Issue #1116 Business

Issue no: 1116/163

• JANUARY 15 - 17, 2019

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

Georgia, India to Launch Free Trade Talks

FOCUS ON BUILDING BETTER New construction material regulations come into force on 15 January

BUSINESS PAGE 4 PAGE 6

Image source: milrose.com

Georgia’s President to Transfer Her Salary to Special Fund

BY THEA MORRISON

Ambiente – Must-Visit Consumer Goods Fair to Reveal the New Styles of 2019 BUSINESS PAGE 5

Georgia’s Breakaway Regions: Should We “Forget” about Them?

A

t a press conference on Friday, President of Georgia Salome Zurabishvili has said she intends to transfer her presidential salary to a special fund.

Zurabishvili said that now that the Presidential Fund has been abolished, she should be a contributor to charity and innovative activities.

“I decided that a special fund is to be established for others strongly encouraged to follow my idea,” she said, adding she was already receiving benefits from an accumulative pension in France and therefore would be readily able to donate the presidential salary to other endeavors.

POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets As of 11ͲJanͲ2019

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m/m

Bank of Georgia (BGEO LN)

GBP 15.66 +14,6%

+16,0%

Georgia Capital (CGEO LN)

STOCKS

GBP 10.23

+1,1%

Ͳ2,6%

GBP 1.96

+2,6%

GBP 14.56

Ͳ2,2%

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

COMMODITIES

Under the changes reflected in the 2019 budget of Georgia, the Presidential Reserve Fund, the budget of which last year was GEL 5 million, has been abolished.

Moreover, the budget of the Presidential Administration will be GEL 6 million, down from GEL 9,800,000 in 2018.

In addition, the number of employees of the new President’s Administration will be reduced by about 60%. Currently, 140 people are working in the administration but within the changes, there will remain only 60 employees.

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

Price

BONDS

Price

w/w

m/m

GEOROG 04/21

100.70 (YTM 6.41%)

+0,1%

+0,1%

GEORG 04/21

105.44 (YTM 4.30%)

+0,1%

+0,2%

Ͳ10,9%

GRAIL 07/22

103.80 (YTM 6.52%)

+0,1%

Ͳ0,2%

+4,7%

GEBGG 07/23

97.64 (YTM 6.61%)

+0,3%

Ͳ0,2%

CURRENCIES

Price

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60,48

+6,0%

+0,5%

GEL / USD

2,6674

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+0,4%

1 290,25

+0,3%

+3,8%

GEL / EUR

3,0592

Price

+0,4%

+1,8%

GEL / GBP

3,4252

+0,6%

+3,3%

INDICES

Price

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GEL / CHF

2,7081

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+1,4%

FTSE 100

6 918,18

+1,2%

+1,6%

GEL / RUB

0,0398

+0,3%

FTSE 250

18 542,31

+4,2%

+5,0%

GEL / TRY

0,4882

Ͳ2,7%

Ͳ1,4%

DAX

10 887,46

+1,1%

+1,0%

GEL / AZN

1,5721

Ͳ0,3%

+0,5%

DOW JONES

23 995,95

+2,4%

Ͳ1,5%

GEL / AMD

0,0055

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NASDAQ MSCI EM EE

Ͳ0,5%

6 971,48

+3,5%

Ͳ0,9%

GEL / UAH

0,0950

Ͳ1,3%

Ͳ0,7%

160,96

+2,7%

+2,7%

EUR / USD

0,8719

Ͳ0,6%

Ͳ1,3%

1 001,11

+3,7%

+3,8%

GBP / USD

0,7787

Ͳ0,9%

SP 500

2 596,26

+2,5%

Ͳ1,5%

CHF / USD

0,9835

Ͳ0,4%

Ͳ1,0%

MSCI FM

2 601,81

+2,1%

+2,7%

RUB / USD

66,8925

Ͳ1,0%

+0,7%

GT Index (GEL)

1 582,68

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TRY / USD

5,4637

+2,5%

+1,8%

GT Index (USD)

1 208,13

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AZN / USD

1,6988

+0,2%

Ͳ0,0%

MSCI EM

Ͳ2,7%

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NEWS

GEORGIA TODAY

JANUARY 15 - 17, 2019

@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: Following four years of success, the family business ‘Gepherrini,’ a Georgian brand offering leather bags and accessories, is to add both a men’s and women's clothing line to its production.

1.2 million GEL has been invested in the Gepherrini project, and it now boasts 48 local sales points, eight of which are brand shops. Many of the products are created for the non-Georgian markets, however, with 38 stores worldwide currently offering the Georgian brand.

Gemuani Georgian dried fruit will soon be delivered to European markets. The product appeared on the domestic market in 2017, led by Nona Tordia within the state program ‘United AgroProject.’ Built on 1.300 sq.m. with a 5 mln GEL investment, the fruit plant is based in the Samegrelo region. 60% of production, in which the original health properties of fruit are preserved, is exported to The Netherlands and America. Belgium, Luxembourg and France are also to be added to the list of importers in spring 2019.

Rent out your car and make money with the C4R platform created by Giorgi Isakadze. Ideal for tourists, the concept beats competitors hands-down for its integrated system. Soon, additional features are to be added to the platform, meaning that renters won’t even need to meet the car owner, with “self-service” boxes to be installed in each vehicle which are accessed through a special code. Isakadze isn’t stopping at Georgia as he has plans to take the project to foreign markets too!

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

Georgia Celebrates National Flag Day

BY KETEVAN KVARATSKHELIYA

T

he National Flag Day is celebrated in Georgia on January 14. The State Council of Heraldry called upon the citizens of Georgia to raise or set the national flag in their homes, windows, balconies, fences, roofs and cars in order to praise and respect the primary symbol of the statehood and independence of Georgia as well as national and personal freedom.

The representatives of the State Council of Heraldry claim it is wrong to identify the flag with government establishments, political parties, protests and manifestations. “The national flag is the main symbol of dignity for each citizen and each family. It is also a symbol of national unity, the historical pathway of the nation, its spirit and striving for the future,” reads the statement of the Council.

