Issue #1058 Business

facebook.com/ georgiatoday

Issue no: 1058/134

• JUNE 19 - 21, 2018

• PUBLISHED TWICE WEEKLY

In this week’s issue...

FOCUS

ADB President Holds Official Meetings in Georgia

ON CARING FOR OUR CITY Tbilisi City Hall calls for clean-up and care campaigns to raise awareness. The competition is on!

PRICE: GEL 2.50

NEWS PAGE 2

Georgia’s and Armenia’s “Deplorables” and “Desperados” – No Longer a Basket Case!

PAGE 5

ISET PAGE 4

Georgian Airline Gets EASA Authorization

BUSINESS PAGE 5

What Bakhtadze’s Policies as Finance Minister Hint about his Leadership

BY SAMANTHA GUTHRIE

O

ne June 14, 2018, Mamuka Bakhtadze was nominated to be the next Prime Minister of Georgia. While he still has to go through confirmation procedures, he is expected to be confirmed, whereby he will begin to build a new government around him. As Georgia’s Minister of Finance from November 13, 2017 to June 13, 2018, Bakhtadze’s policy positions can shed some light on his potential platform as prime minister.

Speaker of the Georgian Parliament and GD member Irakli Kobakhidze called Bakhtadze, “distinguished by his education and versatility.

He is a very serious expert in economy.” Before becoming Minister of Finance, Bakhtadze worked

for Georgian Railways from 2005, including as CEO from 2013-2017. He studied microeconomics and management at Tbilisi State University and has a PhD in technical sciences from the Georgian Technical University. At Georgian Railways, he lobbied on behalf of the Georgian position for Project Viking, ZUBR and the South-West corridor. Bakhtadze also actively contributed to Georgia joining China’s One Belt One Road initiative – focusing on Georgia’s role as a regional transport hub.

Bakhtadze moved from the private sector to the Ministry of Finance just eight months before being nominated for prime minister.

This March, the National Democratic Institute conducted a poll where 43% of respondents said that were not familiar with Bakhtadze’s name, 31% had neutral feelings towards him, 5% negative, and 9% positive.

Continued on page 2

MRDI Unveils $2 Billion Road Construction Project BUSINESS PAGE 6

TBC Capital Releases Report on Fixed Income Securities in Georgia BUSINESS PAGE 7

Economy & Nationalism: Changes in the Russian Western Borderlands

BUSINESS PAGE 11 Prepared for Georgia Today Business by

Markets As of 15ͲJunͲ2018

Price

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Bank of Georgia (BGEO LN)

GBP 19.27

Ͳ3,2%

Ͳ14,1%

Georgia Capital (CGEO LN)

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GBP 12.33 +10,9%

na

GBP 2.70

Ͳ3,6%

GBP 17.06

+0,1%

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

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

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Price

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GEOROG 04/21

101.00 (YTM 6.36%)

Ͳ0,2%

Ͳ0,3%

GEORG 04/21

BONDS

106.30 (YTM 4.47%)

Ͳ0,3%

+0,2%

m/m

+2,3%

GRAIL 07/22

105.42 (YTM 6.22%)

+0,1%

Ͳ0,1%

Ͳ2,4%

GEBGG 07/23

99.97 (YTM 6.01%)

Ͳ0,1%

Ͳ0,8%

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CURRENCIES

Price

w/w

m/m

73,44

Ͳ3,9%

Ͳ6,4%

GEL / USD

2,4582

+0,2%

+1,1%

1 278,94

Ͳ1,5%

Ͳ0,9%

GEL / EUR

2,8545

Ͳ1,0%

Ͳ0,8%

GEL / GBP

3,2634

Ͳ0,6%

Ͳ0,6%

INDICES

Price

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GEL / CHF

2,4564

Ͳ0,9%

+1,2%

FTSE 100

7 633,91

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Ͳ1,2%

GEL / RUB

0,0389

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Ͳ0,3%

21 005,52

Ͳ0,7%

+1,1%

GEL / TRY

0,5197

Ͳ5,1%

DAX

13 010,55

+1,9%

+0,3%

GEL / AZN

1,4459

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+1,1%

DOW JONES

25 090,48

Ͳ0,9%

+1,6%

GEL / AMD

0,0051

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+2,0%

7 746,38

FTSE 250

Ͳ5,0%

+1,3%

+5,4%

GEL / UAH

0,0933

Ͳ0,5%

+0,6%

153,90

Ͳ2,9%

Ͳ6,2%

EUR / USD

0,8615

+1,4%

+2,0%

MSCI EM

1 113,76

Ͳ1,9%

Ͳ3,2%

GBP / USD

0,7529

+0,9%

+1,7%

SP 500

2 779,66

+0,0%

+2,5%

CHF / USD

0,9976

+1,2%

Ͳ0,4%

MSCI FM

2 742,32

Ͳ3,2%

Ͳ4,7%

RUB / USD

63,1426

+1,3%

+1,4%

GT Index (GEL)

