / AZN

1,6163

+1,4%

+1,8%

DOW JONES

25 942,37

Ͳ2,1%

Ͳ0,8%

GEL / AMD

0,0057

+1,8%

+3,6%

NASDAQ MSCI EM EE MSCI EM

Ͳ3,0%

Ͳ0,6%

GEL / UAH

0,1048

+2,4%

+4,6%

162,95

Ͳ3,6%

Ͳ5,8%

EUR / USD

0,8902

Ͳ0,3%

+0,4%

1 033,44

Ͳ4,6%

Ͳ5,7%

GBP / USD

0,7691

+1,3%

+0,7% +0,9%

7 916,94

SP 500

2 881,40

Ͳ2,2%

Ͳ0,2%

CHF / USD

1,0118

Ͳ0,5%

MSCI FM

2 665,12

Ͳ1,6%

Ͳ3,1%

RUB / USD

65,2248

+0,2%

+1,5%

GT Index (GEL)

1 582,68

Ͳ

Ͳ

TRY / USD

5,9827

+0,3%

+5,3%

GT Index (USD)

1 208,13

Ͳ

Ͳ

AZN / USD

1,6993

+0,3%

Ͳ0,0%

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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:

GEORGIA TODAY

MAY 14 - 16, 2019

Georgia to Get around $40 mln from the IMF

Georgian honey is moving beyond the borders of the local market. Jani (ჯანი) is a brand offering fruit and dried fruit dipped in honey, a pioneer Georgian brand in overcoming export issues related to the East. The 100% natural product was launched in Kutaisi by Kristefore Darchishvili along with his uncle and friends, and rapidly obtained popularity on the Georgian market. After active communications with Chinese companies, the brand introduced its products at an exhibition in the Biltmore Hotel and caught the eye of exporters. The product is certified and has received positive results in every regard.

A novelty on the Georgian beer market, the alcohol-free rose canina fruit beer from Shengeli Tokhosashvili is soon to be introduced. A traditional drink for Kists, production was catalyzed by a desire to give wider audiences the chance to try it. The factory in Pankisi is already ready, supported by a grant received within the scope of ‘Enterprise Georgia’. Non-filtered beer under the ‘Kisturi’ brand name will be sold in Pankisi, followed by Kakheti and Tbilisi. The enterprise is to start operating at the end of May. GWS Company, one of the first wineries in Georgia to offer bottled wine, has introduced the premium-quality TAMADA wine in refreshed packaging. The new-look wine will be available for consumers from June. The premium line collection: Grand Reserve and Qvevri were introduced two years ago. The majority of TAMADA vineyards are 15 years old, while others are 25. Since 2015, TAMADA has won 59 medals, 7 double golds among them.

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

G

eorgia will get around $40 million from the International Monetary Fund (IMF).

The statement was made on May 13 by the IMF delegation head in Georgia, Mercedes Vera-Martin.

"As a result of productive discussions, the Georgian government and the IMF mission reached an agreement on com-

pleting the fourth review of the ongoing program in Georgia," she said. "This agreement needs to be approved by the Board of Executive Directors of the IMF, which discusses Georgia's issue in June of the current year. Successful completion of this review will result in giving Georgia 30 million SDRs (about $41.6 million)."

She noted that in the framework of the "Enhanced Financing Mechanism", the total reimbursement for Georgia will reach $207.9 million.

The IMF mission has already met the Minister of Finance, Ivane Matchavari-

ani, National Bank Head Koba Gvenetadze and the Prime Minister of Georgia, Mamuka Bakhtadze.

Matchavariani said at the joint pressconference that Georgia's economic growth projection for the current year is 4.6%, adding it is remarkably high for the region and reaffirms the effectiveness of the reforms carried out by the Georgian authorities.

“I believe this trend will continue on the basis of the ongoing program and the economic dynamics of our country,” the Minister said.

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BUSINESS

GEORGIA TODAY

MAY 14 - 16, 2019

Georgian Economy Strong, Inflation Low, Short-term Consumer Credit Declines

BY DAVIT KESHELAVA AND YASYA BABYCH

I

SET-PI has updated its forecast of Georgia’s real GDP growth rate for the second quarter of 2019. Here are the highlights of this month’s release:

HIGHLIGHTS • Geostat has released its GDP growth estimate for the first quarter of 2019. The Q1 growth stands at 4.7% , which is only 0.4 percentage points above the recent ISET-PI forecast.

• ISET-PI’s forecast of real GDP growth for the second quarter of 2019 stands at 4.7% - up from 4.6% in April.

• Based on March data, we expect annual growth in 2019 to be 4.6% in the worstcase or “no growth” scenario, and 5.6% in the best-case or “average long-term growth” scenario. Our “middle-of-the road” scenario (based on average growth over the last four quarters) predicts 4.9% real GDP growth in 2019.

• According to the recent Monetary Policy Report (May 2019), the National Bank of Georgia’s (NBG) forecast of real GDP growth remained unchanged at 5% in 2019. According to NBG, annual real GDP growth this year will be driven by improved trade balance, and increased consumption and investment spending supported by capital expenditures of the government and a moderate growth of loans.

According to Geostat’s recent release, the official estimate of growth for the first quarter of 2019, which is based on VAT taxpayers’ turnover data, now stands at 4.7%. The newly estimated Q1 figure is higher than initially anticipated by the ISET-PI forecast. Consequently, ISET-PI’s second quarter forecast has also been revised upward to 4.7%. The upward revision of the forecast is due to the increased national currency deposits, continuing money supply growth in Georgia and improved external statistics. However, restricted consumer credit and depreciated real effective exchange rate put a downward pressure on the forecast value.

THE VOLUME OF DEPOSITS WENT UP IN YEARLY TERMS

The first set of variables that have had a significant positive effect on our forecast relate to national currency deposits in commercial banks. In March, all types of national currency deposits, from the most liquid - currency in circulation (up by 18.9% yearly) - to the least liquid - time deposits with a maturity of more than 12 months (up by 31.9% yearly) - experienced double-digit growth in annual terms. The largest yearly increase was again observed for national currency time deposits with a maturity of less than 3 months, which increased by 53.1%, relative to the same month of the previous year (but decreased by 4.4% monthly). Overall, national currency total deposits increased by more than 19.3% yearly. National currency deposit-related variables had a positive contribution to our GDP growth projection.

Furthermore, the total volume of foreign currency deposits went up by 15.6% compared to the same month of the previous year. The dollarization rates of non-bank deposits and loans decreased in monthly terms in March of 2019. Dollarization of deposits fell by 0.3 ppt, amounting to 62.0% (74.7% and 52.2% for individuals and legal entities, respectively), while loan dollarization declined by 0.3 ppt to 56.5%, compared to February of 2019.

According to our model, deposit dollarization had a small, but positive impact on the real GDP growth.

MONETARY AGGREGATES CONTINUE PATH OF GROWTH The other set of variables that had a significant positive effect on our forecast is related to currency in circulation. The Monetary Policy Committee of the National Bank of Georgia met in May, and decided to leave the monetary policy rate unchanged at 6.5%. However, all the monetary aggregates, including the largest - broad money (M3) - experienced significant yearly growth (M3 aggregate rose by 18.3% yearly). The largest increase was observed for monetary aggregate M1 (narrow money), which went up by 20.5% relative to the same month in the previous year. Moreover, currency in circulation itself increased by 13.4% in yearly terms.

It is noteworthy that in a modern economy, the greatest proportion of a money supply is in the form of deposited cur-

REAL AND NOMINAL EXCHANGE RATES EXPERIENCED MODERATE DEPRECIATION

rency, which is created by commercial banks - banks accumulate the savings of individuals, firms and government entities, and provide funds for investment projects and consumption that contribute to higher GDP growth. Thus, rapid expansion of monetary aggregates contributed positively to our GDP growth forecast.

Moreover, the annual inflation in March 2019 constituted 3.7%, which was only slightly higher than the 3% NBG target.

It is notable that increased excise tax on tobacco (one-time factor) was the main contributor to the annual inflation rate (contributing 1.3 ppt. to the annual inflation rate). In addition, the annual core inflation stood at a low 1.2%. This is good news for the Georgian economy, as low core inflation typically translates into lower overall inflation in the future.

EXTERNAL STATISTICS SHOW POSITIVE SIGNS March 2019 showed strong growth in the wider region. According to the estimates for March 2019, most of the countries in the region showed significant improvement compared to the same period in the previous year. The Armenian economy reached a remarkable 7.6% annual growth.

Furthermore, Russian and Azerbaijani economies advanced by 2.1% and 3% respectively (see Figure 2). Thus, improved economic conditions in the wider neighborhood stimulated the Georgian economy through trade, remittances, and tourism channels. However, economic and political instability of the countries situated in the wider region (e.g. Turkey and Iran) are potential external threats to the Georgian economy that might not be taken into consideration in our model yet.

