Issue #972 Business by Georgia Today

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Issue no: 972/91

• AUGUST 15 - 17, 2017

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue... Russian Occupants Seize More Georgian Land NEWS PAGE 2

Construct.ge: More E-commerce Possibilities for Georgian Construction Sector BUSINESS PAGE 5

FOCUS ON INTERNATIONAL ARRIVALS

Check out Galt & Taggart's Tourism Market Watch for the latest on flights, airports, tourism and more PAGE

Macroeconomic Stability in Georgia Ensured BUSINESS PAGE 6

No Longer the Russian Federation: A Look at Tartarstan BUSINESS PAGE 7

Georgia Marks 25 Years since Abkhazian War Iran & the Sanctions War

BY THEA MORRISON

BUSINESS PAGE 8

ugust 14, 2017, marks 25 years since the conflict in Abkhazia, after which the region became a breakaway territory of Georgia. The confrontation started on August 14, 1992, and lasted 13 months and 13 days. It was one of many conflicts precipitated by the breakup of the Soviet Union and left around 300,000 people displaced and more than 10,000 dead. Continued on page 2

Zura Kiknadze’s Music Soiree Photo by Mike Goldwater

CULTURE PAGE 11 Prepared for Georgia Today Business by

Markets As of 11ͲAugͲ2017

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

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

INDICES

Price

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BONDS

Price

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GBP 33.92

Ͳ6,2%

Ͳ3,8%

GEOROG 04/21

105.89 (YTM 4.98%)

+0,1%

+1,0%

GBP 3.45

Ͳ3,5%

Ͳ5,5%

GEORG 04/21

111.99 (YTM 3.36%)

+0,0%

+0,5%

GBP 15.60

Ͳ8,7%

Ͳ6,6%

GRAIL 07/22

109.93 (YTM 5.42%)

+0,1%

+0,4%

BGEOLN 07/23

102.17 (YTM 5.57%)

Ͳ0,2%

+0,6%

Price

w/w

m/m

52,10

Ͳ0,6%

+9,6%

CURRENCIES

1 289,31

+2,4%

+5,9%

GEL / USD

2,3895

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GEL / EUR

2,8229

+0,3%

+2,9% +1,2%

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GEL / GBP

3,1092

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FTSE 100

7 309,96

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GEL / CHF

2,4873

+1,2%

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FTSE 250

19 544,79

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+1,7%

GEL / RUB

0,0399

+1,3%

DAX

12 014,06

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GEL / TRY

0,6758

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+2,1%

DOW JONES

21 858,32

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GEL / AZN

1,4064

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6 256,56

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GEL / AMD

0,0050

NASDAQ

146,35

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+3,5%

GEL / UAH

0,0931

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1 042,80

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EUR / USD

0,8459

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SP 500

2 441,32

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+0,7%

GBP / USD

0,7686

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MICEX

1 944,83

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CHF / USD

0,9618

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MSCI FM

2 746,08

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RUB / USD

59,8388

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GT Index (GEL)

1 133,66

TRY / USD

3,5367

+0,2%

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GT Index (USD)

922,38

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+0,6%

AZN / USD

1,7132

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MSCI EM EE MSCI EM

Ͳ1,6%

NEWS

GEORGIA TODAY

AUGUST 15 - 17, 2017

Georgia Marks Russian Occupants Seize 25 Years since More Georgian Land Abkhazian War Continued from page 1 Georgia’s President Giorgi Margvelashvili and Prime Minister Giorgi Kvirikashvili issued special statements regarding the conflict. “The day will come when we will build a strong, developed, democratic and peaceful state together with the Abkhazians and Ossetians,” the president stated, pointing to the fact that Russia also played a huge role in the escalation of the conflict. “Territorial conflicts and their consequences remain a major challenge for our state and society. The answer to this challenge is the protection of peace with international and neighboring politics, restoration of trust, cooperation with our brothers and development of the country,” he added. The PM stated that August 14 is a “tragic day” in the modern history of Georgia, which brought heavy results for both sides.

“We should not be living in such a reality. We should not allow a third side to stand between us. It is harmful for us; for Georgians and Abkhazians, for the future of our children,” the PM said and expressed hope that one day the Abkhazians and Georgians will live together with respect in a strong and united Georgia. Significant human rights violations and atrocities were reported on all sides and peaked in the aftermath of the Abkhaz capture of Sokhumi, the main city in the region, on September 27, 1993. This was followed by a large-scale campaign of ethnic cleansing against the ethnic Georgian population, according to the Organization for Security and Co-operation in Europe (OSCE). Relations between Russia and Abkhazia improved in the late 1990s and after the Georgia-Russia August War 2008, the Russian Federation recognized Abkhazia as an independent state. Around 2,000 Georgians still remain missing after the conflict.

Georgia’s PM & Davos Mayor Visit Bioli Recreational Resort in Georgia

BY THEA MORRISON

ccupation forces of de facto Abkhazia and the Russian Federation have installed a 400 meter barbed wire fence near the Georgian villages of Khurcha and Shamgona at the so-called border between the breakaway Abkhazia region and Georgia. Khurcha governor Badri Khunjgurua stated that Russian occupants have completed the ‘borderization’ process at the so-called Khurcha-Nabakevi border, seizing a further two hectares of Georgian land. The governor said posts were erected at the location several months ago by the Russian occupants and now barbed wire has been installed between them. “A barbed wire fence had been installed on the posts so claiming about two hectares of agricultural land that had been cultivated by the locals for years. The borderization process has been com-

pleted,” Khunjgurua stated. Georgia’s State Security Service (SSS) has also confirmed the fact of borderization. “The installation of barbed wire fence at Khurcha-Nabakevi restricts locals’ rights and directly impacts the security environment at the scene,” the statement of the SSS reads. The agency reports that the issue will be raised at the Incidents Prevention and Reaction Group Meeting in Gali. Georgia’s Ministry of Foreign Affairs (MFA) assessed the fact as a part of Russia’s deliberate policy to further isolate the population living in the occupied region and to hinder the peace processes “by any means”. The ministry explains that in April this year, occupation forces carried out the preparatory works on that perimeter and installed wooden pylons and on 9-11 August, barbed wire fences were installed on the segment. “This action by the Russian occupation forces grossly violates the fundamental rights of the local population, restricting

