Issue no: 1168/189
• JULY 16 - 18, 2019
• PUBLISHED TWICE WEEKLY
PRICE: GEL 2.50
In this week’s issue... Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2
EU, Georgian Gov’t Sign EUR 28 mln SAFE Program NEWS PAGE 2
GRECO Report: Georgia Fulfilled 5 of 16 Corruption Recommendations BUSINESS PAGE 3
FOCUS
ON INVESTMENT The 1st Eastern Partnership Investment Forum was held in Batumi
PAGE 8
GD Gov't Spent GEL 13 mln on Georgian Tourism Marketing in Russia
Why Economic Sanctions Mean Little to Moscow BUSINESS PAGE 6
Kobuleti Coastline Renovations Could Help Promote Black Sea Tourism BUSINESS PAGE 7
The Economics of Prostitution
BY THEA MORRISON
BUSINESS PAGE 10
I
t has been revealed that the Georgian Dream (GD) government has in its time in power spent more than GEL 13 million ($4.56 million) on promoting Georgian tourism in the Russian Federation. Official statistics of Georgia’s National Tourism Administration (GNTA) read that most of its budget of nearly GEL 6 million ($2.1 million), was spent on marketing in Russia in 2018. The amount spent per year on advertising Georgia is as follows: 2013 – GEL 100,158; 2014 – GEL 188,325; 2015 – GEL 1,679, 482; 2016 – GEL 3,952, 613; 2017 – GEL 1,259,385; 2018 – GEL 5,984,318.
Georgian Archpriest Responds to Putin’s Alternative Version of History POLITICS PAGE 11 Prepared for Georgia Today Business by
Markets As of 12ͲJulͲ2019
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Mestia, Svaneti region. Source: gta.ge
TBC Bank Group (TBCG LN)
2019 is the first year since 2013 where the government did not budget money for marketing activities in Russia. The official information shows that in 2015, the GNTA spent GEL 1.7 million of the tourism administration budget on marketing activities in Russia, while the total budget for marketing was almost 18 million GEL. In 2017, 1.2 million was spent on marketing in Russia from an 18.5 million budget, and in 2018, the National Tourism Administration allocated 16.5 million GEL for Georgia's tourism marketing, of which almost 6 million was spent in Russia alone. Continued on page 4
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NEWS
@entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you: Meet Nika Bagalishvili, a youngster from Tsnori who has been actively engaged in bio-agriculture for the past year. Existing health problems, catalyzed by polluted air, food and an unhealthy lifestyle, were his main motivations for starting the business. He decided to contribute to the food direction by offering ecologically clean and natural products grown without pesticides. Nika states that sales are low due to the relatively high price of the goods but insists they are healthy, protecting individuals from various diseases. He plans to expand his bioagriculture and even launch an agro-school. White House Burger is a popular eatery in Kutaisi among both locals and tourists. Run by Natia Chakhunashvili, the idea for it came to her while she was working at Best Western (where she also met her husband!). She does not use frozen semi-processed goods, instead using those of their own production. Her experience as a member of the Farmer’s Association contributed to the formation of her professional attitude, while funding from projects aimed at supporting female entrepreneurs enabled her to purchase the necessary equipment. Chakhunashvili considers the project a success already, but states there is a lot more work ahead. Georgian agriculture is developing in an interesting way. Lomtagora is one example of that: a wheat-producing company which recently obtained an all-time high harvest of a new species of wheat. The team worked for nine years to get a result from this species. Lomtagora is the only certified company in Georgia in the seedproducing direction. They boast a strong focus on the quality of their products and have already caught the eye of different countries for export. 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 TODAY
JULY 16 - 18, 2019
EU, Georgian Gov’t Sign EUR 28 mln SAFE Program BY KETEVAN KVARATSKHELIYA
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n July 11, the city of Batumi hosted the 16th international conference ‘Georgia’s European Way’, dedicated to the 10th anniversary of the Eastern Partnership. Within the scope of the event, the representatives of the European Union (EU) and the Government of Georgia signed an EU-supported Security Sector Reform program entitled 'SAFE: EU4 Security, Accountability and Fight Against Crime in Georgia,' the first of its kind launched in the country. The five-year program, worth EUR 28 million, is set to be carried out through 12 different projects by the members states and other EU institutions. It will kick off in 2019 and assist Georgia with regards to the eradication of problems related to crime and corruption; hybrid and emerging threats; border management; civil protection and crisis management, as well as oversight of the security sector. Lawrence Meredith, Director for the EU’s Eastern Neighborhood in the European Commission, strongly focused on the significance of the initiative, noting “This program will ensure safer borders
Image source: Delegation of the EU to Georgia
and help the government to more effectively protect its citizens from crime and cybercrime, hybrid threats, and natural disasters.” Vakhtang Makharoblishvili, Deputy Minister of Foreign Affairs of Georgia, expressed his gratitude to the EU for its support in various fields which plays a crucial role in the further development of the country.
In addition, the European Union and the Government of Georgia also signed the EUR 18.6 million 'EU 4 Economic Governance and Fiscal Accountability' program to further strengthen fiscal governance in Georgia. The projects implemented under this program will be devoted to the sophistication of the financial institutions and systems in operation across Georgia.