There are few written sources available exploring the history of the flag of Georgia. However, it is supposed the current look of the ‘Gorgasliani-Davitiani’ flag comes from 1320, when King George V the Brilliant (1314-1346) received ‘the keys of Jerusalem’. From this time, the five-mark composition symbolizing Jesus and the heralds (in different varieties, including 5 cross images) has been presented as a symbol of Georgia, which is proved by many visual sources – Pietro Vesconte’s (1318), Angelino Dulcert’s (1339), Domenico and Francesco Pizzigano’s (1367), Gabriel Vallseca’s (1439) and others marine maps (portulans).

During Soviet times, the Georgian flag appeared with a hammer and sickle.

Image source: royal-flags.co.uk

The flag (above, right) was adopted in 1918 and kept for the three years of Georgia's independence from the Russian Empire. It was re-adopted in the early 1990s, during the presidency of Zviad Gamsakhurdia.

Yet a majority of Georgians, including the Catholicos-Patriarch of the Georgian Orthodox Church, supported the restoration of the medieval flag following the collapse of the Soviet Union. In 1999 the Parliament of Georgia passed a bill to change the flag to that designed

by Vakhtang Rurua. However, it was not

endorsed by then-President Eduard Shevardnadze and was thus adopted in the early 2000s by the main opposition party, the United National Movement, led by Mikheil Saakashvili in opposition to Shevardnadze's rule, and became associated with the Rose Revolution.

The flag was officially adopted by Parliament on 14 January 2004. President Saakashvili formally endorsed it via Presidential Decree No. 31 signed on 25 January, following his election as President. 14 January has since annually been marked as a Flag Day in Georgia.

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BUSINESS

GEORGIA TODAY

JANUARY 15 - 17, 2019

Georgia, India to Launch Free Trade Talks

BY THEA MORRISON

G

eorgia and India are to launch free trade negotiations. Georgia’s Ministry of Economics reports that a joint research group, studying a free trade agreement (FTA) economic expediency between the two countries, held a meeting on the issue.

The meeting was attended by the Deputy Minister of Economy and Sustainable Development of Georgia, Genadi Arveladze, and the Additional Secretary of the Ministry of Commerce and Industry of India, Bidyut Behari Swain.

Within the framework of the meeting, a document was signed on completion of the research. The study conducted by the joint group showed that an FTA between India and Georgia will have a positive effect on the economic prosperity and bilateral trade between the sides, and on cooperation in the field of investments and services. The future deal will also create new opportunities for business.

Arveladze said the FTA will be mutually beneficial and noted that the conclu-

sion of the joint group recommends the parties start negotiations by establishing a special Committee for this purpose.

“We will summarize the results of the research after the governments of India and Georgia make the relevant decisions.

I am sure that we will soon start working on a free trade agreement,” Swain stated.

The study reads that in case of a free trade deal, export from Georgia to India will increase in the fields of metallurgical and medical products, wine and other alcoholic and non-alcoholic beverages, processed agricultural products, etc.

Import from India is predicted to increase in the field of cement, ores, mineral fuels, plastics, electrical equipment and other products.

In the field of services, the study revealed that mutual beneficial trading potential exists in business and professional services, telecommunication, computer, tourism, audio-visual and other sectors.

Georgia has free trade deals with Turkey, the European Union (EU), the European Free Trade Association (EFTA) countries and with the Commonwealth of Independent States (CIS) countries - Armenia, Azerbaijan, Kazakhstan,

Image source: Ministry of Economy

Kyrgyzstan, Moldova, Turkmenistan, Tajikistan and Uzbekistan.

Georgia is the first country in the

region to have a free trade agreement with China. In June 2018, Georgia and Hong Kong signed a free trade agree-

ment which will boost market access and investment flow between the two countries.

86,2 Mil Bottles of Georgian Wine Exported in 2018

BY AMY JONES

G Image source: The Observer

eorgianwineexportstotaled 86.2 million bottles in 2018, 17% more compared to 2017.

The figure is the highest in almost 30 years, showing a promising future for Georgian wines in 2019.

Georgian wine was exported to 53 countries around the world in 2018. Figures from the Georgian National Wine Agency reveal that Russia remains the

top destination for wines, with a total of 53,682,627 bottles. Ukraine (10,687,835 bottles) takes second place, followed by China (6,951,019 bottles), Kazakhstan (3,599,143 bottles), and Poland (3,508,122 bottles).

Export to some countries increased massively. Switzerland imported 378% more Georgian wine compared to in 2017, with 25,350 bottles, whilst South Korea increased by 275% (68,128 bottles).

Wine exports amounted to $184.1 million in 2018, 19% more than in 2017.

Georgian spirit exports also experienced positive growth in 2018. 20 million

bottles of Brandy (0.5 liters) were exported to 26 countries, 9% more than in 2017.

Brandy exports revenue amounted to $40.7 million. In addition, Chacha exports reached 422 thousand bottles to 26 countries, a growth of 47% and generating $1.2 million.

Winemaking is one of the most ancient traditions in Georgia. Indeed, Georgia is considered to be the birthplace of winemaking in the world. Despite its strong heritage and high-quality wines, Georgian wines have often been overlooked compared to other countries such as France, Italy and Spain.

Georgian wine has experienced setbacks during the country’s turbulent past. During the Soviet Union, Georgian vineyards suffered from Communistdriven cultivation restrictions, resulting in a dramatic decrease in the number of grape varieties to less than 20. Projects are underway to recover types of grapes that were lost during this time.

Nonetheless, wine is one of the biggest exports in Georgia. The Georgian wine industry has grown substantially over the past decade. The export market has increased by 73% since 2012 when Georgian wine was exported to 43 countries

and sold 23 million bottles.

The record number of tourists visiting Georgia helps fuel the growth of the wine export market. “This year, the prestige of Georgian products has increased.

Tourist inflow has also grown. The number of promoters of our wines has increased worldwide. This tells people who have visited Georgia and tasted wines here to try to do the same in their own countries, too,” stated Zurab Ramazashvili, head of the supervisory board of the Telavi Wine Cellar winemaking company. Telavi Wine Cellar sold 5.7 million bottles in 2018, a record number in the company’s history.