their freedom of movement and access to education and health care, which will further complicate the already difficult humanitarian situation in the Abkhazia region,” the statement of the MFA reads. The ministry also urges the Russian Federation to cease its aggressive steps against Georgia, respect the principles of international law and its undertaken commitments, to de-occupy the territory of Georgia and take steps for peaceful conflict resolution with respect to Georgia's sovereignty and territorial integrity. Official Tbilisi has once again appealed to the international community to properly assess and respond to the actions of the Russian occupation forces, “which are directed to the factual annexation of territories of the sovereign state, and which damage the security environment as well as international order”. This July, the occupation forces also seized 20 hectares of Georgian agricultural land after moving the so-called border sign 500 meters into Georgian territory at Bershueti village near occupied South Ossetia.

Black Lake, New Tourist Destination at in Mountainous Adjara BY NINO GUGUNISHVILI

iorgi Kvirikashvili, Prime Minister of Georgia, and Tarzisius Caviezel, Mayor of Davos, Switzerland, visited the new recreational resort Bioli, in Kojori, Georgia, last week, for the opening of its new conference hall. Kvirikashvili thanked Tamaz Mchedlidze; the founder of the new resort, for the development of alternative medicine at Bioli, emphasizing the potential of the place and underlining the support the State is to provide for the development of similar resorts in the country. “It’s one of the most important directions and offers vast resources and perspectives for development, especially considering the growing number of tourists coming to our country,” the PM said. “We have seen a 30 percent increase this year and I think if Davos can host two million tourists a year, Georgia can easily host 10-15 million visitors per year”. He went on to highlight that Georgia already passed the six million visitors

benchmark. Seven million is said to be the next aim, set to rise again to 10 million visitors in a few years, with 15 million being the number that, according to Kvirikashvili, will be “a defining factor for the economic well-being of our country”. “The projects the State realizes are vital: Produce in Georgia, the micro grants program, agro-tourism development. All are linked to tourism, to seeing the connection between each tourist coming to Georgia and the well-being of each individual in Georgia. With more than $14 million investments, Bioli health and recreational resort in the village of Kojori is considered an innovative step for Georgia, playing an integral role in creating an ecologically safe environment in which a healthy lifestyle concept is promoted. “Switzerland managed to develop its mountainous regions while preserving its authenticity, that’s what we want to learn from Switzerland,” the Prime Minister claimed, thanking the Mayor of Davos and his spouse for their visit. Georgia’s PM invited Caviezel to Bakuriani next year for the opening of the first hockey arena.

BY NINO GUGUNISHVILI

lack Lake is the new tourist destination to be added to the sightseeing spots in Mountainous Adjara from next year. Buried in green, this lake is located on the Green Lake circle route of the Goderdzi Mountain Pass. The Agency for Tourist Product Development of Adjara plans to mark

Black Lake

and add the Black Lake to the list of touristic destinations next year. Black Lake is located 11.5 km from Goderdzi Mountain Pass, 1900 m above sea level. It is surrounded by alpine forest and plants that usually grow in wetland areas. “The place is difficult to reach due to the lack of a car route,” said Tinatin Zoidze, Director of the Tourist Product Development Agency of Adjara stated. “As it’s located in the forest, it makes a perfect place for picnics and camp-

ing, interesting particularly for fans of adventure tours”. She added that the Black Lake will be examined together with the Environment Protection Department and only then will it be marked. The participants of a two-day info tour to the Green Lake visited Khulo, Danisparauli, Goderdzi resort and Bishumi. They attended the Shuamtoba feast and the laying of the ground for four hotel construction sites at Goderdzi resort.

BUSINESS

GEORGIA TODAY

AUGUST 15 - 17, 2017

Tourism Market Watch: July FOR GEORGIA TODAY BY KAKHABER SAMKURASHVILI

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

NUMBER OF DIRECT FLIGHT ROUTES & FLIGHT FREQUENCY ON THE RISE, IN LINE WITH RECORD GROWTH IN NUMBER OF INTERNATIONAL VISITORS TO GEORGIA The number of direct flight routes peaked in June 2017, as 38 carriers serviced 87 routes with almost 400 weekly flights. The growth in connectivity goes hand in hand with the increasing number of visitors from secondary source countries. As a case in point, the number of visitors from the Middle East was up 94.0% y/y to over 78,000 in the first seven months of 2017, with Saudi Arabia (+217.5% y/y), Jordan (+398.4% y/y), and Kuwait (+184.9%) driving the growth. Given the above dynamics, air arrivals are gaining share, with 21.3% of international visitors to Georgia arriving by air, up from 16.1% in the same period last year.

Source: edu-leaders.com

SHARE OF TOP FOUR SOURCE MARKETS IN TOTAL INTERNATIONAL ARRIVALS AT 79.9% IN FIRST SEVEN MONTHS OF 2017, SECONDARY SOURCES CONTINUE TO POST ROBUST PERFORMANCES

GEORGIAN AIRPORT CAPACITY BEING UPGRADED TO SERVICE INBOUND AND OUTBOUND GROWTH IN TOURISM A second terminal has commenced operations at the Tbilisi International Airport and will be fully functional as of September 2017, increasing the airport’s annual capacity to approximately to 4.0mn passengers (previously 2.4mn passengers). Construction of a new terminal in the Kutaisi International Airport is expected to commence in August. On the back of inbound tourism growth and visa liberalization, passenger traffic was up 43.6 % y/y in Tbilisi and 86.5% y/y in Kutaisi in the first seven months of 2017.

