Issue no: 1084/147
• SEPTEMBER 18 - 20, 2018
• PUBLISHED TWICE WEEKLY
PRICE: GEL 2.50
In this week’s issue... Chinese Wine Importers Visit Georgia
NEWS PAGE 2
FOCUS ON CONSTRUCTION Check out the latest from Anaklia Port
PAGE 7,14
A Fruitful Summer for Georgian Agriculture! The Business Confidence Index Q3 2018 ISET PAGE 4
AUGUST: Average Hotel Prices in Georgia and Hotel Price Index BUSINESS PAGE 6
Finance Minister Predicts GEL 1 bln Wyndham Premium Brand Hotel Profit from Marijuana Export ‘Wyndham Grand’ Opens in Georgia
BY THEA MORRISON
G
eorgia’s Finance Minister, Ivane Machavariani, has said that if the government implements the marijuana cultivation reform for export purposes, in the near future Georgia can expect to see at least GEL 1 billion in profit. The Minister made the statement during an interview with Imedi TV, noting that Georgia could be a “significant player on this market,” as it is connected to new technologies. “From year to year, the production of cannabis is growing rapidly and according to various forecasts, in 2024-2025, it will reach around $25 billion,” he said. The Minister noted that the cannabis culture is old but the industry
BUSINESS PAGE 10
BTU Signs Cooperation Agreement with Entrepreneur Magazine BUSINESS PAGE 15 itself is quite new, hence the desire of the Georgian government to jump on the band wagon. “We want to increase our export potential and gain significant profit, which is of utmost importance for our economy,” he added. Machavariani states the cultivation of cannabis would only be for export and for medical purposes. He added that it is hard to make exact calculations as to how much profit the country could potentially get. “We assume that around two billion GEL would be seen in the next two to three years, though I would be very happy if this figure was higher,” he added. Last week, the government announced that they plan to legalize marijuana cultivation only for export purposes for pharmaceutical and cosmetic products. The draft was prepared and presented to the cabinet members by the Ministry of Internal Affairs (MIA). According to the draft, marijuana production will be announced as a licensed activity. Continued on page 2
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NEWS
GEORGIA TODAY
SEPTEMBER 18 - 20, 2018
Expanding Access to Gas Lines for Rural Georgians BY SAMANTHA GUTHRIE
P
rime Minister Mamuka Bakhtadze and his administration presented a new plan in yesterday’s parliamentary session for expanding access to natural gas lines throughout Georgia. Currently, a large portion of the coun-
try relies on burning wood or electricity to heat water, heat their homes, and for cooking purposes. From January 1 – September 1, 2018, more than 11 thousand subscribers have been added to the gas network in 53 rural settlements. By 2020, the goal is to have 1.3 million households in the natural gas network. In the plan presented, the government pledges to find additional financing for gasification, but does not specify what funds will be covered.
Photo: InterMedia.ge
Chinese Wine Importers Visit Georgia BY THEA MORRISON
G
eorgia’s National Wine Agency reports that Debra Meiburg, Chief of the National Wine Agency's (NWA) contractor company Meiburg Wine Media, and an eightman group of wine importers from China recently visited Georgia. Meiburg reported that some of the members of the group are wine importers specialized in producing unique wine varieties and that past experience has shown that conducting such activities in Georgia can be very successful. “Georgian wine has moved from position 18 to position 9 on China's wine market within the last four years. We are all very excited with the success of Georgian wine on the Asian wine market. Now it is our mission to promote Georgian wine not only among the wine importers but among the wine consumers as well. We will do our best to focus more on wine consumers' interests in Georgian wine," the NWA
quoted Meiburg. Within the wine tour, the guests were able to visit famous wine factories in Qartli and Kakheti: Chateau Mukhrani, Iago's Wine, Teleda/Orgo, Shumi Winery, Vaziani Winery, Kakhuri Gvinis Marani, GWS, Teliani Valley, Friends’ Cellar, Papari Valley, Badagoni, Pheasant's Tears, Vazisubani Estate and Lukasi Winery. They were also familiarized
with the traditional Qvevri wine-making process in Georgia. A wine tasting was held in Tbilisi where over 100 varieties of wine of 27 different wine companies were presented. The NWA says China is the third largest exporter of Georgian wine. Over 8 million bottles of Georgian wine were exported from Georgia to China within the last eight months.
Finance Minister Predicts GEL 1 bln Profit from Marijuana Export Continued from page 1 Presumably, the licensing conditions will define the geographical area, quantity and other issues related to marijuana production in Georgia. The Minister of Internal Affairs, Giorgi Gakharia, stated a special agency would be set up for licensing marijuana cultivation.
“The agency will identify the specific licensing conditions and issue licenses for various activities, including production, growing, processing, etc. This will be a strictly regulated activity, which will have its own regulator and involve the toughest and most effective control mechanisms," said the Minister. The issue has become highly controversial, especially after the Georgian
Orthodox Church came out with a strong objection to the initiative. “We must not regard profit alone. Why do we need such an economy if we lose our children?” Catholicos-Patriarch of All Georgia Ilia II said of the recent developments surrounding marijuana. As the Patriarch said in his Sunday sermon, the authorities should look into the above-mentioned process with great
responsibility. "We must remember that this is dangerous because drug addicts from other countries will come here and enjoy this freedom. This will promote the spread of drug abuse in Georgia,” he added. After the Church voiced its position, Georgia’s Parliament Speaker, Irakli Kobakhidze, announced that discussions over the issue in the legislative body
have been delayed, in order to launch consultations. “Georgian society must be wholly informed about the content of such issues. We need time do so and accordingly we have decided to discuss the issue in two phases,” said the Chairman of Parliament, adding this week only amendments to marijuana use will be discussed by the MPs.
BUSINESS
GEORGIA TODAY SEPTEMBER 18 - 20, 2018
3
The Potential of Gulf Cooperation Council - Georgia Relations (headquarters located in Damman, Saudi Arabia) incorporation with Enterprise Georgia and the Georgian Chamber of Commerce, are planning to organize this business forum on the November 26 in Tbilisi, Georgia. I discussed the GCC-Georgia Business Forum with Secretary General of Gulf Cooperation Council, H.E. Abdullatif Al-Zayani when I spoke with him on September 12, and he also plans to attend the forum in November. The Federation of Chambers of GCC Countries will prepare a list of companies that will attend and are preparing questions for logistics for relations between the GCC countries and Georgia.
EXCLUSIVE INTERVIEW BY SHIRIN MAHDAVI
G
eorge Janjgava, Ambassador of Georgia to the Kingdom of Saudi Arabia, recently held a meeting with the Secretary General of Gulf Cooperation Council, H.E. Abdullatif Al-Zayani on September 12. During the meeting, the men discussed the bilateral relations between Georgia and the Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. They paid specific attention to the economic relations between Georgia and the GCC countries and, interestingly, focus was placed on the tourism sphere and how this area has been a major facet in their economic relations and its further potential. Intrigued by Ambassador Janjgava’s position and his meeting with H.E. Abdullatif Al-Zayani, I decided to find out more. As the ambassador resides in Riyadh, Saudi Arabia, In a telephone conversation with GEORGIA TODAY last weekend, Janjgava gave a brief breakdown of his meeting with AlZayani, discussed the relations between Georgia and the GCC countries, the economic relations and tourism, the GCC-Georgia business forum, and news on the opening of the Embassy of the Kingdom of Saudi Arabia in Georgia.
HOW LONG HAVE YOU BEEN THE AMBASSADOR OF GEORGIA TO THE KINGDOM OF SAUDI ARABIA? Since September 2014. However, the Embassy of Georgia officially opened in January 2015 here in Riyadh. My official title is Ambassador of Georgia to the Kingdom of Saudi Arabia and the Representative of Georgia to the Organization of the Islamic Corporation. In addition, I am the non-resident ambassador of my country to the Kingdom of Bahrain, Sultanate of Oman, and the Republic of Yemen.