1 582,68

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TRY / USD

4,7305

+5,8%

+6,4%

GT Index (USD)

1 208,13

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AZN / USD

1,6915

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NASDAQ MSCI EM EE

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NEWS

GEORGIA TODAY

JUNE 19 - 21, 2018

ADB President Holds Official Meetings in Georgia

BY THEA MORRISON

Photo source: Sukhishvili National Ballet

Georgian National Ballet Sukhishvili in Euronews Spotlight

BY THEA MORRISON

P

opular news agency Euronews dedicated an article to Georgia’s National Ballet Sukhishvili, saying that in parallel with Georgia’s natural beauty and fine cuisine, the National ballet is one of the nation's cultural “crown jewels.”

Wolfgang Spindler, Art Editor of Euronews visited Tbilisi to meet the Georgian National Ballet Sukhishvili, the national folk ensemble, which brings together traditional Georgian Folk dance, classical ballet and modern dance elements.

The authors of the article explain that Sukhishvili started out over 70 years ago as a family enterprise, when the husband and wife team of Iliko Sukhishvili and Nino Ramishvili founded the Company.

“The Ballet has since survived the red terror of Stalin’s Soviet Union, the Cold War and the breakup of the Soviet Union, growing into an internationally renowned company,” the article reads, adding now the grandchildren - Iliko Sukhishvili, the Artistic Director and Choreographer-in-Chief and his sister Nino, Director General and Costume designer, run the ensemble and continue the traditions of their grandparents.

The ballet integrates traditional dances and cos-

tumes from different social backgrounds, and from various regions of the country.

Some dances from the mountain regions look like real battles or competitions of bravery and courage.

"Isn’t it amazing? You can see the fascinating show of the Georgian National Ballet Sukhishvili at the Rike Park every Saturday until August the 25th," reports Wolfgang Spindler for Euronews.

The Georgian National Ballet was founded by Iliko Sukhishvili and Nino Ramishvili in 1945 and was initially named The Georgian State Dance Company. It was the first professional state dance company in Georgia. After them, many other companies were founded on their example.

Nino Ramishvili and Iliko Sukhishvili became inseparable partners both on stage and in life. Filled with determination, they made their dream a reality. Their life together was an adventure of creativity, which was fully realized through new generations of dancers.

The Georgian National Ballet has been hosted by many world renowned impresarios and companies.

The Georgian National Ballet has appeared at the Albert Hall, The Coliseum, The Metropolitan Opera, Madison Square, and dozens of famous venues. In 1967, La Scala welcomed them - it is the first and only time a folklore group was given a chance to perform there. The curtain was lifted 14 times, a record.

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A

sia Development Bank (ADB) President, Takehiko Nakao, paid an official visit to Georgia on June 13-16.

During his three-day stay, Takehiko Nakao met President of Georgia Giorgi Margvelashvili and Acting Minister of Finance and ADB Governor, Mamuka Bakhtadze, who was nominated as candidate for Prime Minister last week.

During his visit, Nakao announced that ADB plans to mobilize over $1.2 billion in financing during 2019–2021, including support for two flagship projects of the government: the development of the East-West and the North-South transport and economic corridors.

He noted that these projects are very important for Georgia as they pursue a goal of its becoming a regional hub through increased connectivity and trade, opening the land-locked markets of Armenia and Azerbaijan, and extending the Central Asia Regional Economic Cooperation corridors to the Black Sea and Europe.

“ADB will continue to support transformative energy as well as urban transport and water projects, while helping the government to implement reforms in such areas as pensions, capital markets and private sector promotion. It will strengthen non-sovereign operations. It will also expand assistance to education, including technical and vocational education and training and using solar energy in schools,” he stated.

The ADB President also commended Georgia’s impressive economic progress over the last decade, noting the government’s sound management of the economy amid regional economic pressures.

“The country has become an important gateway between European and Asian markets,” he said.