Overall, Georgia’s external statistics continue to improve. In March of 2019, total exports grew by 12.3% year over year (slightly decelerated growth rate compared to the previous year), driven by the export/re-export of copper and copper ores (31.0% yearly), export of ferro alleys (22.5% yearly), re-export of motor cars (59.9% yearly) and export/re-export of packaged medicines (114.5% yearly).

Among the external trade developments to watch is the decline in the import of merchandise goods. In the reporting period, imports of merchandise goods decreased by 12.3%, mainly driven by

petroleum and petroleum gases (declined by 37.0%). The great majority of the other main product categories experienced notable yearly increase, but still not enough to outweigh reduced import of the petroleum and petroleum gases. As a result, the trade balance improved by 25.0%, compared to the same month in 2018. It is notable that net export is improving in yearly terms since January 2019 (see Figure 3).

Furthermore, remittances and tourism, together with foreign direct investment (FDI), are among the main sources of foreign funds coming into Georgia. In March, remittances increased by 4.5% relative to the same month of the previous year. Once again, the main contributors to this growth were the United States (increased by 13% yearly, contributing 1.3 ppt to the annual growth figure), EU (increased by 18.9% yearly – Italy, Greece and France were the main drivers of this growth figure) and Ukraine (increased by 34.7% yearly), while the reduction of money inflow from Turkey (-1.9 pp.) and Russia (-2.2 pp.) had a negative impact on the growth estimation. The number of all types of international visitors in March of 2019 increased by 4.6% year over year and exceeded 619,300 people.

Out of these, 65% were classified as tourists, and the growth rate of these visits reached 4.3% annually. As Georgia is among those countries in which remittances and income from tourism form an important part of households’ income, their growth had a positive impact on the projected real GDP.

The real effective exchange rate (REER) depreciated by 0.3% relative to April, and by 0.1% relative to the same month of the previous year. The depreciation of the REER is typically associated with reduced value of the domestic export in the very short-run period and gaining competitiveness of export production in the foreign markets later. Notably, the lari real exchange rate appreciated with respect to the national currencies of two major trading partners – Turkey and Russia.

The GEL/TRY and GEL/RUB real exchange rates appreciated compared to the same month of the previous year by 10.9% (appreciated by 2.6% monthly) and 2.3% (depreciated by 1.5% monthly) respectively. In contrast, the lari real exchange rate experienced a slight depreciation against the US dollar and the euro (falling on average by 0.7% and 0.8% respectively in monthly terms). Overall, REER-related variables had a small negative contribution to the Q2 real GDP growth projections.

CREDIT RESTRICTIONS REDUCED SHORT TERM CONSUMER CREDITS As we mentioned in our previous report, new lending regulations could potentially have a negative impact on short-term growth predictions. The average annual interest rates on the short-term consumer loans at first declined from 20.0% in December 2018 to the 12.7% in February 2019, but then increased notably to 17.5% in March 2019 (long-term consumer credit had a similar pattern). In March 2019, the total volume of commercial banks’ consumer credit increased by only 2.7% yearly and even declined by 1% monthly. However, the volume of commercial banks' short-term consumer credits declined by 59.8% in yearly terms, and increased by only 2.4% monthly (the main driver behind this negative trend being consumer loans in the national currency). Whereas, the volume of commercial banks' long-term consumer credits increased by 16.1% yearly and declined by 1.3% monthly.

Overall, the variables related to consumer credit have had a slightly negative impact on the growth forecast.

BUSINESS

GEORGIA TODAY MAY 14 - 16, 2019

Eastern Partnership Celebrates 10 Years

BY AMY JONES

T

his year, the Eastern Partnership (EaP), celebrates the tenth year since its launch on 7 May 2009 at a European Union Summit held in Prague, Czech Republic. On 13 - 14 May, Georgian Prime Minister Mamuka Bakhtadze, along with representatives from fellow partnership countries and the European Union, is in Brussels to attend events marking the anniversary.

The EaP is an initiative between the European Commission, EU members states and the six participating countries: Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. The partnership was formed to encourage economic integration and convergence with the EU, strengthen energy security, and to promote democracy and good governance.

On 13 May, the annual Eastern Partnership Foreign Affairs Ministerial Meeting took place with the EU’s six Eastern partners, 28 EU member states and Johannes Hahn, the Commissioner for European Neighborhood Policy and Enlargement Negotiations.

The meeting will discuss the 20 deliverables of the 2020 work plan. Adopted in 2017, the plan aims to benefit citizens throughout the region “through working towards stronger economies, stronger governance, stronger connectivity, and stronger societies.”

Economic development and market opportunities deliverables will be discussed at the meeting.

A document, published in 2017 by the European Commission regarding the 20 deliverables, listed the economic development priorities as: supporting EaP Partner Countries to “move towards diversified and vibrant economies, to create jobs in new sectors, attract investments and foster employability; to support macroeconomic stability; to drive economic transition process forward with a few to create an attractive environment, a level-playing

field for investments and business, as well as improve the capacity of Partner Countries to take advantage of the trade opportunities within the EU and with each other.”

As such, the EU has contributed over €348 million towards the EU4Business initiative since 2009, supporting over 70,000 enterprises and creating 28,000 new jobs. In addition to monetary support, the EU has given policy advice on macroeconomic stability and macro-financial assistance to partner countries.

Increasing trade between partner countries and the EU is also a priority. Georgian exports to the EU are increasing: the EU now accounts for 27% of Georgian Trade. Indeed, the EU has invested €233 million into the construction of the Anaklia Deep Sea Port that will enable goods to pass directly between the EU and Georgia. The EU has also aided more than 63,000 SMEs, microenterprises and farmers to receive loans in Georgia, trained more than 250,000 farmers, and helped 1,600 farming cooperatives with financial and technical support.

Whilst speaking at a press briefing on May 10, Georgian Prime Minister Mamuka Bakhtadze stated that the relationship between Georgia and Europe “is at an all-time high,” whilst underlining that it needs “special care, nurturing and deepening.”

Aside from the economic advantages of the EaP, Georgia benefits from territorial protection offered by the EU, an initiative founded only one year after the 2008 Russian-Georgian war. Although Russia has criticized the Eastern Partnership as an expansion of the EU’s sphere of influence, EU leaders have underlined the freedom of EaP members to choose their own paths.

Along with the meeting on 13 May, various other events and activities will take place across the year to celebrate the EaP initiative and its successes.

On Monday evening, Donald Tusk, President of the European Council, hosted a celebratory dinner for the six EaP partner countries heads of state. In addition, Jean-Claude Juncker, President of the European Commission, is to host a conference on Tuesday.

The 2019 Zero Compromise Wine Festival

O

n May 10, with the support of the Association of Natural Wine and LEPL National Wine Agency, Georgia hosted the natural wine festival “Zero COMPROMISE”. This year’s festival was distinguished for its many guests, who came especially from all over the world, among them importers, winemakers and sommeliers.

The 2019 festival stood out for two special guests in particular- the renowned French wine Magister Isabelle Legeron, the largest international Natural Wine Festival ‘Raw Wine’ founder, and Josko Gravner, legend of Italian Wine.

Zero COMPROMISE was represented by new growers like Alexander’s Wine Cellar , Zhuka-Sano Wine Cellar, which were among over 70 cellar participating in the festival. Popular cellars such as the Oda family Winery, Gvardzelashvilis Marani, Iago’s Winery, Okro’s Wines and others also had a

strong presence.

The number of participants and wine makers is growing by the year and the festival has proved itself a window for new wine cellars to boost the popularity of Georgian Wine abroad.

The day before the festival there was a presentation of Simon J. Woolf’s book ‘Amber Revolution: How the world learned to love Orange Wine,’ a book devoting a large discussion to Georgian Wine.

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BUSINESS

GEORGIA TODAY

MAY 14 - 16, 2019

Media Session Hosted by IDS Borjomi Georgia at Rooms Hotel

BY KETEVAN KVARATSKHELIYA

E

nvironmental protection is a matter of paramount importance on the modern world’s agenda. Various Georgian companies are aware of their corporate social responsibility (CSR) and join a number of campaigns in this respect. IDS Borjomi Georgia is no exception. Within the scope of the CSR project #BorjomiCSR, on May 10, it hosted the representatives of media platforms at Rooms Hotel Tbilisi at a media seminar on aspects of environmental protection.

Nitsa Cholokashvili, Head of Public Relations Division at IDS Borjomi Geor-

gia, briefed the guests about the results of the Borjomi forest restoration program, ongoing since 2011, while Marine Sujashvili, Deputy Head of Forest Maintenance Department at the National Forestry Agency (NFA) discussed in detail important environmental issues and explained the right technique of tree plantation.

“Environmental protection of the territory adjacent to Borjomi represents one of the most valuable and important directions for IDS Borjomi Georgia in terms of Corporate Social Responsibility,” stated Cholokashvili. “Borjomi is a ‘postcard’ destination for our country with its incredible nature. It is also a territory where the main deposits of mineral waters that we produce are

located. Thus, the preservation of this area is as vital for locals as it is for guests.”