Moreover, government initiatives have helped wineries to expand. Wineries benefited from not paying profit tax in 2018, enabling them to reinvest more money back into their businesses. The government has also funded participation in agricultural exhibitions and tasting events abroad. “The government has specially hired companies for the popularization of Georgian wines abroad. All these efforts boost our sales,” said Ramazashvili. Georgian wine exhibitions were held around the world in 2018, for example in South Korea, France, the US and Japan.

In addition, international media exposure, such as the recent article published in the Washington Post titled ‘White Wine on the Red Planet? Scientists in Georgia are hunting for the perfect Martian grape’ are raising the profile of Georgian wine internationally. “If we’re going to live on Mars one day, Georgia needs to contribute. Our ancestors brought wine to Earth, so we can do the same to Mars,” Nikoloz Doborjginidze, founder of Georgia’s Space Research Agency and advisor to the Ministry of Education and Science told the Washington Post.

Although export to space may be a distant dream, Georgian wineries continue to expand into other markets around the globe. Head of the National Wine Agency Levan Mukhuzla stated that Georgian wine will be sold in Scandinavia and Canada from 2019.

BUSINESS

GEORGIA TODAY JANUARY 15 - 17, 2019

5

Ambiente – Must-Visit Consumer Goods Fair to Reveal the New Styles of 2019

W

hat’s new? What’s set to stay the same? The international consumer goods fair Ambiente will be showing off the new styles for the coming year from 8 to 12 February 2019 in Frankfurt, Germany. Exquisitely presented trend worlds, expert guided tours and a digital brochure will provide retailers and industry representatives with a comprehensive insight into future trends.

The design studio Stilbüro Bora.Herke.

Palmisano has looked into the styles that will reflect the feel of the times for 2019, and will be showcasing those styles for Ambiente. To forecast such trends, they’ve been sifting through global developments in design, art and architecture, as well as fashion and lifestyle.

“Every trend is based on a social development. It’s an attitude to life which expresses itself in new, rediscovered and modified shapes, patterns and functions.

It takes the form of valuable stimuli for buyers, though also for manufacturers who can specifically prepare for the year ahead at Ambiente,” says Nicolette Naumann, Vice President of Ambiente.

For 2019, the design studio has selected three thematic trends: Tasteful Residence, Quiet Surroundings and Joy-Filled Ambience. These trend worlds will be highlighted through the presentation of products from Ambiente exhibitors.

The trade fair will also feature some exclusive guided tours and talks by the design studio, offering in-depth glimpses into Ambiente trends. At 11:30 and 14:30 each day, on the Ambiente Academy Stage in Hall 9.1, Annetta Palmisano will be demonstrating the dominant styles of tomorrow using a large number of examples. Following the talk, she and Claudia Herke will be giving a guided tour of the trends showcased in Galleria 1.

In addition, the Ambiente trends will also feature on a dedicated website, where the results of the trend investigation will be illustrated by examples of products, materials and specific color ranges: www.ambiente-trends.com.

TASTEFUL RESIDENCE – TIMELESS ELEGANCE

tive support for its customers and their business interests. By offering a wide range of services, both on site and online, Messe Frankfurt gives its global customers a consistently high level of flexible support in planning, organizing and running their events. This wide range of services includes renting exhibition premises, trade fair construction and marketing, human resources and food services. The Group has its head office in Frankfurt am Main and is owned partly by the City of Frankfurt (60%) and partly by the State of Hesse (40%).

Image source: Messe Frankfurt Exhibition GmbH/Petra Welzel

A trend which stands for perfect craftsmanship and which creates a comfortable yet sophisticated atmosphere using specially chosen showpieces and unique items. The preferred materials will be hardwood, leather and Bouclé, in addition to velvet, velours and porcelain.

Other special highlights will be colored glass and polished surfaces.

QUIET SURROUNDINGS – A PLACE TO WITHDRAW TO Plain products that are close to nature, soft colors and respect for the original material create a natural environment that is ideal for anyone longing for a stress-free daily life that is full of peace and tranquility. Natural materials such as wool, silk, hemp, wood, stone, clay and ceramics are combined. There is joy in experimenting and in applying traditional craft techniques. Recycling often plays a role.

JOY-FILLED AMBIENCE – STYLING AS A FORM OF SELF-EXPRESSION A happy, colorful trend world with bold combinations of colors and the charm of randomness: Diverse materials, an eccentric mix of patterns. This refreshingly unexpected style is dominated by botanical themes, geometric and oversized décor and vintage prints, to name but a few.

Further details and trend collages of all three style worlds can be found at ambiente.messefrankfurt.com / trends2019-press

AMBIENTE – A LEADING INTERNATIONAL TRADE FAIR Ambiente is the leading international trade fair and the world’s number one in products associated with dining, cooking, household goods, furnishings and ornaments, design concepts for the home, gifts, jewelry and fashion accessories. It

Tbilisi Metro Celebrates 53rd Birthday

BY AMY JONES

T

he Tbilisi Metro celebrated its 53rd year since opening on 11 January 1966. The Tbilisi Metro was the first to open in West Asia and the fourth metro in the former Soviet Union.

The construction of the Tbilisi Metro began in 1952. The first six stations were opened on 11 January 1966. Since its opening, it has grown to 23 stations and 2 lines.

Tbilisi Metro has had a turbulent history. During the 1990s, the Metro was underfunded and struggled to run properly due to a lack of electricity. In addition, petty crime such as pickpocketing and mugging was rife.

Although many of the station names were changed after the collapse of the Soviet Union, Georgia’s soviet past is still visible in the Metro. Typical of other Soviet metros, the stations are located very deep under the city and

is ‘The Show’ for the entire industry. The breadth and width of Ambiente make its unrivalled product range unique throughout the world. Ambiente 2018 featured around 4,441 exhibitors and attracted 134,600 trade visitors from 168 countries, presenting classic and innovative products over five days. This most important global consumer goods exhibition offers a wide range of events, programs for newcomers, trend presentations and award ceremonies, all at the same time.

BACKGROUND INFORMATION ABOUT MESSE FRANKFURT Messe Frankfurt is the world’s biggest trade fair, convention and event organizer with its own premises. It employs a workforce of 2,400 at 30 sites and generates an annual revenue of around EUR 669 million. Thanks to far-reaching ties with the relevant sectors and an international sales network, the Group provides effec-

Soviet decorations are still visible.