GEORGIAN GOVERNMENT TRYING TO INCENTIVIZE DOMESTIC AIR TRAVEL According to the latest amendments to the tax code, domestic flights are exempt from excise and VAT taxes on aviation fuel and flight service, which should increase their affordability. Furthermore, the government has provided a GEL 10.8mn subsidy to ServiceAir, a company operating domestic flights to Batumi, Mestia, and Ambrolauri. ServiceAir is expected to operate domestic flights year-round.

INTERNATIONAL TRAVEL INFLOWS TO GEORGIA

INCREASED 27.9% Y/Y TO US$ 659.0MN IN 2Q17, AFTER GROWING 23.3% Y/Y IN 1Q17 Overall, travel inflows were up 26.0% y/y to almost US$ 1.1bn in 1H17. The share of travel inflows in service exports reached 61.1% in 1Q17, up from 56.4% in 1Q16. Foreign card operations of international travelers in Georgia were up 34.2% y/y to GEL 165.1mn in June 2017 and 33.5% y/y to GEL 952.3mn in 1H17.

VALUE ADDED FROM TOURISM WAS ROUGHLY FLAT Y/Y AT GEL 480.1MN IN 1Q17 AND ACCOUNTED FOR 6.8% OF GDP, COMPARED TO 7.4% IN 1Q16 Value added was up 36.2% y/y in the accommodation units and 5.5% y/y in the food establishments categories, while value added was down 8.5% y/y in the transport segment and 8.3% y/y in the travel companies category.

NUMBER OF INTERNATIONAL ARRIVALS UP 28.5% Y/Y TO 0.98MN IN JULY 2017

Out of the top four source markets, there was very strong growth from Armenia (+25.4% y/y), Azerbaijan (+13.8% y/y), and Russia (+60.4% y/y). For the first time in 2017, the number of visitors from Turkey was up, albeit slightly (+0.6% y/y). Arrivals from the EU were up 21.4% y/y to over 45,000 visitors.

Arrival growth from secondary (non-EU) source markets contributed 4.0ppts to the overall growth of 16.8% y/y. The number of Israeli visitors increased 43.1% y/y to over 66,000, while the number of Indian visitors was up 100.9% y/y to over 31,000. Arrivals from the EU were up 22.8% y/y to almost 174,000 visitors, with Germany, Poland, and UK driving the growth.

TOURIST CATEGORY CONTINUES TO DRIVE ARRIVAL GROWTH IN JULY 2017 The number of overnight visitors (‘tourist’ category) was up 32.9% y/y – after the largest y/y growth on record in July 2017 – and accounted for 52.9% of international arrivals. Same-day arrivals were roughly flat, while transit visitors posted an outsized 53.7% y/y growth rate. The number of tourist arrivals is up 30.2% y/y to 1.83mn in first seven months of 2017, while the number of same-day visitors is down 1.6% y/y and the number of transit visitors is up 25.3% y/y.

NUMBER OF INTERNATIONAL ARRIVALS UP 16.8% Y/Y TO 3.98MN VISITORS IN FIRST SEVEN MONTHS OF 2017 The number of visitors increased from all major source countries except for Turkey (-12.9% y/y). The largest individual contributors to overall growth were Armenia (+18.3% y/y) and Russia (+35.9% y/y). Azerbaijan contributed 2.2 percentage points, as the number of visitors from Azerbaijan posted a solid increase of 8.7% y/y despite the high base of last year. The number of Iranian visitors was up 2.7x to almost 166,000 visitors and surpassed the number of Ukrainian visitors (110,275) in first seven months of 2017.

10 Galaktion Street

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

BUSINESS

GEORGIA TODAY AUGUST 15 - 17, 2017

Construct.ge: More E-commerce Possibilities for Georgian Construction Sector BY NINO GUGUNISHVILI

onstruct.ge, an online platform launched in February this year, claims to be an innovative web portal providing a multitude of services to the construction sector in the country by offering an e-commerce system of construction products while connecting buyers and sellers with each other, directly. Aiming to increase the volume of sales of sellers and simplify the process of trade, construct.ge is there to assist architectural, design, construction and inspection companies to buy or sell any construction related product with a fully automated process, also giving companies the chance to promote their products, expand their market reach and stimulate competition. Additionally, the construct.ge website provides an up-to-date catalogue of market prices, the Georgian and foreign distributors and producers operating in the sector, and the possibility to sell leftover construction materials. It also develops an innovative approach to calculating market prices according to the live transactions of trading. Construct.ge Chief Executive Officer and Co-Founder, Gigi Gachechiladze (27), talked to GEORGIA TODAY about his startup, the road he took to take the project from an idea to a successful venture, why he thinks construct.ge is an innovative and unique concept as a platform and what his aspirations and ambitions are for the future. “I decided to quit my job back in the summer 2015. I worked at the Georgian office of Foton, the largest Chinese company producing automobile, construction and agricultural equipment. When I quit, I made a list of what really interested me, and which distinct road I wanted to follow, and in that process, I came up with the idea to create a trade platform. It came from a visit to a supermarket where I saw several people making notes on their phones and iPads, talking to the supermarket staff. It turned out they were the representatives of product producers, the ones we call pre-sellers, or in other words, sales managers, taking orders. It hit me that it would be both a lot more time and financial-resource efficient to create an online platform which would link product producers, importers, suppliers and buyers with

