Issue #1110 Business by Georgia Today

Issue no: 1110/160

• DECEMBER 18 - 20, 2018

• PUBLISHED TWICE WEEKLY

FOCUS ON SKIING

Gudauri is open for fun and business!

PAGE 3

PRICE: GEL 2.50

In this week’s issue... Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

Real Property Sales ISET PAGE 4

Kobulia Emphasizes Importance of Mountain Economies

Zurabishvili: My Aim Is to Make Georgia’s European Future Irreversible BY THEA MORRISON

he first female President of Georgia, Salome Zurabishvili, has vowed to develop the country and make its European future irreversible. She made the statement during her inauguration ceremony in the 18th-century Batoni Palace in Telavi Municipality, Kakheti region, on December 16. “I will do everything in my power to guarantee individual rights and freedoms. I will defend the rule of law. I will strive to strengthen civil society and further improve the country’s political culture,” the new president stressed. She added that a modern, European country requires the balanced development of the regions and the capital. Continued on page 2

BUSINESS PAGE 5

Economy Minister Opens New Enterprise BUSINESS PAGE 7

Nenskra Hydro to Complete Damaged Road Rehabilitation by Year End BUSINESS PAGE 8

EU Funded Project Awards Best CSR Initiatives with First Meliora Award POLITICS PAGE 15 Prepared for Georgia Today Business by

Markets As of 14ͲDecͲ2018

STOCKS

Price

w/w

m/m

BONDS

Price

w/w

m/m

Bank of Georgia (BGEO LN)

GBP 13.47

Ͳ0,5%

Ͳ15,6%

GEOROG 04/21

100.72 (YTM 6.41%)

+0,0%

Ͳ0,7%

Georgia Capital (CGEO LN)

GBP 10.00

Ͳ7,0%

Ͳ14,6%

GEORG 04/21

105.40 (YTM 4.40%)

+0,2%

+0,1%

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

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

GBP 2.20

Ͳ7,6%

GRAIL 07/22

103.99 (YTM 6.48%)

Ͳ0,2%

Ͳ2,0%

GBP 14.06

Ͳ4,2%

Ͳ14,8%

GEBGG 07/23

97.95 (YTM 6.52%)

Ͳ0,2%

Ͳ0,3%

m/m

CURRENCIES

Price

w/w

60,28

Ͳ2,3%

Ͳ8,8%

GEL / USD

2,6653

+0,4%

Ͳ0,5%

1 239,02

Price

Ͳ0,8%

w/w

+2,3%

GEL / EUR

3,0129

Ͳ0,4%

Ͳ0,6%

m/m

GEL / GBP

3,3542

Ͳ0,9%

INDICES

Price

w/w

m/m

GEL / CHF

2,6651

Ͳ0,6%

Ͳ0,0%

FTSE 100

6 845,17

+1,0%

Ͳ2,7%

GEL / RUB

0,0400

+0,3%

FTSE 250

17 666,91

Ͳ1,0%

Ͳ6,6%

GEL / TRY

0,4969

Ͳ0,8%

+1,2%

DAX

10 865,77

+0,7%

Ͳ4,8%

GEL / AZN

1,5709

+0,4%

Ͳ1,0%

DOW JONES

24 100,51

Ͳ1,2%

Ͳ3,9%

GEL / AMD

0,0055

NASDAQ MSCI EM EE MSCI EM

Ͳ3,7%

6 910,67

Ͳ0,8%

Ͳ3,2%

GEL / UAH

0,0955

Ͳ0,1%

Ͳ0,9%

156,23

Ͳ2,3%

+0,8%

EUR / USD

0,8845

+0,8%

+0,0%

+1,1%

+3,2%

971,90

Ͳ1,0%

+0,4%

GBP / USD

0,7945

SP 500

2 599,95

Ͳ1,3%

Ͳ3,8%

CHF / USD

0,9980

+0,6%

MSCI FM

2 537,37

Ͳ0,5%

+2,5%

RUB / USD

66,8605

+0,6%

Ͳ0,3%

GT Index (GEL)

1 582,68

TRY / USD

5,3621

+1,1%

Ͳ1,8%

Ͳ0,9%

GT Index (USD)

1 208,13

AZN / USD

1,6993

Ͳ0,0%

+0,3%

NEWS

GEORGIA TODAY

DECEMBER 18 - 20, 2018

Zurabishvili: My Aim Is to Make Georgia’s European Future Irreversible @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: In the 1970s, famous Georgian pharmacist Irakli Natroshvili created a recipe for a nonalcoholic drink based on Saperavi grape but it wasn't actually made until 40 years later when his son Giorgi decided to start a new business based on his father’s recipe. With some deeper research into his father’s scientific works, Giorgi was able to launch the unique "wine tea" made using highly technological methods and the Saperavi grape. The first test versions have already been sent to the USA and China and the founder has his eye on the European markets too. Heshkili Huts it’s a family-owned wooden cottage hotel in Heshkili, one of the oldest villages in Svaneti, at 1900 meters above sea level. One year ago, the Pilpani family decided to transform their land on the way to the famous Hatsvali ski resort by building four wooden huts for guests. In no time at all, the Heshkili Huts became one of the trendiest destinations in Svaneti. Confident in this knowledge, the owners decided to extend the property to eleven cottages while keeping the same format based on comfortable authenticity. GGM Board Games is a startup recently established by three students of the Agrarian University, Mikheil Cholokava, Guram Gelkhauri and Givi Dolidze. The young entrepreneurs see their board games as "the right product launched at the right time" as there is increasing demand for real communication in this era of ever-dominant technology. They have created two games so far, one of which is already available on international platform Kickstarter. The founders say GGM is the first Georgian company to create and produce table games and despite a low investment and challenges along the way, they intend to increase their portfolio. 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

Continued from page 1 “Throughout our history, in fact, Georgia’s provinces were its pillar and underpinned its strength. We should merge this historical experience with the modern European example,” she noted. Zurabishvili underlined Georgian society is united around the issue of its European future. “By electing me, the Georgian people yet again voted for the European path,” she added. Reuters reported the fact, saying Georgia’s first female president had vowed to “reconcile political divisions and deepen ties with NATO and Europe” at Sunday’s inauguration after opposition protesters were blocked from attending. “Zurabishvili, 66, daughter of Georgian émigrés and now the country’s first female president, chose for her inauguration an 18th-century palace in the eastern town of Telavi as she lost the vote there but wanted to demonstrate inclusiveness,” the article reads. Reuters added that with the prime minister and government wielding most executive power, the presidency is largely ceremonial but is still the international face of a nation seeking better relations with the West to counter Russia’s influence. The President also stated that the EU Association Agreement and visa liberalization have opened up great opportunities for Georgians, and the country has solid support from its Western friends and partners. “This process should be accelerated. The will of the Georgian people is expressed in the new Constitution: a path towards the European Union and NATO. Together with our strategic partners – the United States of America and European nations – I will take this process forward. I will make use of all my experience and contacts in international organizations and the European Union to achieve our common purpose,” she declared in before around 1800 guests

who attended the inauguration ceremony. Georgian Prime Minister, Mamuka Bakhtadze met with the Turkey's Vice President Fuat Oktay, who attended the ceremony and stated that in his view, the elections were held in a democratic way, adding it was a significant step toward the building of the country's democracy. However, Deutsche Welle noted, in an article dedicated to the inauguration ceremony, that the Georgian opposition parties had denounced Zurabishvili’s victory as fraudulent. Opposition supporters marched with sacks of onions and potatoes on Sunday to mock what they claim were government efforts to bribe voters by handing out free vegetables. The article also read that the inauguration marks the start of a new constitution which transforms her post into a

largely ceremonial role. “Zurabishvili said in her inaugural speech that she would use her experience in France's diplomatic service, and previous role as Georgia's foreign minister, to promote her nation's aspirations to join the European Union and the NATO transatlantic military alliance,” Deutsche Welle reports. The leaders of different countries sent warm wishes to the new President of Georgia. Her Majesty Queen Elizabeth II also congratulated Zurabishvili. “I would like to extend my sincere congratulation on your inauguration as President of Georgia. I send my best wishes to you and the people of Georgia and look forward to continuing the excellent relations between our two countries,” - was stated in the official letter of Queen Elizabeth II.