The Tbilisi Metro has undergone major rehabilitation since the 2000s.

A third line under Vake is planned, however it is unclear when construction will begin.

Or visit http://www.georgien.ahk.de

The Banking Association of Georgia Speaks out in Support of TBC Bank

T Photo source: Georgia Starts Here

The German Business Association (DWV) was established in 2007 representing the German Business interests in Georgia. With more than 170 members it is the second largest bilateral foreign Business chamber and promotes the German-Georgian trade relations by providing support and services. The DWV Board is headed by the Chairman, Dr. h.c. Sascha Ternes (BlueOrchard Finance Ltd. - Representative Office in Georgia). The board also includes David Shengelia (Caparol Georgia), Giorgi Batlidze (BLC Law Office), Michael Hampel (HeidelbergCement Georgia), Andreas Heidingsfelder (Sheraton Grand Tbilisi Metechi Palace) and the German Embassy in Tbilisi as a consulting member.

German entrepreneur Prof. Dr. Claus Hipp serves as an Honorary Chairman of the board.

DWV is part of the German Chamber of Commerce and Industry network (DIHK), official representative of Messe Frankfurt Exhibition GmbH (www.messefrankfurt.com) and Senior Expert Service (www.ses-bonn.de) in Georgia.

For further information please contact: Zaira Soloeva, Senior Project Manager and Official Representative of Messe Frankfurt Exhibition GmbH in Georgia and Armenia, Deutsche Wirtschaftsvereinigung (DWV). zaira.soloeva@georgien.ahk.de

he following is a statement released by the Banking Association of Georgia: “Distinguished by a high level of stability, the Georgian banking sector presents a guarantee for the economic development of the country. A high level of financial transparency, regular positive assessments by international credit-rating agencies and activity in the sector of international financial institutions/investors points to a high level of confidence in the sector.

“Misinterpreting the recent developments with respect to TBC Bank and profiteering through high interest from the public may interfere with the process of understanding the correct information and at the same time generate incorrect expectations regarding future developments.

“The [Georgian] banking sector has

always been under the close scrutiny and supervision of local regulators, international auditors, credit-rating agencies and investors, which secures a high level of stability and sustainability of both TBC Bank and the banking sector as a whole.

“The Banking Association of Georgia will always protect the interests of its member banks and will not allow the running of a smear campaign targeted against a leading financial institution of the country, which can not only shake the reputation of a specific bank but also the whole banking system of Georgia, thus adversely affecting the economic development of our country.”

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BUSINESS

GEORGIA TODAY

JANUARY 15 - 17, 2019

New Construction Regulations to Be Introduced

BY AMY JONES

N

ew construction regulations will come into force on 15 January affecting the production of cement products, steel frames, electric cables and plastic pipes. The changes will align Georgian technical regulations with those of the European Union, stated the Technical and Construction Supervision Agency of Georgia.

The new regulations come under Georgia’s obligations to the European Union within its Association Agreement. The Association Agreement sets out a framework of co-operation between the European Union and Georgia in areas such as trade, culture, and security. The regulations also form part of the Deep and Comprehensive Free Trade Deal, which established free trade areas between the European Union, Georgia, Moldova, and Ukraine.

The regulations require importers of construction materials to submit a declaration specifying the characteristics of imported products to the Revenue Service of Georgia. The Revenue will stop the import of any construction materials that do not have the necessary documents and report such cases to the Technical and Construction Supervision Agency.

Moreover, any construction products that do not meet the required standards will be removed from the market.

The regulations were initially introduced on 15 November 2018. However, the launch date was postponed to 15 January 2019 as the private sector was not adequately informed about the regulations.

Tighter construction regulations have been an important topic in Georgia for some time. In 2017, the government amended technical regulations and building safety rules with the aim of making new buildings and construction sites safer.

The changes will align Georgian technical regulations with those of the European Union A lack of regulations in the past has allowed for the poor management of new building construction. Many modern buildings in Tbilisi contradict their surroundings and stand completely empty. Such new regulations are important to ensure that urban planning in Tbilisi is successful and safe.

The Decline of Russia’s Knowledge Economy

BY EMIL AVDALIANI

S

ince the Ukraine crisis and the Russia-West confrontation we (and I myself) have often turned our attention to wider geopolitical processes which affect Russia’s borderland regions and how this impacts Moscow’s ability to project its power across Eurasia. While this is important, there are spheres where greater attention should be given.

One of them is a marked decline in Russia’s knowledge economy.

Today’s Russia-West crisis is indeed fundamental in many ways. At times, we have little information on how this geopolitical confrontation is leaving its mark on Russia’s internal processes. It also complicates our forecasts for the country’s foreseeable future.

Image source: issek.hse.ru

Numerous foreign and Russia-produced reports document a significant decline in what Russia is able to produce scientifically and how this is used. This was even reported on by the Russians themselves at times when oil prices were high, leading many to believe that Russia was resurgent across the Eurasian landmass. In 2008, the Russian Academy of Science reported on Russia’s Scientific-Technical Development until 2030, noting that the country was losing its technology base as it increasingly becomes dependent on revenues from the sale of natural resources such as gas and oil. Another fundamental problem was inefficiency and high levels of corruption.

However, those problems at the time were not visible to many ordinary Russians, largely due to the focus on the Ukraine crisis, flare-ups in the confrontation with the West, oil prices dropping

and more. The point here is that corruption and even low scientific output would still not be enough to result in troubles as long as there are viable incomes to the budget. Once this stops, all wounds open and what you get is the need for more pressure for greater accountability from Russian officialdom.

Ironically, what happens in Russia nowadays is almost identical to what happened in the last years of the Soviet Union. By the late 1980s, the Soviets were fundamentally lagging behind the West in technologies and other important sectors of the state. Oil prices were low and there was high demand for a viable reform, despite there being a distinct lack of resources to transform the country. The result, predictably, was the dissolution of the Soviet Union.

Taking this comparison, one might suggest, and quite correctly, that the Russian government had a very good

opportunity to initiate large scale reforms by 2012 or even earlier, as the situation in the country was much better economically. Instead, in the 2000s the decision was made to initiate a quick military resurgence.