Cholokashvili then focused on the CSR project, launched several years ago. “[It is] a platform through which we work in three directions: environmental protection, education and sport, all of them being mostly centered around the Borjomi region. The location has been chosen on purpose, as our country certainly needs decentralization and there is a lack of important campaigns in the regions of Georgia,” she said. She also accentuated the importance of education for raising public awareness and developing different sports for bringing up healthy and energetic generations.

Cholokashvili said a training center

was launched in Borjomi catering for 400-500 students annually, where the youngsters are able to acquire knowledge in academic subjects, as well as benefit from informal education classes.

The Head of the Public Relations Division of the company stated that along with the Ministry of Environmental Protection and Agriculture of Georgia, IDS Borjomi Georgia has been engaged in the Borjomi forest restoration project for three years and regularly participates in the tree planting programs.

“What is crucial in this case is that the initiative not only involves the planting of trees, but that we take part in the ongoing processes. For five years we have taken care of each sapling and followed all the rules to ensure their healthy growth.”

Marine Sujashvili informed the media representatives about the challenges faced by the nature and forests of Borjomi today and explained ways to over-

come them. Sujashvili focused on the significance of investigating the area prior to the start of the plantation, going on to clarify the methods and the tree varieties that have to be used in different areas during plantation. She also gave particular examples and defined the methods of proper irrigation.

Finally, she outlined the importance of the contribution of large companies in terms of environmental protection.

“It is vital that IDS Borjomi Georgia be involved in the social project of forest restoration,” she said. “And the fact that the company follows all the rules and regulations is of paramount importance.”

The presentation of the speakers was followed by a discussion with the media.

At the end of the session, Sujashvili and Cholokashvili called upon the attendees of the event to join the campaign and travel to Borjomi on May 18 to take part in a tree planting.

GWS Introduces a Refreshed Label for One of Its Core Brands OLD TBILISI

BY MARIAM DIASAMIDZE

G

eorgian Wines & Spirits Company (GWS), one of the oldest and best-known producers of handpicked wines in Georgia and a constant provider of high quality product, is excited to launch a refreshed label for OLD TBILISI, hitting the shelves June 2019. The new label reflects the company’s approach to representing the

true spirit of the old town and add a modern twist to it.

Company Brand Manager Salome Dolidze explains the rationale behind the label: “The updated label highlights our core values and is a tribute to the stunning architecture and hidden treasures of the old town. Our labels convey the emblematic traditional houses of the Old Tbilisi district in memory of an old tradition when inhabitants used to sing, dance, party and drink on the balconies of Old Tbilisi. We desire our wines to express the joyful tradition of Georgian hospitality and conviviality.”

Precisely because OLD TBILISI is a symbol of Georgian values such as hospitality, friendship and loyalty, the wine is best enjoyed with family and friends in a festive environment. Wine lovers can find the wine that they like among the seven diverse varieties of OLD TBILISI white and red wines: Alaverdi Red and White, Alazani Red and White, Saperavi,

and produces wine that serve as popular gifts for tourists to take back home.

Both tourists and locals should stay tuned for the introduction of new wine.

The GWS CEO announced that he is very enthusiastic about the company’s plan to launch a new range of organic wines from its own estate.

ABOUT GWS

and Rkatsiteli- Mtsvane. These diverse set of wines will now be placed in bottles covered with diverse and colorful labels.

The introduction of a more colorful and vibrant touch to iconic Tbilisi balconies and terraces adds joy and happi-

ness to the label. The updated label will stand out from the competitors and be more relatable to both Georgian and international wine lovers. This is important since the brand actively exports its products beyond the borders of Georgia

For more than 20 years, GWS has been one of the leading businesses in Georgia and worldwide. GWS produces around four Million bottles of premium wines, made exclusively from its own vineyards, 100% of the harvest being hand-picked.

In the last few years, GWS was awarded with up to 160 awards and distinctions by prominent national and international competitions. The high profile of the wines from GWS are fueled by the quality of its vineyards and the know-how of the team.

Cheers! გაგიმარჯოთ!

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BUSINESS

GEORGIA TODAY MAY 14 - 16, 2019

7

On the Success of the ‘Georgia Homeland of Wine’ Exhibition in Tokyo modern technologies.

The closing of the exhibition ‘Georgia - Homeland of Wine’ was celebrated with a ceremonial reception.

"In 2014 we started implementing the most important state project ‘Georgian Vine and Wine Culture Research’, said the Head of the National Wine Agency, Levan Mekhuzla. “As a result of four years of work, the study confirmed that Georgia is the homeland of wine and that we are the country where vine was first cultivated. International recognition of Georgia as the homeland of wine, 8,000 years of continuous history of viticulture and winemaking, has increased interest in Georgia. Japanese people have a special respect for traditions and, as

T

he exhibition ‘Georgia Homeland of Wine’ in Terrada Warehouse, Tokyo, has ended. The exhibition within the project of the same name held in the capital of Japan during two months hosted thousands of

Japanese visitors.

Georgian wine and its history, which started 8,000 years ago, were especially interesting for the Japanese. The exhibition combined unique archaeological exhibits as well as aiming to present the uniqueness of Georgian wine culture via

Third International Cyber Security Festival at the University of Georgia

C

yberspace carries various and immense loads of information, including that concerning the private lives of people.

Society’s increasing dependence on information and communications technologies creates opportunities to be exploited by uninvited guests. The threat of cybercrime to business, public and non-governmental structures is intensifying because organizations accumulate and store information in various storage that could provide criminals with entry points into internal networks.

On May 3, the School of Science and Technology of the University of Georgia, in cooperation with Internet Development Initiative, hosted the third International Festival dedicated to Cyber Security.

Participants of the event included the representatives of public and private sectors Greennet, ICANN and the Cyber Security Bureau.

Within the framework of the event, for the first time in Georgia, the ‘DNSSEC Security for Domain Name Systems,’ as well as the following issues, were discussed: • Cyber security ecosystem in Georgia; • Cyber threats and the role of the state; • Protection of critical infrastructure; • Cybercrime and international law; • Personality protection in internet space; • Internet and children.

The University of Georgia emphasizes the relevance of cyber security and actively tries to raise awareness on cyber security issues.

such, the unique artefacts presented as part of the exhibition, along with Georgian wine with such a long history generated special interest, which means that our project’s aim to promote Georgian wine and become increasingly demanded on the world's important markets, has been achieved.”

The event dedicated to the closing of the exhibition also hosted representatives of the diplomatic corps.

The dinner was held in the traditional Georgian way, lead by the first Georgian Odzeki, Tochinoshini. The guests received information on the history of the concept of “Tamada” and its significance. Japanese singers performed some of the most distinguished samples of Georgian pol-

yphonic songs at the ceremony.

According to Mekhuzla, within the framework of the ‘Georgia - Homeland of Wine’ project, similar expositions will be implemented in other markets strategic for Georgia.

The project was implemented in partnership with Sony Music Communication and TOPPAN. ‘Georgia - Homeland of Wine’ is organized by the National Wine Agency and Association ‘Georgian Wine,’ implemented by the Ministry of Environment Protection and Agriculture of Georgia, with the support of Intellectual Property Center ‘Sakpatenti,’ Ministry of Education, Science, Culture and Sport and National Museum.

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BUSINESS

GEORGIA TODAY

MAY 14 - 16, 2019

DCFTA Implementation: Partnership, Push-backs & Potential Conference

BY MARIAM MERABISHVILI

T

he implementers of the EUfunded project ‘Georgia on the European Way: Effective Model for DCFTA and SME Strategy Implementation’ hosted the project’s closing conference, ‘DCFTA Implementation: Partnership, Push-backs and Potential’ at Holiday Inn, Tbilisi, on May 8.

After signing the Association Agreement with the EU in 2014, a crucial part of which is the Deep and Comprehensive Free Trade Area (DCFTA), Georgia has come closer to integration into the EU market. The DCFTA simultaneously represents both an opportunity and challenge for Small and Medium-sized Enterprises (SMEs), activating institutional and regulatory reforms and helping approximate Georgian standards to those of the EU. Yet, it demands change in production processes as well as regulations of activities. As such, during the implementation, Georgia faces many advantages as well as various challenges.

The EU-funded project ‘Georgia on the European Way’ was launched in 2017 and lasted until spring 2019. The main aim of the project was to raise awareness about the opportunities and advantages provided by the DCFTA between Georgia and the EU. During the process, implementers tried to increase the crucial role of Georgian civil organizations in a nationwide DCFTA/SME communication campaign to help local SMEs access the EU single market through their strong capabilities. The project was funded by the European Neighborhood Instrument and

co-funded by the Lithuanian Development Cooperation and Democracy Promotion Program and the Slovak Official Development Assistance ‘SlovakAid.’ The project’s closing conference presented results in three main panels: 1) civil society engagement in economic development, 2) DCFTA and SME strategy implementation in Georgia and 3) DCFTA implementation in Georgia, Moldova and Ukraine.