Among major problems ICCA member companies faced were leftover construction materials and no way to calculate market prices

each other. I shared the idea with Sandro Tavkhelidze, a friend of mine, who has a small hotel and a shop in Bakuriani and almost on a daily basis encountered the problem of being out of supply of various products since they were brought by retailers themselves. He was interested and had experience in web business solutions development,” Gachechiladze said. After conducting thorough market research, Gachechiladze says it turned out that importers were not ready to replace the pre-sellers with services directly operated via an online platform, as they thought these human resources were extremely important for the companies. They were afraid to lose sales. He and Sandro tried cooperating with smaller offices and importers; placing office supplies on the web to buy and sell, and quickly achieved significant results. “This was the idea we brought to the one year Business Incubator program, offered by the Geor-

gia’s Innovation and Technology Agency, which helped us to develop our project from an idea to business, providing trainings and consultancy together with an actual work place, and offering a GEL 5000 small grant for the prototype. We were joined by a technical team that worked on developing our web-platform,” Gachechiladze says. In summer of 2016, the Infrastructure Construction Companies Association (ICCA) expressed interest in the online platform. One of the major problems ICCA member companies faced were leftover construction materials after the construction process. Another was that there had been no research based on which the budgets for construction materials would have been made, as they participated in government tenders. “The market price availability is crucial,” Gachechiladze told us. “Every year, 34% of state tenders in the construction sector are abolished by the state procurement agency due to various reasons, the major one being inadequacy of prices provided, with no digital and up-to-date market research conducted in the country. Our idea was to focus on the construction sector segment, adding market price research as a component based on trade transactions, which enables us to see the overall picture of the market and create the right algorithm to

Importers were not ready to replace the presellers with services operated via an online platform Gigi Gachechiladze CEO Construct.ge and Ana Sabakhtarishvili, ICCA Executive Director

enlist the right products together for an accurate result,” he said. Along with ICCA, the project was joined by a budgeting company, Modulator LTD, which assists construct.ge in market price research, and worked on creating the algorithm. The first results of the market price research will be announced in October. “Of course, we’re not yet competing with such giant wholesale suppliers’ platforms as Alibaba.com or Amazon Business, but we have the ambition to become leaders in the region. The combination of trade and research solutions is what makes construct.ge unique and innovative, as it provides anyone interested in information about Georgian market prices, for concrete, for example, and provides the option of running market research without scouting. This is one of the key advantages of our platform,” Gachechiladze told us. Construct.ge, is now focused on serving corporate clients and boasts 12,000 listed products, 88 suppliers and 87 buyers registered on the portal. “Nothing was easy, but it was worth it, since we’ve learned an incredible amount along the way,” he added. “When we announced early this year that we would have 1300 clients by the end of the year, it was ambitious, but on the other hand, having a bigger budget would naturally

Construct.ge boasts 12,000 listed products, 88 suppliers and 87 registered buyers help us more.” He says they have set more realistic goals for the future. One of the main difficulties, he states, was collecting together electronic product catalogues from suppliers, since many companies in Georgia are still working with printed ones. As such, some of the companies on the platform have yet to provide a catalogue. In addition, some of the companies are reluctant to have their products listed on the construct.ge site when they have their own company sites, not realising that construct.ge offers a new chain of trade and a possibility to expand. “Persuading the companies to meet with our

representatives is quite challenging sometimes, although once they get what we’re offering, their interest grows and we can see the positive trend: the companies we’ve registered are getting more and more active, and we’ve already had more than 125 transactions through our site,” he says. For Gachechiladze, the benefits of online trade in general, with the three major components of saving time, offering product market research and receiving the best price available, combined with strong online security, are obvious. “Online trade is the future,” he says. When asked what he thinks is needed to change the mindset of suppliers and producers to better rely on online commercial platforms, Gachechiladze says it’s a matter of trust, and that trust still needs to be gained. “As a startup, we were quite fast paced, wanting to do as many things as we could before our potential competitors and maybe that resulted in losing some important things in the process,” he says. “You have to choose your team very carefully, one that can get you better results in the long term. Hurrying and making the right decisions simultaneously is very difficult to achieve, and you need to work on yourself in that regard. Setting priorities right and choosing the right methodology for your business are also important, as is controlling your emotions, which may very well top the list,” he says. Of the future, Gachechiladze says, “I’d be the happiest man in the world to reach all the goals we set in our business plan, say, expanding our web platform regionally, which we see as our next step, registering international suppliers to the platform, and then strengthening our position globally”. “The uniqueness of the construct.ge platform lays in the fact it’s a combined product ensuring all the key players and actors in the construction industry are involved,” Ana Sabakhtarishvili, ICCA Executive Director, told GEORGIA TODAY. “At present, we only have construction materials listed, and we’re looking to add the lease/rent/buy/sale of construction equipment, as well as labor cost calculations for construction companies and our beneficiaries, as we see it to be a platform that any company in the construction industry or even the state institutions, could use. For ICCA, this web platform is important, as our member companies will be receiving precise and accurate information on the market prices, saving them time and financial resources,” she said. The online platform construct.ge is a joint project of ICCA, Wesale LTD, and Modulator LTD.

BUSINESS

GEORGIA TODAY

AUGUST 15 - 17, 2017

Macroeconomic Stability in Georgia Ensured BY TAMZIN WHITEWOOD

he Chairman of the Budget and Finance Committee, Irakli Kovzanadze, has declared that macroeconomic stability in Georgia is ensured. At the same time, during the year, Georgian currency is also stable and as such presents no problems. “Economic growth is ensured, and we’ve got exactly the figures which were planned by the end of 2016. GDP growth is more than four percent. During the first half of 2017, GDP growth has increased by 4.5 percent, which is a really good indicator in the region. Home investment increase is also evident. I think that the investment climate in Georgia is attractive,” Kovzanadze said. The chairman also mentioned that the economic strategy of the government includes: sector restructure of the economy; eradication of economic inequality among regions; ambitious plans for spatial planning and infrastructural development; a capital market reform; pension reform; land reform and many other issues such as urban development, international trade relations, and education- including technical education, and other important areas. “To find its economic purpose and place in the world market, the government has a strategy to create a foundation for developing a more dynamic, fast and competitive economy in Georgia once and for all over the coming years,” Kovzanadze stated.