This “military overload” (voennaia nagruzka), according to the same Russian Academy of Science report was the “main source of structural deformation” and that “all bureaucratic measures to speed up scientific-technical progress, as a rule, turn out to be unproductive.”

This was the last stage of a struggle between hardliners and economic liberals. Unsurprisingly, the then-Finance Minister Aleksei Kudrin was dismissed in 2011 when he openly criticized the level of military spending.

The report also pinpointed several other spheres of Russia’s declining knowledge economy. There are longterm trends that production technolo-

gies are moving to developing countries that would have major advantages over Russia in terms of both quality and price.

More crucially, there are even signs that though Russia spends large resources on military development, the country might already be falling behind not only the developed nations but also “second tier” powers like China. The reason for this is that China and many other emerging states are rapidly improving the quality of their military equipment (perhaps the best example of Chinese competitiveness is the US willingness to leave the INF agreement).

Beyond the numbers and pure statistics, there is also a simple problem of little knowledge of what should be done to resolve the situation. Russian citizens may ask how bad things are, yet few (and Kudrin is a good exception) wonder what is causing the degrading trends.

BUSINESS

GEORGIA TODAY JANUARY 15 - 17, 2019

7

Green Gardening Project Set Up in Tbilisi

BY AMY JONES

A

new environment-initiative, Green Tbilisi, hopes to create more green spaces in the city by planting and maintaining gardens in unused spaces. Founded last week by members of the Tbilisi community, the project is already gaining traction.

In addition to brightening up the city with plants, the project participants hope to reduce dust in Tbilisi. There are many areas along sidewalks and in small parks that consist of soil with no plants. Planting these areas will help prevent this soil from polluting the air.

Although it was founded just a week ago, Green Tbilisi already has support from Tbilisi City Hall, who has said it will help plant the first pilot space.

“We are looking into the most suitable options and at the same time what would be most aesthetically pleasing for the arrangement of garden spaces. We're also thinking about the spaces themselves, which would be run by our group leaders in the first instance. We will start creating the first gardens at the end of February.” Green Tbilisi representatives told GEORGIA TODAY. The project took its inspiration from

Photo source: airways.cz

Passenger Traffic at Georgian Airports up 23% in 2018

BY AMY JONES

T Photo source: Green Tbilisi's Facebook Page

a similar project in Paris that was launched in 2015. The city government allowed citizens to submit proposals online to develop urban gardens on unused public land around the city.

Green Tbilisi has already gained a lot

of interest. Even residents in other cities such as Rustavi and Mtskheta are interested in participating. People interested in participating in the project can fill in a contact form on the Green Tbilisi Facebook page here.

he number of passengers taking flights from Georgia’s three international airports increased by 23% in 2018 compared to 2017. The number of flights on offer increased by 17%.

Tbilisi Shota Rustaveli International Airport, Batumi International Airport and Kutaisi David Aghmashenebeli International Airport together served a total of 5,033,323 passengers.

The biggest increase was experienced

by Kutaisi airport. 617,363 passengers took a flight from Kutaisi, a 52.37%

increase compared to 2017. With 3,808,619 passengers, Tbilisi International Airport served the highest number of passengers and 20.37% more than in 2017. Batumi International Airport served 598,891 passengers – 20.83% more than the previous year.

Three airlines dominate the Georgian market. Wizz Air catered to 587,179 passengers (+12%), 559,749 (+11%) passengers flew with Turkish Airlines and Georgian Airways welcomed 550,831 passengers (+11%).

The increased passenger traffic at Georgian airports reflects the booming tourist industry in Georgia. More and more international visitors are visiting Georgia.

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BUSINESS

GEORGIA TODAY

JANUARY 15 - 17, 2019

From Carpet Vendor to Founder of the World-Class Rixos Brand EXCLUSIVE INTERVIEW BY GEORGE SHARASHIDZE, ENTREPRENEUR MAGAZINE GEORGIA EDITOR-IN-CHIEF

I

can think of no-one in Georgia who hasn’t heard about Rixos.

Many have even had the pleasure of staying in one of the brand’s hotels. Few, though, know its backstory: that it was established in our neighboring country Turkey as a result of the entrepreneurial spirit and vision of its founder. A strong competitor to other world class brands, Rixos never stops developing and the 27th Rixos was launched in Abu Dhabi just recently.

Rixos Saadiyat Island is the first hotel with an “all-inclusive” concept. Entrepreneur Magazine Georgia was the first from Georgia to check it out and also got to meet Rixos founder Fettah Tamince, a person for whom money does not represent the only definition of success, a person who went beyond the borders of Turkey on a forward-thinking and global mission.

CONSTANT DEVELOPMENT, DISCIPLINE AND GLOBAL VISION “I have always been grabbed by the concept of entrepreneurship and have always tried to get involved in purchase and sales. Education, experience and contacts came later, helping me to expand my own enterprise on a global scale.

“You might be a born entrepreneur, with talent such as musicians and sportsmen can claim. However, when it comes to world class, talent is not going to be enough. Non-stop development and discipline are what’s needed in business, as much as in art and sport.

“Although I was born in a small town in Turkey, I’ve always had a vision of how to launch to a global scale. I had to learn foreign languages, build relationships and travel. I worked hard on the path to my goals and I continue to do so even today. It helped me to achieve success and I advise it of others, particularly of young, novice entrepreneurs. Along with unsparing work, vision and direction are of paramount importance. You need to know what you want to achieve.”

FAILURE “Every failure that doesn’t kill you makes you stronger. That doesn’t mean one should always fail. On the contrary, you must try not to fail. However, it can happen to everyone, and if it does, remember that failure is not the end of world.

I don’t belong to wealth, wealth belongs to me. That’s why it’s all right if I lose my wealth: I know I’ll get it back. If I allow wealth to control me and I lose it, I will surely lose everything.”

ADVICE FOR NOVICE ENTREPRENEURS “I would advise beginner entrepreneurs to focus on non-stop development. They should ameliorate their skills and work constantly on the improvement of communications and relations. They say it matters not who you are, but who you know. Visualization of the world is a must – what happens, which direction the world is moving in, how to be prepared for the latest demands, what the world can offer.”