The conference was opened by Giedrius Puodziunas, Ambassador of Lithuania to Georgia; Pavel Vizdal, Ambassador of the Slovak Republic to Georgia; Carl Hartzell, Ambassador of the European Union to Georgia; Khatia Tsilosani, Deputy Minister of the Ministry of Environmental Protection and Agriculture

of Georgia; and others. They congratulated Georgia on such a great project and highlighted the EU’s role as the biggest trade partner of Georgia. They talked about the standards Georgia has to approximate to those of the EU, and about the EU’s support in info-sharing, finance, entrepreneurship support, training programs for companies and more.

The civil society engagement panel looked into the current position of civil society organizations (CSO) and their capabilities to work on economic issues, helping the Georgian government and SMEs to effectively access the EU single market. The panelists talked about experiences and good practices for civil society organizations seen during the project, including their workshops, the act of

delivering the right information about the DCFTA and EU, and the advantages, benefits, energy efficiency, EU directives, regulations, role of cooperatives and advocating for reforms and improvements to the implementation process.

Results showed how CSO awareness had increased (before the project only 12% was very familiar with the DCFTA, and after 83%) but spotlighted the need for more trainings and consulting. At the conclusion of the project, the main results concluded that: 1) after the right communication and info-sharing, people had changed their standings towards the DCFTA, forming perspectives and breaking the old stereotypes; and 2) civil society organizations should be a key link between government and SMEs.

The session ‘DCFTA and SME Strategy implementation in Georgia’ focused on SME conditions today, surveying how they operate, what they export and on raising awareness of how SMEs can benefit from the DCFTA. The discussion included what progress has been achieved in Georgia-EU trade relations since signing the DCFTA, what kind of products the country exports to the EU, and the long-term progress that can be expected.

The main obstacles for SMEs, such as getting the certificates needed to export, qualified employees, financial problems, language barriers, lack of laboratory centers, less active approach, were noted and it was advised that “Georgia should continue such projects,” and “needs to do more for further benefits.”

The last panel focused on ‘DCFTA Implementation in Georgia, Moldova and Ukraine,’ looking at the varied challenges and perspectives and the impact on ordinary citizens. Panelists talked about what impact the DCFTA has on the countries’ economies, what progress has been achieved in the framework of the Eastern Partnership document ‘20 Deliverables for 2020,’ and emphasized what needs to be done further.

Overall, the topics discussed at the conference showed the real partnerships, push-backs and potential of DCFTA implementation. Georgia has come steps closer to integration into the European market; however, it has much more to do.

Such projects are vitally important, the moderators and panelists agreed, and further awareness needs to be raised about the real benefits of the DCFTA for people throughout Georgia to help SMEs do their jobs more effectively and to those standards that the EU has and requires.

Future Agro Challenge Held May 10-12 in Tbilisi

BY SAMANTHA GUTHRIE

T

he 2019 Future Agro Challenge Georgia was held on May 10-12 at Tbilisi’s Tech Park.

Future Agro Challenge is an international competition that aims to foster a community of startups, farmers, manufacturers, distributors, and what the organization calls “agro-visionaries.”

The competition brings together stakeholders from countries worldwide to start a global conversation, focused around discovering fundable food, agricultural technology, agro-tourism and agriculture innovators and “agripreneurs.”

This is the first year Georgia has participated in Future Agro Challenge, supported by the Tbilisi Startup Bureau, Georgian Innovation and Technology Agency (GITA), and Beeline. Each year, there are different categories delimited

by Future Agro Challenge. This year, there are nearly 30 categories, ranging from the more traditional: agro tourism, farmers’ incomes, indoor agriculture, and food traceability and safety, to the innovative: dairy alternatives, drones and robots, food e-commerce, and precision agriculture.

Participants in the Future Agro Challenge are owners of an agribusiness venture that has existed for less than five years, which claims an innovative, scalable clear business model, has a customer

segment, has initial market traction or a Minimum Viable Product (MVP), and has unique, strong and applicable technology or innovation.

In the weekend’s competition, Georgian agribusiness startups participated in a 48-hour hackathon after which the eight finalist teams pitched their agribusiness concepts to a panel of judges. The winning team, Qvevri XYZ, was deemed “Agripreneur of the Year.” Qvevri XYZ was selected by the judges to represent Georgia at the Future Agro Challenge Global Championship, a central event of the Global Agripreneurs’ Summit, which will be held this year September 7-11 in Thessaloniki, Greece. Participation in the Global Championship will grant the national winner access to world class mentors, investors, potential clients and new market opportunities, along with winners from 59 other countries. The national winner was also granted a cash prize.

The grand prize winner, Qvevri XYZ, is a young Georgian company that has decided to take on a national icon, the qvevri, a clay amphora-shaped vessel traditionally used for fermenting wine.

While the qvevri wine-making method was granted the status of Intangible Cultural Heritage by UNESCO in 2013, Qvevri XYZ argues that the 8000-year-old “primitive methods of production,” make modern qvevris “inaccessible, inconsistent and not of good quality.” They offer another approach: 3D printed qvevris.

The company pledges to retain elements of the traditional qvevri-making process,

Image source: Future Agro Challenge

blended with modern technology to “improve its structure and quality, yet [keep] its unique characteristics.”

Two other ventures were recognized at Sunday’s finals: Insect Killer, a company that manufactures a device to catch and kill the brown marmorated stink bug that has ravaged Georgian agricul-

ture in recent years, received a GEL 2000 ($730) cash prize, and SoilQuick Tester, a hardware and software product that helps quickly test the soil, which received technical assistance from the Georgian Farmers’ Association.

Future Agro Challenge Georgia’s partners are the Friedrich Naumann Foun-

dation for Freedom South Caucasus, Caucasus University, ISET - International School of Economics, Agro Solutions, Wolt, Agricopter, Gogra.ge, Georgian Farmers' Association, Enterprise Georgia, Georgian National Tourism Administration, and the Tbilisi Night Economy Development Project.

BUSINESS

GEORGIA TODAY MAY 14 - 16, 2019

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MJERA is a Georgian Word and it Means “I BELIEVE”

M

JERA is willing to support new projects to become real, like natural forces (4 elements) that create new life. MJERA believes that life is art. The food we eat, the

music we listen and dance to, the books we read, the houses we build and live in, the nature and everything else that surrounds us – in essence is creativity, passion and art. Using unique ways of connecting different industries in artistic way,

MJERA supports all industries, because all industries are creators. It is never too early or too late, so MJERA encourages all ages. Nothing in life is set in stone and MJERA wants to unfold what’s hidden inside. You don’t have to follow a system

and MJERA drives you to find your own, unique way to express yourself, via creativity, art and passion for distinctive thinking and positive change.

MJERA in US!

Agro Investment Business Forum Takes Place in Zugdidi

BY THEA MORRISON

T

he western Georgian city of Zugdidi hosted the Agro Investment Business Forum on Saturday, which focused on the development of the regions and producing ecologically clean products in the country.

The forum was opened by the Prime Minister of Georgia, Mamuka Bakhtadze, Minister of Environment Protection and Agriculture, Levan Davitashvili and Samegrelo-Zemo Svaneti Region Governor, Alexander Motserelia.

In his speech, the PM focused on the importance of promoting enterprises which produce ecologically clean and organic products. According to him, step-by-step, the government will abolish taxes for such enterprises.

“The world must come to know us as a country manufacturing ecologically clean products, and that is what will help us defeat poverty and to advance Georgia's agriculture sector to a new level of development,” he said.

Bakhtadze noted the Government’s new initiative, Plant the Future, raises the upper limit of co-financing from the State from GEL 100,000 to 250,000 GEL, noting it will promote local production of agricultural products.

The Prime Minister also spoke about the importance of tea production potential, saying a decision has been made to further enhance support in this direction.

“The Samegrelo region has great potential to become a successful region in agricultural production, especially with its various kinds of grapes,” he said, going on to highlight that without overcoming poverty, Georgia cannot be successful, and developing agriculture plays an enormous role in this regard.

“Regional development, with special

emphasis on agriculture, is the only way to ensure Georgia's success. A strong Samegrelo and strong regions stand for a strong and prosperous Georgia," he added.

The Prime Minister said the government aims to not only replace import, but to transform Georgia into an exporter country.

Image source: PM’s Press Office

Minister Levan Davitashvili also delivered a speech, emphasizing the agroprojects implemented by the State, which contribute to the development of agribusiness in the country and allow local farmers to increase production.

The Minister said within the state-initiated Unified Agro Project, 25 new enter-

prises were created, and 45 existing enterprises were expanded and recovered.