Russian Grain Prices Bending under the Harvest KUK-Hndesl GmbH is pleased to announce a vacancy in Georgia on the position Country Manager / Technical Sales Manager MAIN RESPONSIBILITIES: • • • • • •

Found LLC, run and develop company’s business in Georgia; Create better products together with the food producers in all branches; Establish and commit to a vision and sales strategy; Responsible for sales activities, deal with key clients and close cooperation with them; Directly reporting to regional branch; Other duties as assigned;

REQUIREMENTS: • • •

• • • • • •

Bachelor and preferably Master’s degree in Food Technology; Minimum 3 years of experience in food production; Be a good food technologist, who likes to solve technical problems and also likes to develop good food products and have practical experience in the development and production of high quality food; Have very good selling skills; Be capable of independently running a business and simultaneously have the potential to be an active sales person; Action oriented, willingness to take responsibility and initiative; Ability to influence and negotiate while maintaining a strong focus on customer service; Fluency in English; Clean driving license.

COMPANY OFFERS • • • •

Connection with 40 ingredients producers, with all their research centers and also with 60 food technologists within the company sharing his/her experiences with them; Training to enable the candidate to be provided with know how behind Company‘s Specialties, to help the Georgian Industry to produce better Food and Pharma Products; Challenging and very interesting job; Salary to match your performance;

Interested candidates can send their CV (English Version) at:anelia.malcheva@kuk.com Attention: We consider and contact only suitable candidates!

BY DAVID DRUMMERS

ast week, grain prices in central Russia and the Volga region fell by 250-700 Rubles per ton, the biggest drop since the beginning of the season. The market is being pressured by a large crop, record reserves, as well as a lack in trucks and elevator capacity. If the same situation repeats in the south of the country, it can be expected to lower the export prices of Russian grain. Analytical center Sovecon claims this is the largest decline in the regions since the beginning of the season. The average prices for wheat of the fourth class decreased by 275 Rubles to 8.1 thousand Rubles per ton. Barley has fallen in price by 250 Rubles to 6.55 thousand Rubles per ton. The fall in prices for wheat of the third class was less significant - by 100 Rubles (up to 8.95 thousand Rubles per ton). The prices have been crushed by a huge harvest, Sovecon explained, going on to forecast the rise in the grain harvest as up to 125.2 million tons (including 77.9 million tons of wheat). In 2016, Russia collected a record 120.7 million tons of grain (73.3 million tons of wheat). Given the good yield and high harvesting rates, this season the USSR record of 1978 may be broken, when 127 million tons of grain were harvested. The Russian Ministry of Agriculture still maintains a forecast for the collection of grain at a level of 103-105 million tons. In addition to the high harvest, record-breaking carry-over stocks are now pressing the market, says Arkady Zlochevsky, President of the Russian Grain Union (RGU). On July 1, Rosstat estimated their volume at 15.3 million tons, which is 12 percent more y/y. The dynamics of domestic prices is also affected by the shortage of elevator capacity in the Volga region and the lack of trucks for the operational transportation of grain, Soevcon reports. “In such a situation, the formation of surplus is inevitable,

therefore the fall in domestic prices can be significant," said Dmitry Rylko, Director General of the Institute for Agrarian Market Studies. “Domestic prices were also affected by the beginning of the restructuring of the grain market, during which the largest exporters refuse intermediaries and purchase grain directly from producers or commission agents,” Zlochevsky points out. He believes that the decline in domestic prices, in the long term, will affect the southern regions, where the main volumes of grain go for export. According to Sovecon, the demand for fourth grade wheat in ports last week remained in the range of 10.2-10.4 thousand Rubles per ton. Export prices fell from $198 to $196 per ton (according to FOB). At the same time, according to the analytical center, the main Russian competitor in the world wheat market, France, last week had export prices in the range of $190-192 per ton. On Friday, the Russian Ministry of Agriculture reported that from July 1 to August 9, Russia increased grain exports by 24.1 percent to 3.65 million tons (wheat by 2.6 percent, to 2.4 million tons). Acceleration of shipments by the President of the Russian Grain Union (RGU) connects with favorable conditions for exporters on the domestic market. “According to the results of the season, Russia can export 38 million tons of grain against 35.5 million tons in the past,” said the head of the Ministry of Agriculture, Alexander Tkachev.

BUSINESS

GEORGIA TODAY AUGUST 15 - 17, 2017

Source: transsibtom.de

No Longer the Russian Federation: A Look at Tartarstan OP-ED BY EMIL AVDALIANI

n July 24, Russia effectively ceased to be the Russian Federation when the last power-sharing agreement which had existed between Moscow and Tatarstan was not renewed. This may have big repercussions for the entire country as Tatarstan is an important region with a large economy and some level of nationalism. At the same time, it shows the level of centralization inside Russia and the preparation for challenges which lie ahead for Putin’s long rule. Russia had been gearing up for this scenario for quite some time. For example, on July 11, the members of Tatarstan's State Council adopted the text of a statement asking Russian President Vladimir Putin to prolong the agreement signed between Tatarstan and Moscow in 2007. By July 24, it was clear the Russian government would not be prolonging the treaty. Tatarstan always looked for some sort of autonomy within Russia. During the Soviet period, the region numbered among the existing 16 Soviet socialist republics. When the Soviet Union broke up, 46 regions across Russia demanded separate agreements with Moscow to highlight some sort of autonomy. Tatarstan was one of them, with several years of negotiations between Moscow and the Tatarstan capital, Kazan, bringing about the 1994 agreement which transformed Tatarstan into a constitutional republic with its own president. Kazan also got autonomous control over its taxes, judicial system, police force, citizenship and even foreign relations. In 2007, another agreement was signed between Moscow and Kazan for the next 10 years. However, this trend of having powersharing agreements between Moscow and the regions began to shift when Putin came to power. Slowly, one by one, the

The trend of power-sharing agreements between Moscow and the regions began to shift when Putin came to power