HOW DID YOU COME TO ACQUIRE THESE POSITIONS? I’ve been working in this field for a long time. I was Ambassador of Georgia to Egypt and Syria. Then, I was the Ambassador of Georgia to Iran and Pakistan. After, I worked for a short time in Ireland. Following that, I came here to Saudi Arabia as the Ambassador of Georgia.
DURING YOUR MEETING WITH THE SECRETARY GENERAL OF GULF COOPERATION COUNCIL, H.E. ABDULLATIF AL-ZAYANI, WHAT DID YOU ALL DISCUSS? We discussed several issues, but we focused on the economic relations between Georgia and the GCC countries.
WHAT ARE THE RELATIONS LIKE BETWEEN GEORGIA AND THE GCC COUNTRIES? Since I began working as the Ambassador of Georgia in Saudi Arabia in 2014/2015, relations, especially economically, have grown stronger and are stably moving forward. The GCC countries have strong relations with Georgia economically, and I would emphasize the United Arab Emirates and Saudi Arabia.In the last decade, it is estimated that Georgia has profited up to$1 billion from the UAE andup to one hundred million dollars from relations with the Kingdom of Saudi Arabia.Tourism in particular has actually been among the most prominent factors in our economic relations with the GCC. After tourism, trade and investment are the strongest facets in the economic relations. We also need to mention the successful military cooperation between the Kingdom of Saudi Arabia and Georgia.
HOW ARE YOU PLANNING TO FURTHER DEEPEN THE ECONOMIC RELATIONS BETWEEN GEORGIA AND THE GCC COUNTRIES? The economic relations have improved and strengthened over the past few years. Tourism has been one of the biggest and most important reasons for the growth of our economic relations. But trade and investment are also significant between Georgia and the GCC countries. An interesting example in trade is that Saudi Arabia is the biggest buyer of Georgian sheep and has just become an importer of Georgian mineral water, while Bahrain and Kuwait have been buying meat from our country. But even the increases in tourism can be linked
AND ARE THERE PLANS TO OPEN AN EMBASSY OF SAUDI ARABIA IN GEORGIA? WHEN CAN THAT BE EXPECTED? Yes, the Embassy of Saudi Arabia will certainly open. The delegation came to Georgia a few months ago to look for properties in Tbilisi. I believe that they have chosen a temporary location, and it should open within the next couple of months.
IS THERE ANYTHING ELSE OF INTEREST THAT YOU THINK I SHOULD NOTE OF GEORGIA AND THE GCC COUNTRIES?
Secretary General of Gulf Cooperation Council, H.E. Abdullatif Al-Zayani and Ambassador of Georgia to the Kingdom of Saudi Arabia, H.E. George Janjgava
to trade, as the tourists who come to Georgia like Georgian food, Georgian mineral water, even Georgian lemonade, and they buy these products. And then business people from Saudi Arabia, for example, become aware of these popular goods and come to buy them. Further, people from the GCC countries are trying to invest in Georgia. More come from Saudi Arabia and the Arab Emirates and are buying properties and investing in agriculture and companies. And they choose to invest and do business here in Georgia because it can be simpler than in the GCC countries.
HOW HAVE THE ECONOMIC RELATIONS BETWEEN THE GCC COUNTRIES AND GEORGIA BEEN STRENGTHENED THROUGH TOURISM? One fact that is very attractive is that maybe about three years ago, Georgia only had several hundred GCC country passport holders coming in. The statistics now are amazing. In 2017, 106,000 people holding GCC passports traveled to Georgia, the majority from Saudi Arabia. And in just the first seven months of 2018, 74,000 GCC passport holders came to Georgia. Again, the largest number of travels from the GCC countries were from Saudi Arabia. Why? Because Saudi Arabia is the largest country within the GCC countries. When there is such a large number of tourists coming to a country, there comes a need for direct flights. Before, there was only one flight operating between Georgia and the GCC countries, and this was from Tbilisi to Dubai. Slowly, we also had flights to Doha, Qatar as well with Qatar Airlines, added. After that we had a charter flight from Tbilisi to Saudi Arabia with Georgian Airways. In 2017, we signed an agreement with Bahrain, and after that Gulf Air entered the Georgian markets. The same year Jazeera and Wataniya Airways from Kuwait began charter flights to the Georgian capital. And from the summer 2018, Oman, SalamAir, and Flynas started operating direct flights. Another point we should also underline is the number of expatriates from other countries such as Syria, Egypt, Jordan, Pakistan, Bangladesh, and so on, that hold GCC identification cards and are utilizing these direct flights to and from Tbilisi and the GCC countries. So, when we are speaking about tourism from these countries, we should realize that there are tens of thousands of expatriates coming to Georgia from the GCC countries. There are also a lot of Americans, Canadians, and English people living and working in the GCC that will often spend their weekends in Georgia. So, essentially, there is a large number of people traveling from the GCC and the number is larger than solely those holding GCC passports. Tourism has become very important and has grown significantly between Georgia and the GCC.
But again, its tourism combined with investment and trade that has been successful and is strengthening our economic relations.
TELL US ABOUT THE GCCGEORGIA BUSINESS FORUM The Federation of Chambers of the GCC Countries
Yes, I didn’t mention that it is expected that in the fourth quarter of 2018, H.R.H. Prince Sultan bin Salman Al Saud, who serves as the President of the Board with the rank of Minister of the Saudi Commission for Tourism & National Heritage, plans to sign an important tourism agreement with the Ministry of Sustainable Economy in Georgia. The Prince will also plan to visit Georgia. H.R.H. Prince Sultan bin Salman Al Saud is very known person in Arab world, not only in the GCC. He is the first Arab astronaut to fly in space. Also, in the near future, the Georgian Prime Minister plans to visit the GCC countries. Georgia and the GCC countries are continuing to strengthen their ties.
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BUSINESS
GEORGIA TODAY
SEPTEMBER 18 - 20, 2018
A Fruitful Summer for Georgian Agriculture! The Business Confidence Index Q3 2018
O
verall, the BCI lost 4.2 points compared to Q2 2018. Expectations in the private sector in Georgia decreased by 2.8 percentage points, and dropped to 64.2 index points (up from 67.0 points in Q2). Business performance over the past three months decreased, reaching nearly 38.2 points (decreasing from 41.6), indicating a downturn in production/turnover/sales. The synergy of worsening performance in the past three months
and lower expectations have led to a drop in overall BCI. The BCI index worsened in manufacturing (-36.2), retail trade (-10.1), financial (-36.2), and other (-4.2) sectors. The construction, agriculture and service sectors improved by 16.4, 13.4 and 4.7 points, respectively. Business confidence in the third quarter of 2018 decreased for both large firms (-3.8) and SMEs (-5.9). Both types of firms expressed less optimism and had weaker performance, which
resulted in a decrease of -4.2 index in overall BCI.
PAST PERFORMANCE Businesses’ actual performance decreased by -3.4 compared to the second quarter of 2018. In the Q3 2018 reporting period, sales (production or turnover) of the 130 firms surveyed decreased from 41.6 (Q2 2018) to 38.2 (Q3 2018). A significant increase in performance was observed in the agriculture (+86.1) and construction (+27.0)
over the next three months, and 35% did not expect any changes in the future, while a lower share of businesses expect their business conditions to worsen.
SALES PRICES EXPECTATIONS The Sale Price Expectation Index decreased from 11.7 points (Q2 2018) to 10.3 points (Q3 2018). The decrease in the Index is driven by a significant drop in the manufacturing, retail trade and agriculture sectors. The manufacturing sector expects a noticeable decrease in prices over the next three months, while the service and construction sectors expect an increase. The majority (77%) of all surveyed firms are not going to change the prices they charge over the next three months. Only 8% of firms expect to decrease prices, and 15% expect to increase prices in the future. A low level of consumption activities and lack of access to financing continue to be two of the most significant obstacles for businesses. From a total
sectors. Significant improvement means that in these sectors, the weighted balance between positive and negative responses decreased compared to the previous quarter. In the remaining sectors, production/turnover/sales for the past three months worsened: financial (-52.9), manufacturing (-46.7), service (-1.8) and others (-45.0) sectors.