NEWS

GEORGIA TODAY DECEMBER 18 - 20, 2018

Skiing Season Officially Opens in Gudauri BY THEA MORRISON

udauri, a rapidly developing winter sports resort located in the MtskhetaMtianeti region of Georgia, is now ready to host visi-

tors. The famous Georgian resort is approximately a two-hour drive from Tbilisi, at the height of 2,196 meters. The winter season was offi cially opened in Gudauri by the Georgian Prime Minister, Mamuka Bakhtadze, who said Gudauri has the potential to become a destination of global importance, with Georgia to be mapped among the countries with the best winter resorts. Bakhtadze said this season Gudauri is offering a number of innovations: six new aerial lifts, two of which are rehabilitated from old lifts. “Of the six new areal lifts, three are in the Gudauri-Kobi section. It is important in terms of clustering Kobi, Gudauri, and Stepantsminda as they will enable us to increase Gudauri's traffic capacity, meaning tourists can enjoy an exceptionally comfortable environment without queues plaguing them as they did in the past,” he said.

The PM added that other infrastructural projects are also underway. “The water reservoir project is nearly finalized, and snowmaking infrastructure is already in place throughout most of Gudauri. We want Gudauri to be a destination of global importance, and that requires a well-functioning snowmaking system," he said. The Prime Minister wished Gudauri's visitors a joyful season. He thanked everyone involved in the implementation of projects in Gudauri, and Doppelmayr and other companies for having completed important projects within the tight deadlines. "This year, we are celebrating Gudauri's 30th anniversary. 30 years ago, when the resort was established, the key message was for Georgia's winter destinations to be made the best in the world. Similarly, our task today is to continue implementing this message in real life. I am convinced these and similar infrastructural projects will ensure that Georgia gains a foothold on the world map as a country with the most successful winter resorts," he said. Bakhtadze thanked the 82 Patrol Police officers who completed a special winter resort patrolling training course, and the patrol teams who, with relevant equipment, work at every winter resort to ensure the safety of visitors.

Image source: PM’s Press Office

An Art & Design Night Market to Be Held in Tbilisi

GEORGIA TODAY – exclusive media partner in Georgia of the INTERNATIONAL PROPERTY SHOW (IPS), invites you to join a professional skills improvement program - “Effective Participation at the Exhibition – All You Need to Know” in the framework of the IPS presentation. For further inquiries, please contact Georgia Today T: +995 32 229 59 19 E: marketing@georgiatoday.ge W: www.georgiatoday.ge

rt & Design Night Market will be held at Ghvinis Karkhana in Tbilisi on December 20. This is a new format of party-market, where visitors can enjoy super music by Guga Khelaia, have delicious drinks and what is most

important – attend a very interesting and unusual market connected with Art and Design. Art & Design Night Market is a joint project of Ghvinis Karkhana - ღვინის ქარხანა and Print Festival LIFE N STYLE. The event starts at 7pm on December 20 and lasts until late at night.

BUSINESS

GEORGIA TODAY

DECEMBER 18 - 20, 2018

Real Property Sales

various districts. The highest drop was in Mtatsminda, by -13.9% (YoY), while the highest jump was in Samgori, by 19.0% (YoY). Due to the new law, which requires the pricing of real estate in GEL, prices in the local currency stabilized starting in Q3 2017, while the prices in USD became more volatile, reflecting exchange rate fluctuations. In Q3 2018, the most expensive and the cheapest districts of Tbilisi by ASP were: Mtatsminda (1099 USD) and Samgori (546 USD); and by ARP: Mtatsminda (7.72 USD) and Gldani (4.68 USD)

area of 103 km2 (-40.8%), have also been added to Tbilisi’s residential property supply.

RESIDENTIAL PROPERTY PRICES HLIG

COMMERCIAL PROPERTY PRICES

average). The quarterly averages are 872 USD for ASP and 7.0 USD for ARP. For Q3 2018, ASP increased (YoY) in all Tbilisi’s districts, except Samgori. The highest increase can be observed in Nadzaladevi and Didube, 12.4% in both areas. ARP revealed various patterns for

he Georgian (GEO) real property market grew by 2.4% in Q3 2018, in comparison with Q2 2018. While the annual increase was more pronounced at 24.3% (YoY), in comparison with Q3 2017. Tbilisi (TBS) dominated the real property market with a 44.4% share in total sales in Q3 2018. The Tbilisi market was followed by Ajara and Kakheti, with a 10.1% and 8.7% proportion of GEO sales, respectively. The highest annual increase (YoY) in sales was observed in Racha-Lechkhumi and Kvemo-Svaneti (70.1%), SamtskheJavakheti (44.4%), and Tbilisi (37.7%). In Q3 2018, TBS had an annual growth of 37.7% in real property sales, while the market outside TBS began to catch up and grew by 15.4%. More than half of GEO sales were registered in the two largest cities: Tbilisi and Batumi. For Q3 2018, the TOP 3 regions by sales in GEO were: TBS (13 7711 units, 44.4%) Ajara (3 131 units, 10.1%) Kakheti (3 080 units, 8.7%)

Maintaining its upward trend, SPI increased by 10.4% (QoQ) in Q3 2018, reaching 0.982 index points. RPI increased as well, by 37.6% (QoQ), to 1.470 index points. During Q3 2018, ASP varied between 993 and 1086 USD per m2, and ARP between 9.35 and 9.87 USD per m2. The average ASP for commercial properties increased by 1.7 % (YoY), and reached 1092 USD per m2. While ARP declined by -2.3% (YoY) and dropped to 9.72 USD per m2.

REAL PROPERTY SUPPLY In total, 179 new buildings with an area of 253,665 m2 were completed in TBS during Q3 2018. The real property supply in TBS slowed both in respect to the number of buildings (-22.2% YoY) and the total area of buildings (-35.6% YoY). The slowdown in total supply has been driven by a -42.2% decrease (YoY) in the supply of commercial buildings (37 units with a total area of 150 km2). A further 142 (-14.5%) units, with a total

H In Q3 2018, Sale Price Index (SPI) and Rent Price Index (RPI) for residential properties experienced an increase of 5.1% quarterly (QoQ) and 0.5% (QoQ), respectively. During this quarter, Average Sales Price (ASP) varied between 831 USD and 949 USD per m2 (monthly average), and Average Rent Price (ARP) was between 7.1 USD and 7.9 USD per m2 (monthly

For Q3 2018, the TOP 3 districts by sales in TBS were: Saburtalo (3 724 units, 27.7%) Vake (2 212) units, 16.1%) Gldani (1 668 units, 12.2%)