Tatarstan has Russia's sixthbiggest gross regional production per capita regions with power-sharing agreements began to lose their autonomy. In 2010, Head of Chechnya Ramzan Kadyrov famously conceded its presidential position, leaving Tatarstan as the only presidential autonomous region in the Russian Federation. The case of Tatarstan is not only important for it being the last example where a power-sharing agreement is not prolonged, but also because Tatarstan is in fact the most prosperous region of the autonomous 46. Located in the heart of Russia's strategic Volga region, almost half the republic's population consists of various ethnic groups, among them the Tatars. The region has always been prone to gaining some sort of independence from the central government and there were historical examples, including the famous well-known rebellion led by Kazak Pugachev who had a power base in the Volga region, Tatars featured prominently in his enterprise. More importantly, Tatarstan also has Russia's sixth-biggest gross regional production per capita. The oil company Tatneft, Russia’s fifth-largest energy firm, also belongs to Tatarstan. The capital Kazan boasts being the second-most industrialized city in Russia with massive production of trucks, planes and helicopters, and running petrochemical and chemical production facilities. So far, the Russian government has made it clear that no continuation of the power-sharing agreement will take place. And this shows the level of power centralization in Russia under Putin. But it could set in motion a dangerous set of events in Russia which it has always worked hard to avoid: ethnic groups wishing to gain more autonomous power. While the North Caucasus has been traditionally regarded as a region most prone to fighting the Russian government, Tatarstan could a be the next battleground. As said above, the region is among the most prosperous in Russia. It has an economic powerbase it might be unwilling to concede in the longer term. In the light of Russia’s standoff with the West and difficult economic conditions within the country, exacerbating central government-regional rela-

tions is the last thing the Kremlin wants now. At the same time, from Moscow’s perspective, the prolongation of the powersharing agreement with Tatarstan could encourage other regions to ask for similar arrangements – a scenario the Kremlin also wants to avoid.

However, the case of Tatarstan overall fits into the wider processes unfolding in Russia under Putin. Centralization of power in Moscow has already been at full steam in the last several years. As Putin gears up for his next presidential term, the central government wants near total control over all the regions. Any opposi-

tion must be stamped out and the control over regional economic assets must be in Moscow’s hands. The case of Tatarstan, although some think it only symbolically important, is nevertheless an example of modern Russia further tightening control as the Kremlin feels more pressure from abroad and within about Putin’s rule.

BUSINESS

GEORGIA TODAY

AUGUST 15 - 17, 2017

Iran & the Sanctions War BY DAVID DRUMMERS

he worst thing that can be happen in a sanctions war is the disconnection of the country from the interbank SWIFT system and a ban on the purchase of its oil and gas. This is proven by the experience of Iran, against which sanctions began to be introduced in the early 50s, with a toughening over subsequent decades. The United States intends to respond to Russia's expulsion of diplomats from Moscow. According to Secretary of State Rex Tillerson, Washington will make a decision by September 1. The Secretary of State did not specify how the United States intends to respond, but it is clear that the sanctions war, which entered an acute phase after Russia’s occupation of Crimea, will continue. The Russian Ministry of Economic Development, with the help of experts from the All-Russian Academy of Foreign Trade, decided to analyze how the sanctions mechanism had been applied at the global level in the last 70 years. Since 1970, the US has imposed 95 sanctions against various countries. During the same period, the EU introduced 35 sanctions. The USSR and Russia applied sanctions seven times during this time and 16 sanctions were imposed by the UN. Sanctions began to be actively used as an instrument in world politics after the Second World War. The peak came in the period from 1991 to 1995 which saw 34 countries sanctioning each other. In recent years, such actions have become less popular, with many realizing that the weapon was double-edged. The recent study says that sanctions are applied mainly to developing countries, "not having a stable political, social and economic system." Since 1970, with respect to the countries of Africa, 32 blocks of sanctions have been applied, to countries of Latin America - 20, Asia - 16, the USSR and the countries of the post-Soviet space - 14. The study further claims that only one third of the applied sanctions led to

the desired effect. Experts point to several reasons that reduce the effect of sanctions. For example, the absence of an international consensus on the need for such punishment. As a result, economic damage from the application of sanctions is substantially compensated or, in some cases, even overlapped by the effect of economic assistance from other countries. US sanctions against Cuba, for example, were extremely ineffective in the period from 1960 to 1990 due to active assistance from the USSR. After the collapse of the USSR in 1991 and the cessation of financing, the economic damage from sanctions became devastating. And in the case of the USSR sanctions against Yugoslavia in 1948 and the United States against Ethiopia in 1977, the combined effect on the economy and social welfare of Yugoslavia and Ethiopia was even positive: thanks to active financial assistance from other countries. Often, the reason for failure in such a policy is the "narrowly targeted nature of sanctions," for example, with regard to specific individuals or in cases where restrictions are applied in just the financial or commercial sphere. Complex sanctions, that is the simultaneous application of sanctions in the financial and trade spheres, appear to be more effective in 10-20% of cases. The Russian study details how sanctions have affected the economies of countries such as China, Cuba, South Africa, Syria, Iraq, and Iran. Of greatest interest to the Russian authorities is, of course, the mechanism of the sanctions and their consequences in the case of Iran, which can be used as a study of “the worst-case scenario”. The economies of Russia and Iran are both largely dependent on the export of hydrocarbons, and the “emotional background” is very similar. Anti-Americanism in recent years, especially after the annexation of Crimea, has become an important component in the political field of Russia. Parallels with Iran also arise in the case when the RussianForeignMinistrysuggestsreducingthedependence of the Russian economy on the US dollar.