WHY ABU DHABI FOR THE LATEST RIXOS? “The Government of the United Arab Emirates is doing whatever is needed to become the best in the world, constructing ideal infrastructure and airports. It represents an optimal place for vacations, with excellent conditions for the tourism industry set out by the government, which is why I choose to invest there. Rixos is the 4th hotel in the UAE already. The Abu Dhabi government attempts to take care of nature and ecology and to engage world-class brands and offer visitors entertainment: the Ferrari and Louvre museums, the best golf courses. The rivalry is very high in the tourism industry globally, but the UAE is the best for the winter months which is why we decided to construct the best Rixos there.”

ALL-INCLUSIVE, ALL-EXCLUSIVE “The world brands are enthusiastically

interested in the market of the UAE. Rivalry is high and almost every day new hotels are being launched. That is why we try to compete strongly and offer something only we are capable of producing: ‘All-inclusive, all-inclusive’ is our new concept.

“Wealthy individuals also count their cents; that is why they are wealthy. Rich people also don’t wish to book a hotel and then pay double the price for nutrition or other services. That’s why they love us and choose Rixos.”

EVERYTHING THE BEST FOR RIXOS GUESTS “A million people stay at a Rixos hotel annually and many visit all our new hotels, and I thank them. We are clearly aware of our responsibility towards our guests. We know they do not wish to be unpleasantly surprised. One saves money year-round for the perfect twoweek holiday and as they have decided to trust and choose us, we need to make everything the best for them. Our brilliant team is best at achieving this - its members know perfectly well what needs to be done, as they have already been working in Rixos for numerous years and are constantly striving for development.

“It is difficult for an individual who spends at least eight days in our hotel, to return home and not be unsatisfied by at least one thing. Our team, comprising 8000 members, devotes itself to decreasing any kind of dissatisfaction to the minimum level. Each guest must feel like a king or queen. This business is an emotion, a vital relationship. It is impossible to substitute individuals with robots in this business, at least in Rixos.”

REGULAR RENEWAL “We constantly study the existing global trends related to healthy lifestyles and ecology and change and develop our products accordingly. Nowadays, people travel more, and the demands are increas-

SUCCESS

ing respectively. Everything changes so fast; each new hotel we launch is old already. Hotels need novelties. You have to change everything, which needs huge investment.

RIXOS ON THE WORLD MAP – STRATEGY 2025 “The Abu Dhabi Rixos is the 27th consecutive hotel in our chain. We have an ambitious plan, along with our partners, among them Accor Hotels, a 50% shareholder of Rixos, to have 100 Rixos hotels operating in 30 countries worldwide by 2025.

“We’re looking to the Asian countries, Indonesia and Taiwan, which are very interesting markets. We carry out ongoing research as to how and in which direction the tourism industry is developing. If the global growth of tourism is approximately 7%, the given figure in Asia is relatively higher. The Chinese travel a lot, especially to the European countries. Where there are 20 million Chinese tourists today, this number will soon reach 50 million, making a significant opportunity for all companies operating in this field.”

CRITERIA FOR CHOOSING THE ARCHITECTS

“What is success? Success is a balance.

If you plan your life successfully, where your family, relations, health and business are balanced, it means you are successful. If you have money, but your children are unhappy; if you have a profitable business, but do not have good relations with others, then you are not successful. As well as work, I always find time for reading, sports, family and friends.”

“I choose two or three architects from the outset and compare their projects.

The visual side is one; the budget second; and time third. I make the final decision taking into consideration these three criteria. I choose the project which meets all three requirements simultaneously. However, few architects are able to present such projects. We should

understand that even though the project may be sophisticated, there are always acceptable changes to be made during the working process in order to keep up with the times.

“What we liked two years ago is no longer suitable. For instance, light colors are preferable today and dark colors represent the past. The materials and technologies also change. That is why I choose architects free from psychological complexes; those who can easily adapt.”

WHAT DOES THE NAME OF THE BRAND RIXOS MEAN? “I am from Antalya. Antalya was a prominent city in the Roman Empire. The strong city of Perga was nearby, and Rixos was the name of one of the founders of this city. [In founding the brand], we started out discussing banal names like ‘Sunset,’ ‘Sunbeach,’ ‘Sunrise’, etc.

Then an experienced professor advised me to relate the name of the brand with a historical theme. I accepted and chose Rixos.”

BUSINESS CONTROL “Guests communicate on social media and, alongside letters of gratitude, I receive notes, ideas and recommendations that way. I receive information from the team, read the reports, travel and check the quality of services in-situ, personally meeting with the guests. If I want to find out how the sauna is working, I put on shorts, go in and hear it straight from the visitors themselves.

They don’t know who I am and speak about everything quite openly.”

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BUSINESS

GEORGIA TODAY JANUARY 15 - 17, 2019

9

Fashion in Tbilisi: Trending Change

BY AMY JONES

H

alf a decade ago, few people regarded Tbilisi as a fashion capital. Stuck in post-Soviet trauma and struggling to find its political feet, the city was overlooked and unknown. However, since Georgian designer Demna Gavasalia burst onto the international fashion scene, the fashion industry has been gaining momentum and notoriety. For many Georgians in Tbilisi, the industry has become a symbol of change and progress in a city that is still carving its new identity.

It’s been over four years since the announcement that Demna Gavasalia would become the artistic director of Balenciaga, firmly cementing Tbilisi as a powerful force in the world of fashion.

“His voice stirred curiosity in the history and culture of the region,” said Vogue. com Fashion News Writer Liana Satenstein in an interview with Fashionista.

“The country has a fledgling group of talents, and Gvasalia just helped shine the light on them.”

As the world’s fashion eye turns its attention to Tbilisi, Tbilisi’s youth and fashion culture are turning their eyes towards self-expression and cultural change. Music, fashion, arts, and a generation of motivated, creative, and curious young Georgians are fuelling a cultural revolution in Tbilisi which is being watched by the rest of the world. The

Image source: fashionlaw.com

popular culture magazine Dazed and Confused even ran a whole day focusing on Tbilisi on 11 January 2019.

Young designers are using their style not only as a reflection of self-expression, but also to dissect Georgia’s difficult past and question the country’s future. In past

collections, designer George Keburia combined gun prints influenced by the civil wars in the 90s with rainbow colors, ruffles and the word ‘Gay’ written in glitter.