In addition to this, within the same project, more than 2100 new jobs have been created in the Samegrelo region through these enterprises. New gardens and orchards have been laid on more than 500 hectares of land and the reha-

bilitation of tea plantations over an area of over 450 hectares has been carried out throughout.

Davitashvili noted that such forums promote active communication between the State and the private sector and provides the possibility of development of existing agro-production.

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BUSINESS

GEORGIA TODAY

MAY 14 - 16, 2019

Georgian Women’s Path to Leadership

Photo Source: WEN

BY GABRIELLE COLCHEN

T

he Women Empowerment Network (WEN) is a project that unites 17 young ladies and 17 successful mentors promoting gender equality and women leadership in Georgia. It was initiated and organized by the NGO Center for Progress and is implemented with the support of the Dutch Embassy in Georgia. GEORGIA TODAY had the chance to interview Maia Kveladze, Director of the network, and Diana Khomeriki, a young lady participating in the project and working at the Georgian Chamber of Commerce and Industry.

WHAT IS THE SITUATION OF WOMEN IN GEORGIA? Equality in the access to opportunities for women and men is still an issue

worldwide, and Georgia is no different in this regard. On the one hand, we know many examples of strong women from Georgian history as well today, but we can still say that Georgia is quite a masculine society and it can be very hard for a woman to achieve positions with decision-making power. Every member of society must have the same opportunities to participate. It is especially hard for recently graduated students to find good working positions if they have no contact with people already working in their field.

Things are already changing in Georgia and some young ladies can go abroad to study and come back with new ideas. A lot of things have been done at the legislative level to ensure equality between men and women, but in practice, the reality is quite different. It is a problem that comes from socially constructed ideas. There is no restriction on women entering politics, theoretically, at the level of legislation, but in practice, women

working in parliament are not in the top positions where decisions are made.

Another example is the difference between the wages of men and women, which is still extremely high. The issue is especially present in the regions, where populations tend to be more traditional.

We need to understand that gender equality is not an idea coming from the West: it is inherent to Georgian history and Georgian culture.

HOW WOULD YOU DESCRIBE THIS NETWORK? WHAT ARE THE GOALS OF SUCH A PROJECT? The project was initiated less than a year ago and we have two main goals. The first is to establish a network between female leaders and young ambitious girls, and the second is to facilitate policy change related to gender issues. We realized that we already have a lot of successful Georgian women and that students who are just finishing their studies could benefit from their experience. We

decided that they could meet with mentors several times and write policy documents. There is no other idea behind our project: it is just a network in which people support each other. We are a team of around five people working on the coordination of these exchanges.

Our project includes 17 young ladies with very different profiles who are promising in their own fields. The other part of the group is made up of 17 already successful women who are mentors of each of the 17 girls. Some of them are entrepreneurs, journalists, theater directors, or are working for the government, such as Anna Dolidze, Doctor of law and Non-Judge member of the High Council of Justice, Tina Khidasheli who was the Minister of Defense of Georgia in 20152016 and Eka Mazmiasvili, Doctor of Arts Management and Director of the Marjanishvili Theater.

We organize several personal meetings between the girls and their mentors. One of the aspects is to go to the mentors’ office to see their everyday work. They share their own experience and explain how they achieved what they did.

Each of the 17 young participants have to write a policy paper with concrete propositions. For example, Diana suggested the creation of quotas in politics to enable women to break ceilings. It is quite a radical proposition but we believe it is a necessary and temporary measure.

Once women enter politics, other women will have the opportunity to do the same.

Sometimes, you have to force the situation before it changes naturally. We gave the proposition to parliament and we are waiting for an answer.

We also had meetings with important institutions such as the NATO Office in Georgia, the Gender Equality Council of the Georgia Parliament and the National Democratic Institute in Georgia.

We are training the girls to give them the skills necessary to become leaders.

They have trainings in academic writing and leadership. For example, we had a two-day training on leadership in Bakuriani with the former Minister of Defense

in Georgia. We also had a training held by the photographer of the former president.

WHAT CHALLENGES ARE YOU ENCOUNTERING? The selection of the girls was tough. We had more than a hundred applications and we took only 17 girls. It is also hard to manage the exchanges between the girls and the mentors because they are very busy, though for that reason our project is very flexible.

We need women to believe in themselves and believe that they are great leaders. Most of the women do not believe that they are qualified or strong enough and as such lack confidence. For example, Eka Mazmiasvili never realized that she was the only female director of theater in Georgia. Women are very humble, they want to achieve a lot and do not always realize how much they have already achieved. It is all about the attitude.

WHAT IS YOUR MAIN ACHIEVEMENT AND WHAT ARE YOUR FUTURE AMBITIONS FOR THE PROJECT? Our girls are already gathering with the mentors without our coordination, so we’ve already managed to create a sustainable network.

The project is also becoming very popular and we are facing a lot of demand from girls who want to get involved in it, which is very positive. No other sustainable projects of this kind exist in Georgia. We would like to grow bigger and supervise more girls.

In future, we would like to export our project to the regions and support girls there. For now, participants are mainly from Tbilisi. Also, we will have new mentors sharing new experiences next year.

Their Facebook page: https://www.facebook.com/wen.org.ge/ The interview has been edited for more clarity.

Shovi Resort Development Plans Aim to Attract $60 mln in FDI

BY SAMANTHA GUTHRIE

A

new plan to turn the small resort village of Shovi in the Racha region into a massive tourism complex is being led by real estate development firm Simetria. Simetria is a member company of Capitol Management, an investment management and support company.

Initial speculation over the plans surfaced in February, when Simetria signed a cooperation agreement with the Kazakh Business Group, which owns the rights to 60% of the territory of the Shovi Resort. Within the terms of the agreement, Simetria will take the lead in developing the Shovi Resort into a unique, luxury tourist center in Racha.

The project is currently in the exploratory stage, analyzing the 16 different mineral waters that the resort claims, and finalizing the development plan for utilizing the balneological and mountain tourism resources. Expert consultants from Austria and Germany have been hired to support the process.

Simetria’s webpage explains that “all of [their] projects...rely upon reliable and up-to-date market research and analysis.”

Capitol Management has expressed its expectations that the project will attract approximately $60 million in foreign

Image source: Shovi.ge

direct investment.

“The project will arrange for a new and unique tourism center in Georgia, which will host about 56,000 high-income tourists every year. The Racha region is the second poorest region in Georgia, after Guria. Therefore, attracting tourist inflows to this area will essentially improve the economic situation in the region,” Capitol Management representatives told BM.ge in February.

Simetria has pledged to actively cooperate with local and national governments, private businesses in the region, and the local residents to ensure that the new Shovi Resort respects the natu-

ral environment and local conditions.

The company explains that they aim to create “interesting and original concepts distinct from other projects on the market.”

It was announced this past week that negotiations are now underway with the Georgian Partnership Fund, which Simetria expects will result in a $15 million input from the Fund. The state-owned Partnership Fund has an equity value of 1.4 billion GEL ($50 mln). It provides equity financing to financially viable projects, focused on foreign investors.

The Partnership Fund acts as a “silent partner,” to decrease the risks of invest-

ing in Georgia for new foreign investors.

The Fund finances a maximum of 49% equity and offers managing partners the option to buyout Partnership Fund shares at any point. The shares can also be sold on the market. Tourism is a priority sector for the Fund.

In August of last year, Prime Minister Mamuka Bakhtadze visited Ambrolauri, the administrative seat of Racha, and announced his plan to transform the region into a major tourist destination with year-round appeal. “Our aim is to turn Racha into a four-season destination,” said Bakhtadze, “Our goal should be to at least triple the number of tour-

ists and visitors coming to this region of the country.” He pledged increased investment to improve infrastructure and support local businesses. “21 infrastructure projects are being implemented, of which 18 are close to completion. It is essential to maintain momentum in the construction and rehabilitation of rural roads,” the Prime Minister confirmed. One infrastructure project in the pipeline is the plan to expand the small airport in Ambrolauri to accommodate higher tourist flows. Bakhtadze claimed that only 10-15% of the full potential of the region is being realized. “The next stage will of course involve the rehabilitation and development of very important tourism sites in Shovi and other destinations,” Bakhtadze hinted in August.

Simetria was founded in 2015. Its webpage describes its mission as “to maintain the best architectural environments for residence, work, relaxation and entertainment.” The company develops hotels, residential homes, business centers, parking lots, and retail centers.

Shovi is an alpine health resort perched on the slopes of the Greater Caucasus Mountains at 1600 meters above sea level. The area is best-known for hiking trails through rich forests to glaciers and lakes, and its various mineral water springs. The current complex offers a few small cottages and a rustic, local feel. Simetria plans to begin construction next year.

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BUSINESS

GEORGIA TODAY

MAY 14 - 16, 2019

Handling Frozen Conflicts: the Economic Angle

BY ERIC LIVNY AND TOM COUPE

I

t now seems more and more likely that Eastern Donbass (the area currently controlled by the selfproclaimed Donetsk and Luhansk People’s Republics) will become a frozen conflict zone, a territory in which the Ukrainian government will have little power to enforce its laws and where slowly a parallel governance system, an unrecognized ‘quasi-state’, will emerge.