Iran has already passed this. And in return, Iran began to form mutual agreements with the countries included on the "black" list of the United States, in particular, with Syria, Pakistan, Afghanistan and Iraq. In 2013, Iran's foreign trade was almost completely reoriented to Asian countries, whose share in Iranian exports exceeded 90 percent (while the share of European, North and South American countries was only three percent). The total damage to the Iranian economy since 1995, when the United States first imposed sanctions for developing a nuclear program, amounted to $170 billion According to Bloomberg, Iran, which is one of the largest oil producers in the world, is losing $133 million daily due to sanctions. The International Monetary Fund (IMF) says that, under the impact of sanctions in 2012, the growth rate of Iran's economy fell to 0.4 percent. By March 2013, more than 6,000 Iranian enterprises (approximately 67 percent of their total number) were placed on the verge of bankruptcy. The two most serious negative effects on the Iranian economy, experts claim, were the exclusion of SWIFT from the global interbank payment system and the ban on imports of Iranian oil and gas by the EU and US countries. As a result, in 2013, Iran's GDP contracted by 6.6 percent. Sanctions against the Iranian banking system led to a reduction in Iran's foreign trade by about 30 percent. Inflation reached a record level: according to the Iranian Statistics Department, from March 2012 to March 2013, it exceeded 30 percent, which is the worst indicator in the history of the country. At the same time, food prices rose by more than 60 percent. From the middle of 2012 to 2013, when the embargo

on the purchase of Iranian oil by the United States and the EU came into force, unemployment rose by 25 percent. By early 2014, 44 to 55 percent of Iran's population was below the official poverty line. International sanctions also led to a weakening of the automobile industry of Iran, which was in second place after the oil industry. In 2011, the automobile industry accounted for almost 10 percent of Iran's GDP, with nearly 1 million people employed in the industry. In 2011, imports of equipment and some components for the automotive industry were banned. That year, before the ban, the country produced 1.5 million new cars. A year later, production fell to 800 thousand. In the sanctions war, the initiating countries also bear economic losses, experts warn. On average, such losses can reach 6 percent of GDP. For the US and EU, sanctions against Iran resulted in significant losses. According to the assessment of the National American-Iranian Council, from 1995 to 2012, the United States, due to imposed sanctions, lost about $175 billion in potential export earnings from trade with Iran. According to the US Department of Commerce, the loss of export earnings of $1 billion cost from 55 to 60 thousand jobs per year. Thus, for example, only in the crisis year of 2008, due to sanctions against Iran, more than 250 thousand Americans lost their jobs. Sanctions against Iran also caused significant damage to the economies of some EU countries. In the period from 2010 to 2012, Germany's losses as a result of anti-Iranian sanctions, according to experts, amounted to $23.1 billion to $73 billion, Italy - from $13.6 billion to $42.8 billion, France - from $10.9 billion to $34.2 billion. And so the sanctions war goes on…

Georgia’s External Merchandise Trade Shows Growth BY NINO GUGUNISHVILI

ollowing the preliminary data results published by the National Statistics Office of Georgia (Geostat), the external merchandise trade of Georgia amounted to $5674.7 million for the period from January 2017 to July 2017, up by 13.0 percent y/y. The value of export is reported to have increased by 28.9 percent ($1446.2 million) with import growth at an 8.5 percent increase ($4228.6 million), compared to 2016. The preliminary data provided by National Statistics Office states that the trade deficit stood at $2782.4 million, with its share in trade turnover at 49.0 percent. Geostat is to publish more details on external merchandise trade in Georgia on August 21.

POLITICS

GEORGIA TODAY AUGUST 15 - 17, 2017

De Facto Tskhinvali Prohibits Georgian Language Education in Akhalgori Schools

BY THEA MORRISON

fter prohibiting pupils from receiving education in the Georgian language in Gali, occupied Abkhazia, the de facto authorities of another Russian-backed breakaway region, South Ossetia, have also decided to replace the Georgian language with Russian at schools in Akhalgori town, which was occupied during Georgia-Russia War 2008. Georgian media reports that the changes to the education system of Akhalgori schools will take place from September and the studying process will be conducted in Russian, while the Georgian language will be taught as a separate subject. Governor of Akhalgori Municipality, Nugzar Tinikashvili, says that the restrictions apply to two Georgian kindergartens, too. “At present there are two Georgian kindergartens in the town, but they will soon be shut down as the occupants have built a new kindergarten, which will become operational from September,” he said.

There are six Georgian schools in Akhalgori, which have 140 Georgian teachers. The majority of Georgian pupils and teachers do not speak Russian. The locals believe that after the changes, the Georgian teachers will be dismissed. They say the occupants want to make the local Georgians leave the town. Georgia’s Minister of Reconciliation and Civil Equality, Ketevan Tsikhelashvili, says that the action of the de facto authorities is another step within the policy of Russification. The minister stated that receiving education in one’s native language is a fundamental human right. “This is discrimination against Georgian nationals who live in the occupied area. This is totally unacceptable for the Georgian government and the international community,” Tsikhelashvili said, going on to promise that Tbilisi. Tsikhelashvili promised that Tbilisi will use all possible international formats to prevent Akhalgori locals from discrimination and Russification and to ensure the protection of their fundamental human rights.

SOCIETY

Natakhtari & Coalition for Children & Youth Present New Program housing and job problems independently, not to mention the necessity for psychological support," Coalition representatives said. “In Georgia, young beneficiaries, at the age of 18, have to leave the state care system, when they have not yet overcome the traumas inflicted by abandonment and in some cases, violence. They are not financially and independent, nor do they have the practical skills required to lead an independent life”. The advocacy campaign provides for cooperation with the relevant agencies of the central and local self-government and the implementation of the prepared recommendations. Within the framework of the campaign, several meetings were organized with all involved sides.

BY THEA MORRISON

round table was held within the framework of the youth support campaign at the Gepra Competence Center on Monday. The Natakhtari Company and the non-governmental organization (NGO) Coalition for Children and Youth presented a jointly prepared program. The program consists of several important chapters, serving as a guidebook for young beneficiaries registered in various municipalities. The state structures, including the Ministry of Labor, Health and Social Affairs, the Ministry of Infrastructure and Regional Development, and the Administration of the Government actively participated in the program development process. Nikoloz Khundzakishvili, Director of Corporate Affairs of Natakhtari, said that this is a project that started a month ago with the NGO Coalition for Children and Youth. “Natakhtari will provide financial support for the project,” he said, adding that, “This is a kind of document, a guide that will allow local authorities to mobilize available resources to support youth beyond the care system”. “This program also contains financial assistance with housing components, utility payments, and the support of young students who need preferential transportation in municipalities,” said Ketevan Kalandadze, a representative of the NGO Coalition for Children and Youth. Representative of the Ministry of Health, Nino Odisharia, said the program is very good but needs refinement.