Meanwhile, Tika Paksashvili created a collection subtly exploring the testing

transition from Soviet times into modernity. Her campaign, shot by Giorgi Wazowski, showed traditional countryside, with androgynous models in gregarious checked pantsuits replacing locals.

Georgian designers today seem torn

between belonging, distance and restraint, and excess, perhaps due to the complex social and historical context of the country. However, there is a clear undercurrent of freedom. “There’s this generation of young people who have the power to rule their own lives who don’t live in fear of any kind of terror,” said Gvantsa Jishkariani, stylist and gallery owner, in an interview with Indie Mag. This fearlessness and the power of the arts to fuel change came to light in May 2018 following the police raids on famous techno clubs Cafe Gallery and Bassiani, which saw thousands of young Georgians taking to the streets to protest their right to party. A sound system was set up in front of the Old Parliament building as youngsters danced for change.

However, the unsanctioned raids also reflected the difficulties for many freethinkers in Georgia. “There’s a dark side to Tbilisi that makes itself known every now and then to remind you that things are still complicated here,” said Tamuna Karumidze, founder of Troubelmakerz alternative modeling agency and Tamra Skateboards, in an interview with Dazed and Confused magazine.

Some people believe the government is afraid of the change being brought about by Tbilisi’s creatives. Traditionally a conservative country, the country is often closed to change and against liberal values. Despite the crackdowns, the new generation of Georgians has shown they are willing to bravely fight for the right to express themselves creatively.

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Online publication ‘Stuff’ named the HUAWEI Mate20 Pro the “Smartphone of 2018.” “The new HUAWEI brand smartphone is really impressive - the OLED display with rounded edges of 6.39-inch, embedded Touch ID fingerprint scanner, IR-based face ID scanner, and powerful processor Kirin 980. This is an incomplete list, but the real star is the three key cameras created with Leica.

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10

POLITICS

GEORGIA TODAY

JANUARY 15 - 17, 2019

Fight against Defamation or against Freedom of Expression?

BY THEA MORRISON

T

he Georgian non-governmental sector released a statement on January 13 calling on officials to clearly define what they mean when speaking about the need for regulations against defamation.

NGOs under the Media Advocacy Coalition say that the recent statements from President of Georgia Salome Zurabishvili and Parliament Speaker Irakli Kobakhidze on the need for legislative amendments related to defamation, need clear explanations.

The NGO sector says many years of effort from society have resulted in the current legislation setting a high standard of freedom of expression and it has always been considered a great achievement of Georgian democracy.

“High ranking officials have made numerous statements about the legislative amendments regarding defamation…

The current law on Freedom of Speech and Expression involves civil legal liability for defamation of both public figures and private persons. Consequently, any person can appeal to the Court to protect his/her violated rights, honor and dignity,” the coalition statement reads.

The NGOs believe that any legislative changes in this direction will worsen the current standards of freedom of expression and will threaten the country's democratic development.

The Parliament Speaker stated this

Image source: conatusnews.com

weekend that there is a problem of defamation in the country, adding discussions are necessary to introduce measures to solve the issue.

“Defamation and verbal abuse are com-

mon nowadays in the TV space and social networks. This has unfortunately become a part of daily life, which is improper for the Georgian culture," he said, adding “the issue necessitates the adoption of

some measures which will be in line with the freedom of expression and speech.”

Before Kobakhidze, the President of Georgia stated that the country needs an anti-defamation law.

"Media has its rules and people are more protected there. But it is difficult when dealing with social networks. The processes there are sometimes anonymous, sometimes orchestrated by other countries, and I think it necessary to consider this,” Zurabishvili stated during a press-conference on Friday.

The opposition believes the move from the ruling officials is “alarming” and might result in a restriction of freedom of expression and speech.

MemberoftheoppositionUnitedNational Movement (UNM) Zaal Udumashvili says the President has to be the guarantor of freedom of expression in the country.

“However, we see that Zurabishvili, along with the ruling party, is attacking free media and today, as six years ago, Georgian Dream believes its main enemy is freedom of speech,” Udumashvili stressed.

Zurab Chiaberashvili, from the parliamentary minority European Georgia, says GD wants to change the legislation in a way to “silence critical voices.”

“It is impossible to implement such regulations which will not contradict the Constitution or our international obligations,” he said.

The ruling party has not yet specified when or what kind of changes are planned in this direction. However, Leader of the Parliamentary Majority Archil Talakvadze has confirmed that discussions will be held on the issue.

“If we adopt any regulations in this field, we will make sure that freedom of expression and speech stays at the same high level as it is currently,” he said.

POLITICS

GEORGIA TODAY JANUARY 15 - 17, 2019

11

Georgia’s Breakaway Regions: Should We “Forget” about Them?

BY ERIC LIVNY

T

homas de Waal is a household name when it comes to conflicts and politics of the Caucasus. Hosted last week by the Heinrich-BöllStiftung South Caucasus, Tom’s public lecture attracted a very large crowd of young Georgians. Most attendees were too young to have any first-hand knowledge of the almost 30-year-old conflict between Georgia and Abkhazia. Tired of politically-motivated narratives, many were thirsty for an objective account.

And everybody expected to hear new ideas about a possible resolution.

Yet Tom provided very little new information or ideas. Instead, exactly as promised by the title of his lecture, he put the Georgian-Abkhazian conflict into a longer perspective, that of an all but forgotten 19th century war fought by two of Europe’s emerging “nation states”. The two states in question were Germany and Denmark.

The conflict was over two borderline duchies, Schleswig and Holstein, ethnically divided between the Danes (concentrated in northern Schleswig), the Frisians, and the Germans.

Over a span of less than 20 years, the Danes and Germans fought two bloody wars for the right to incorporate Schleswig and Holstein into their respective states.

The second war, waged in 1864, ended in a resounding victory for the better-organized Prussian army. As a result, Bismarck’s Germany and its then-ally Austria established full control over both duchies, annexing them into the newly formed German Empire and bringing some 200,000 ethnic Danes under its rule.

The military defeat and the loss of territory were no petty matter for the Danes, who regarded Schleswig as an ancient core region of Denmark (the southern part of Schleswig contains the ruins of the old Danish Viking "capital" Hedeby). Many were displaced or chose to migrate - to Denmark or overseas. The trauma of that war was a factor behind Denmark’s reluctance to commit troops abroad until 1999!