In the absence of a viable military alternative, one option likely to be considered

by Ukraine and its Western allies is to exercise ‘strategic patience’. As discussed in a Foreign Policy article by Lincoln Mitchell and Alexander Cooley, this approach has been until recently employed by Georgia and the US in their dealings with Abkhazia and South Ossetia. ‘Strategic patience’ consisted, according to Mitchell and Cooley, of: “helping Georgia develop into a prosperous and democratic country under the assumption that once this happened the people of Abkhazia would naturally want to rejoin Georgia. In practice, therefore, StratPat meant doing nothing – certainly not building relationships with anyone in Abkhazia.”

‘STRATEGIC PATIENCE’ OPTION ASSESSED An important assumption behind ‘strategic patience’ thinking is that quasistates (QS) emerging in contested frozen conflict zones will not do well either politically or economically, fueling a sense of frustration with the corrupt regime and the breakaway status quo.

Prima facie, there are good reasons to expect QS, such as Transnistria, Nagorno Karabakh, Abkhazia, South Ossetia, and, potentially, also Eastern Donbass, to implode in the absence of international recognition and economic isolation. In his 2006 article “The Sustainability and Future of Unrecognized Quasi-States”, Pål Kolstø lists some of the obvious reasons for their difficulties.

First, QS are typically off to a bad start, with much of the infrastructure lying in ruins after a ferocious civil war fought (mostly) on their territory prior to secession. While there is considerable empirical evidence suggesting that wars do not necessarily inflict long-term damage to a country’s economic development, a crucial condition is that war really ends and is followed by stable peace (see, for example, “Civil War” by Christopher Blattman and Edward Miguel (2010)).

Second, like any new states, QS at least initially lack in governance machinery and skills, and are unable to collect taxes and perform the basic functions of government, ensuring personal security, let alone property rights. These initial difficulties (often shared by the parent states – Ukraine, Georgia and Moldova) are compounded by the lack of international recognition. As argued by Kolstø, the QS status “puts a damper on normal legal trade with the outside world, and encourages illegal business”. While enriching the political elite of QS (through cuts and kickbacks), smuggling and other types of illegal business do not help QS emerge from the post-civil war institutional limbo and develop a normal, busi-

ness friendly institutional framework.

Third, non-recognition carries additional economic cost as foreign investors will be reluctant to invest in a jurisdiction where legal contracts are not internationally binding, international conventions have limited applicability, and investment may be wiped out through an outburst of hostilities (such as the 2008 war between Russia and Georgia over South Ossetia).

Yet, despite these less than auspicious circumstances, neither Abkhazia nor any other QS on the fringes of the former USSR have succumbed to more than 20 years of isolation and non-recognition.

Rather than crumbling and crawling back, these “frozen economies” appear to be doing sufficiently well to establish a reasonable degree of internal legitimacy and sustain themselves over time.

In part, this has to do with the unenviable condition of the parent states’ own economy and politics. Both Georgia and Moldova were failed states for much of the 1990s – corrupt, criminal, plagued by brain drain and, as a result, not attractive enough for the ‘strategic patience’ policy to work. The other major factor for the economic and military sustainability of unrecognized QS has been the existence of a powerful external patron.

What Russia is for Abkhazia, South Ossetia and Transnistria, Armenia is for the Nagorno Karabakh Republic (NKR). The same pattern is also to be found elsewhere: EU and NATO ‘patronize’ and protect Kosovo; US and Turkey do the same for Taiwan and the Turkish Republic of Northern Cyprus (TRNC), respectively. The presence of these two factors – an (initially) weak parent and a strong patron – are hardly incidental. Both are at the root of the secession phenomenon in the first place.

While none of the post-Soviet QS are star performers, the scanty evidence that is available to us suggests that the

policy of ‘strategic patience’ has not been very effective so far. Despite very bad initial conditions and the high toll on investment and quality of institutions exacted by the lack of international recognition, QS do well enough to generate a sense of loyalty and patriotism among the local population that chose (or ‘was chosen’) to remain under their control. At least in the case of Transnistria, the parent state (Moldova) failed to decisively outperform its former territory. While, arguably, Georgia has accomplished a great leap forward since 2003, this did not translate into a change in perceptions and political preferences on the Abkhazian or South Ossetian side of the divide. Moreover, an economically stronger and modern Georgia may be perceived as more of a threat (particularly, after the 2008 attempt at forceful re-unification with South Ossetia).

Public perceptions have been a subject of a very interesting set of parallel surveys conducted in 2010 by John O’Loughlin of the University of Colorado at Boulder, together with several colleagues. Simultaneously held in Georgia and Abkhazia as well as in Moldova and Transnistria, these surveys suggest that people in QS are not necessarily unhappy about their existence. In “Divided Space, Divided Attitudes? Comparing the Republics of Moldova and Pridnestrovie", O’Loughlin et al argue that while being richer (according to ‘official’ per capita income data) people in Transnistria feel richer. Moreover, a higher share of people in Transnistra think that their country is better off than Moldova compared to the share of Moldovans thinking that Moldova is better off than Transnistria. The findings of O’Loughlin et al for Abkhazia and Georgia (“Inside Abkhazia: a survey of attitudes in a de facto state") are quite similar, lending little support for the ‘strategic patience’ doctrine.

LESSONS LEARNED FOR UKRAINE With a population estimate of 3mln, the eastern part of Donbass (not controlled by the Ukrainian government) is much larger than all other post-Soviet QS. In terms of its size and economic structure, it is closest to Transnistria (about 500,000 citizens). Both Donbass and Transnistria have been the mining and industrial centers of their parent states and have rather similar human capital and factor endowments. Designated for manufacturing by the Soviet planner, both have been magnets for internal migration by (mostly Russian) engineers, technicians, miners and steelworkers. This Soviet legacy puts them at an advantage relative to three tiny ethnic enclaves in the South Caucasus which have been historically specialized in tourism (Abkhazia) and agriculture (South Ossetia and Karabakh).

Like Transnistria, Eastern Donbass is likely to be on the receiving end of Russian subsidies, trade contracts and infrastructure investment, and last but not least, military protection. Eastern Donbass’ size and the fact that it directly borders on Russia further weakens the case for isolation and ‘strategic patience’ as a means of achieving re-unification.

What are then the options for Ukraine and Eastern Donbass?

While the pain is all too fresh for both sides in the recent conflict, the only viable strategy for reunification is mutual political engagement and economic integration. The rationale to re-integrate economically (in all frozen conflict areas) will only get stronger over time, and will undoubtedly play a role in bringing divided people together, once the memory of war and human loss recedes into the background. What may support a move towards greater economic (and, eventually, political) integration is the fact that despite years of separate exist-

ence, people in divided areas continue to share the same values. Such is another finding from the survey work conducted

by O’Loughlin et al in Transnistria and Moldova, Abkhazia and Georgia.

Despite the lack of recognition and years of hostility, economic integration has eventually made it to the agenda of Transnistria and Moldova. A sizeable share of Transnistria’s exports goes to the EU (through Moldova); discussions are underway concerning construction of additional bridges over Dniester to improve communication and trade linkages.

After more than 20 years, Georgia is also gradually coming to realize that negative rhetoric (branding secessionists as “Russian puppets” and “terrorists”) and continued military and political confrontation are counterproductive in the sense of keeping the borders sealed and preventing mutually beneficial trade and human connections. Back in 2012, Bidzina Ivanishvili made economic linkages (e.g. reopening the railway connection to Russia via Abkhazia, and restoring the famous Ergneti market straddling the border with South Ossetia) a key subject of his election campaign. While yet to be realized, Mr. Ivanishvili’s pragmatic vision of using mutual economic interests in order to overcome the trauma of recent bloodshed, is worth of serious consideration

by Ukraine and all other parties to frozen conflicts in the region.

This piece also appears on VoxUkraine.

ABOUT 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). Tom Coupe is Associate Professor at University of Canterbury and former President at Kyiv School of Economics.

BUSINESS

GEORGIA TODAY MAY 14 - 16, 2019

Turnava: Ministry of Economy to Be Exemplary

BY THEA MORRISON

G

eorgia’s new Minister of the Economy and Sustainable Development, Natia Turnava, says that she has a clear vision of what needs to be done to make the ministry successful.

“I see the tasks that we have to achieve and I will do everything to ensure that our ministry is the driving force of the government and that it keeps up with the pace,” she told Forbes Week.

The Minister explained that different departments of the ministry will have different tasks.

“Every plan will have a responsible person and I personally will be responsible for fulfilling all the plans the ministry has,” she added.

The Minister of Economy and Sustainable

Development focused on the protection of local businesses, highlighting the need to protect the Georgian business and Georgian production not only inside the country but on the foreign markets.