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BUSINESS

GEORGIA TODAY DECEMBER 18 - 20, 2018

Kobulia Emphasizes Importance of Mountain Economies

Image source: Ministry of Economy and Sustainable Development

BY SAMANTHA GUTHRIE

ast week, as part of celebrations for International Mountain Day on December 11, Georgian Minister of Economy and Sustainable Development Giorgi Kobulia attended an event at ExpoGeorgia. Kobulia spoke to the event’s attendees, saying that “developing the mountain [regions], developing the economy and businesses in the mountains is our greatest priority.” The event was attended by the Prime Minister of Georgia and other members of the government. Sustainable development in the country’s mountainous regions was one of the main topics of the event. The speakers noted that one of the goals of the International Day of the Mountain is to facilitate and enhance effective cooperation between various institutions, civil society, and the private sector in the direction of development for mountainous regions. Awards were given to successful residents of mountainous regions in different fields. Kobulia presented one award to Rostom Kobakhidze from the region of Racha, who is well known for producing high quality Racha-style ham (rachuli lori). Kobulia praised Kobakhidze for working with one of Georgia’s most unique and valued products. “These kinds of enterprises and products are what makes our country more popular and we need more. Today, as I know, production is only for the Georgian market, but we must help Mr. Rostom to export,” said Kobulia, adding that Kobakhidze’s business is capable of processing up to 29 tons of pork per year. International Mountain Day was established in 2003 by the UN General Assembly. The event’s

website notes that mountains cover approximately 22% of the earth's land surface, provide 60-80% of the world's freshwater, and attract 15-20% of tourism worldwide. The theme for the day in 2018 was #MountainsMatter. People around the world used the hashtag to share why mountains matter to them. Georgia is largely situated in and through the Caucasus Mountains – approximately 54% of Georgian territory is mountainous, according to the National Parliamentary Library of Georgia. Georgia’s mountains have been getting increasing international attention recently. In April 2017, Vogue published an article titled “5 Reasons to Explore the Mountains of Georgia (the Country, not the State),” and earlier this month, the New York Times published a piece called “The Rockies, the Alps, the Caucasus? Georgia Plans for the Future.” Both exalted the virtues of peaceful, idyllic mountain lifestyles, clean air and water, and, in the winter, world-class skiing. Also on International Mountain Day, the Georgian government presented some key aspects of the new Strategy on Development of the High Mountainous Regions of Georgia 2019-2023, to be adopted after a series of public consultations. Georgia adopted the Law on the Development of High Mountainous Regions in 2016 as part of efforts to address the challenges of mountain living and promote sustainable development of the regions. Since then, more than 1,730 settlements have received the official designation of “high mountain,” granting businesses and residents certain benefits, including tax exemptions and monthly financial assistance payments. The new strategy is projected to benefit over 300,000 mountain Georgians, emphasizing local entrepreneurship, the effective use of renewable energy, waste management, environmental tourism, and other development initiatives.

Bakhtadze Meets Turkish Vice-President

BY THEA MORRISON

eorgian Prime Minister, Mamuka Bakhtadze met with the Turkey's Vice President Fuat Oktay, who attended the inauguration ceremony of Georgia’s first female President Salome

Zurabishvili. Fuat Oktay noted the elections were held in a democratic way, adding it was a significant step

toward the building of the country's democracy. The sides discussed the relationship between the two countries. The two officials reaffirmed commitment to further advancing relations across a variety of areas, including economy. As agreed, Georgia and Turkey will continue their active participation in the implementation of regional projects. Bakhtadze thanked Turkey's Vice President for visiting the country, adding it was yet another demonstration of the strong partnership between the two neighboring states.

BUSINESS

Internships at State Institutions to Be Qualified as Work Experience

he Parliament of Georgia is discussing amendments to the Labor Code and the Law on Public Service, according to which internships at state institutions will be qualified as work experience. The amendments were proposed by the ruling party Georgian Dream (GD) and the draft law aims to define the status of an intern on the labor market as an equal participant in labor relations, ensuring in this way that the rights of interns are protected by legislative mechanisms. The changes also read that the Labor Code shall define the rights of interns or trainees, and the period of internship shall be qualified as work experience. The regulations on issuing internship certificates will also be introduced. The amendments will also define the general concept of internship and related regulations, such as the period and procedures of internship to be determined by specific public institutions. Under the current Labor Code and the Law on Public Service, the general concept of internship is not defined; however, after the amendments are adopted,

DECEMBER 18 - 20, 2018

6.8 mln Euros Allocated for Mountain Tourism and Organic Agriculture

Image source: fc2success.org

BY THEA MORRISON

GEORGIA TODAY

such a concept of internship will be introduced. “An employed intern is a person who works for an employer under a labor agreement signed in accordance with this Code, for the purpose of raising qualifications, gaining experience and/ or professional development,” the draft reads. It also says that an internship certificate shall be issued in accordance with information contained in the Human Resources Management System of the Public Service. The current law also says nothing about the internship procedure and remuneration, but it is clearly defined in the amendments that internship shall have a specific duration, which, together with the procedure, shall be determined by the state agency or institution running the internship. The changes state that internship can also be paid. “A labor contract must be signed with a paid or unpaid intern for no more than six months. Following the expiration of this term, the employer can conclude a new contract of the same term limit,” the changes read, adding the term of internship in public service should not exceed one year. “After the expiration of this term, the person may compete for an internship in the same or other institution,” the draft law says.

BY KETEVAN KVARATSKHELIYA

n a mutual project of the EU, Sweden and Austria, with the budget of EUR 6.8 million, are to develop areas of Upper Svaneti, RachaLechkhumi, Lower Svaneti, and Imereti. On International Mountain Day, in the setting of the Georgian Ethnographic Museum, representatives of the EU, Sweden and Austria signed an agreement to start the project named: "Green Economy: Sustainable Mountain Tourism & Organic Agriculture (GRETA)". Within the scope of the project, it is planned to support small and medium enterprises of Georgia, aiming to ameliorate the degree of professionalism and grow the scale of them. Another objective of the given initiative is to facilitate an improvement of the business environment and create new income opportunities in the two significant sectors: mountain tourism and organic agriculture. The project was developed as a result of close partnership among the Ministry of Environment Protection and Agriculture, the Ministry of Economy and Sustainable Development and the Georgian National Tourism Agency. The four-year program will commence in 2019 and will be funded by the European Commission (EUR 3 million), Sweden (EUR 2.8 million) and the Austrian Development Cooperation (EUR 1 million). It will be carried out by the Austrian Development Agency (ADA), man-

Source, Image source: Delegation of the European Union to Georgia

aged by 9 members of the staff, permanently based in Mestia and Tbilisi. With the purpose of boosting Mountain tourism, the project aims to accomplish a number of things, including the establishment of a national quality standard and control system for local tourism service providers. The program will also present an opportunity for international and national exchange regarding the given field. Within the framework of the development of organic agriculture, the project aims at harmonizing Georgian organic legislation with EU organic legislation, establishing an internal control system, enabling capacity development for certification agencies and agro-advisory

services, strengthening farmer cooperatives intending to become organic farmers as well as coordinating and support the promotion of advisory services to processors, suppliers and traders in the organic farming sector. Ambassador of the European Union, Carl Hartzell focused on the high potential of mountainous regions of Georgia and stated the given project will support their development and growth of income, and at the same time will preserve their natural beauty and cultural heritage. The project is a constituent ofa 49 million EU programme to support economic and business development in Georgia which was signed on 21 November at a high level meeting in Brussels.

BUSINESS

GEORGIA TODAY DECEMBER 18 - 20, 2018

Image source: Ministry of Economy

Economy Minister Opens New Enterprise BY THEA MORRISON

eorgia’s Minister of Economy Giorgi Kobulia opened a new enterprise under Nova, a company which produces and exports building materials. At the opening ceremony, the Minister emphasized the need to create as many competitive enterprises as possible which will operate not only for local but also for export markets. "Such a good cooperation between the State and the private sector is vital to achieving more success and driving the country towards industrialization,” he stated. He added said that the new enterprise is an example of such industrialization. “Such an enterprise can be competitive in Georgia not only on the local market but also for export. Nova has replaced numerous imported goods and was able to export products to our neighboring countries. We need more such competitive enterprises,” he said.