EXPECTATIONS The Expectations Index decreased by 2.8 index points in the third quarter of 2018. Expectations about the next three months improved for the agriculture (47.0), construction (2.9) and service (4.1) sectors. The highest decrease was reported in the manufacturing and retail trade sectors. The majority (59%) of surveyed businesses do not expect any changes in employment over the next three months. Furthermore, 28% of firms stated that they would employ more employees in the future. 55% of the surveyed firms expected that the economic condition of their businesses would improve
of 130 firms participating in the survey, 23% of large sized firms and 34% of SMEs noted that lack of access to finance was their main obstacle. Meanwhile, 10% of large firms and 29% of SMEs chose lack of demand as the main limiting factor for further business development. It should be noted that the BCI results presented here may be overestimated, as the survey only covers businesses currently operating, and not those that have already exited the market. Firms still in operation are more likely to have a negative outlook to some extent.
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BUSINESS
GEORGIA TODAY
SEPTEMBER 18 - 20, 2018
AUGUST: Average Hotel Prices in Georgia and Hotel Price Index
I
n Georgia, the average cost of a room1 in a 3-star hotel was 147 GEL per night in August 2018. The most expensive 3-star hotels in August in Georgia were in Samegrelo-Zemo Svaneti - 177 GEL and Adjara – 164 GEL. The cheapest 3-star
In terms of apartments, on Airbnb in Georgia the average cost of an apartment in August was US$45. On Airbnb in Georgia, the price distribution among most visited destinations by international visitors is the following (in 2017)3: Tbilisi – US$42, Batumi - US$46, Kazbegi -
Table 1: Percentage change of prices in August 2018 over July 2018
Graph 1: In the graph, average prices for standard double rooms in 3 and 4-star hotels and guesthouses are given by region. 5-star hotel prices are provided below
hotels in August in Georgia were found in Kvemo Kartli- 89 GEL and Imereti – 103 GEL. The average cost of a room in a 4-star hotel in Georgia in August 2018 was 253 GEL per night. The most expensive 4-star hotels for this month were found in Kakheti – 299 GEL and SamtskheJavakheti – 274 GEL. The cheapest 4-star hotels in August in Georgia were found in Samegrelo-Zemo Svaneti – 155 GEL and Imereti – 233 GEL. The average cost of a room in a 5-star hotel in Georgia in August 2018 was 455 GEL per night. In Tbilisi, the average price was 619 GEL, followed by Adjara – 393 GEL, Samtskhe-Javakheti - 383 GEL, and Kakheti - 357 GEL. In August 2018, the average cost of a room in a guesthouse2 in Georgia was 74 GEL per night. The highest daily rates for guesthouses were found in Guria – 138 GEL and Kvemo Kartli -107 GEL. The cheapest guesthouses in August in Georgia were found in Kakheti – 61 GEL, Imereti and Shida Kartli – 62 GEL.
US$50, Mtskheta - US$37, Gudauri US$89, Kutaisi - US$31, Sighnaghi - US$27, Borjomi - US$32, Kobuleti - US$46.
HOTEL PRICE INDEX In August 2018, the hotel price index4 increased by 0.01% compared to July 2018. The daily rates for standard double hotel rooms increased the most in Guria – 7.6% and Imereti – 1.4%. Such price increase in Guria was mainly due to hotel
price increases in Ureki (14%). The price increase in Imereti was mainly due to hotel price increases in Kutaisi (1.5%). Among ten regions of Georgia and Tbilisi, in August 2018, compared to July 2017, hotel prices decreased in six regions. The prices decreased the most in Samtskhe-Javakheti and MtskhetaMtianeti, by 1.6% and 1.3% respectively. Price decrease in Samtskhe-Javakheti was mainly due to hotel price decreases in Bakuriani (4.7%). Price decrease in Mtskheta-Mtianeti was mainly due to hotel price decreases in Gudauri (10%). The 3-star, 4-star and 5-star hotel price index decreased by 0.9% in August 2018 compared to July 2018. In these types
of hotels, the highest price decreases were recorded in Mtskheta-Mtianeti (4.1%) and Samtskhe-Javakheti (3.4%). Price decrease in Mtskheta-Mtianeti was mainly due to 3, 4 and 5 star hotel price decreases in Gudauri, in SamtskheJavakheti – because of 3,4 and 5 star hotel price decreases in Borjomi. The 3-star, 4-star and 5-star hotel price increased only in Guria and Kakheti, by 18.4% and 0.1% respectively. Price increase in Guria was primarily due to 3, 4 and 5 star hotel price increases in Ureki, in Kakheti – because of 3, 4 and 5 star hotel price increases in Telavi and Lagodekhi. For guesthouses, the price index
increased by 0.7% in August 2018 compared to July 2018. In this type of accommodation, the biggest percentage price increases for standard double rooms were recorded in Imereti (4.1%) and Adjara (2.2%). The price increase in Imereti was mainly due to price increase of guesthouses in Kutaisi, in Adjara because of price increases of guesthouses in Kobuleti and Makhinjauri. In this type of accommodation, the prices decreased the most in Kakheti and Shida Kartli in both by 0.9%. The price decrease in Kakheti was mainly due to price decrease of guesthouses in Telavi and Sighnaghi, in Shida Kartli because of price decreases of guesthouses in Surami.
1 The results are based on the surveying of standard double hotel room prices of 3, 4, 5-star hotels and guesthouses in 10 regions of Georgia. Hotels were chosen arbitrarily according to random sampling principle. The study contains 71% (312) of all 3, 4 and 5-star hotels and 25% (456 guesthouses) of all guesthouses registered on www. booking.com The 3, 4 and 5-star hotel price data was collected by contacting hotels individually, while the prices of guesthouses were taken from booking.com. The average prices are arithmetic mean of standard double hotel room prices. 2 Guesthouse: a type of accommodation that is characterized by having a small number of rooms and services are usually offered by the resident family. 3 Source: Georgian National Tourism Administration 4 The calculation of the hotel price index is based on the recommendations given by the International Monetary Fund (IMF). The elementary aggregate price index is calculated by Jevons index (Consumer Price Index Manual-Theory and Practice (2004), Practical Guide to Producing Consumer Price Indices (2009)). 5 * Preliminary results
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BUSINESS
GEORGIA TODAY SEPTEMBER 18 - 20, 2018
ADB, Anaklia Consortium Sign MoU to Develop Port, Economic Zone in Georgia
T
he Asian Development Bank (ADB) has signed a memorandum of understanding (MoU) to explore the development of the Anaklia Deep Sea Port and Special Economic Zone (SEZ) in
Georgia. Strategically located between Europe and Asia, the Anaklia project is expected to be the driver for an integrated regional development program worth about $3 billion that will connect Central Asia to international markets. “The Anaklia Port and SEZ will transform regional connectivity and trade, and it will help establish Georgia as an international logistics and business hub,” said ADB’s Central and West Asia Department Director General, Werner Liepach. “ADB will mobilize its financing and advisory services to explore the regional development opportunities that are presented by this important project. We offer both sovereign and non-sovereign financing. We can facilitate large-scale financing as a lead syndication agent, provide transaction advisory services, public-private partnerships, regional cooperation, and technical assistance for capacity development.” The deep-water port will be one of the largest and most sophisticated in the Black Sea region with a handling capacity of 10,000 TEUs shipping containers. Through a linking network of road and rail, the port will also act as a gateway for landlocked neighbors in central Asia, including Armenia and Azerbaijan. The port’s surrounding hinterland will be developed into a city-sized SEZ that will be promoted as a prime business, logistics, and investment destination. The MoU will enable ADB and the Anaklia Port and SEZ’s developing consortium, Anaklia Development Consortium (ADC) and the Anaklia City JSC, to explore opportunities for partnership in the areas of infrastructure, human resource development, financing, and trade facilitation. The memorandum was signed by Mr. Liepach, ADC CEO Levan Akhvlediani, and Anaklia City JSC CEO Ketevan Bochorishvili in Tbilisi. Potential areas of cooperation identified in the
MoU include the development of the infrastructure network to connect the port and SEZ to other cities and regions in Georgia and neighboring countries; public-private partnerships; policy and regulatory frameworks; urban planning; private sector development; and technical and vocational education and training for essential services in the port and the city. “ADB’s partnership with Georgia has expanded rapidly over the last 3 years,” said ADB Country Director in Georgia, Yesim Elhan-Kayalar. “This project has the potential to transform the geoeconomic landscape, and we will explore support at multiple levels.” “We are developing the first deep sea port in Georgia to become the primary transportation gateway for the landlocked countries of Caucasus and Central Asia. Infrastructure development in Georgia and neighboring countries is crucial, therefore, cooperation with ADB, the leading donor in our region, is of high importance to us,” said Akhvlediani. “We are excited about the opportunity to expand our cooperation with ADB. Our projects will create thousands of new jobs. We want to provide education and training activities in the region to support employment opportunities for the local community,” said Bochorishvili. “In addition, we are eager to cooperate with ADB to develop Anaklia City as a modern, future-oriented project with state-of-the-art hard and soft infrastructure.” ADB has supported Georgia since 2007 and is one of the country’s largest multilateral development partners. Sovereign and non-sovereign loans to Georgia total $2.42 billion. ADB’s key development priorities in Georgia are to foster inclusive and sustainable economic growth, reduce poverty, enhance regional connectivity, and improve public service delivery. ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 67 members— 48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in co-financing.