“The first is an investment policy based on the 'one window principle,' which also promotes privatization processes. For this purpose, we are planning to reform the Property Management Agency.

For further accelerated economic growth, we need to activate all reserves and adjust the investment policy to the needs of investors,” she said.

Turnava said that the task of the ministry is to distribute the economic growth of the country to each citizen.

Natia Turnava became the Minister of Economy on April 18, when ex-minister Giorgi Kobulia was dismissed. From July 12, 2018 to April 18, 2019 she was the First Deputy Minister of Economy.

Owners of Multiple Cars Might Pay Taxes

BY THEA MORRISON

T

he results of a thematic study published by the Environmental Protection and Natural Resources Committee of Parliament read that people who own three or more cars should be subjected to special taxes.

Member of the Committee, MP Giorgi Khatidze, clarifies that there is an ongoing discussion as to whether such taxes should be introduced or not, adding a decision has not been made.

In addition, Khatidze explains that if a positive decision is made, it should happen so that the tax will not be an extra burden for citizens.

“Not only old vehicles but fuel quality also pollutes the air. We should have a complex approach to this topic. Any issue related to additional taxes is very sensitive for the public. Hence, our approach is to discuss and simultaneously create such regulations that will reduce air pollution and at the same time will not significantly affect the finances of our citizens,” he noted.

The thematic document reads that taxes should be imposed on people according to the volume of the car engine.

“The larger the engine of the vehicle, the more it pollutes the air. Accordingly, the owners of motor vehicles with low volume engines will have preferential terms. These changes must be an encouragement for those who run ecologically clean vehicles,” the document reads.

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POLITICS

GEORGIA TODAY

MAY 14 - 16, 2019

Mtatsminda Elections: A Look beyond the Numbers

Sofio Khorguani

BY KYRA DEVDARIANI

T

he fight for the Mtatsminda district parliamentary seat vacated by Salome Zurabishvili as she moved on to Presidency is coming to its final stretch. With less than a week to go, the election day is Sunday, May 19, the race is getting heated, and several traits are shaping up into what may very well define the next Parliament in 2020.

With the main concerns of the voters being unemployment and rising prices, low wages and poverty, people seem to have grown tired of the two major parties that have been in power for the last 15 years. In Tbilisi, almost half of the voters either have a difficult time picking between the two, or openly root for the new political force, the third power, to emerge and pull the country out of its current state. Mtatsminda is an excellent choice to test some ideas and formats: it’s a decent-sized district with some 43,000 eligible registered voters, and the turnout is projected to be around 70%. The district itself is, in many ways, representative of the whole Georgia: an old settlement with multinational neighborhoods where building the new needs to be balanced with protecting the old.

Crumbling infrastructure, an onslaught of developers, gentrification, tourists, new cultures, reconciling them with the existing identities, historically high tolerance, overwriting the narratives and, against this complex background, the candidates’ takes on these issues.

What makes the race for a sole spot in Parliament even more interesting is that all the available polls show it to be quite unlikely that any candidate will break 50%, which means a second round of elections. The field is overcrowded, with 20 entities on the ballot: 14 from the parties and six independent candidates. On the surface, it’s business as usual: 18 parties and electoral blocs applied to the Central Election Commission (CESKO) at the “show of interest” stage. Traditionalists and the People’s Party were unable to proceed to the registration stage due to a lack of signatures to show preliminary voter support, as prescribed by the law. Thirteen parties registered, uneventfully, which leaves us with the three entities: the UNM, European Georgia and the Free Democrats.

European Georgia is a spinoff from

UNM and is widely known as Euro-UNM, so their trade-off deal makes perfect sense: the mothership called off its participation in the parliamentary elections in Mtatsminda district and threw its weight behind the “Euro-nationals” in exchange for the latter providing all kinds of support in the Zugdidi mayoral race.

An MP for a mayor seems like an uneven swap, but Zugdidi is a high-stake battleground, where UNM’s beleaguered exleader’s wife, Sandra Roelofs, is vying for a win and Euro-UNM’s regional support would come in handy. While the UNM and its spinoff joining forces for any chance to defeat Georgian Dream anywhere they could didn’t surprise anyone, the later addition of the Free Democrats to the bloc raised many an eyebrow. On an ideological level, the Free Dems, under Alasania, were distinctly at odds with the party of Saakashvili, where the current European Georgia leadership held prominent positions.

Shavgulidze, who succeeded Alasania as a chair of the party, was widely expected to continue this line, especially since his prominence and recognizability rested on the Girgvliani case, a gruesome murder of a young man that has become the symbol of the abuse of power, lawlessness and rampant disregard of human rights under the Saakashvili regime.

Shavgulidze represented the family of the victim, standing up to those in power with professionalism and courage, and gained the respect of many while doing so; the idea that he would switch the sides and stand with those he labeled murderers and enablers, just to get elected, repulsed many. That he would try to get elected precisely in the district where the murder took place added insult to injury. It may have looked good on the paper, and in the preliminary polls, the Free Democrat base adding their votes to European Georgia, but in the Mtatsminda district, it may misfire badly.

Georgian Dream has a candidate issue of its own, albeit a less severe one: Kakhadze was running against GD-backed Zurabishvili in this very same district and became a “dreamer” for the sake of the parliamentary elections. He’s said to be a decent guy and a good doctor, although many doubt that yet another grandfatherly figure in Parliament is what a doctor would prescribe. With the ruling party’s administrative resources behind him, he does have a chance to make it to the second round, though.

Of course, not all parties have the same

ambitions: some throw their hat in the ring for every bout of elections, Presidential, Parliamentary or local, getting the state-mandated financing whenever applicable, use it up in salaries, gasoline charges and office supplies, and all but fade till the next scheduled outing. My personal favorite is the “Union Recovery justice voice of the people: The Lord our righteousness,” spelling and capitalization of the original letterhead, a one-man show of Mikheil Gela Saluashvili who shows no movement of funds on the accounts, but duly registers and files mandatory reporting to the Monitoring Service of the State Audit Office. (* Note: monitoring.sao.ge is a wonderful resource, and SAO responds to all calls in a superhelpful way – for those who might want to go through the numbers in more detail). Our numbers are based on data from two reporting periods (the last one, May 01-May 19, will be submitted after the elections): March 20-April 09, and April 10-30. The campaign finance reports are due within five business days from the end of a period, and certain entities will be facing SAO in court for failing to comply with the law, like Girchi (translated as “pinecone”), a party known for its theatrical stance on everything from military service to religion and cannabis laws. With undeniable appeal among younger voters, Girchi is often seen as testing the boundaries, and might be pining for its day in court (pun intended) as a matter of strategy. Most importantly, it doesn’t prevent their candidate from running: Herman Szabo has been seen canvassing the district and putting his live feeds up on Facebook.

Still, there are only two serious contenders among the 14 items on the party list: the usual suspects, Georgian Dream and the Euro-UNM-Free-Dem bloc, who operate the purses that can withstand over half a million GEL in advertising expenses, with items like candidate photo sessions, flags and songs, in addition to

ubiquitous billboards and banners peppered throughout. This is a luxury independent candidates and even well-established parties simply cannot afford. Now, the “indies” are making the case that they don’t even need to go down the road of “the one with the most money wins.”

The six independent candidates make a very interesting group, but we will talk of three, as Tamar Alfaidze and Ioseb Koberidze show no activity, financial or otherwise, in the whole campaign period.

Koba Davitashvili, once a brilliant lawyer considered a rising star in the Georgian legal field, now lends his voice to “say no to LGBT” and alt-info videos making up his Facebook feed; more importantly, his spending, or lack thereof, shows that his heart isn’t really in the race. For the remaining three candidates, the LGBT pride day on May 17 and the counterparade of “Family Purity” backed by the Georgian Orthodoxy, should be an easy test to pass: they are progressives and respect the rights of all, regardless of their orientation or identity.

Youngest of the remaining three, Grigol Gegelia got off to a late start, and started spending mid-April, printing 2,000 copies of a flyer, but has been trying to attract attention by announcing a street action themed around the Rustaveli movie theater. The non-issue got swiftly debunked, and the cause for a street protest died with it, but Gegelia scheduled another one, on the Sunday before the elections: a procession through the electoral district. While he is not expected to make any impact in the May 19 elections, he’s may well have a future ahead of him. Lado Papava, a member of the Gegelia team, made an excellent point while taking questions on a TV show: media needs to quit painting the elections as a two-horse race; there are others in the fray, and journalists need to pay attention.

Two independent candidates deserve

Levan Ioseliani and his backer Alexander Elisashvili

a good look, as they might break into the second round: Khorguani and Ioseliani.