The new enterprise and warehouse infrastructure of Nova is located in Tbilisi, on 24,000 square meters of territory. The investment amounted to GEL 12 million ($4.5m). On the opening of its new enterprise, Nova has expanded production from construction material to include plastic windows, doors and roof materials. The project was implemented with the support of the European Bank for Reconstruction and Development (EBRD) and TBC Bank. The company representatives say its new factory produces up to 100 kinds of products and construction materials. Nova also owns an exhibition hall and building materials factory in Tbilisi, as well as the same facilities in the Black Sea coastal city of Batumi. Batumi’s Nova branch was opened with the support of State Program ‘Produce in Georgia’ in 2017. The company says that within the framework of the EBRD's current project, labor hygiene and safety standard OHSAS 18001: 2007 will soon be introduced in its factories. The newly opened enterprise and warehouse employ up to 60 people, while 320 work in the Tbilisi and Batumi factories.

Average Salary in Georgia Increases to 1,125 GEL BY AMY JONES

aGELes in Georgia have been steadily rising year-on-year since 2014. The National Statistics Office of Georgia (Geostat) has reported a 56.4 GEL average salary increase in the third quarter of 2018, bringing the average salary to 1,125.5 GEL. Those working in the financial and insurance sector earn the highest salaries and enjoy the largest annual growth, on average. They can expect to earn an average of 2,354.3 GEL, an increase of 26.6% compared to the previous year. The second highest annual salaries can be found in the professional, scientific and technical fields, where the average salary is 1,867.9 GEL (+8.6%). Information and communication roles are the third most lucrative. Employees in these fields can expect to earn 1,785 GEL (+18%). A gender pay-gap is very prevalent in Georgia: the average monthly earnings of men were higher than those of women in almost every sector. In the third quarter of 2018, the average earnings of women equaled 851.9 GEL, whilst their male counterparts earned on average 1360.5. The annual growth also reflects inequalities. Annual salary growth for men amounted to 66.7 GEL, whereas this figure stood at only 42.5 GEL for women. How do the salaries reflect living costs in Georgia? Data from Geostat showed the minimum sub-

sistence level for a working age male to be 174.3 GEL in November 2018. The average person needs a minimum of 154.4 GEL, while a family needs on average 292.5 GEL to survive. These figures are based on the minimum cost of items in the consumer basket, defined by Georgian law since 2004. Whether it is actually possible to live on these figures is debatable. Monthly mortgage repayments, rent costs or utility bills are not included in the indicator. Numbeo, a database providing information on cities and countries worldwide, ranks Georgia in 80th place in its rankings of average monthly net salary by country, below the Phillipines and above Moldova. The median annual house hold income worldwide is $9.733 according to Gallup metrics. Unemployment in Georgia increased by 0.1% in Q3 of 2018, equalling 12.2% of the population. Men are more likely to be unemployed than women by 1.7 percentage points. The unemployment rate in women increased by 0.9% whilst the figure reduced by 0.7% among men. The rate is one of the highest in the region. Unemployment in Turkey stands at 11.3%, at 5% in Azerbaijan, 5.2% in Russia, and 4.9% in Kazakhstan. In Armenia, however, the unemployment rate is 18.2%. The Georgian economy continues to grow year-onyear. The real GDP growth is expected to reach 4.6% in the fourth quarter of 2018 and first quarter of 2019. The tourism industry is growing especially fast. As the Georgian economy develops, salaries should continue to rise for employees in the country.

BUSINESS

GEORGIA TODAY

DECEMBER 18 - 20, 2018

Connections in the Caucasus BY REZO SURGULADZE

n December 10, I had the opportunity to attend the presentation of a new World Bank report on an already well-established topic–connectivity, or, as it is more often referred to as, globalization. Titled Critical Connections: Promoting Economic Growth and Resilience in Europe and Central Asia, this publication sees the light of day at a time when the long-term trend towards regional and global integration seems to have come to at least a temporary halt. Instead of embracing greater connectivity, many people around the world increasingly see nationalism and isolation behind barbed wire and ‘walls’ as remedies to uncertainty. This uncertainty is easily understandable, springing from rapid advances in computerization and automation, on the one hand, and the double whammy of immigration and outsourcing, on the other hand. Yet, it is far from obvious that “the problems that give rise to nationalism” can be solved by nationalism, as noted by UK Prime Minster Gordon Brown in a 2015 speech. Indeed, what the “Critical Connections” report argues is that while increased connectivity exposes countries

to external shocks, the solution is not isolation, but rather broader and more diversified connectivity. Focusing on Central Asia, Caucasus and Eastern Europe, the report argues that “international connectivity through trade, foreign direct investment, migration, telecommunications, transportation and other avenues facilitates the transfer of knowledge and technology that are critical to long-term growth and shared prosperity.” Especially, different aspects of connectivity complement one another. Migration, for example, enhances knowledge spillovers through trade and foreign investment by migrants transferring information on foreign markets, speaking foreign languages and helping build connections to foreign entrepreneurs. Not all countries, firms or individuals play an equal role in diffusing knowledge as well as spreading other benefits of connectivity. A key role is played by those who have relatively stronger connections to further-away actors outside their ‘native’ cluster (think of a group of childhood friends, a sub-industry or a regional club of countries). At the same time, those who find themselves relatively isolated on the edges of a cluster are at a relative disadvantage. As is well established in network analysis, “most social structures tend to be characterized by dense clusters of strong

Figure 1. Cost-driven criticality in container network for Europe and Central Asia

connections. […] An individual who acts as a mediator between two or more closely connected groups of people could gain important comparative advantages. […] The position of a bridge between distinct groups allows him or her to transfer or gatekeep valuable information from one group to another. […] Individual can combine all the ideas he or she receives from different sources and come up with the most innovative idea among all. […] A broker also occupies a precarious position, as ties with disparate groups can be fragile and time consuming to maintain.” A good case in point of this connectivity, is transport connectivity in Central Asia and the Caucasus (see Figure 1). Georgia’s access to ports on the Black Sea and land border crossings to Russia and Turkey allows it to serve as a mediator for countries further to the east. In particular, it is the only ‘bridge’ for Armenian exports to Eurasia and Europe. Yet, a critical question is whether Georgia’s locational advantages for trade and transit are fully utilized from the point of view of ancillary businesses. As argued in “Critical Connections,” if a country’s economic and business environment is sufficiently attractive for investment … transit flows may increase export and import opportunities for firms along these routes (or corridors) develop new sectors such as logistics services, and generate nonmaterial benefits (flows of ideas and knowledge) to boost productivity. Firms located in transport hub countries may benefit from lower production costs and an improved ability to deliver on time. Higher transport network connectivity might be desirable for increasing a country’s participation

in regional and global value chains, attracting FDI or increasing in participation in development corridors.” As I considered these characteristics of networks and their significance, I was drawn to my own experience as a citizen of two different countries, and perhaps as a node in two different networks. As a child, I immigrated with my parents to the US, where I spent most of my childhood and adolescence before attending university. After graduating with a BBA from the Ross School of Business at the University of Michigan, I headed into a turbulent job market during the peak of the global financial crisis. After working various odd jobs, as well as at a medium-sized technology startup in the Chelsea district of New York City, I decided to pack my bags and return to the country of my ancestors – Georgia. Upon my return, I immediately felt out of place. The difficulty of adapting to the frenetic pace of life in the Georgian capital was compounded by the fact that I had left behind an entire network of friends, classmates, co-workers, etc. My remedy for this was straightforward: start from scratch. I set out to build a new network of friends, classmates, coworkers, etc., based not in the US, but in Georgia. And, so, here I am today: one foot in my American network and one foot in my Georgian network – with the ability to act as a connector. So, what does all of this have to do with globalization and Georgia’s response to it? Georgia’s historic position as a hub between the larger networks of the East and West is a true asset that should be cherished and further developed. Thanks to its location and Janus-like cultural