Ban On Wheat Import/ Export By Truck Postponed BY SHAWN WAYNE
T
he Georgian government imposed an initial ban on the import and export of wheat or wheat-rye by truck from/ to Armenia on September 15; however,; the ban has since been postponed to
October 1. Armenian producers say that due to the ban, the price for all products where grain is used in one way or another, will increase. This is bread, meat, and eggs, since the feed grain for chicken and livestock is also imported in large quantities. On September 1, the transport departments and railways of the two countries announced the reduction of railway tariffs for transportation from the port of Poti to Armenia. The reduction was 52%, but even in this case it will be 20-25% higher than transport by truck.
According to the Georgian Ministry of Finance (MoF), the ban was imposed due to long lines of trucks at the border crossing with Russia. The MoF argued that the ban would not affect the economy, and would not trigger a rise in prices. However, Georgian businessmen do not agree with this and say the ban would definitely push the bread and flour prices up and simultaneously leave thousands of people engaged in this sector unemployed.
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BUSINESS
GEORGIA TODAY
SEPTEMBER 18 - 20, 2018
Creation of the Accumulative Pension in Georgia
M
G Law Office, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Irakli Sokolovski, Ana Kochiashvili, Tamar Jikia and associates Ana Chikovani, Elene Samadbegishvili, and Mariam Kalandadze is partnering with GEORGIA TODAY on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.
Pension Law, companies are obliged to transfer 2% of the gross monthly salary of their employees to the pension fund and are responsible for being a payment agent for employees for the portion of the pension contribution to be made by the employees. Notably, in contrast with the employees, employers do not have freedom to opt out from the pension scheme – if the employee chooses to participate in pension saving system, the employer is automatically obliged to follow.
BACKGROUND
According to the Constitution of Georgia, a new type of common-state tax may be adopted or the upper limit of the current rate may be increased by a type of common-state tax only through a referendum. According to Georgian legislation, a tax is a mandatory, unconditional monetary payment to the state budget made by a taxpayer based on the necessary nonequivalent and gratuitous character of the payment. In contrast, pension contributions made to the Pension Agency do not belong to the state budget and will be returned to citizens at their retirement age. Thus, under the laws of Georgia, most likley pension contributions cannot be qualified as a new tax.
These days, many developed and developing countries are in the process of transforming pension systems with the objective to address the issues of retirement income adequacy and financial sustainability more effectively. In the last two decades, Georgia has been through multiple rounds of reforms of its pension system. Most important was the introduction of a flat rate pension in 1995. Another reform of the pension system commenced in 2004. Until 2004, state pensions were financed by the State United Social Insurance Fund (SUSIF) based on social contributions of employer and employee. However, from 2004, social programs became financed from the general budget revenues. Remarkably, from 2008 to August 2012, the pension amount included a long-service bonus distributed on top of the flat rate pension – for those with 25 years or more of working life, the bonus equaled GEL 10 per month. However, at the end of August 2012, pensioners stopped receiving long-service bonuses and instead received the combined amount as a flat rate pension benefit. In light of the series of transformations of pension system in Georgia, the Ministry of Economy and Sustainable Development of Georgia (“MOESD”) created a Pension Reform Unit (“PRU”) with ultimate goal to design a pension reform strategy, which proposed mechanism for increasing the social pension (indexation) and the creation of a complementary pension system component – the contributory private pension model and prepare the relevant draft law on contributory pension model. As a result of drafting activities of PRU, on 21 July 2018, the Parliament of Georgia adopted the Law on Pension Savings (the “Pension Law”). The goal of the
DOES MANDATORY PENSION CONTRIBUTION QUALIFY AS A NEW TAX?
Image source: irishtimes.com
Pension Law is to provide the citizens of Georgia with the opportunity to create the savings in proportion to the compensation earned under their employment and upon occurrence of the retirement age, receive the accumulated pension savings, thus ensure higher replacement rate for the citizens participating in pension scheme. The proposed private pension scheme envisages a 2%+2%+2% system for employed workers: each of the Government of Georgia, the employer and the employee will have to contribute 2% of the gross salary of the employee into the personal account of employee from each salary payment, i.e. in aggregate 6% of the amount of the salary payment. Notably, participation in such pension scheme is mandatory for all the employees under age 40 and voluntary for those who have already reached such age. Significantly, the Government of Georgia will be released from the obligation of making any contribution on behalf of those employees whose annual gross salary exceeds GEL60, 000, transforming the pension scheme formula into 2%+2%. As forecasted by MOESD, introduction of the private pension system will gradually allow the social pension system to become a “pure poverty alleviation tool”.
THE PENSION AGENCY Under the Pension Law, LEPL Pension Agency (the “Pension Agency”) will be a body responsible for overall administration and management of accumulative pension system in Georgia. Main functions of the Pension Agency will include: (i) analysing the pension saving scheme; (ii) assessing the risks associated with the pension scheme used by the Pension Agency; (iii) pooling contributions received by the Pension Agency and adopting investment decisions in relation to the investment of the contributions. Under the Pension Law, the above responsibilities of the Pension Agency will mainly be carried out through the Investment Board. The Investment Board shall: (i) draw up investment policy document defining investment strategy and principles used in course of adopting investment decisions related to investment of assets accumulated with the Pension Agency; (ii) monitor and assess all the activities related to the investment of the assets of the Pension Agency; (iii) developing proposals for the annuals expenses of the investment activities; (iv) select the companies managing the assets of the Pension Agency. Investment activities of the
Investment Board will be regulated and supervised by the National Bank of Georgia. In addition to the activities carried out by the Investment Board, the Pension Agency will be guided and supervised by the Supervisory Board. The responsibilities of the Supervisory Board will cover: (i) appointing the Chief Investment Officer of the Investments Board; (ii) determining and supervising the mechanism of internal auditor of the Pension Agency; (iii) approving the rules and conditions of payment of the pensions; (iv) elaborating the selection criteria and appointment of the director of the Pension Agency; (v) approving the charter of the Pension Agency; (vi) adopting the PR strategy of the Pension Agency; and (vii) carrying out independent audit of the Pension Agency; (viii) supervising any and all activities of the Pension Agency. Notably, the Supervisory Board will not be authorized to monitor the investment activities of the Pension Agency.