BUSINESS
GEORGIA TODAY JULY 16 - 18, 2019
GRECO Report: Georgia Fulfilled 5 of 16 Corruption Recommendations BY THEA MORRISON
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he Group of States against Corruption (GRECO), the Council of Europe’s anti-corruption monitoring body with headquarters in Strasburg, has released the Fourth Evaluation Round compliance report for Georgia which reads that the country has fully fulfilled only five of a total 16 recommendations given in 2016. Under the GRECO procedures, the Government of Georgia had to take into account the recommendations within the next two years and provide information to the GRECO Secretariat. In the Fourth Evaluation Round, GRECO examined whether the corruption prevention legislation and practice were in compliance with the CoE standards in three different areas: the Parliament, the Judiciary and the Prosecution Service. In early 2019, GRECO, in the Compliance Report, assessed the implementation of the recommendations issued in 2016 and stated on July 2 that Georgia has implemented satisfactorily five of the sixteen recommendations contained in the Fourth Round Evaluation Report. “Of the remaining recommendations, eight have been partly implemented and three have not been implemented,” the report reads. One of the 16 recommendations set out by the GRECO Fourth Round Evaluation Report, ‘Improvement of the Monitoring Mechanism for Asset Declarations,’ was related to all three evaluated agencies: the Parliament, the Judiciary and the Prosecutor's Office and was considered fulfilled. Three of the recommendations were related solely to Parliament and called on guaranteed transparency of the legislative process and the uniform practice of public consultation in this process, the adoption of a Code of Ethics by the members of Parliament, enforcement of that Code and the obligation of MPs to make ad hoc declarations on conflicts of interest. From the three recommendations with regards Parliament, GRECO did not consider any recommendation to have been fully implemented. The NGO Institute for Development of Freedom of Information (IDFI) says that despite the fact that GRECO saw progress in all three recommendations, it highlighted important flaws in the legislation. Six of the total 16 recommendations regarding prevention of corruption were directed towards the Judiciary. GRECO called on the Georgian government to: • Reform of the appointment and promotion of judges for the purpose of ensuring the reasonability, objectivity and transparency of the decisions in this process; • Upgrade legislation on the transfer of judges in such a manner which enables the transfer from one court to another without the consent of the judge only in exceptional circumstances; • Improve the system of case distribution within the court in order to ensure objectivity and transparency of the process; • Adopt norms of judicial ethics and their implementation in practice;
• Ensure efficiency, transparency and objectivity of disciplinary proceedings of judges; • Limit absolute immunity of judges to functional immunity. “In most cases, GRECO has acknowledged the progress in implementing recommendations by the Judiciary. In particular, GRECO considered the recommendations regarding the transfer of judges and the case distribution to have been implemented in a satisfactory manner…It considered unimplemented the recommendation regarding the absolute immunity of judges,” the NGO says. IDFI also says that the shortcomings found by GRECO in the implementation of the recommendations are related to the following issues: the obscurity of the judicial promotion process on which the Georgian authorities have not taken measures; the need for renewal and adoption of judicial norms on ethics, which has yet to be implemented; the need for a clear definition of the grounds of disciplinary liability of judges and the necessity to introduce the right to appeal the decision on disciplinary proceedings; and introducing a simple majority (instead of 2/3) of the High Council of Judges to adopt a disciplinary decision. In addition to this, of the six GRECO recommendations on corruption prevention within the Prosecution Service, two recommendations were considered to have been implemented satisfactorily, two recommendations - partially, and two – not implemented. NGO IDFI says one recommendation was fully implemented, since the constitutional amendments entered into force in 2018, after which the Prosecution Service was detached from the government and became a fully independent agency. The recommendations with regard to the distribution of cases among the prosecutors, the improvement of issuance of directives/instructions were also considered to have been implemented. As for the unfulfilled recommendations, progress has not been seen in the expansion of the circle of subjects bound by norms on assets declarations, as the present legislative requirements do not apply to all prosecutors. The recommendation was also considered not to have been implemented regarding clear provision of disciplinary liability and the proportionality of sanctions. Regarding the two partially implemented recommendations, GRECO determined the following shortcomings: the regulatory norms of the appointment and promotion of prosecutors are still quite vague and envisage too large a discretionary power to the General Prosecutor; notwithstanding the adoption of the Code of Ethics of the Prosecution Service, no explanatory guidelines have been introduced to ensure their implementation in practice. The Georgian government now has 18 months to fully comply with the recommendations given by GRECO in 2016 and eliminate the shortcomings. GRECO’s objective is to improve the capacity of its members to fight corruption by monitoring their compliance with Council of Europe anti-corruption standards through a dynamic process of mutual evaluation and peer pressure. It helps to identify deficiencies in national anti-corruption policies, with a view to prompting the necessary legislative, institutional and practical reforms.
Georgia Runs First Dual Vocational Education Qualification Exam
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n 10-11 July, for the first time, a Qualification Exam for students of the dual vocational education program in ‘Viticulture-Winemaking’ took place in Georgia. The dual vocational education program is implemented with the support of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. Ongoing since autumn 2016, it is offered in two state colleges: LEPL Ilia Tsinamdzgvrishvili Public College and LEPL Community College Aisi. The program has actively and directly engaged up to 20 private sector companies at all stages of the program, where 60% of the students’ vocational learning took place. “This month, for the first time in Georgia, the dual vocational education program in ‘ViticultureWinemaking’ qualification exam was carried out,” said Tata Jaiani, representative of the Georgian Wine Association. “As a result of introducing the Dual Vocational Education Model, the wine sector will have professionals fully meeting the needs of the labor market. I have to highlight the importance of the fact that the private sector representatives were involved not only in the development and implementation of the training program but supported the coordination of the entire process.” The examination board consisted of the representatives of enterprise management, company instructors and college teachers. The practical
exam was conducted in cooperation with the ‘Georgian Wine Association’ and representatives of the implementing colleges. The National Center for Educational Quality Enhancement supervised the exam to ensure international best practice and institutional sustainability. “A qualification exam is one of the preconditions for providing the labor market in the sector with professional staff. The exam contains both theoretical and practical components,” noted Dalakishvili, representative of the National Center for Education Quality Enhancement. The practical exam took place in educational enterprise ‘Kindzmarauli Corporation’ in Kvareli, Kakheti region. Students performed work/operations to demonstrate the skills attained during their three-year program. The dual vocational education program includes viticulture, winemaking, administration (accounting, etc.) and wine marketing modules. The program is supported by the Private Sector Development and Technical Vocational Education and Training South Caucasus (PSD TVET SC) Program implemented by the responsible Ministries of Georgia, Azerbaijan and Armenia with the support of Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, acting on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).