“We will continue to work with the Coalition for Children and Youth to make this program more flexible and better tailored to the needs of the young people who need it," she said. Members of the Coalition Board, representatives of the Natakhtari Foundation and Association Our House – Georgia, and the Health and Infrastructure Ministries also participated in the round table. The sides focused on the importance of the involvement of the State and private sectors. Company Natakhtari expressed its readiness to

support the distribution of the program in the regions. In early July, a memorandum was signed between Natakhtari and Coalition for Children and Young People, which aimed at supporting young people beyond the care system. “The state care systems in the developed countries of the world (foster families and small family houses) assist children deprived of care not only until the age of 18, but even until the age of 21-24, as it is impossible for a young person of 18 to resolve

SOCIETY

GEORGIA TODAY

AUGUST 15 - 17, 2017

Education Ministry Offers Free Apples to Tbilisi Schoolchildren from September

BY THEA MORRISON

ducation Minister of Georgia, Alexander Jejelava has initiated a new campaign to distribute free apples at Tbilisi schools that have more than 1,000 pupils. The minister explains that the aim of the campaign is to promote a healthy lifestyle among children. Jejelava says the program will be expanded in future so that all pupils throughout Georgia will get an apple a week from the State. “The program will last from September to December 2017. The project is quite complicated and expensive but we want pupils to eat apples during the breaks,” the minister stated at a special pressconference. Jejelava thinks that, at the first stage, around 40,000-60,000 schoolchildren will get apples from the State weekly. The minister also said that board games are to be introduced in schools from September as a pilot project which will be gradually launched in every school in Georgia. “We started working with the games’ producers with the desire to use board games in primary classes. There is great experience in this direction in the world,” he said.

At the first stage, around 40,00060,000 schoolchildren will get apples from the state weekly

We should focus on the development of social skills, sports and a healthy lifestyle Moreover, the Ministry of Education intends to simplify the program for 7, 8 and 9th grades. “Grades 7, 8, and 9 should be relatively light and fun. We should focus on the development of social skills, sports and a healthy lifestyle. We are working in this direction,” Jejelava stated. “Labor” lessons will also be introduced in schools from September. Labor classes were very popular in Soviet and post-Soviet times in schools, but were abolished in the late 90s. Minister Jejelava says the subject will be re-introduced as a way to develop students’ labor skills. “This will be an important step for promoting vocational education and I think it will be fun for children. Most importantly, it should be diverse, with children being offered many alternatives,” he added. Jejelava explained that at first this will be a pilot project to be individually tailored to each school depending on the available facilities, such as space for workshops or vegetable gardens. “First, we have to assess the facilities and capacities each school has in order to develop their potential. At this stage, we don’t plan to set up vegetable gardens at schools,” he added. This spring, the Education Ministry introduced a pilot program of free lessons at some schools, which envisages more sports classes and the promotion of cultural-cognitive skills in children. From the new academic year, the project will be introduced in most schools of Georgia.

CULTURE

GEORGIA TODAY AUGUST 15 - 17, 2017

Scary Mother by Ana Urushadze Wins at Locarno Film Festival BY NINO GUGUNISHVILI

eorgian Filmmaker Ana Urushadze won the Golden Leopard award for her film debut Scary Mother, in the Best First Feature category at the Locarno Film Festival in Switzerland. It also received an independent jury prize. A Georgian-Estonian co-production, Scary Mother was featured at the Concorso Cineasti del Presente section of the festival. The award ceremony was held on August 12. One of the most prestigous film festivals in the world, Locarno International Film Festival has taken place

every August since 1946. This year sees its 70th anniversary. Urushadze’s debut film tells the story of 50-year-old housewife Manana (played by Georgian actress Nato Murvanidze), "whose passion for writing transforms into an obsession" a review of the film claims. “In most cases, it takes time (and more than one film) for a filmmaker to find an aesthetic form that can tell the mental and emotional state of the characters through images. In her debut film, Sashishi Deda (Scary Mother), Georgian director Ana Urushadze is able to demonstrate that she possesses a surprisingly mature clarity of storytelling and a mastery of vision.” Adriano Ercolani, a freelance film critic, wrote.

Zura Kiknadze’s Music Soiree DOES THE REPERTOIRE CHANGE EVERY WEEK?

BY MAKA LOMADZE

ura Kiknadze is a 42-year-old singer and composer who plays on acoustic guitar. You can catch his performances at the Zazanova café-restaurant every Tuesday. GEORGIA TODAY went along to meet him.

WHEN DID YOUR COLLABORATION WITH ZAZANOVA BEGIN? I’ve been playing here for four years. I started out playing in a duo, then I appeared with Tako Davitashvili, a singer on keys, and Tornike Gordadze on drums. I started playing a solo repertoire around three years ago.

Basically, yes. I play covers as well as my own compositions. We, me and the Zazanova team, get on perfectly well in terms of musical taste, and they leave me free to offer the audience whatever I wish. There are a lot of clubs in Tbilisi for those who wish to entertain but it’s not my niche as I don’t go for commercial material: I focus more on high quality, tasteful music and try to offer the audience something new.

mat. I play ‘Shape of my Heart’ and ‘Fragile,’ both acoustic ballads. I try to respond to the terms of cover performance, which implies that it should be a performer’s interpreted version and not a copy-paste. Sometimes, I play Georgian songs, for instance, ‘Suliko’. The interpretation depends on the voice timbre and character of a performer. Sometimes, there are some songs that I perform that the audiences listen to for the first time. In this case, soirees become something informative, too.

HOW DO YOU CHOOSE WHAT TO PLAY?

DO YOU PLAN ANY OVERSEAS WORK?

I never know beforehand: it depends on the feeling I get from the public. I already have a loyal following, people aged 20 to 70, who like high quality music. Sting is the ‘best-selling’ musician for this for-

I was recently offered production by a producer from Canada who works here in Georgia. I’m preparing for it now.

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