IMPACT OF THE PENSION LAW ON BUSINESS The Pension Law foresees certain obligations for the companies in terms of their status of employers. Under the
*** Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business. MG Law is the first full-service law firm in Georgia to be founded by international partners. The firm advises a diverse group of Georgian and foreign companies, financial institutions, investment funds, governments and public enterprises. Among many other areas, the firm primarily focus on the following sectors: Banking & Finance, Capital Markets, Arbitration & Litigation, Labor & Employment, Infrastructure and Project Finance, Energy Law, Real Estate, Tax and Customs, Investment Law, Corporate Law, Real Estate, Infrastructure & Finance Projects, and Cryptocurrency & Blockchain. For more information, please visit www.mglaw. ge or contact Archil Giorgadze at archil. giorgadze@mglaw.ge and Nicola Mariani at Nicola.mariani@mglaw.ge
Czech Minister of Industry & Trade Visits Georgia BY MARIAM MERABISHVILI
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n September 12-14, Minister of Industry and Trade of the Czech Republic had an official visit to Georgia, which is hosting the Georgia-Czech Business Forum organized by the Georgian and Czech Chamber of Commerce and Industry. In the framework of the mentioned event, on September 13 Minister Marta Novakova visited JSC Elmavalmshenebeli, a company that actively cooperates with the Czech side. Elmavalmshenebeli (Tbilisi-based) and Skoda Electrician (Plzen, Czech Republic) are jointly creating a double tact and eightaxis induction motor locomotive. The project is being implemented due to the December 2015 Georgian Railway initia-
tive to purchase 45 such locomotives. On October 20 2016, a presentation of the two companies’ induction motor locomotive was led by JSC Elmavalmshenebeli General Constructor Nikoloz Manjavidze and Skoda Electrician’s Technical Progress Director, Ladislav Sobotka. The meeting was attended by the Ambassador of Czech Republic in Georgia, Tomash Pernicki, Mission Leader assistant Iri Preclik, Majoritary Deputee of Nadzaladevi, Zaza Gabunia, JSC Georgian Railways’ truck transporting director’s assistant, Aleqsandre Qoreli, media and other guests. On September 13, during her visit to JSC Elmavalmshenebeli, Minister Marta Novakova saw the Elmavalmshenebeli Museum where she stated she was impressed by its history, and where she met company leaders. “The project has great perspectives in the future,” said the Minister.
Minister of Industry and Trade of the Czech Republic Marta Novakova visited JSC Elmavalmshenebeli
BUSINESS
GEORGIA TODAY SEPTEMBER 18 - 20, 2018
Real Estate & Crypto Currency
BY SHAWN WAYNE
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s the popularity of Georgia spikes around the world and investments become bigger, tourists are looking to into real estate options not just for investment purposes but also as a getaway spot. With these social developments, official structures being built in Tbilisi and the ones that will be built in the future are interested in the development of the capital's real estate market, being ready to provide all kinds of support to private companies. Additionally, companies and organizations from more than ten countries are currently engaged in the construction and sale of real estate in Georgia, with special interest shown by companies from multiple countries like China, India, Pakistan, Qatar, Turkey, the UAE, France, Spain and the US. With Georgia’s economic growth of 5.5% in the first seven months of 2018, and an expected overall growth of 4.5%, the world is watching, but not just waiting. Interesting things have started happening in Georgia regarding real estate, especially concerning crypto currency. The mining of crypto currency tends to gravitate towards regions with cheap electricity, which makes sense, and as it becomes more popular, actual ATMs are being established in Georgia especially for crypto currencies. This craze has now gone a few steps further, however, with actual real estate being bought and sold using crypto currencies such as bitcoin and etherium. Buying real estate with crypto currencies started in around 2012 with agencies accepting bitcoin for real estate; however, it wasn’t widespread, with most such sales happening in the private sector. Despite warnings of massively fluctuating values, things started changing in 2014 when it slowly started gain-
ing popularity. In 2017, some agencies in the US, United Arab Emirates (UAE) and Indonesia openly began to accept crypto currencies for real estate. In May 2018, an apartment in Vake was bought using bitcoin. The apartment was advertised by a real estate agent and at the request of the owner, it was also added that he would accept bitcoin. In the end it was bought for 25 bitcoin (currently valued at $163,040) and thus kicked off the first known case of this kind of sale in Tbilisi. Following suit, in July, another apartment was sold for bitcoin in Batumi, bought by a citizen of Kazakhstan. Geoline, a company which recently opened an office in Batumi, operates online specifically for parties interested in purchasing real estate with crypto currencies. There is high interest from countries such as Belarus and the UAE to purchase apartments in bitcoin all over the world, as it is difficult to make transactions and buy apartments abroad without getting questioned by authorities. For its part, the National Bank of Georgia warns the public that for virtual currencies there is a significant fluctuation in value, so due to price volatility, their users may face potential financial risk. The National Bank points to the need to introduce regulation of virtual currencies, but it is not yet known when this will happen and in what form. According to Vakhtang Gogokhiya, Co-founder and CEO of crypto currency mining company Golden Fleece, regulation is needed primarily to protect against fraud, but for now the State should fix its position on this sector and outline the appropriate strategy so that investors do not have a fear of uncertainty. Crypto currency changed Georgia economically, and it’s only fair to assume it will do so in the future. The use of it in real estate purchases is part of the ripple effect caused by throwing such a large stone into the territories of the Black Sea, and will surely result in a wave of new economic possibilities.
IMO Praises Georgian Government’s Maritime Policy BY THEA MORRISON
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he International Maritime Organization (IMO) Secretary General Kitack Lim praised the Georgian government's maritime policy. At the meeting with the Prime Minister of Georgia, Mamuka Bakhtadze, held as part of the International Maritime Forum in Batumi, the importance of developing maritime transport and Georgia's role as an international investment, communications, transport, and logistics hub was noted. Kitack Lim pointed out Georgia's impressive progress in the development of maritime transport and commended the Georgian government's plans to invest more in maritime education and to adopt significant tax cuts for companies operating in this sector and those providing services to such companies.
As Bakhtadze said, the Government of Georgia is always eager to share the experience and recommendations of the IMO in introducing modern technology and successfully developing maritime transport. The IMO Secretary-General also met with the Foreign Minister of Georgia, David Zalkaliani. The Ministry of Foreign Affairs (MFA) reports that the meeting focused on prospects for further deepening of cooperation between Georgia and the IMO. The Minister underlined the fruitful cooperation between UN structures, including the IMO, and respective Georgian agencies in order to make significant contributions to the country's maritime transport. As Kitack Lim said, Georgia is an exemplary country with achievements and reforms in the region and the Black Sea basin. He thanked the Georgian side for its active work in the IMO and noted that the IMO will continue to work closely with Georgia.
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BUSINESS
GEORGIA TODAY
SEPTEMBER 18 - 20, 2018
NGO EcoVision Presents Recommendations on Tbilisi’s Air Pollution Crisis BY SAMANTHA GUTHRIE
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n Thuersday, the Georgian environmental non-governmental organization (NGO) EcoVision held a press conference at the Radisson Blu Iveria Hotel in Tbilisi. The aim of the event was to present the results of research conduct by the organization on air quality in the Georgian capital. EcoVision teamed up with the Committee on Environmental Protection and Natural Resources of the Parliament of Georgia to conduct a study on atmospheric air conditions in Tbilisi. The main results of the study included the role of dust contamination as a pollutant in the city’s air. They found both a high concentration of dust in the air and a high level of particulate matter. Particulate matter (PM), also known as particle pollution, is a complex mixture of extremely small particles and liquid droplets in the air. They are small enough to inhale without feeling them, and the tiny particles can affect the heart and lungs and have serious health effects – according to the USA’s Environmental Protection Agency. The EcoVision study found high levels of both PM2.5 – particulates with a diameter of 2.5 micrometers or less – and PM10 – with a diameter or 10 micrometers or less. PM2.5 can be particularly harmful for human health, as they can linger in the air longer than larger, heavier particles, increasing the chance of being inhaled. PM2.5 particles can bypass the nose and throat, embedding themselves deep into the lungs, and some may even enter the circulatory system, reports industry website Bliss Air. Studies published by the American Medical Association have
Image source: EcoVision
linked increased inhalation of these fine particles to premature death from heart and lung disease, and have found them to be triggers for chronic diseases such as asthma, heart disease, and bronchitis. Scientists in a study published in the Journal of the American Medical Association estimated that for every 10 micrograms per cubic meter (μg/m3) increase in fine particulate air pollution, there is an associated 4%, 6% and 8% increased risk of all-cause, cardiopulmonary and lung cancer mortality, respectively.