“Georgia’s economic growth has accelerated to 5.0% in 2017 from the 2.8% recorded in 2016.”

What Bakhtadze’s Policies as Finance Minister Hint about his Leadership Continued from page 1

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Nakao visited ADB-assisted projects during his stay. Along with Tbilisi City Mayor Kakha Kaladze, he visited the University Metro station which has improved mobility for over 300,000 passengers a day. ADB provided $34 million in financing to refurbish the station.

The ADB President also met the Minister of Regional Development and Infrastructure Maia Tskitishvili, Minister of Education and Science Mikheil Chkhenkeli, and the Head of the National Bank of Georgia, Koba Gvenetadze.

Nakao then had a meeting with the representatives of TBC Bank, which has received ADB loans through non-sovereign operations.

Partnering with local banks and microfinance institutions, ADB supported more than 14,000 micro, small, and medium-sized enterprises (MSMEs) in agribusiness, retail, small manufacturing, and tourism in 2014–2016. During the meeting, it was noted that ADB will continue to support MSMEs through sovereign and non-sovereign operations.

Georgia became an ADB member country in 2007 and since then it has supported both infrastructure and institutional development.

Georgia has received over $2.4 billion in development assistance from the ADB since 2007. Moreover, the bank’s operations and staff in Georgia have doubled in the last two years and continue to grow to bring better services and infrastructure to the people of Georgia.

The response was mirrored in an April poll by the International Republican Institute (IRI), in which 55% of respondents had not heard of Bakhtadze, 22% said they viewed him unfavorably, and 9% said they viewed him favorably.

During a speech accepting his nomination for prime minister, Bakhtadze listed as one of his four main principles of governance, “A new economic model with new fair rules,” promising to deliver reforms “in all directions,” affecting every Georgian family. Another of his principles is small government, and he has a vision of stronger institutional and public control, with less corruption, “the starting point is that we need a small, effective and flexible government. Small government, of course, means that certain agencies may be united,” said Bakhtadze.

Until his nomination, Bakhtadze’s most significant move in public office was introducing sweeping reforms of the banking sector. In April, he called Georgia’s very profitable banks an impediment to the national economy by encouraging growing debt among citizens. While, as Finance Minister, bank reform was not in his purview, as Prime Minister, Bakhtadze will have the power to initiate any reforms he sees fit – with the support of his party, of course.

In a healthy economy, the banking sector should provide businesses and individuals with funding to grow and expand, but in the last few years, banks have profited mainly on retail credit, which has dominated banking sector loans, rather than loans for small and medium sized businesses. “Consumer loans and retail financing tend to promote imports rather than encouraging local production which would create employment and bring added value to the economy,” says development economist Tato Khundadze, pointing to research by the World Bank and EBRD which “puts access to credit as the third biggest obstacle to Georgian businesses.”

The IMF ranked Georgia as having some of the highest number of individuals in debt, with 680 out of every 1,000 adults having at least one active loan in 2015. By the end of 2016, there were 2.4 million active loans in the country. Penalties for nonrepayment are harsh, including permanent seizure

of property not listed as collateral in the loan agreement. Bank of Georgia and TBC Bank hold 72% of the country’s financial assets, indicating a bulky, inefficient system.

With Bakhtadze as Finance Minister, the government announced a Four Point Reform Program aimed at promoting savings, productivity and export growth, diminishing vulnerabilities, and guaranteeing more robust, healthy and inclusive economic growth. Bakhtadze has also expressed strong support for the ongoing de-dollarization/larization program. In a March interview with Emerging Europe, Bakhtadze also promised “an automatic VAT credit refund system, and insolvency reform are coming soon, as well as several important reforms that will ease tax administration.”

In plans announced since his nomination, Bakhtadze discussed wanting to reform the banking sector, most notably: Cutting the effective annual interest rate ceiling on loans to 50% instead of 100%; Recalculation of late fees on loans, including lowering them; Prohibiting banks from seizing property not listed as collateral in a loan agreement. He also plans to create a “financial arm” of the Georgian Government to spend up to 1% of GDP on affordable loans for small, local start-ups.

Banking sector reforms could lessen the burden of debt on a nation with low salaries and high unemployment. Predatory lending practices are common in Georgia, used as a stop gap for urban and rural families who cannot make ends meet.

“Precarious self-employment and high structural unemployment, especially among young people,” comments Khundadze, “drives many Georgians towards risky debt practices.”