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BUSINESS
GEORGIA TODAY
JULY 16 - 18, 2019
Georgia’s New Tea Route BY SAMANTHA GUTHRIE
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ith the support of the Un i t e d Na t i o n s Development Program (UNDP), municipal governments in Ajara and Guria, the National Tourism Agency, the governments of Switzerland and Austria, and other partners, a Tea Route has been established in western Georgia. The route, modeled after similar routes in other countries and the successful wine routes that crisscross eastern Georgia, is meant to help visitors learn about Georgia’s tradition of tea production and better access some of the best quality tea currently being grown. There is also potential for the route to increase tourism in some of western Georgia’s more rural areas, providing income opportunities for local populations. On July 11-12, representatives of 25 tour operators and more than 20 hotels from the Black Sea coast region were invited to Guria for a workshop that explored the “touristic potential of the newly established Tea Route in western Georgia,” says the UNDP. The workshop was designed to inform relevant partners about the Tea Route and other lesserknown gems of western Georgia so that they can share the information with visitors to the region who might be interested. Alongside formal meetings, the workshop included discussions with local entrepreneurs, a visit to a nearby trout farm, and conversations with representatives from municipal governments in Ajara and Guria. Using the hashtag #discoverGuria, UNDP Georgia shared several photos on its Facebook page related to the new Tea Route, writing “The newly established Tea Route in western Georgia creates new touristic and developmental opportunities for mountainous Guria, one of the poorest regions in Georgia. UNDP and the governments of Switzerland and Austria assist local municipalities team up with business and com-
Image source: UNDP
munities to unlock this rich potential.” In recent years, the Government of Georgia has taken steps to revive the nearly dead tea industry. In 2016, the Georgian Ministry of Agriculture initiated the ‘Georgian Tea’ program to restore abandoned tea plantations. As part of the program, participants receive financial support to bring plantations up to international standards for export. Georgia once had a flourish tea economy. According to global industry website STiR, at the height of Georgian tea production in 1985, 152,000 metric tons of tea were produced by mechanical
harvesting methods from 60,000 hectares growing tea plants. If Georgia had been an independent country, it would have been the world’s fourth-largest exporter of the crop. Comparisons have been made with the Georgian wine industry: under Soviet management the focus was on quantity over quality. As wine growing in the country today is increasingly emphasizing natural, organic, and local production, the tea industry aims to follow suit. Tea harvesting by hand is a labor-intensive process, but pickers in Georgia can earn up to $11 per day – higher than the
average national income and a significant opportunity for people in rural villages who would otherwise be without formal or consistent employment. According to Renegade Tea Estate, a plantation near Kutaisi established in 2017 by Baltic expats, the Georgian tea industry once employed approximately 150,000 people, but almost completely collapsed in the first five years after Georgia’s independence from the Soviet Union in 1991. In May, the Ozurgeti Municipality hosted their first Ozurgeti Tea Festival, as part of the Tea Route project. More than 20 Georgian tea producers were
involved in the festival, which was supported by the Administration of Governor of Guria, UNDP in Georgia, and the governments of Switzerland and Austria. “Georgia has a rich history of tea production,” Louisa Vinton, UNDP Head in Georgia, said at the festival. “Reviving this tradition in Guria is bringing benefits both to tea producers and to businesses catering to tourists keen to experience authentic local culture. Given Georgia’s diversity of local identities, this is a dual approach that the UNDP is confident can be replicated across the country.”
GD Gov't Spent GEL 13 mln on Georgian Tourism Marketing in Russia Continued from page 1 In recent years, the private sector, including the Platform of the Investors’ Council, has repeatedly urged the government to reduce costs in Russia, yet these recommendations have been disregarded by the Ministry of Economy and the National Tourism Administration, previously headed by Giorgi Chogovadze (2014-2018). The private sector said that the budget should not be spent on marketing Georgian tourism in big countries like Russia, and instead should focus on new markets and on targeting young trend-setters.
This year the GNTA’s total budget is GEL 17 million ($5.96 million) of which 7 million has already been spent on various activities not including Russia. Since 2013, the number of visitors from Russia has been continually growing, and reached 1.4 million last year. However, with Russian President Vladimir Putin banning direct flights with Georgia from July 8, it is believed that this year alone the country will lose one million tourists, which will result in around a $700 loss. The number of Russian tourists in Georgia since 2012, when GD came to power, is as follows: 2012 – 0.4 million
visitors, 2013 – 0.6 million, 2014 – 0.6 million, 2015 – 0.7 million, 2016 - 0.8 million, 2017 – 1.1 million, 2018 – 1.4 million. The amount of money spent by Russian tourists has also grown. In 2018, the total tourist expenditure from Russia amounted to GEL 1.9 billion ($666 million) and in the first quarter of 2019 it was 318.5 million GEL ($111 million). Yet it is noteworthy that Russian tourists were not on the top 10 list of tourists who spent the most money in Georgia in 2018 or Quarter 1 of 2019. Moreover, where one visitor from Russia last year spent 1326 GEL ($465) per visit, this year they spent less than 1135
GEL ($398) in the first quarter, while American, Chinese, French and Iranian tourists tend to leave 2000 ($701) GEL or more per person, according to the data. Current GNTA Head Mariam Kvrivishvili said that European Union countries, Israel, the United States and the Persian Gulf countries are the main target markets for popularizing Georgia this year. “Marketing campaigns are already underway in Israel, Germany, and the Netherlands and are planned in Kuwait, Saudi Arabia and Kazakhstan. Kvrivishvili says that after the Russian ban on direct flights with Georgia, the
GNTA is focusing on marketing Georgia in countries whose citizens can visit Georgia as soon as possible. “Such countries are Ukraine, Kazakhstan and the Baltic countries – Estonia, Latvia and Lithuania,” she explained. The GNTA Head noted that the decision not to spend money on marketing activities in Russia was made even before the travel ban was imposed. “Awareness about Georgia is quite high in Russia and visitors from there usually recommend Georgia to their relatives and friends after visiting…25% of tourists to Georgia come from Russia, which is already very high number,” she said.