The American Heart Association also warns that “Exposure to...PM2.5 over a few hours to weeks can trigger cardiovascular disease-related mortality and nonfatal events; longer-term exposure (e.g., a few years) increases the risk for cardiovascular mortality to an even greater extent...and reduces life expectancy within more highly exposed segments of the population by several months to a few years.” The EcoVision study connected high dust concentrations with the city’s many
construction sites, which rarely use water to suppress dust – a common practice around the world known to reduce the spread of particulate matter. Throughout the later part of the summer, Tbilisi’s City Hall has been working day and night to renovate many major streets, stirring up constant clouds of dust and debris. Another source of dust identified in the report was the prevalence of bare open ground, particularly in the eastern part of the city and in Kakheti, which sends dust flying with every strong wind.
At the press conference, EcoVision presented several recommendations to prevent air pollution in the capital. First, they recommended introducing and applying EU technical regulations to construction in the city, and dedicating resources for consistent and fair enforcement. Second, intensive planting of trees and shrubbery in the eastern part of Tbilisi to prevent wind from carrying dust from the Iori Plateau in southeastern Georgia into the city. Third, an intensive rehabilitation of streets, sidewalks, and the development of a fountain system throughout the city to improve citizens’ overall quality of life – particularly for pedestrians. Finally, the report noted that the most effective way to reduce vehicle emissions is to restore the technical inspection process, which will come into force in January 2019 for all vehicles, and to improve the conditions of the buses and mini-buses operated by the Tbilisi Transport Service. Tbilisi Mayor Kakha Kaladze announced a new citywide transport policy in June, which includes replacing the entire bus fleet with modern, cleaner blue buses by the end of 2019, introducing regulations for the taxi industry, introducing vehicle emissions inspections, introducing night transportation routes, and speeding up the metro by adding more cars and reducing the intervals between them. In July, specialists from the Environmental Pollution Monitoring Department of the National Environmental Agency of Georgia introduced mobile air quality testing stations in 25 locations around Tbilisi, and released preliminary findings, noting that Tsereteli Avenue in the Didube district registered the worst pollution levels in their study, and connected high-traffic areas with high levels of toxic nitrogen dioxide.
Wyndham Premium Brand Hotel ‘Wyndham Grand’ Opens in Georgia BY MARIAM MERABISHVILI
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he construction of the unique former Rixos hotel on Gudiashvili Street, Tbilisi, is nearing an end. The project has seen a $45 million investment and has been organically integrated with neighboring historical buildings on the list of cultural heritage. The hotel will open under the name of Wyndham’s premium brand ‘Wyndham Grand.’ The entrance of the chain on the Georgian market is said to be yet more proof of the country’s attractiveness and special potential. On September 17, the signing ceremony between the former shareholder of Rixos, City M’s Director Gocha Gvenetadze, a representative of its Board of Directors, Itsik Moshe, and a repre-
sentative of Wyndham, was held at the Courtyard Marriott Hotel. According to Gvenetadze, the Wyndham Grand hotel will soon be opened, and its guests will have 161 high-standard rooms to choose from. When the Wyndham brand decided to take over the project from Rixos, they requested some changes to the building, namely in the design of the meeting rooms and restaurants, which City M approved. According to Moshe, the former Rixos Tbilisi building was built using modern technologies that are almost unprecedented in Georgian reality. Local constructors working on the project gained a lot of experience, which is the prerequisite for using local workforces in future projects of such scale. The signing ceremony was attended by representatives of the business sector, National Tourism Administration of Georgia, architects and engineers from Israel, and Georgian media.
Nikora Trade Associating with TBC Capital Release Bond of 25 mln GEL BY MARIAM MERABISHVILI
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upermarket network Nikora Trade has released a bond of 25 million GEL, which is the first public bond issued by the company in GEL. TBC Bank's subsidiary "TBC Capital" provided the issue of the bond and put it on the Georgian Stock Exchange. This transaction is the largest of its kind for this period of 2018 in the GEL corporate public bond segment. The main benefits imply refinancing loan bonds and funding monetary resources for future development. The three-year obligations are listed on the Georgian Stock Market. The interest rate is 11% and the term of coverage until 2021. Various financial institutions have invested in bond issuance, including local banks and the European Bank for Reconstruction and Development (EBRD). On September 14, a press conference was held in TBC Bank’s headquarters,
where the key speakers, General Director of “Nikora” Irakli Boqolishvili, Assistant of TBC General Director Goga Tkhelidze, Director of “TBC Capital” Irakli Elashvili and EBRD Director in the South Caucasus, Bruno Balvanera, introduced the project and the leading processes to the audience. Nikora Trade is a company which has released coupon bonds worth $5 million since 2016. International rating company Scope Rating awarded B+ to Nikora and BB to released bonds in 2017, proving its strength and transparency. “Experience gave us the opportunity to release 25 million three-year coupon bonds because they are an alternative way to attract financial resources. The more diversified the funds, the better conditions the company has. Why Lari? Because in the current currency situation in Georgia, GEL is less risky. Half of the mentioned 25 million bond will go towards refinancing obligations and half of it will be used for developing the Nikora network,” said Boqolishvili.
The assistance of the EBRD, the leading institutional investor in Georgia, didn’t go underestimated at the meeting. It has invested in 223 projects in the financial, corporate, infrastructural and energy sectors. “This partnership is important for EBRD for several reasons: 1) because we see potential and demand in the Georgian market, 2) From now on, Nikora will have to be transparent as much as possible and accountable in finance, and 3) Part of our financing will be used for environmentally friendly products, which will contribute to the company’s role in the global warming sphere. The EBRD is interested in environmental protection,” noted Balvanera. The conference was summed up by TBC Bank, with its representatives talking about their experience with Nikora, connections between investments and currency diversification, the priority of the Lari, and about why this project stands as an example for other Georgian companies.