Bakhtadze has been nominated to replace Giorgi Kvirikashvili, who served as Prime Minister from December 30, 2015, until he resigned on June 13, 2018. Kvirikashvili stepped down after weeks of protests against the country’s justice system, but blamed his resignation on differences on “fundamental issues” with party leader Bidzina Ivanishvili.

If confirmed, Bakhtadze will be the fourth Prime Minister since his political party, Georgian Dream (GD) came to power in 2012. GD has 116 seats in Georgia’s 150 member parliament. Mamuka Bakhtadze needs votes from at least 76 MPs to be confirmed as Georgia's next Prime Minister.

4

BUSINESS

GEORGIA TODAY

JUNE 19 - 21, 2018

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economic growth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists.

Georgia’s and Armenia’s “Deplorables” and “Desperados” – No Longer a Basket Case!

BY ERIC LIVNY AND LAURA MANUKYAN

G

eorgian and Armenian ruling parties have been until recently basking in the glory of high GDP growth rates. Armenia’s stellar growth performance of 7.5% in 2017 and Georgia’s respectable 5% are, indeed, worthy of praise. However, do these figures really matter for the objective wellbeing of the majority of Georgians and Armenians? Second, how does economic growth, as measured by GDP, affect people’s subjective perception of happiness?

Third, what does it do to crime rates?

And, finally, does economic growth diminish people’s appetite for political representation, social justice and fairness?

THE THEORY AND PRACTICE OF TRICKLE-DOWN ECONOMICS A belief traditionally held by liberal economic thinkers and ideologues is that wealth tends to ‘trickle down’ from the upper echelons of society to the lower classes. The implication of this trickledown proposition is that economic growth benefits everybody by increasing the overall size of the pie. The entrepreneurial class may be the first to benefit from expanded business opportunities, but more business (and businesses) also means more jobs, and more income redistributed to the poor – directly, through the tax system, and indirectly, through public education and healthcare systems. Economic growth thus helps reduce the absolute level of poverty in a society.

The ‘trickle down’ theory makes a lot of sense … in theory. Whether it actually works in practice depends on a few important nuances. First, if economic growth is generated in just a few capitalintensive sectors of the economy, such as Azerbaijan’s oil and gas sector, it is likely to create relatively few jobs. Moreover, these new jobs may not be suitable for the uneducated and unskilled urban and rural poor. Second, economic growth certainly increases the amount of taxable income in an economy, but whether and when the extra tax revenues will benefit the poor depends on a country’s political priorities. At one extreme, the government may choose to increase social pensions; at another, it may increase public spending on defense or reduce the tax rate on businesses (so as to encourage investment and future growth).

At least in Georgia, economic growth does seem to have had a mitigating impact on poverty, and extreme poverty in particular, as reflected in UNICEF’s 2017 Welfare Monitoring Survey (WMS).

First, Georgia’s economic growth has been primarily driven by labor intensive sectors – tourism, trade and traditional agriculture. Second, since early 2013, Georgia’s has been aggressively engaging in redistribution policies – it introduced universal healthcare coverage and free preschool education, and increased targeted social assistance (TSA) and pensions. In 2017, at 24.6% of central public expenditures, social protection was the largest spending item in the

Georgian state budget.

Unfortunately for both Georgia and Armenia, however, economic growth, even when accompanied by a reduction in absolute poverty, does not automatically translate into improved subjective perceptions of well-being of either the poor or the budding middle classes.

ECONOMIC GROWTH, INEQUALITY AND HAPPINESS There is a fairly broad consensus in the social science literature, as discussed in a recent CityLab piece, that money alone does not make people happy. For example, a study by Shigehiro Oishi (University of Virginia) and Selin Kesebir (London Business School) finds that happiness (“subjective well-being”) in 16 developed countries is correlated positively with GDP per capita and negatively with income inequality (measured by the Gini coefficient). Much more surprisingly, when looking at 18 less-developed Latin American economies, Oishi and Kesebir find that not only inequality tends to dampen happiness, but – in contrast to advanced nations, – happiness does not increase alongside economic growth.

What can explain the fact that economic growth cannot buy happiness in the lessdeveloped Latin American nations? One reason may be the very high initial levels of inequality in Latin American societies, and the failure of their political systems to make sure that a fair share of newly created wealth trickles down fast enough to the poor masses.