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BUSINESS
GEORGIA TODAY
JULY 16 - 18, 2019
Why Economic Sanctions Mean Little to Moscow OP-ED BY EMIL AVDALIANI
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ealpolitik, a German term for politics based on dayto-day calculations regarding the military and economic balance of power among major states, should be used and discussed more often in the modern world, though we often discuss Russia and the ways to influence its actions over the long-term especially in its immediate neighborhood. Economic sanctions are a common tool for the West, and many, particularly in the former Soviet space, believed that western measures would cripple Russia and make Moscow change its foreign policy with regards to Ukraine and perhaps Georgia. Others thought the economic sanctions would do no more than influence some aspects of Russian policies, though in such a way as to limit to a certain degree Russia's projection of power. But Russian politicians giving in to
Putin is not to blame; there is simply a different civilizational approach to foreign relations in Moscow
In a world based on realpolitik there will more avenues for direct, bolder and balancechanging moves European pressure would be humiliating from a nationalistic point of view. Instead of (or on top of) those sanctions, what the West lacks is a quiet military and economic build up along the Russian borders so that Moscow starts seeing the changing geopolitical landscape. Again, those western actions would not be based on loud bombastic statements such as "we’ll change if you do," but on a real shift in the balance of power. This is what is happening now when Europe demands Russian concessions on Ukraine in exchange for lifting financial restrictions. But for the Russian leadership, it will be self-destructive to radically abandon its current policy on Ukraine and Georgia. That there is a larger western economic and military presence in the Russian neighborhood is what matters to the Russians. For Vladimir Putin, a master practitioner of realpolitik, western notions of the democratic development of Ukraine, Moldova and Georgia, and thus Russia's non-interference, is a fla-
grant misconception. The leadership in Moscow does not genuinely believe that the West is so interested in Ukraine and Georgia. From the Russian perspective, the spread of democracy cannot be a viable explanation and the West's purely geopolitical calculations should be considered. Putin, like his predecessors from the Soviet era or even the Romanov dynasty, believes that any Western moves in the Russian neighborhood are anti-Russian per se. He is not to blame; there is simply a different civilizational approach to foreign relations in Moscow compared to Western countries. In studies on geopolitics, this factor is often missed, but it is deeply important. There is also a distinct way in which the Russian leadership responds to foreign threats. In Europe, governments of countries facing problems can easily resign, while in Russia, bending to foreign pressure is tantamount to an unravelling of the state apparatus, leading to elite infighting and even possibly something
close to troubles on the periphery of the state. This is a product of Russian geography, ethnic composition and culture. On the contrary, faced with direct pressure, the Russians usually make moves which better show off their military strength. Consider what happened in Ukraine. Facing a total loss of Ukrainian territory in 2014, a distinctively Russian reaction to this coming disaster was taking the pieces which Moscow could still take. To counter Russian moves, a larger US and European presence in Ukraine, Moldova and Georgia could arguably be the only viable solution to the problems with Russia in the former Soviet space. Moscow will have to consider more acutely the changing geopolitical landscape, while it will serve as a good further pointer to various Russian elites that the state's foreign policy for the past 20 years has been counterproductive. This will be a good representation of realpolitik towards Russia. In a way, the time is ripe for reinvigoration of this 19th
century German foreign policy concept. The US recently reformulated its foreign policy, while its latest national strategy document clearly outlined the rise of power competition in Eurasia. To strengthen its positions across the continent, Washington ideally would need to work in Japan, South Korea and other traditional US allies. In this atmosphere, direct US support for Georgia and Ukraine might be logical and could be more practical than time-consuming NATO procedures. It will be costly, but still not as much as the US is spending on its larger allies. In the era of the Cold War and later in the 1990s, when notions of world democratic world order were a driving motor of the US foreign policy, in a world based on realpolitik there will more avenues for direct, bolder and balance-changing moves. This brings us back to Russia and how the economic sanctions have had only a limited impact on Moscow. Imposition of sanctions alone failed to produce viable results: instead, they should have been propped up by other actions, such as changing the economic and military landscape of Georgia and Ukraine.
The Foreign Policy Center’s Spotlight on Turkmenistan Shows a Country in an Economic & Human Rights Crisis
A
new Foreign Policy Center publication shines a spotlight on Turkmenistan, a country “in the middle of a sustained economic crisis that has seen hyper-inflation in the lives of ordinary people and widespread food shortages, all despite its vast gas reserves.” This economic crisis has, it says, “led to the regime’s repression of its people becoming ever tighter and its personality cult becoming ever more grandiose.” The research argues Turkmenistan has a ‘Potemkin economy’, with marble facades, respectable official GDP figures and tightly regulated state shops, which mask huge structural challenges and a chaotic black economy. Potential investor risks examined include: the whims of the President, leading to arbitrary behavior by a sclerotic bureaucracy; a high risk of non-payment for goods or services; endemic corruption; insecurity of legal title or contracts; the lack of rule of law and independent judiciary; and reputational risks from being associated with severe human rights abuses. This research documents Turkmenistan’s massive human rights abuses that have seen it ranked as the worst in the world by ‘Reporters without Borders’ and many other global freedom rankings. The report draws attention to the massive use of forced labor, ‘disappeared’ activists in the prison system and restric-
tions on independent journalists and human rights activists. It argues that “the current economic turmoil creates new opportunities for leverage on human rights.” The research suggests that the UK should reconsider the position of Prime Ministerial Trade Envoy to Turkmenistan and challenges whether it is appropriate to be promoting trade ties through the Turkmenistan-UK Trade & Industry Council (TUKTIC). It also argues that the European Bank for Reconstruction and Development (EBRD) should not expand its lending in Turkmenistan, avoiding any expansion to the public sector or state enterprises. It makes the case that “pressure should be placed on Turkmenistan to abide by its UN and international investment treaties, and to allow greater access to UN Special Rapporteurs and international NGOs.” As put forward by the Foreign Policy Center Director and project editor, Adam Hug: “Turkmenistan is a country facing a sustained economic and human rights crisis as its citizens struggle to find food, face being forced to work in the cotton fields and have one of the world’s most repressive regimes intensifying its crackdown on their basic freedoms. International investors need to consider if they want to be associated with these abuses or risk their money in a country where
COMMUNITY
KEY RECOMMENDATIONS TO THE GOVERNMENT OF TURKMENISTAN:
• Free political prisoners and jailed journalists; • Improve prison conditions and end the use of torture in the detention system; • End forced labor in the cotton harvest; • Allow visa access by representatives of international NGOs; • Enhance judicial independence in the criminal and commercial sector.