duality, Georgia should have little difficulty in dealing with shocks that are regional in nature. Unless hit by a shock of a truly global magnitude, Georgia should be able to utilize its ‘betweenness’ in order to rebalance its portfolio of economic activities, find new partners, stand up on its feet and walk again. The best illustration of this actually happening was Georgia’s economic recovery in the wake of Russia-imposed economic embargo in 2006-7. Having all eggs in one basket, on the other hand, comes with increased risks. According to the World Bank, the multidimensional nature of connectivity is such that shocks in one dimension (e.g., trade) can adversely impact other dimensions (e.g., FDI). That is why, it is important to have a broad array of connections in order to reduce risks and better deal with shocks. This means that Georgia should strive to develop connectivity in all complementary dimensions, moving beyond trade and tourism to participation in global value chains and related foreign direct investment. This can best be achieved if Georgia remains open for business when it comes to its migration policy, and for investment. This can be accomplished, among other things, through free trade agreements, bilateral investment treaties, development of transportation and ICT, and migration policy. The theory of networks can help us understand Georgia’s optimal response to the processes occurring in the age of greater connectivity. As such, Georgia should take heed and focus on its geographic advantages, while designing a strategy that will allow it to achieve its full potential.

Nenskra Hydro to Complete Damaged Road Rehabilitation by Year End BY ANNA ZHVANIA

reparatory works are underway for the Nenskra Hydro Power Plant in Chuberi village, Mestia Municipality, with 20 mobilized units of heavy equipment currently on site. Rehabilitation of the damaged road, a result of a natural disaster on July 5, will be completed by the end of 2018. As a result, locals will be able to freely move around the area, while the construction company will regain access to the site of the dam. The next stage of the construction works will be the construction of three

bridges over the River Nenskra. The works are being executed by Georgian Construction Consortium, contractor of Nenskra Hydro. The project preparation works, which include the construction and rehabilitation of bridges and roads in Nenskra and Nakra Gorge, will further boost the construction of camps and power lines and is planned to be completed by 2019. JSC Nenskra Hydro is a project-based company established 2015 as a result of cooperation between Korea Water Resources Corporation K-water and JSC Partnership Fund. The company will construct the Nenskra Hydropower Plant in the Nenskra and Nakra River valleys in Mestia Municipality of Samegrelo-

Zemo Svaneti region. The 280 MW Nenskra Hydropower Plant will generate approximately 1,200.00 GWh of electricity annually, which will be fully consumed by the Georgian market.

BUSINESS

GEORGIA TODAY DECEMBER 18 - 20, 2018

Russia: Solving Problems through Economy BY EMIL AVDALIANI

aking the overall picture of the Eurasian landmass over the past 25 years, it is clear that Russian power has been receding. Although it is fashionable to say that Russia is resurgent and that Moscow’s actions in Ukraine, Georgia and Moldova are good examples of this, in fact, Russia’s influence in those countries has only diminished. In the early 2000s, where civilians in these countries were either neutral or pro-Russian, now they are unequivocally pro-Western. Moreover, the former universal communist doctrine has been supplanted by a particular concept of the “Russian world” and the trouble is that this new, at times vague, notion is not welcomed in the neighboring countries. Even in Belarus, the idea of Russia being a

Underdevelopment of the economy is hampered by growing centralization of power inside the country

friendly partner is already a forgotten one. Therefore, from a strategic point of view, politicians in the Kremlin should be worried that Russia’s sphere of influence is diminishing. This leads to the following question: since geopolitical differences between Russia and the West are wide and Russia is likely to lose more, can Moscow take a different path? In other words, can Russia become economically powerful? Various elements of modern Russia’s internal or foreign policy actually point to a negative answer to the posed question. For example, over the past several years, a slump in most of the secondary industries, except for those currently owned by foreign companies (e.g. those producing passenger cars or domestic supplies of refrigerators, washing machines and television sets), has been seen in the Russian economy. Underdevelopment of the country’s economy is also hampered by the growing centralization of power inside the country, which nearly borders on authoritarianism. It is still not as it was back in the Soviet period, but it nevertheless makes it harder for the economy to develop, as largely only one – political – elite garners most profits from Russia’ economic productivity. Growing centralization of power therefore means that it will be getting more and more difficult for the political elite to renounce it. The need for economic changes is essential for Russia. This might be clear to many, but the willingness to carry out reforms is quite different. In fact, the decision to implement changes comes when the political elite and ordinary people understand that the State is in a dire situation. In today’s Russia, quite the opposite is happening. The elite, at least for the moment, is not carrying out fundamental reforms to change the course of the State’s

economic development, whereas ordinary people are precluded from active participation in state affairs. This leads to the conclusion that a revolution from the top will not happen in modern Russia. President Vladimir Putin will unlikely be as Peter I or Alexander II were when the top-to-bottom revolution took place in the Russian Empire. Politicians in Russia also know that a robust middle class, independent of oil revenues and statemanaged wealth redistribution, can make the subservience of the population less probable. This very thinking drives the basic idea why fundamental reforms are not forthcoming. But it is not only about Darwinist thinking on the part of the Russian elite. In fact, the introduction of economic reforms

in Russia is a very difficult process, as the country’s past shows, and typically borders on revolution. The last point needed for Russia to introduce a successful economic reform will be its association with the world it aspires to be a part of. Is it West or AsiaPacific? – the two most powerful economies in the world, and two very different political systems. The recent geopolitical problems with Western countries matter, and taking on the European development model might be problematic for the Russian political elite as it will prove the West’s superiority in a period when the Kremlin portrays Europe as decadent and troublesome. The list of reasons can go on and on, but the above problems are crucial as to why Russia nowadays is the way it is.

BUSINESS

GEORGIA TODAY

DECEMBER 18 - 20, 2018

Electricity Market Watch increased electricity consumption.

FOR GEORGIA TODAY BY MARIAM CHAKHVASHVILI

ELECTRICITY CONSUMPTION AND GENERATION – OCTOBER 2018

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

Electricity consumption increased by 3.2% y/y in October 2018. The growth was driven by increased consumption of direct consumers (+40.5%y/y), as new companies were added to the group of eligible consumers, in line with legal changes effective since May 2018. Consumption by distribution licensees was down by 0.7% y/y in October 2018, caused by above-mentioned reallocation of eligible consumers. The addition of new commercial and household subscribers to the group was not sufficient to fully absorb the mentioned reallocation effect, especially for Telasi. Growth in demand coupled with a drop in domestic supply created increased need for electricity imports in October 2018. Electricity imports were up by 46.1% y/y and accounted for 22.7% of total electricity supplied to the grid. An 87.8% of imports came from Azerbaijan, while rest was imported from Turkey (under terms of ESCO’s barter agreement). Domestic supply was down 5.5% y/y as hydro generation decreased by 0.8% y/y and thermal generation reduced by

GRID CODE FOR ELECTRICITY UPDATED GNERC updated Grid Code for Electricity on October 26, 2018 to include requirements of Energy Community’s regulation No 543/2013 concerning submission and publication of data in electricity markets. This update is one step forward to implement Georgia’s obligations under the Energy Community. The Grid Code sets general rules for gathering, submission and publication of information on the European Network of Transmission System Operators for Electricity’s platform (ENTSO-E). The mentioned information includes: actual and forecasted loads, planned and emergency maintenance, grid congestions, NTCs, etc. The dispatch licensee - Georgian State Electrosystem (GSE) - is responsible for the data gathering and publication process and should prepare detailed instructions by April, 2019 and start publication by November, 2019.