Both have been accused of being notso-independent, and there might be some truth in it. Sofio Khorguani has been opposed to UNM rule both in her pervious line of work and in principle, and showed staunch support for GD early on. However, her tune changed and showed signs of disillusionment with the current lineup, which may hint at a readiness to join a “3rd power” that many voters are hoping for, if and when it emerges – or, maybe, even lead it. Levan Ioseliani, however, is not in a position to lead any 3rd power, as he’s nominated

by Elisashvili, who is testing waters before forming a party of his own. This is a trial run for both, as they need to show that they can deliver swing votes: something that European Georgia toyed with (adding Elisashvili to their current bloc), but ultimately, decided against. Ioseliani started fast out of the gate, spending in excess of 2,000 GEL on outdoor banners and billboards, printed booklets and branded accessories – more than all the other independent candidates together.

Khorguani had a contrasting approach, putting in less money, but more long hours of canvassing the district on foot and meeting hundreds of potential voters in a door-to-door effort before the other candidates picked up on it and followed suit. These individual talks, non-scripted, non-filmed interactions, are a very welcome change that candidates have embraced, a change that was long overdue.

Regardless of whether an independent candidate makes it to the second round or not, excitement is in the air: non-party faces bringing to the table issues that voters care about deeply, low-budget campaigns seeming to have true connection to the population they want to represent, people finally starting to appreciate their power of being heard.

Mtatsminda spring, anyone?

CULTURE

GEORGIA TODAY MAY 14 - 16, 2019

15

Charlie Chaplin in Tbilisi

BY IRAKLI MAKHARADZE

T

bilisi (known as Tiflis until 1936) is a city of bustling life. It is diverse, rich, original, and in the Middle Ages was called the “City of Joy.” In the mid-20th century, an Italian Opera House was opened in Tbilisi and the whole city sang Opera arias. Later came the circus, a world in which all feel good: adults and children alike.

The circus has always attracted artists for its raging color palette, comedy and drama, images of the clown Pierrot, a character of the Comedia dell’arte: Domier, Renoir, Degas, Watteau, Picasso, Leger, Vasily Shukhaev. The sensitive boy Zurab Tsereteli was also fascinated by the circus. Gymnasts, acrobats, jugglers, illusionists and clowns gave the future artist a joyful world full of dynamics and drama. Ernest Hemingway said: “The circus is the only performance that makes you feel like you are sleeping and seeing a really happy dream.”

The circus artists were considered social outsiders, poor and independent.

The master dedicated to them a number of works whose mood echoed the words of Marc Chagal: “Circus! A magic world, the age-old parade of entertainment before our eyes, where tears, smiles, gestures obtain the quality of great art.

And what circus do people get in return?

The night brings them solitude and sadness lasting until the next day and the next evening; in the fire of the electric light heralding the renewal of the old life. For me, the circus is a most tragic performance.”

A special place in Tsereteli’s work belongs to birds and animals to which the artist gives human traits, often plac-

had a cat in my arms.” The master presented Geraldine as a gift the model of the sculptural composition ‘Charlie Chaplin.’

“Is it possible to say that Chaplin is one of your favorite images?” The artist was asked. “I used to really love portraying him,” he answered. “But now that I have met his daughter, I will paint them together.”

The compositions with Charlie Chaplin are not literal portraits of the actor: they take a high poetic form of the sad clown’s image. The great actor wrote: “For more than 40 years, I have made people laugh. But I cried more than they laughed.”

The meaning of art is not to convey the visible, but to make the invisible visible. When we look at the world through the camera lens, we see the visible. But if we look out of focus, we see something else, and this opens up the artist’s vision.

Despite the melancholy of some of Tsereteli’s works depicting “the little tramp,” these artworks contain the principle idea of the master: good always defeats evil, and love is the main value of life.

Among the two masters, Chaplin and Tsereteli, there are many common things: both of them are self-made men; they are unique identities whose talent was early revealed, and to reach the top, they needed a lot of effort and energy.

The mental closeness of Charles Spencer Chaplin (Charlie) and Zurab Tsereteli, as artists, creative personalities who largely determined the image of the era, has resulted in a series of unique artworks created over forty years…and this creative dialogue continues.

ing them in human life situations.

The “humanization” of an animal or “replacement” of a man by animal is well known in the history of world art and literature. This allegorical technique was very popular in the improvised folk theater “Berikaoba” which presented masks of characters and masks of animals. The character-animals in Tsereteli’s canvases are full of feelings and emotions, love and fidelity, game and slyness, sorrow and joy.

In the late 19th century, the cinematograph, or the Great Silent as it was then called, was born. Later, there appeared films featuring Charlie Chaplin, about a sly, kind and sad tramp with a funny walk. Tsereteli, together with his grandmother, watched these films, experiencing and laughing at the adventures of the hero with a cane. Later, the image of Charlie Chaplin’s “small tramp” inspired Tsereteli to create a series of works combining real cinema scenes and the artist’s imagination.

The artist placed Charlie in the atmosphere of Old Tiflis, where the image immediately became native, as if he had been born and raised in the city. We can see Charlie’s character with a street shoe cleaner, or together with his chum Kinto.

Charlie and the Kinto, one of the most colorful characters of Tiflis, have much in common: cheerfulness, a tendency to trickery, restlessness. Charlie himself in Zurab Tsereteli’s canvases sometimes looks like a Georgian, his plastic and facial expressions reminiscing the Imereti character of the classic of Georgian literature, David Kldiashvili.

The daughter of the great Charlie Chaplin, Geraldine, visited Tsereteli’s studio in 2011. In an interview, she said: “Zurab showed me a portrait where I was depicted together with my father. I was there, a little similar to a Georgian woman, and

The exhibition will open on May 15 in the Zurab Tsereteli Museum of Modern Art, 27 Rustaveli Avenue, Tbilisi.

SOCIETY

Justice Minister: There Is No More Ill-Treatment of Prisoners Continued from page 1

During the visit, the delegation assessed progress made in the implementation of the recommendations made by the CPT following the previous visit in 2014. In this context, the delegation paid particular attention to the treatment of persons in police custody and the situation of prisoners in penitentiary establishments, in particular those in high-risk and semiopen prisons, as well as juvenile inmates.

In addition, the delegation carried out visits to several psychiatric hospitals and, for the first time in Georgia, to an immigration detention facility.

"The conclusion proves that in Georgian prisons, in temporary detention isolators and in all penitentiary establishments, state violence against people has once and for all been eradicated,” Tsulukiani stated, adding that as the problem of ill-

treatment of inmates has been eliminated in Georgia, the Committee called on the government to protect the rights of inmates even better and to focus more on their re-socialization and rehabilitation.

The report on Georgia reads that the CPT delegation spoke with many persons who were or had recently been in police custody, and received hardly any allegations of ill-treatment by police officers.

“As previously, no allegations were heard of staff working in temporary detention isolators (TDIs). Furthermore, none of the very few allegations heard could be considered credible, backed by medical evidence and/or referring to the recent past. Overall, the CPT received a very positive impression of the sustained efforts of the Ministry of Internal Affairs aimed at combating police ill-treatment,” the report reads.

The delegation also said that they did

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not receive any allegations of ill-treatment by staff from the Temporary Accommodation Center (TAC) of the Migration Department of the Ministry of Internal Affairs. Further, it appeared that conflicts between detained foreign nationals were rare and never of any serious nature. The overall atmosphere at the TAC was “relaxed.”

Regarding the environment in the prisons, the delegation heard hardly any allegations of ill-treatment of inmates by staff.

Overall, as assessed, there was a “relaxed atmosphere and good staff-prisoner relations” in the prisons visited.

“Only a few isolated allegations were heard of excessive force used while prisoners were transferred to so-called ‘deescalation rooms,’ especially at Prison No. 6. The CPT stated that custodial staff in all Georgian prisons, and especially at Prison No. 6, would benefit from more

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

training in dealing with high-risk situations and challenging inmates, including in verbal communication, de-escalation techniques and manual control,” the report reads.

As regards inter-prisoner violence, the delegation said it was not a major issue in closed-type prisons, except for a few allegations and other indications. The report says this was hardly surprising given the very low staff/prisoner ratio and the limited presence of staff in inmate accommodation areas.

Moreover, the report says that at Prison No. 15, there was a pernicious influence of informal prisoner hierarchy. The CPT stressed that this was totally unacceptable; the (re)emergence of this phenomenon at Prison No. 15 was a troubling sign and major efforts were required to ensure that it did not spread throughout the prison system.

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The delegation also visited three psychiatric hospitals, where they found some violations, mainly in accommodation, treatment and lack of psychiatrists. The CPT called upon the Georgian authorities to make every effort to fully implement their 2014 de-institutionalization Action Plan and, in this context, substantially develop psychiatric care in the community.

The CPT was set up under the Council of Europe’s “European Convention for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment,” which came into force in 1989.

The CPT is not an investigative body, but provides a non-judicial preventive mechanism to protect persons deprived of their liberty against torture and other forms of ill-treatment. It thus complements the judicial work of the European Court of Human Rights.

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