• Notify all families about the condition of their imprisoned loved ones and allow visitor access;
KEY RECOMMENDATIONS TO THE INTERNATIONAL
the government is failing to pay its debts and prices are spiraling. International organizations should be more cautious in their engagement with Turkmenistan and the UK Government needs to rethink its trade promotion efforts in the face of this crisis.”
• Ensure the European Union (EU) adopts and applies the European Parliament human rights benchmarks for Turkmenistan; • Require the EBRD’s lending to Turkmenistan to reflect the need to improve human rights and avoids expansion to the public sector in the absence of genuine reforms; • Push for the presence of the ILO with a strong mandate to tackle forced labor; • Reconsider international trade promotion efforts to Turkmenistan, such as the UK’s TUKTIC. The Foreign Policy Center (FPC) is an outward-looking, non-partisan international affairs think tank based in the UK. Its mission is to provide an open and accessible space for the ideas, knowledge and experience of experts, academics and activists from across the world, so that their voices can be heard by a global audience of citizens and decision makers in order to find solutions to today’s international challenges. The FPC has a global perspective and a focus on Europe, the former Soviet Union, the Middle East and Asia. It also seeks to examine what a progressive, pragmatic and internationalist foreign policy for the United Kingdom could be. A “commitment to democracy, human rights, good governance and conflict resolution” is “at the heart” of its work.
BUSINESS
GEORGIA TODAY JULY 16 - 18, 2019
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Kobuleti Coastline Renovations Could Help Promote Black Sea Tourism BY AMY JONES
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enovations of a two kilometer stretch of coastline in Georgia’s Black Sea town Kobuleti have been completed. The President of Georgia, Mamuka Bakhtadze, Deputy Minister of Regional Development and Infrastructure Maya Tskitshvili and Executive Director of the Municipal Development Fund of Georgia visited Kobuleti on Friday to view the completed coastline. The Municipal Development Fund of Georgia headed the renovation works, which cost GEL 9 million. The World Bank funded GEL 2 million of the total cost, with the state budget covering the rest. The rehabilitation works began two years ago but were delayed, angering the local population. The contract with the original contracted company was cancelled, leading the State Construction Company to complete the work. “It is my pleasure to present the completely renImage source - Wikipedia
Local businesses have new spaces to organize commercial facilities and generate more income from tourism
ovated boulevard to visitors this year,” Tskitishvili addressed attendees. “It is an important endeavour to prevent the future deterioration of the coastline. Through this and similar projects, we make it possible for local businesses to create new spaces, organize more commercial facilities and generate more income from tourism,” she continued. The Ajara region is Georgia’s third most popular tourist destination, with visitors enjoying the area’s diverse nature and the Black Sea beaches. However, the region might be heavily hit by Vladimir Putin’s decision to ban flights from Russia to Georgia following the protests that erupted on June 20 in Tbilisi. Many Russian tourists have already cancelled their bookings in the region since the flight ban came into force on July 8, which could take a toll on businesses
in the area, especially holiday rentals. The head of Georgia’s National Tourism Administration (GNTA) Mariam Kvrivishvili stated that around 1 million tourists could be lost this year due to the flight ban. “Ajara and the seaside towns face the biggest challenge because a large number of reservations have been cancelled,” she stated. The government has pledged to act to lessen the effects of the ban. This week, the government announced that they had spent GEL 13 million on marketing in Russia. However, Russian propaganda has targeted Batumi and the Ajara region, claiming that it has become a Turkish area. Pervy Kanal, a Russian TV channel, ran a report focusing on anti-Turkish stereotypes. “Turkish troops have already crossed the border
of Georgia,” says the report. “Batumi International Airport was built by a Turkish company and is operated by a Turkish company as a Turkish domestic airport. And the Turks who come here don’t need a passport.” The report also states that mosques “are being built almost as fast as hotels,” and multiplying “like mushrooms.” Despite such false claims, tourist numbers are expected to rise in Georgia and Ajara this year. 471,979 tourists visited Georgia last month, 71,990 more visitors compared to the same period in 2018. The number of Russian tourists also increased by 30.8%. Infrastructure projects such as that of Kobuleti should help to encourage tourists to continue visiting the region.