ANNUAL FORECAST FOR 2018 ELECTRICITY BALANCE REVISED MoESD revised the annual balance of electricity in November 2018. The forecast for annual electricity consumption growth for 2018 was revised downwards from 9.9% to 8.2% in November 2018. The high expectation for annual growth

was caused by 11.8%y/y increase in consumption during May-July period. Since August 2018, the growth of consumption slowed down to average 2.6% y/y. As a result, consumption forecast was revised to follow the trend. Actual electricity consumption was up by 6.9% y/y and reached 7.4 TWh in 10M18. Updated annual balance of electricity

17.2% y/y in October 2018. Increased generation of Enguri/Vardnili (+21.6%y/y) was not sufficient to compensate the drop in deregulated (-18.1%y/y) and other regulated (-8.3%y/y) HPPs, mainly caused by unfavorable hydrological conditions. The guaranteed capacity fee was down by 3.8% y/y to USc 0.72/kWh in October 2018. All TPPs provided guaranteed capacity for entire month (except 1 day for Mtkvari Energy)

ELECTRICITY PRICES IN GEORGIA AND TURKEY Wholesale market prices in Georgia decreased 4.3% y/y to USc 5.3/kWh in October 2018. A 31.8% of total electricity supplied to the grid was traded through the market operator (ESCO), with the rest traded through bilateral contracts. Average price of electricity imports to Georgia was slightly down (-2.7% y/y) to USc 5.1/kWh in October 2018. Turkish electricity prices increased by dramatic 91.8% y/y in TRY terms, but in US$ terms price was up by 19.8%, the result of TRY’s depreciation since August 2018. Generally, Turkey’s energy sector is highly sensitive to FX movements and is anchored to US$. In October 2018, average electricity prices in Turkey reached US$ 5.5/kWh.

also includes updated forecast of supply for November and December and actual figures for 10M18. According to updated balance, the import in 2018 is expected at last year’s record level of 1.5TWh. The record high electricity import in 2017 was caused by Enguri’s closure in winter reducing supply and 2018 import forecast is explained by

Georgian Ports See Significant Decrease in Cargo Turnover Compared to 2017 BY SAMANTHA GUTHRIE

DITOR'S NOTE: This article was originally published online on December 6 and in print on December 7. This version has been corrrected to reflect errors in figures included in the original article. Georgia’s major Black Sea ports and terminals have seen a serious downturn in volume within January- October 2018 as compared to 2017. The 1.07 million ton difference is a combination of decreases at all sea ports and terminals – Batumi, Poti, Kulevi, and Supsa. In total, volume is 8.0% lower in January – October 2018 compared to the same period in 2017, says the Ministry of Economy and Sustainable Development. In the January – October 2018 period, 12.42 million tons of cargo passed through Georgian sea ports and terminals. Poti saw the most significant decrease – a 0.41 million ton decrease to 5.14 million tons – a nearly 7.4% loss. Batumi’s cargo volume decrease just 0.40 million tons to 3.11 million- a nearly 11.3% loss. Kulevi, Georgia’s current northmost sea terminal, saw a 0.22 million ton decrease to 1.15 million tons, and Supsa handled 3.01 million tons, with a decrease of only 0.05 million tons. Interestingly, the decrease in weight was not due to an overall decrease in

Photo: Project Cargo Weekly

individual containers. Batumi and Poti ports combined increased their number of containers by nearly 15.7 % to 370,128 TEU (twenty-foot equivalent unit) containers. The total turnover from January – October in Georgia, including all modes of transport (excluding sea ports and terminals), was 33.2 million tons, a 0.24 million ton decrease year-on-year (0.7%

decrease). In January- October, the largest volume of cargo was transported through Georgia overland by truck, amounting to 24.84 million tons, a 0.27 million ton increase year-on-year (1.1% increase). Railway cargo transport decreased by 0.50 million tons to 8.32 million tons (5.7% decrease). Air transport also saw a decrease, 24.8% to 21.42 thousand tons.

Decreases in cargo transport were somewhat offset by an 9.55 million person increase in passenger transit compared to 2017 amounting to 334.0 million passengers in January – October 2018. 327.2 million passengers were transported by roads during the first 10 months of the year, 2.4 million by rail and 4.4million by air. In June, Georgian cargo airline GEO

SKY, was granted European Aviation Safety Agency (EASA) authorization for meeting international operational and safety standards, becoming the third Georgian cargo airlines to be authorized to fully operate in the EU after Georgian Airways and TCA. The authorization was expected to lead to an increase in the company’s operations between Georgia and Europe.

BUSINESS

GEORGIA TODAY

DECEMBER 18 - 20, 2018

Produce in Georgia Provides over $17 mln in Co-Financing in 2018 BY SAMANTHA GUTHRIE

roduce in Georgia was born in early 2015, a creation of the Government of Georgia under then-Prime Minister Irakli Garibashvili and the Ministry of Economy (not yet “and Sustainable Development”). The program was designed to encourage new entrepreneurs and stimulate local production. It offers financial support, infrastructure accessibility support, and consulting services. In its first year, Produce in Georgia funded more than 130 new businesses and revitalized more than 600. Now, nearly five years into the program, Prime Minister Mamuka Bakhtadze has released new figures. “The Produce in Georgia program has so far supported 5,313 regional projects with a total investment value of 50 million GEL,” Bakhtadze noted at a Press Briefing held prior to last week’s Executive Government Meeting. Bakhtadze said that the program has now spent 22,949,474 GEL ($8,603,363) on co-financing for nearly 8,500 beneficiaries. “Support for micro and small enterprises has been provided by the Government of Georgia since 2015

Image source: Government of Georgia

through Produce in Georgia. This program has been particularly vital in the regions. You may well be aware that one of the key priorities of our government is to ensure an equitable development of our regions, so that inclusive economic growth can be felt by each individual citizen,” said Bakhtadze. 917 new winners were announced for micro-grant financing in 2018 and they will receive a total of 8,300,000 GEL

($3,111,527) in co-financing by the end of the year. “It is particularly gratifying for me that 45% of the winning applicants are female entrepreneurs,” proclaimed Bakhtadze, “Overall, if we review the performance in the current year, 6,230 projects have been financed, while co-financing has exceeded 47 million GEL ($17.6 mln).” In February of this year, Dimitri Kumsishvili, who was then First Vice-Prime

Minister and later served a brief term as Minister of Economy, said that as many as 16,000 jobs had been created within the framework of Produce in Georgia. He noted that government reforms supported their claims of prioritizing “freedom of business and promotion of local production, especially in the regions.” He called Produce in Georgia “one of the most successful state programs.”

On the program’s founding, Garibashvili announced that the Georgian Government had set a goal to gradually replace imported agricultural goods with locally produced alternatives. “I had conversations with the leaders of our neighboring countries who have successfully promoted local production and development programs. They have followed the path for years and have had good results. They have strong agricultural and industry sectors. Establishing such enterprises creates jobs for many Georgian people. This is one of the main tasks of our Government,” Garibashvili said in July 2015. He emphasized that, while his government welcomed imports and foreign companies as part of a robust economy, their priority was “the development of local industry and the creation of new jobs for our citizens.” Through Produce in Georgia, if a company receives a bank loan of a certain amount, the government can finance part of the interest payment. On the issues of infrastructure support, if a company agrees to a certain investment obligation and it invests in a new building project, it can obtain state-owned immovable property for a symbolic cost of 1 GEL. For more information on the program, visit: http://enterprisegeorgia.gov.ge/en/home

TBC Business Awards Construction Begins of TBC's New Head Office ‘Tbilisi Business Center’ Image source: Caucasus Business Week