When it comes to income inequality, Georgia and Armenia do more or less fine relative to their level of development. As reported by the World Bank, the level of income inequality in Georgia and Armenia (Gini coefficients of 38.5 and 32.4 in 2015, respectively) is much lower than in African, Asian and Latin American societies divided by caste, clan and race (the most unequal societies, such as South African Republic and Haiti, have Gini coefficients above 60). As could be expected, it is quite a bit higher than in some of the wealthiest and most egalitarian societies of the world, such as Finland and Iceland, with Gini coefficients around 25.

However, what is important in the context of subjective well-being and happiness is not the absolute degree of income inequality, but how people in a society

feel about it. For one, people’s perceptions of existing social and economic disparities may be determined by cultural factors (one may argue that Nordic people tend to place a higher value on social solidarity, whereas caste-based societies tend to accept inequality as a given, reflecting the will of God). Additionally, perceptions are affected by the speed with which social gaps are closed (or not) through the political system. Stagnation or slow progress in addressing social disparities is likely to generate frustration, desperation, anti-social or radical political behaviors, as we have recently observed in both Georgia and Armenia.

(UN)HAPPINESS, DESPERATION, AND POLITICAL ACTION For all their differences, Georgians and Armenians share much in common. Both are small ancient nations that survived through centuries of imperial domination and conquest. Both proudly embraced independence 100 years ago and, again, in early 1990s. And both are seriously unhappy with the current state of their political institutions.

Out of 156 countries included in UN’s World Happiness Report 2018, Georgia and Armenia have been ranked 128th and 129th, only a few notches ahead of

10 Galaktion Street

war-and-corruption torn Ukraine (138th) and not very far from Africa’s failed states at the very bottom of the ranking: Burundi, Central African Republic, South Sudan, Tanzania, Yemen and Rwanda. Not surprisingly, the happiest five nations in the world are those that place social harmony and fairness on par with individual success: Finland; Norway, Denmark, Iceland and Switzerland.

Importantly, a perceived lack of social justice is a powerful trigger of anti-social and radical political behaviors. As Jordan Peterson put it in his vodcast, “what causes crime, especially, aggressive crime, is relative poverty. And relative poverty is not the same thing as poverty at all…

Poverty is when you don’t have enough to eat. Relative poverty is when the guy next door has a much better car than you.” By the same token, what causes radical political behavior is a feeling that the guy next door is somehow above the law or is able to get special treatment from the courts, the law enforcement agencies, and the political system.

Armenian people’s success in bringing down a corrupt regime is truly inspiring.

An unprecedented wave of social solidarity swept through the entire society, manifesting itself in civil disobedience acts and protests cutting across Arme-

nia’s geography and social classes. Restoring social solidarity appears to be at top of Nikol Pashinyan’s priorities and his vision for Armenia’s Velvet Revolution: “healthier institutions, less corruption, fair pay, stronger regulation, better education, advancement for all.”

The eagerness with which thousands of Georgians are gathering to protest perceived injustices suggests that Georgia’s “deplorables” and “desperados” have also reached a point of no return.

Corruption may not be Georgia’s main concern, however, for much of its recent history, Georgia has been ruled by dominant parties and powerful individuals who have been able achieve a nearmonopolistic status in the country’s political arena. This objective weakness of the Georgian political system and the country’s fundamental inability to address persistent social gaps appear to be at the root of the current crisis.

Giorgi Kvirikashvili was one of the finest prime ministers in Georgia’s modern history, and his departure will not address either of these causes. If anything, the manner in which Kvirikashvili has been thrown under bus serves to illustrate Georgia’s weakness as a democratic polity and the urgent need for political and economic reforms going beyond PR and the quick ease-of-doing-business fixes.

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

BUSINESS

GEORGIA TODAY JUNE 19 - 21, 2018

5

PM Candidate Pledges Support for Startups, the Green Economy & Angel Investors

BY SHAWN WAYNE

M

amuka Bakhtadze, candidate for the next Prime Minister from the ruling Georgian Dream party, chose to hold his first meeting in his new role with young representatives of Georgian tech start-ups, at Technopark Tbilisi, a public-private project supporting the development of a new economy.

During an almost two-hour meeting, where Bakhtadze made a presentation and fielded questions from the audience, he exposed his vision of the country’s development steeped in the government supporting a high-tech economy, entrepreneurship and competition.

Specifically underlining his intention to support FinTech startups and boost Georgia’s competitive advantage in the financial services sector, he pledged to curb unfair competition to private IT start-ups from governmental agencies’

IT departments. At the same time, he promised financial incentives for Georgian tech start-ups, and spoke of the need to attract talent also from the neighboring countries (Armenia, Belarus, Kazakhstan and Ukraine were mentioned).