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BUSINESS
GEORGIA TODAY
JULY 16 - 18, 2019
1st Eastern Partnership Investment Forum Held in Batumi BY SAMANTHA GUTHRIE
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he 1st Eastern Partnership Investment Forum, titled ‘10 Years After Prague’ was held on July 10-11th in Batumi, Georgia. The Forum was a complementary event to the 16th Batumi International Conference in Georgia, which was attended by guest of honor European Union (EU) Council President Donald Tusk, and EU and Eastern Partnership (EaP) ministers, political leaders, international organizations, civil society and media representatives. More than 500 participants attended the conference. The main objective of the EaP Investment Forum is to promote new investment opportunities and cooperation between the EU and the Eastern Partnership Countries, explain the Forum organizers, which included the Center for European Governance and Economy, the European Commission, the Georgian Ministry of Foreign Affairs, the Georgian Ministry of Economy and Sustainable Development, and Enterprise Georgia. The Eastern Partnership consists of Georgia, Armenia, Azerbaijan, Belarus, Moldova, and Ukraine. Together, the populations of the EaP countries total 75 million and their economies are worth more than EUR 200 billion annually. The Forum featured heavy-hitting speakers including Donald Tusk, Georgian Prime Minister Mamuka Bakhtadze, and European Investment Bank Vice President Vazil Hudak, among others. After a networking reception on Wednesday, on Thursday the Forum began in earnest with thematic panels on infrastructure and energy and on agriculture and manufacturing, followed by government-to-business (G2B) and businessto-business (B2B) meetings. Additionally, during the forum, a new catalogue of investment projects from all the Eastern Partnership countries was presented. The Forum was sponsored by the European Investment Bank, the Business Association of Georgia, and the Autonomous Republic of Ajara. Partners of the Forum were the Georgian Chamber of Commerce
The key philosophy and the primary values of the Georgian government are to ensure economic development, security and democracy and Industry, the European Business Association, and the European Bank for Reconstruction and Development. Within the framework of the 1st EaP Investment Forum, Georgian Minister of Economy and Sustainable Development Natia Turnava held several highlevel meetings, including the Hungarian Minister of Foreign Affairs and Trade, Péter Szijjártó. During that meeting, the pair discussed trade and economic relations between the two countries, including the strong potential for bilateral trade, and agreed that more active steps should be taken to strengthen economic ties. Turnava also met with Secretary General of the International Energy Charter Treaty, Urban Rusnák, with whom she discussed ongoing and upcoming reforms in the energy sector, with a particular focus on the liberalization of the energy market and the development of regulations regarding renewables and energy efficiency. The sides agreed that the implementation of relevant reforms “will facilitate the development of the electricity trade with neighboring countries and the European Union, establishing Georgia as a regional hub and encouraging energy efficiency measures, using renewable energy sources,” reports the Ministry of Economy and Sustainable
Image source: Ministry of Economy and Sustainable Development
Development. Secretary General Rusnák expressed his approval of and support for ongoing energy reforms in Georgia. During a panel titled ‘Challenges and Opportunities for Investment in Eastern Partnership Area – 10 Years after Prague,’ Turnava said that “The key philosophy and the primary values of the Georgian government are to ensure economic development, security and democracy.” While addressing the crowd, Turnava described Georgia’s economic policy and governmental priorities, noting that the country’s economic and business climate model is necessarily based on being open and attractive for FDI, due to its lack of valuable natural resources. Thus, the country prioritizes maintaining a secure and predictable political environment and moving towards a technology-and knowledge-driven economy. The “economic policy of the Government of Georgia is based on the free market principle, with a special emphasis on private sector development and macroeconomic stability. In line with macro stability, institutional strength represents a solid background for eco-
nomic development and increasing confidence towards our country,” said Turnava. She also explained to participants that the country’s economic growth has been largely supported by structural reforms and the reform agenda outlined by the DCFTA (Deep and Comprehensive Free Trade Agreement between Georgia and the EU). “Georgia’s economy proved resilient to significant economic and financial shocks in the region in 2014-16 and its GDP growth averaged 3.5% during this period, while many of our neighbors were in or close to recession," she boasted. Turnava pointed to international credit ratings to make her argument that Georgia managed to maintain “a stable macroeconomic environment and continuous implementation of economic reforms… Moody's Investors Service has upgraded Georgia’s sovereign credit rating from Ba3 to Ba2. Just as importantly, in February 2019, the credit rating agency Fitch upgraded Georgia's rating to 'BB' from 'BB-' with a stable outlook.” “Georgia, as a country of only 3.7 mil-
Georgia’s GDP growth averaged 3.5% in 201416, when many of our neighbors were in or close to recession lion people, may seem to be an unprofitable market. However, if you look at Georgia as a regional hub, then it is a completely different story. We see Georgia as a gateway to not only the South Caucasus but also to Central Asia, the European Union and then further to western and eastern Markets,” Turnava said.
Event Company Origami Launches at Silk Factory
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resentation and the first event of the event company Origami was held at Silk Factory Studio on May 3. Artbat and Marc Romboy were among the major headliners there who brought together over 2,000 listeners. Georgian performers Gio Shengelia and 9EYE also took to the stage at the event. The Origami Company is actively cooperating with the livestream platform “Cercle”. The joint event Polo & Pan (live) is scheduled for July 20 at Electro Carriage Building Factory. Origami is also engaged in the charity auction #ჩვენვაშენებთთეატრს (#WeBuildTheater), which aims to support the Movement Theater and collect resources for the construction of the new building for the theater. The event company Origami was launched in 2019 and plans to offer diverse events and master classes in future.
BUSINESS
GEORGIA TODAY JULY 16 - 18, 2019
9
Entrepreneur Magazine Launches Campaign to Support Georgia’s Tourism Industry TRANSLATED BY KETEVAN KVARATSKHELIYA
E
4E (Entrepreneur for Entrepreneur) is the name of a social campaign which marks the readiness of successful and experienced entrepreneurs to help, support and share their experience and know-how with those new to the sector who are operating in the regions of Georgia. And they are doing so free of charge! Entrepreneur Magazine is launching an active campaign across the Georgian regions aimed at sharing knowledge and experience. Following the recent developments in Georgia, the campaign is primarily to be focused on assistance to SMEs operating in the tourism and hospitality industry. “We believe that, regardless of the restrictions, Georgia will further diversify its economy, including the field of tourism, and assimilate new markets,” Entrepreneur Magazine reps state. “However, in this case, it is of vital importance to raise the bar in terms of tourist product and service quality, especially in the regions, including in the less popular destinations, in order to maximally utilize their potential.” Aiming to enhance knowledge, skills and communication for SMEs operating in the regions, Entrepreneur Magazine plans to carry out a number of different activities, welcoming all guest house owners, eateries, wine cellars, and producers of any tourist services, to engage in the campaign.