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BUSINESS
GEORGIA TODAY
SEPTEMBER 18 - 20, 2018
Russians to Limit Grants to Protect Citizens from “Financial Slavery” BY DIMITRI DOLABERIDZE
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ussian MPs are to limit their citizens’ access to credit, having proposed prohibiting banks from issuing a loan if payments on it exceed half the aggregate income of the borrower's family, says the head of the State Duma Committee for the Financial Market, Anatoly Aksakov. The law is also expected to extend to microfinance organizations (MFOs). Parliamentarians, in so doing, plan to protect the population from credit bondage. However, according to experts, because of this restriction, Russians risk becoming even more bogged down in debt. In addition, the may end up in the clutches of "black creditors" and then at stake is not only the property of the borrower, but even their life. In Russia, it is almost impossible to find a person who has never taken a loan. Accordingly, the greater the debt burden, the heavier the price to pay. According to the Central Bank, from the beginning of the year, the volume of indebtedness of individuals to credit organizations grew by more than 25%, and by June 1, 2018, it had reached 13.5 trillion Rubles ($197,100,000,000.00). The growth in lending was due to low
rates. In addition, banks now find it more profitable to lend to the population than to companies that are in stagnation. In the MP’s plans, it is necessary to prohibit banks and MFOs from issuing loans to citizens if their repayment will take more than 50% of the total income of the family. Corresponding amendments to the Law "On Banks and Banking Activities" and "On Microfinance Organizations" are being developed by the State Duma Committee on the Financial Market. Authors of the bill say the restriction is aimed at protecting citizens, and the choice of a mark of 50% is in line with world practice. For example, in Canada, the debt load on mortgages is 42%, in Israel 50%. According to the Bureau of Credit Histories, Equifax, on average Russians spend 40% of their income on loan payments. Experts warn it is risky to try to replicate the experience of other countries indiscriminately. “What is meant by the family? How many people does it consider a ‘family’? Do they include people with incomes? It is necessary to consider whether the borrower has dependents as their presence reduces the size of the declared income, as some of the money goes to their maintenance. In addition, it is not clear what kind of income is being talked about. Whether only the wages of family members will be taken into account, or other sources of income - deposits, shares,
income from renting apartments, for example. And it's not easy to fix them all,” said Mikhail Belyaev, head of the Finfast Consumer Banking section. In addition, the income of a foreign borrower and Russian one is diverse. According to the Federal State Statistics Service, in June, on average, the monetary incomes of the population in Russia amounted to 33,447 Rubles ($491.00196). At the same time, in Moscow the figure reached 62,621 Rubles ($919.27628), in the Central Federal District - 42,197 Rubles ($619.45196) in the Volga Federal District – 27,078 Rubles ($397.50504), and in the Siberian Federal District – 24,946 Rubles ($366.20728). “The problem of Russian regional finance is monstrously low salaries. People who have a salary of 30,000 Rubles
($440.4) a month or less need a second or even third part-time job, because income below a thousand dollars a month humiliates and offends the dignity of a modern civilized person,” said expert of the International Financial Center, Vladimir Rozhankovsky. And if the crediting of the population is on the up, the incomes of citizens on the contrary fall. According to calculations by experts of the United Popular Front, as of the first half of 2018, the average Russian family owes banks more than 234 thousand Rubles ($3.435.12). This indicator increased by 19% in comparison with the previous year. Often, Russians take another loan to pay off the previous one, and also to fill the lack of funds for current expenses. “At such low incomes, for many families
the threshold of loans of 50% could become an obstacle for refinancing old loans. And this despite the fact that now new loans are almost the only way not only to extinguish the previous ones, but also simply to have funds for the day-today expenses,” says Mark Telehman, leading analyst of TeleTrade Group. In other words, the authors of the legislative innovations should take into account that the Russians have already sat down on the “credit needle:” no growth of incomes is foreseen, but somehow it is necessary to live. And if banks and MFOs start denying them loans, then citizens will have nothing else to do but go to the black creditors. And communication with them can be fraught, with risks not only of losing property, but also life.
RMG Supports Bolnisi Winemakers BY SAMANTHA GUTHRIE
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he Bolnisi Winemaking Union is holding a series of educational seminars for winemakers in the Bolnisi municipality September 13-21 with the support of RMG. RMG (Rich Metals Group) is a precious metals mining company that operates gold mines in and near Bolnisi. The Union organized educational trainings on viticulture and winemaking topics, with a focu on small,
family-type wineries. The trainings focus on new, modern technologies and techniques that winemakers can apply to their businesses now and in the future. The Mayor of Bolnisi, Davit Sherazadishvili, is also supporting the training series. Up to 20 Bolnisi winemakers and vendors will attend the seminars, which are free of charge. The professional trainers will be: Irma Chanturia, Tinatin Jajanidze and Mikheil Meskhi. This summer, a Memorandum of Cooperation was signed between RMG, the Bolnisi Municipality and the Bolnisi Winemaking Union. As the largest business
operating in Georgia, RMG has committed to participate in corporate social responsibility projects in the Bolnisi region. In June 2018, with the support of RMG, Bolnisi winemakers participated in the 11th International Exhibition of Wine and Spirits, held in Tbilisi. Bolnisi qvevri wines won 16 prizes. RMG has a sordid history in Bolnisi. Transparency International Georgia reports that “There are long standing questions about the negative effects of gold mining in Bolnisi. In previous years the main concern was damage inflicted to the environment and the health of
local population. More recent concerns have to do with the damage and destruction of the cultural heritage sites in Sakdrisi gold mine.” There are also questions about who actually owns the mining company and its subsidiaries. Transparency International “attempted to trace the ultimate beneficiaries of these companies, but encountered problems with offshore registrations that render public sources of information useless.” In March of this year, a resident of the village Didi Dmanisi, in the Bolnisi municipality, was assaulted by a member
of the Dmanisi sakrebulo (local administration) who represents the Georgian Dream party. The victim, Murad Martiashvili, claimed that he was beaten because he continually crossed land owned by RMG to access his own plot, and when he brought the issue to the sakrebulo, they sided with the company. Mayor Sherazadishvili denied any connection between the local government and RMG, and brushed off the accusations that the conflict was related to the company, saying, "Conflict can be between individuals and speculation directed to something else.”
BUSINESS
GEORGIA TODAY SEPTEMBER 18 - 20, 2018
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15 Health Benefits of Drinking Beer That’ll Make You Wanna Raise Your Glass ADVERTORIAL
20% of the recommended regular dosage of fiber, which helps in better bowel function.
he science gods have said it! Drinking beer in moderation is actually good for your health. These 15 facts reveal why you shouldn’t feel bad when you crack open a cold one after a stressful day.
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BEER MINIMIZES THE RISK OF CANCER
BEER IS GOOD FOR THE HEART
BEER HELPS BOOST MENTAL HEALTH
Several studies show that the consumption of beer could reduce the risk of coronary heart disease. This is because beer has a thinning effect on blood and reduces the chances of forming a clot which can cause a blockage in the coronary artery. It also reduces the risk of inflammation which has the potential to cause atherosclerosis.
Xanthohumol, an antioxidant, that is found in beer, plays a major role in the prevention of cancer. Beer is also a good source of polyphenols which helps in the prevention and treatment of cancer.
Studies claim that beer can help protect the brain against neurodegenerative diseases like Parkinson's and Alzheimer's. Drinking beer also increases the amount of dopamine in the brain which can make you feel calmer and relaxed.
BEER HELPS IMPROVE EYESIGHT
A study conducted by Oregon State University found that xanthohumol, a chemical flavonoid found in beer, helps reduce weight and cholesterol levels.
Enzymes and antioxidants found in beer help protect the eyes by preventing mitochondrial damage. A study by University of Western Ontario claims that a beer a day can minimize the risk of people developing a cataract.
BEER IMPROVES CHOLESTEROL LEVEL
BEER MINIMIZES THE RISK OF DIABETES
Beer helps increase the levels of lipoprotein- the good type of cholesterol which prevents plaque buildup in the arteries. Beer also has high amounts of fiber which helps reduce the levels of LDL cholesterol- the bad type of cholesterol.
A study conducted by Harvard found that people who increased the consumption of alcohol reduced the risk of developing type-2 diabetes.
BEER HELPS YOU LOSE WEIGHT
BEER PROMOTES BETTER BOWEL MOVEMENT A regular bottle of beer contains around
BEER REDUCES THE RISK OF DEVELOPING KIDNEY STONES Beer contains potassium and magnesium which help prevent the development of kidney stones. Also, beer is 90% water, and water is the most powerful tool for
the prevention of kidney stones. In fact, a study actually found that drinking a bottle of beer every day can reduce the risk of kidney stones by 40%.
beer contains Vitamin B6 which prevents the risk of heart disease by keeping in check the formation of homocysteine in our body.
BEER HELPS IN THE DEVELOPMENT OF DENSER AND HEALTHIER BONES
BEER HELPS CURE INSOMNIA Beer contains Lactoflavin and nicotinic acid which can help promote sleep.
Beer is rich in dietary silicone which contributes to a higher bone density. It also minimizes the risk of osteoporosis.
BEER INCREASES VITAMIN B LEVELS Beer contains several B vitamins. The Lancet, a medical journal, suggests that
BEER HAS POSITIVE EFFECTS ON THE SKIN AND HAIR The vitamins present in beer are a good preventive and corrective source for acne and also add a glow to the skin. Additionally, hops and malt in beer promote healthy growth of hair.
BEER DELAYS AGEING AND PROMOTES LONGEVITY Beer increases the levels and impact of Vitamin E, acting as an antioxidant which helps keep the skin healthy while also slowing down the ageing process.
BEER FLUSHES OUT TOXINS FROM THE BODY Beer has diuretic properties which increase urination, thus facilitating increased removal of toxins from the body. Mind you, it's always better to drink in moderation. So, now that you're well-aware of the nutritional benefits of beer, let's drink to that!