BY KETEVAN KVARATSKHELIYA

nDecember14,theNational Parliamentary Library of Georgia hosted the ceremony of the TBC Business Awards. The given event was dedicated to the support of the development of Georgian enterprises and the desire to motivate entrepreneurs to expand their businesses or create something new. TBC Business Awards, a major award ceremony in Georgia, has already been held for the 3rd consecutive time and since its inception, the platform has integrated more than 1200 participants. Alongside revealing the best companies within particular business sectors, TBC Business Awards also shares brief histories of nominees of different categories. 2018 was a special year as together with the four well-known categories, two new nominations were added to the list:

‘Female Entrepreneur’ and ‘Business for Positive Influence’. The winners of 2018 were revealed as follows: Business of the year – Gross Energy Group LLC Georgian product of the year – Gepherrini Tourism business – Ecotours Georgia Year’s Female Entrepreneur – Santa Alpia Ltd Startup – TRC Business for positive influence – Geomulci The winners of this year were awarded with a special prize in three categories, from which they were able to choose based on their own business needs: Digital Strategy and New Website, Brand-Strategy and Imagery Campaign, Software Solution (Software Development) The awards ceremony was attended by a large number of guests, including representatives of government bodies, entrepreneurs and media.

he construction of a new head office for TBC Bank had begun. On December 17, the founder of TBC Group, Mamuka Khazaradze and the Mayor of Tbilisi, Kakha Kaladze, laid the foundation of the Tbilisi Business Center on its 26th jubilee. The event was held in the vicinity of the Lisi Lake, where the new head office and the nearby Mukhran Machavariani Park will be built. The project, which was announced on the 25th anniversary of TBC Bank, will be based entirely on modern and innovative technologies. The complex will be built on 13 hectares and is designed for 2,000 employees, with full energy efficiency meaning the consumption of a minimal amount of electricity. The project is based on the 80/20 concept, meaning that only 20% of the building will be constructed, while 80% will be made up of green areas and recreational zones. The project of the new head office of TBC includes the construction of buildings and structures within green landscapes, where terraced plants will be planted, and healthy ecosystems created. Three main projects will be combined into one public space of Tbilisi Business

Center: the TBC Head Office; thr Innovation Laboratory - a new center for research and generating new ideas; the Cultural Hub, merging a gallery, restaurant and common work spaces, which allows for active interaction. The new head office will replace the existing concept of a closed space in the banking sector with a focus on open and flexible sphere of relationships. Employees in the office will have the opportunity to maximize their capabilities through more interaction and a comfortable working environment. The location of the Tbilisi Business Center is a crucial part of its design. In the natural landscape of Lisi Lake, the new office complex will become a part of the green environment where natural landscapes are enriched by the vineyards of the capital city. The design was created based on the inspiration of the Shatili towers, where the architectural structures harmoniously merge with the landscape with their terraced layout and large balconies. This is the main source of the concept: a complex on the mountain slopes, away from the city center, suited to the community with an environmentally friendly and ecologically sustainable environment.

TBC employees will be able to enjoy work, relax in a comfortable atmosphere and efficiently interact with colleagues and guests. The complex will boast restaurants, fitness clubs, special spaces for children and more. The brain behind the project development is a Dutch architect, Franz Vourea, who represents international company UN Studio. UN Studio conducted serious preparatory works before the implementation phase, thoroughly studied the location and TBC’s brand strategy and values. TBC's new head office will become a business card for TBC Group, which will merge its brand values, vision and philosophy for the future. This will be the first time such a large-scale complex concept has opened in Georgia. Implementation of the Tbilisi Business Center project will begin in January 2019 and will be completed in 2021.

BUSINESS

GEORGIA TODAY

DECEMBER 18 - 20, 2018

Natakhtari Foundation Named Best Company in Category of Cross Sector Partnership – Shared Responsibility at Meliora 2018

BY MARIAM MERABISHVILI

he awards ceremony of ‘Georgia's Responsible Business Competition Meliora 2018’ organized by the Center for Strategic Research and Development of Georgia (CSRDG) was held in Biltmore Hotel on December 13, within the framework of the EU supported project ‘Civil Society Development Initiative.’ 41 companies participated in Georgia's Responsible Business competition with 76 projects nominated in the corporate social responsibility field. The jury revealed 10 winning companies with 10 projects in the various nominations. The Natakhtari Company won with its project ‘Care for your Future in ‘Cross Sector Partnership – Shared Responsibility’ which was awarded by the Deputy Ambassador of the Republic of Italy, Stefano Crescenzi. "In the modern world, it is necessary to realize that a company is not just about maximizing profit,” said Natia Surmava, Brand Manager at Natakhtari Company. “It must create something valuable that is important for consumers and the public. In general, the Natakhtari Foundation aims to create exactly those values. We believe that strengthening abandoned/orphaned children and aiding their complete integration into society is beneficial for each of us. We thank the association ‘Our House – Georgia’ for its cooperation and also to the organizers of ‘Meliora 2018: Georgia Business Responsible Business Competition.’ This motivation is not only for us but for every company.”

Natakhtari Foundation has been helping abandoned/orphaned children towards independent lives since 2011. The sum is collected from November to February. More than 841835 GEL was collected in three years. Currently, 500 beneficiaries use the following services: psychological consultation, preparation in subjects, vocational education and driving license, purchase of equipment / materials for their professions, a scholarship (apartment rent, catering, road). The amount of money for each beneficiary is individually allocated according to need. The project is being implemented with the support and blessing of the Patriarch of Georgia and by the association Our House - Georgia. Transparency of the funds is confirmed by the international audit company PricewaterHouse Cooper. The independent jury of the recent competition was composed of leading foreign and Georgian experts, including eleven international experts (from Great Britain, USA, Belgium, Denmark, Israel, Norway, Slovakia and other countries) and Georgian independent experts from international and local public organizations and academic circles. The award ceremony was opened by Eka Urushadze, Executive Director of the Center for Strategic Research and Development of Georgia. The audience was addressed by Deputy Head of the EU Delegation to Georgia, Carlo Natale. The welcoming speech was followed by awarding the winning companies in different categories by the honorable guests. 250 people attended the ceremony, including representatives of diplomatic corps, members of the Georgian government, local and international experts of this field and representatives of civil society and companies of Georgia.

POLITICS

GEORGIA TODAY DECEMBER 18 - 20, 2018

Russian Navy Faces Century-Old Dilemmas

he recent incident in the Kerch Strait between Russian and Ukrainian war ships showed how important the Azov Sea is to the Russians. The reasons for the Russian moves to constrain Ukrainian passage range from tactical, such as countermeasures to what Ukraine does in Church affairs, to strategic: control over the Azov and securing the Don river basin against potential western military deployment. In other words, securing its seas and rivers continues to be an important issue in the Russian geopolitical thinking. In the imperial and Soviet periods, Russia faced a problem when it was effectively cut off from ocean-faring. Although it was possible for the Russians to reach the world’s oceans through the Baltic and the Black seas, this was often hindered as sea empires such as Great Britain in the 19th century and the US in the 20th possessed larger naval capabilities than the Russians and could prevent Russian moves. This constrained Russian naval activity to the Black, Baltic and Caspian seas only. Economic weaknesses as well as a lack of drive to invent made the Russian fleet incapable of carrying out large expeditions overseas. To succeed, the Russians had to have a green light from the sea powers for logistical support and unhindered progress. This happened very rarely. Keeping a militarily capable naval fleet was beyond possible due to the fact that the Russians, both in the imperial and the Soviet times, required large economic expenses to do so. The State could not provide enough resources as Russia’s borders stretched thousands of kilometers and it was essential instead to spend

Image source: engineeringrussia.files.wordpress.com

money on field armies to hold back the Europeans, Turks, Iranians and Japanese and Chinese. But there was also a geographic factor which played largely to the Russians’ disadvantage. Throughout the centuries Russia kept three naval fleets in the Black and Baltic waters as well as in the Sea of Japan. But a look at the map shows how far are the seas are from each other, which precluded the Russians amassing their

fleets in one theater of military action. When the Russo-Japanese war broke out in 1904, the Russians, to help their fleet in the Japanese Sea, had to move their fleet from the Baltic ports all the way from the Atlantic, circumventing Africa (as the British would not allow them to use Gibraltar or the Suez Canal) to Japan. Unsurprisingly, the Russians were already late by the time they reached the war.