ENTREPRENEURIAL MEETINGS Within the scope of the campaign, various meetings of different format, as well as panel discussions, are to take place, bringing together successful entrepreneurs from Tbilisi and the regions, who will share their experience with local entrepreneurs.
It is of vital importance to raise the bar in terms of tourist product and service quality, especially in the regions, in order to maximally utilize their potential
MENTORING PROGRAM Local entrepreneurs in the regions will be identified and allocated to a relevant mentor/coach who, over three months, will offer them consultations for the further development and progress of their businesses, including choosing the strategy, branding, increasing sales, marketing, managing social media and more.
E-COMMERCE The entrepreneurs in the regions will get involved in the new e-commerce platform shop.entrepreneur.ge, which is to kick off shortly. The platform will allow them to place any kind of product or service and as a result increase the sales potential.
TOURIST KNOW-HOW ARTICLE The magazine and website’s focus on tourism will increase. “Tourism already represents a direction of both, but we plan to accentuate more the publishing of blogs and articles on the subindustries of the tourism and hospitality sector,” Entrepreneur reps say.
FREE ONLINE MARKETING The team of Entrepreneur Magazine is to produce informative-promotional materials for SMEs participating in the project and place them on the Entrepreneur website, also helping the promotion of domestic tourism through its social media platform.
LOCATIONS The following regions of Georgia where the tourist potential has yet to be fully developed, but which
have all the resources to become go-to destinations, have been selected for the above activities: Highland (Mountainous) Ajara, Samegrelo, Upper Svaneti, Guria, Tkibuli, Kharagauli, Gori, Kaspi, Tsnori, Marneuli, and Lagodekhi.
The Entrepreneur Magazine calls on all volunteers to get involved in the campaign. Contact us: editor@entrepreneur.ge #დაისვენესაქართველოში #SpendYourSummerInGeorgia
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BUSINESS
GEORGIA TODAY
JULY 16 - 18, 2019
The Economics of Prostitution
B
y prohibiting prostitution, the Georgian people are simply closing their eyes to a phenomenon that has always existed and will continue to exist. At the very least, it is important to be aware of the costs associated with the “illegal” status quo and the benefits of legalization. * * * When thinking of “market distortions” we typically imagine government regulations, taxes and subsidies that prevent market mechanisms from achieving an optimal outcome. For example, if you pay $100 for a 30-minute taxi ride (as is the case in many European capitals), you can easily relate it to a government regulation requiring all taxi drivers to be licensed (at a very high cost). In the absence of such a requirement many more drivers would be able to enter the taxi driving profession, increasing supply and reducing prices. However, the government is not the only source of “market distortions”. Culture and religion also pose very serious constraints on the operation of markets (and government), potentially preventing them from achieving the “first best” outcome. For example, nepotism – the cultural norm in many non-European countries – can be said to interfere with the efficiency of labor markets. Depending on the cultural setting, the very “market” in which trade in certain goods and services occurs can been driven into underground, providing fertile ground for crime and corruption. A good case in point is “provision of sexual services”. While often referred to as the world’s oldest profession, pros-
titution is treated very differently in different cultural setting. In some countries (like Singapore) it is permissible but unregulated, in others (e.g. the Netherlands) it is a regulated profession allowed only in brothels; in yet others, including Georgia, it is considered to be a crime. In countries in which prostitution has been legalized, it generates considerable revenues (the global revenue is estimated at more than USD 100 bln). Ignoring the moral aspect of the problem, there are many economic (and not only) reasons to legalize prostitution.
ECONOMIC BENEFITS It is no secret that the sex industry exists in every country, forming a substantial part of the underground economy. Legalization would help shed light on the shadow sex industry activities, providing
For many developing countries, prostitution is a major export industry and source of foreign earnings
possibilities for regulation and taxation. Tax income thus generated could be used to improve public services, such as education, giving young women other professional opportunities and in this way helping treat the (social) root causes of prostitution. In Nevada (the only US state where prostitution is legal), annual tax revenues exceeded 20,000 dollars female sex worker (Ayres, 2003). For many developing countries, prostitution is a major export industry and source of foreign earnings, a means of redistributing income on a global scale. For example, according to a 1998 Kyodo News report on South East Asia, “Between 1993 and 1995, it was estimated that prostitution in Thailand produced an annual income of between $22.5 billion and $27 billion.”
CRIMINAL JUSTICE BENEFITS Driving prostitution into underground is a costly proposition, straining the police force and the entire justice system. While recent data on prostitutionrelated policing activities are not available, public spending on this issue is certainly non-negligible. Besides, legalization would solve the problem of overcrowded prisons. According to available data, in California alone more than eleven thousand people were arrested for prostitution in 2010. Not only would legalization reduce public expenditures, it would also relieve the police force of the duty to monitor streets, allowing it, instead, to spend more time and effort on preventing other, more serious crimes. Another important benefit of legalization has to do with a reduction in the level of criminal activities that are linked to (illegal) prostitution. To begin with, countries that legalized prostitution experience
fewer rapes and sex trafficking offences. Not less importantly, legalization gives prostitutes stronger protection against violence. You cannot call the police and report a crime while committing one by yourself. In countries where prostitution is illegal, female sexual workers often become objects of violence. Gary Ridgway (a serial killer who killed 48 women), claimed to be killing prostitutes knowing he would not be held accountable.