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BUSINESS
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SEPTEMBER 18 - 20, 2018
Large-Scale Maritime Works at Anaklia Deep Sea Port Have Commenced
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6.09.2018, Anaklia - Maritime construction works at Anaklia Deep Sea Port have commenced. The scale and engineering solutions of Anaklia Port’s maritime works are historical and unprecedented for Georgia. The maritime works for the port will be carried out by one of the most advanced and technically capable dredging vessels ever built. The vessel owned by Van Oord, the Athena, will be deployed for dredging and reclamation. It will perform the reclamation of 5.0 million cubic meters of sand from the sea and bring dredged material to the port area. The works will be accomplished by one of the world’s leading marine engineering contractors, Van Oord, which was awarded a contract (July 2018) through an international tender announced by Anaklia Development Consortium (ADC). A formal ceremony highlighting the launch of the maritime construction works was held at Anaklia Port on September 16th, 2018. The event was attended by the founding partner Mamuka Khazaradze and management team of ADC, the Minister of Economy and Sustainable development, Giorgi Kobulia, Governor of Samegrelo-Zemo Svaneti region, Alexander Motserelia, Van Oord’s Project Manager, Jaap Bruinsma. The ADC founder and distinguished guests hit the button to officially launch the first dredging and reclamation works of Anaklia Deep Sea Port. Before the ceremony began, more than 30 journalists who visited the port area went on a media tour and had the opportunity to see the port construction area, mobilized heavy equipment and reclamation works. Along with the dredging vessel, The Athena, at the port area there is modernized heavy equipment at the port which can perform large scale maritime works. These include 2.5 km long floating pipes, vertical drains of 3,500 km in length in total, 10 km long bunds, a 2.5 km long melioration channel and a water regulation system. Construction of Anaklia Deep Sea Port started
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in December 2017 with the preliminary land construction works. Anaklia Deep Sea Port will operate commercially in December 2020.
ABOUT THE CONSTRUCTION OF ANAKLIA DEEP SEA PORT Construction during the 1st Phase will include: • Dredging of the ports maritime area up to 16 meters deep • Dredging of 15 million cubic meters of sand that will be reclaimed onshore to surcharge the terminal area. • Construction of a 1.6 km long breakwater which will be constructed using 1.3 million tons of rock and concrete armor units • Construction of a 625 meter long quay wall with multifunctional capabilities along with 110 hectares for paved container yard port operations, customs and other supportive buildings. The port infrastructure built during the 1st Phase will enable Georgia to dock 10,000 TEU Panamax and Post-Panamax vessels, which can’t be docked at other seaports in Georgia. At the time of its opening and after phase I is put into operation, in 2021 Anaklia Deep Sea Port will be able to handle 1 million TEU containers and 1.5 million tons of dry bulk. Anaklia Deep Sea Port will be constructed in 9 Phases. The total investment value of the project is $2.5 billion USD.
ABOUT VAN OORD Van Oord is a leading Dutch international contractor which carries out dredging, marine engineering and offshore projects in different parts of the world. The construction of Palm Island in Dubai, the expansion of the Maasvlakte 2 port in Rotterdam’s Maasvlakte 2, and the record-breaking Suez Canal are among the projects which Van Oord have implemented.
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GEORGIA TODAY SEPTEMBER 18 - 20, 2018
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PM Introduces New Education System Strategy BY THEA MORRISON
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eorgian Prime Minister MamukaBakhtadzebelieves that the way to solve the issues and challenges that Georgia currently faces, ie. occupied territories, poverty and social problems, is through the development of the educational system. “Modernizing the system of education, the development and introduction of a strong fundamental educational system, is the main precondition for Georgia to overcome these obstacles,” he said. The PM made the statement at the presentation of the new educational system strategy at Ikalto Academy, one of the most significant cultural-scholastic centers of Georgia in the 11-13th centuries. According to Bakhtadze, the new educational reform envisages a five-year cycle from 2018 to 2023, as a result of which the educational system will be moved closer to the European system of education. The PM said that in autumn 2019, the government will propose a legislative package addressing the crucial issue of transforming education into the dominant sector in the economy, making sure that the educational sector enjoys at least 10-11% of the GDP. “No country or economy in the 21st century will be successful without building on the creation of human capital. Consequently, our objective for the educational reform is to put in place human capital in Georgia, to create systems which will place Georgia among developed economies,” Bakhtadze stated. According to the PM, the educational reform will cover five directions: early
and preschool education, general education, vocational education, higher education, and science. “Special attention will be paid to preschool education, because education at an earlier age will later reflect at subsequent levels of development. Unfortunately, preschool education is not part of the overall educational system today, which is a grievous mistake which we will be correcting,” he noted. As for general education, according to Bakhtadze, in 2019, a new model of learning will be launched in 50 public schools. “By 2030, this model will be fully adopted by more than 2,000 schools… All schools in Georgia must meet the highest standards. This reform will produce a new school model, a mix of the best international experience and Georgia's actual environment, along with the experience of Georgian scientific and pedagogical experience,” he underlined, adding that in the 2018-2019 academic year, about 10,000 teachers will enjoy a raise and promising that by 2022, the average schoolteacher’s salary will be tripled. Bakhtadze says it will be one of the most important directions in the reform, focusing on the needs of regional development and rapid employment. “We will seek to rapidly increase in the number of students in the regions and develop vocational education centers,” he added. In the direction of higher education, the PM plans to introduce a new model for financing, and integration in the European architecture of higher education. “A portal for electronic educational resources will be created and the system will employ block chain technologies to ensure a higher degree of reliability, top transparency standards, while saving
Photo source: Georgian Government’s Press Office
finances, simplifying relevant processes, and focusing on fast results,” he added. Bakhtadze said Georgia is a part of European civilization, adding the country strives to return to its family. Education Minister Mikheil Batiashvili also delivered speech at the presentation. He said the first stage of the reform is starting this year and is to last through 2019. It envisages an increase of number of vocational educational institutions in 13 municipalities. The second phase of the reform will
be implemented in 2020-2023, when joint programs with international universities will be introduced and the number of foreign students will increase by 50 thousand students as a result of the targeted programs. At the first stage of the reform, the target funding is planned to support high standard international scientific publications and actively engage Georgian scientists in the International Mobility Program of Science. “The second stage of the reform envis-
ages getting membership in international scientific and educational projects such as Academia Europea, EU Joint Research Center, COST, H2020 / Horizon Europe, Japan JNR / COMET, CERN / ATLAS / CMS and thus increase the number of Georgian scholars involved in these projects. In addition, a modern electronic system of science will be created, which will significantly help to develop this field,” the Minister said.
BTU Signs Cooperation Agreement with Entrepreneur Magazine to the Business and Technology University leadership for selecting Entrepreneur as a strategic media partner for BTU students,” said Sharashidze. “I am looking forward to meeting with the students at various panel discussions and presenting new issues of the Entrepreneur Magazine, which features Geor-
gian startups and entrepreneurs. I am also looking forward to covering students’ success stories, best startups by BTU students and of course, looking forward to enriching Entrepreneur magazine content with blogs by high qualified contributors- BTU lecturers and academicians.“
Publisher and Editor in Chief of Entrepreneur Magazine, George Sharashidze and the rector of the Business and Technology University (BTU), Andro Rurua
BY MARIAM MERABISHVILI
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Memorandum of Cooperation was signed by the rector of the Business and TechnologyUniversity(BTU),Andro Rurua, and Publisher and
Editor in Chief of Entrepreneur Magazine, George Sharashidze, on September 14 in the BTU conference Hall. Entrepreneur is to begin cooperation with the BTU which seeks to initiate joint start-up and technology projects, involving preparing publications under the "Entrepreneur + BTU" brand, and the holding of masterclasses on the main
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magazine features each issue. Within the partnership, the Entrepreneur Hub will be set up from the new semester, in which attendees will be given the latest information on the latest trends in the field of entrepreneurship, world trends, innovations and technologies and business process management. “I would like to express my gratitude
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