In a sense, the Russian Federation nowadays has the same problems. The Soviet Union collapsed, but Moscow managed to keep the perimeter of its Soviet military bases in the Baltics, Black Sea and near Japan. Annexation of the Crimean Peninsula adds strength to the Russian naval capabilities, but it does not change it spectacularly. The same set of geopolitical problems still haunt the Russians. In the Baltic and Black

Seas, the Russian fleet might be strong, but they do not allow for extended overseas operations. Again, it all comes down to the unavailability of large funds for modernizing the Russian fleet and to a Russian emphasis put on the modernization of field armies necessary to defend the country’s extended borders on the European (against NATO expansion), South Caucasian and Middle Eastern fronts. Nowadays too, as in the past two centuries, the Russians depend on the Bosporus and the Dardanelles straits, which, despite good Russo-Turkish relations, are in NATO member – Turkey’s possession. Having unhindered access to the Mediterranean Sea requires keeping good relations with Turkey, especially at a time when Russia has been carrying out military operations in and around Syria. This would largely explain why the Russians did not oppose diffusing disagreements with Ankara (following 2015 shoot-down of a Russian military jet by the Turks) in 2016 – Moscow needed access to the Mediterranean Sea. Still, Moscow faces the same dilemma as the Romanovs or the Soviets had. Because of large distance between the Black, Baltic and the Japanese seas, it is nearly impossible for the Russians to concentrate their fleets quickly and efficiently in one war theater. Putting the Kerch Strait problem between Ukraine and Russian into the above perspective, one can see that the Russians’ behavior is explained by a need to secure the Azov Sea from a potential foreign presence there. For Moscow, Ukraine is now a base for Western expansion, thence a foreign fleet in the Azov waters is, if not technically, then potentially a possible scenario.

EU Funded Project Awards Best CSR Initiatives with First Meliora Award

n 13 December, the Center for Strategic Research and Development of Georgia (CSRDG) organized and held the Award Ceremony of Georgia’s Responsible Business Award Meliora within the EU-funded project “Georgian Civil Society Sustainability Initiative” 2018. 41 companies with 76 CSR projects/ initiatives participated in Georgia’s Responsible Business Awards. The independent jury consisted of leading Georgian and international experts, among them eleven well-known international CSR experts from Great Britain, USA, Belgium, Denmark, Israel, Norway, Slovakia and other countries; and Georgian jury, who represented leading international and local civil society organisations and academia. The event was launched by Eka Urushadze, Executive Director of CSRDG followed by presentation of CSR awards by honorable guests. Overall the ceremony was attended by 250 persons, including representatives of the diplomatic corps, the Georgian Government, national and international experts in the field and members of the Georgian business community and civil society. Deputy Head of Delegation of the European Union to Georgia Carlo Natale about Georgia’s Responsible Business Award Meliora: “Like elsewhere in the world, sharing corporate social responsibility is a very important part of economic, environmental and sustainable development of the society in Georgia.

Therefore, publicizing excellent CSR practices of businesses through competition will develop this process even further, encourage other businesses to get involved in CSR and will have positive impact on the well-being of Georgia’s population”. The independent jury awarded the following businesses in different categories: 1) The Best Responsible Large Company of the Year became MFO Crystal - the award was presented by deputy head of the delegation of the European Union to Georgia Carlo Natale; 2) Bank of Georgia was awarded in the Best Green Initiative category for the project “Gzad” - the award was also presented by deputy head of the delegation of the European Union to Georgia Carlo Natale; 3) In the same category, the small and medium company TRC was awarded for the project “Do not dump what can be recycled” - the award was presented by Anna Bolt, international jury member of Meliora. 4) Policy and Management Consulting Group PMCG was acknowledged in the category: Responsible Employer for its Employee Development Program - the award was presented by Tamila Barkalaia, Deputy Minister of Internally Displaced Persons from the Occupied Territories, Labour, Health and Social Affairs of Georgia. 5) GPI Holding was named the best in the category: Responsibility in the Marketplace – for its support to small and medium businesses - the award was

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was presented by Pavel Hrica, Senior Manager of Pontis Foundation. 10) Palitra Media Holding project “Makuliteratura” was awarded in the special category of Waste Management Initiative - the award was presented by Ms. Lauren K.Russell the Deputy Director of Economic Growth Office at USAID Georgia.

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presented by Ekaterine Mikabadze, Deputy Minister of Economy and Sustainable Development of Georgia. 6) TBC Bank was awarded as the best company in the category: Supporting Community, with its project “Tsereqartulad” (Write in Georgian) - the awards was presented by H.E. Ambassador of Sweden to Georgia, Mr. Ulrik Tidestrome. 7) Small and Medium Company ACT – was awarded in the same category for its support to social entrepreneurship - award was presented by director of Enterprise Georgia Mikheil Khidureli. 8) In the category: Cross Sector Partnership – Shared Responsibility, Natakhtari was awarded for its “Care about Future” project - Deputy Head of Mission, Mr. Stefano Crescenzi. 9)Advertising company HOLMES&WATSON was acknowledged for the project #ARGAMBOLO in the best Creative CSR category - the award

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

The Contest was supported by international and local business associations and Government of Georgia, including: Academy of the Ministry of Finance; Committee of European Integration of Parliament of Georgia; Ministry of Internally Displaced Persons from the Occupied Territories, Labour, Health and Social Affairs of Georgia; Ministry of Economy and Sustainable Development of Georgia; Tbilisi City Hall; Embassy of Sweden to Georgia; United State Agency for International Development (USAID); Association of Communication Agencies of Georgia (ACAG); CENN; Georgian Business Association (BAG); Georgia’s Innovation and Technology Agency; Georgian Microfinance Association; Georgian Chamber of Commerce and Industry; Enterprise Georgia; European Business Association (EBA); EUGeorgia Business Council (EUGBC); International Chamber of Commerce (ICC); World Wide Fund for Nature (WWF). The special “Waste Management” category of Georgia’s Responsible Business Awards was supported by USAID-funded

Website Manager/Editor: Tamzin Whitewood Layout: Misha Mchedlishvili Webmaster: Sergey Gevenov Circulation Managers: David Kerdikashvili, David Djandjgava

Waste Management Technologies in Regions Program (Phase II) implemented by CENN and the special category of “Creative CSR” was endorsed by Association of Communication Agencies of Georgia (ACAG). Georgia’s Responsible Business Awards Meliora sponsors: Dugladze Wine company; Micro Business Capital, Sarajishvili, Tep, Holo and Holliday Inn. The Awards Ceremony was hosted and supported by Hotel Biltmore Tbilisi. About the project ‘Georgian Civil Society Sustainability Initiative’: Starting from January 2017 a consortium led by Konrad Adenauer Stiftung in partnership with Georgian civil society organizations: Center for Strategic Research and Development (CSRDG), Civil Society Institute (CSI), Center for Training and Consultancy (CTC) and Education Development and Employment Center (EDEC), has been implementing the Georgian Civil Society Sustainability Initiative (CSSIGE) in order to address key challenges of Georgian civil society sector. The project is funded by the European Union and the Federal Ministry for Economic Cooperation and Development of Germany. About implementing organizations: Center for Strategic Research and Development of Georgia which was established in 1995 has successful multi-year experience in the field of civil sector development in Tbilisi as well as in the regions of Georgia. CSRDG has been focused on results that can improve the lives of individuals and societies in general.

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