REDUCED HEALTH RISKS Last but not least, legalization can greatly reduce the health risks related to sexually transmitted diseases (STD), such as HIV. Unregulated prostitution is one of the main sources of spreading STD. Thus, legalization (and regulation) would be a major prevention tool, requiring sexual workers to get regularly tested and improving their access to contraceptives, medical care and consultations. Not only would legalization reduce the incidence of STD, it would also reduce public expenditures on preventing and/or treating the consequences of STD. Data provided by the US Center for Disease Control and Prevention support this argument. Accordingly, Nevada – the only US state that legalized prostitution – has one of the lowest rates of STD in the US. As illegal and unregulated prostitution is often linked to the drug industry, legalization can also help a country deal with drug addiction-related health risks. Drug dealers may often try to get prostitutes “on the hook” (or, rather, needle) in order to exercise better control and “employ” them as co-dealers. In case of legalization, brothels can protect employees and help them overcome addiction
(such precedents are reported in Nevada).
WHAT ABOUT GEORGIA? Taking into account the growing influence of the Orthodox Church on the Georgian government, parliament and society, legalization seems like a very long shot. Yet, while Georgia takes a lot of pride in its Orthodox Christian heritage, Christian dogma should not be the only guide for a country’s legislation. On the one hand, by prohibiting prostitution we will simply be closing our eyes to a phenomenon that has always existed and will continue to exist. At the very least, it is important to be aware of the costs associated with the “illegal” status quo and the benefits of legalization. On the other hand, as prostitution is invariably a “business” of the poor (see e.g. a recent study by Lena Edlund), measures to prohibit prostitution are likely to exacerbate poverty. Conversely, the economic benefits of legalization will disproportionately accrue to the poor, helping them escape from the vicious circle of poverty and a lack of economic opportunities. In the meantime, Georgians will find the way to go around any cultural, religious and legislative restrictions towards “second best” solutions. A heartening example of the market’s ingenuity in overcoming manmade restrictions is being provided today by Uber – a new piece of booking software that allows smartphone users to hail private-hire cars from any location. As reported by The Guardian, London's cabbies –holders of lucrative licenses – are on a warpath while customers celebrate all the way to the bank (and anywhere else, office, home or the airport).
POLITICS
GEORGIA TODAY JULY 16 - 18, 2019
11
Georgian Archpriest Responds to Putin’s Alternative Version of History BY ANA DUMBADZE
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eorgian Archpriest Ilia Chigladze has responded to Russian Presiden Vladimir Putin’s “alternative version” of how Georgia “occupied” the currently Russianoccupied Abkhazia and Tskhinvali (South Ossetia) regions. "Georgia, with help from German troops, occupied Abkhazia in 1918, and Georgian troops were even crueler in South Ossetia during 1919 and 1920. This was essentially what is called genocide today," Russian President Vladimir Putin stated at a meeting with journalists on July 9. Archpriest Ilia Chigladze published a thorough statement through social media in response to Putin’s statement and in answer to his version of history, presenting historically justified facts. In his statement, the Archpriest addresses Vladimir Putin directly. “Mr. President, Vladimir Vladimirovich, "I would like to respond to your statement: unfortunately, either you know history very badly or you lie deliberately. In 1774, Ossetia became part of the Russian Empire, but at the time it was the Republic of North Ossetia. No land existed called South Ossetia. That ter-
ritory, Shida Kartli (Samachablo), which the Russian colonialists called South Ossetia, has been the heart of Georgia, the historical, cultural center and an integral part of our homeland, for centuries. Geographically and historically, there was only one Ossetia and not two.
"In the 17th century, the Ossetian diaspora from North Ossetia crossed the Caucasian ridge and settled on the land of Java, the Kingdom of Georgia. At the beginning of the 20th century, not a single Ossetian family was present in Tskhinvali, but Georgians, Armenians, and
Jews were living there. Convertion of the city of Tskhinvali into an Ossetian settlement was carried out by Bolshevik Russia. At the time of the annexation of the Kingdom of Kartli-Kakheti (Eastern Georgia) by the Russian Empire in 1801, Tskhinvali was as much a part of Geor-
gia as Tbilisi, Gori, Mtskheta, and Telavi. "As for Abkhazia, indeed, when the Russian Empire annexed Abkhazia in 1810, at that time it was a self-governing principality, a vassal entity of the Ottoman Empire, as were other Georgian principalities. The dissolution of Georgia into separate principalities was the result of the Ottoman occupation, and this cannot be an argument of your statement and propaganda that Abkhazia was not part of Georgia. Did not Russia consist of small independent principalities until the 15th century? "Abkhazia is the cradle of Georgian culture and statehood. The official titles of our greatest kings David Aghmashenebeli and Queen Tamar were "King of the Abkhaz, Kartvels, Rhans, Kakhs." "Your imperialistic ambitions and lack of knowledge in history are familiar to us, but you should also be aware that the Georgian people will never reconcile and will not forgive you the occupation of our lands. Remember, your Georgian collaborators, who constitute a minority in our country and are morally degraded, cannot help you. Throughout its long history, Georgia has overcome many enemies and tyrants, and we will overcome you! "God will protect oppressed Georgia and the oppressor will be defeated,” Archpriest Ilya Chigladze writes in his statement.
Armenian Citizen Detained for Illegal Handling of Radioactive Substances BY MARIAM MERABISHVILI
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hrough an investigation at the Sadakhlo border control checkpoint, it was established that Armenian citizen Militos M. had attempted the transportation of radioactive substance Thorium in four packages on a minibus traveling from Armenia to Russia via Georgia. The investigation began when a radiation detector being used at the Georgian-Armenian border picked up signs of contamination.
“The total weight of the four packages is 71.63 kg and they contain radioactive isotope Thorium 232, which belongs to category of nuclear material. The radiation dose rate on the surface of the packages amounted to 18 mcSv/h while the maximum safe dose rate is 0.5 mcSv/h. The seized substance poses life and health hazards,” noted the State Security Service (SSS) of Georgia. The SSS detained the Armenian citizen on charges of illegal handling of radioactive substances and breach of customs regulations. Tbilisi City Court has sentenced him to pre-trial detention. He may get 5 to 10 years imprisonment as a penalty.
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