Nevertheless, since WWII, the Danes and Germans have lived side by side at the heart of a united and peaceful Europe.

Schleswig-Holstein, once a war zone, is much better recognized today for its wind farms than any past conflicts. In fact, it is easier to imagine a modern-day Don Quixote waging a war on local wind turbines than a real war starting between the two neighboring nations. With the significance of borders greatly reduced

In 1864, Germany and Denmark fought a bloody war over Schleswig-Holstein for the right to incorporate these territories into their newly established “nation states”. Since WWII, the Danes and Germans live side by side at the heart of a united and peaceful Europe.

in today’s Europe, who would want to go to war over the precise location of the “Willkommen in Deutschland” and “Velkommen til Danmark” signs?

WHAT CAN YOUNG GEORGIANS LEARN FROM THE HISTORY OF A LONG FORGOTTEN 19TH CENTURY CONFLICT BETWEEN TWO EUROPEAN NATIONS? The first lesson, according to Tom de Waal, is that territorial conflicts are never “frozen”. They evolve. The original reasons for the conflict are often forgotten, and what is passed down through history is the trauma – the loss of life, territory and forced migration. And, yet, after an extended period of non-violence, conflicts may be completely erased from memory.

Secondly, what is also prone to change is the international context in which conflicts originate. In particular, the interests of external patrons may – and often do – require a reconfiguration of existing alliances. Back in 1864, Britain was siding with Denmark, worried about Germany’s gaining control over Kiel, a major naval base at the entrance to the Baltic Sea. Yet, there is nothing permanent in the world of political alliances.

De Waal quotes Lord Palmerston, Britain’s Prime Minister at the time of the conflict, who famously said: “We have no eternal allies, and we have no per-

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petual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.”

However, judging by questions asked by people in the audience, young Georgians are certainly reluctant to forget or give up. “How many real Abkhaz still live in Abkhazia?” “How many of them regret breaking away from their historical motherland?”

Likewise, recent pronouncements by senior EU politicians, such as Federica Mogherini, suggest no abating in Europe’s support for Georgia’s national sovereignty and territorial integrity. Speaking in European Parliament in 2018, she claimed that “all of our actions within the two regions are fully coordinated, and I would like to underline this because it is a very important point, and approved by the Government of Georgia, and fully in line with the Georgian engagement policy.”

Departing from the Schleswig-Holstein analogy, de Waal argues for an independent engagement strategy on the part of EU leadership – a strategy that would allow for actions that might not be approved by Tbilisi, such as the opening of an EU information center in Sukhumi, allowing Abkhaz students to study in Europe, or providing Abkhazia with humanitarian and development assistance.

“All the regional actors have their hands tied,” says de Waal, “the EU still has room

Journalists: Tony Hanmer, Zaza Jgarkava, Maka Bibilashvili, Dimitri Dolaberidze, Maka Lomadze, Joseph Larsen, Vazha Tavberidze, Nugzar B. Ruhadze, Nino Gugunishvili, Thea Morrison Photographer: Irakli Dolidze

for maneuver.” He further predicts that, if the current stalemate continues, the world will soon forget and move on. In five years’ time, the Georgian-Abkhazian conflict may become “as obscure as Schleswig-Holstein but in a less favorable part of Europe”. Do you agree? I don’t.

TERRITORIAL CONFLICTS IN THE 21ST CENTURY: FROZEN AND NOT FORGOTTEN! The world may soon give up on any future attempt to promote a peaceful resolution of the Georgian-Abkhazian conflict. However, there is very little chance for the conflict to become “obscure” in the same way in which the Schleswig-Holstein “question” vanished from the world’s agenda in the late 20th century.

First, and most obviously, the bloody conflict and loss are very much alive in the collective memories of both nations.

Thirty years is simply not enough for people to forget and move on.

Secondly, the international context of the conflict has deteriorated since the 1990s. The Russia of Boris Yeltsin was seeking compromises with the West.

Putin’s Russia is a resurgent power seeking to dominate and be reckoned with.

In this environment, the Georgian-Abkhazian conflict can only truly be resolved as part of a grand settlement among the world’s major superpowers concerning their regional spheres of influence.

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Thirdly, the post-WWII international legal order is conducive to freezing rather than fundamentally resolving territorial conflicts: • Germany and Denmark, as well as most other European states, were able to forget about their conflicts and move on in the legal environment of the 19th century in which “national” borders were constantly redrawn through wars and conquests. In that context, the cycle of dealing with national grief and loss did not last too long. People and whole nations had no choice but to quickly move from denial to anger to bargaining to depression and, ultimately, to acceptance of the new reality.

• Dating back to June 1945, the current UN charter was designed to delegitimize conquest and secession. It did so by sanctifying existing political entities and their borders, even when drawn by cartographers in the service of imperial powers, and by failing to provide a clear legal procedure to dissolve legally recognized states (even if completely dysfunctional), or to create new sovereign entities against the will of their parent states. Hence, more than a dozen territories around the world, starting with Taiwan, find themselves in a “frozen” limbo state. Having gone through the first three phases of dealing with loss – denial, anger and bargaining – the parties to relevant conflicts are stuck in the “depression” phase without the legal ability to accept “forget and move on”.

I don’t agree with Thomas de Waal’s prediction, because “forgetting” is discouraged by the UN charter and is not permitted by the global context surrounding the Georgian-Abkhazian conflict. Nor is the option of “forgetting” on the political agenda in both Georgia and Abkhazia. Thousands died in the chaos and bloody wars of the early 1990s. Many thousands lost their homes and everything that was dear to them. Still today, many IDPs live in temporary housing, barely making ends meet and dreaming of their “Paradise Lost”.

“Forgetting” under these circumstances appears impossible and even inappropriate, but is it really such a bad thing?

Ultimately, the ability to “forget and move on” is what allowed the bringing of peace and unity to a Europe devastated by wars fought in the name of national sovereignty, religious and ideological fanaticism. Georgia wants to be a part of united Europe. For now, however, it is stuck in a region as divided by war and frozen conflicts as Europe was prior to WWII.

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