Responding to a question from his audience, Bakhtadze said the government will present proposals for attracting angel investors from abroad, as well as encouraging high-technology companies to open their representations in Georgia by easing or completely abolishing their corporate tax.

Aside from these, he also pledged concrete initiatives to support the green economy and highlighted education as being the focal point for the new government’s investment.

Bakhtadze, perhaps attuned to the needs of the audience, refrained from touching upon other, wider, issues of poverty, social support or security.

Georgia has a tradition of technocratic Prime Ministers primarily responsible for the country’s economic stability and growth. But Georgia’s new Constitution,

which would fully enter into force this coming autumn, foresees a much wider executive role for the Prime Minister as the full-fledged Head of Government.

kashvili stepped down amid public protests as well as apparent “differences of opinion” with the ruling party leadership.

Georgian Airline Gets EASA Authorization

Care for the City Campaign

T

he Public Information Communication Agency of Tbilisi City Hall has announced a six-month contest for the social campaign “Care for

the City.”

On June 18, the press conference for the campaign was held in Stamba Hotel Tbilisi by the Mayor of Tbilisi, Kakha Kaladze. The members of the commission also attended the event.

The goal of the campaign is to develop a sense of social responsibility and care for the city among the community; to create a valuable product that will initiate irreversible processes lasting in our memories and habits, encouraging the population to act in favor of the city.

Long-running awareness-raising and campaigning through various activities will illustrate how crucial it is to take care of the city. This campaign will unite not only society, but also the state, nongovernmental and private sectors.

To maintain the implemented projects and the efficiency of the relevant activities and services by Tbilisi City Hall, it is vital raise a sense of responsibility among the population. Vandalism and theft is frequently recorded within Georgian society. Millions of GEL are spent on amenities and infrastructure projects throughout the year. These projects need not only material, but also human resources. Due to negligence and vandalism, it becomes necessary to carry out additional repairs. Moreover, there are cases when the population pollutes the city, which needs additional mobilization and resources. The above-mentioned circumstances impede the process of the city’s development, affecting its appearance and the everyday lives of citizens.

The concept winner will be selected, jointly by the specifically created Competition Commission and Tbilisi City Hall, for being interesting and resultoriented. Only legal entities can participate in the contest and must have at least three years’ experience in the relevant field. The participants should submit their related work and a proposal of the concept by July 9th, 2018. The involvement of the young generation in taking

Georgia’s Finance Minister since November 2017, Bakhtadze, a political novice, was tapped to be the country’s new head of government after PM Kviri-

BY THEA MORRISON

A

care of the city and encouraging a sense of responsibility from early age is particularly important. In addition, it is essential to actively involve leaders who have high social responsibility. The campaign will include various types of useful and result-oriented action activities, in which citizens of Tbilisi will actively participate.

The new campaign follows the example of Singapore which set a campaign of similar content in the 1970s, resulting in its gaining and maintaining the status of the cleanest and best regulated city in the world.

The members of the Commission include: 1. David Birman - Head of Electronic Bank Management Service of Bank of Georgia 2. Nana Janashia - Executive Director of the Caucasus Environmental NGO Network (CENN) 3. Nino Lomadze - Founder and Editor of Magazine "Indigo" 4. Giorgi Popiashvili - Creative Director, Director 5. Giorgi Kalandia - Director of the State Museum of Theater, Music, Cinema and Choreography; Historian, Professor 6. Giga Khatiashvili - Professor of International School of Design, Founder and Director of Creative Lab 919 7. Ako Akhalaia - President of the Association of Georgian Communications

Agencies ACAG; Founder of Marketer.ge 8. Goga Chanadiri - Photographer 9. George Sharashidze - General Manager of Media Holding Georgia Today Group 10. Soso Galumashvili - Senior Consultant of PRP and Marketing Communications Company GEPRA 11. Giorgi Kekelidze - General Director of the National Parliamentary Library of Georgia, Writer 12. Tamar Amashukeli - Art Critic; Cultural Heritage Expert 13. Tinatin Rukhadze - General Manager of "ACT Global"; Psychologist, Sociologist 14. Ekaterine Jojua - Director of Communication Development Agency of Tbilisi City Hall.

"Its a really positive initiative which will have an impact on our city and more importantly will create a good example to other citizens, encouraging them to take responsibility for their neighborhoods," said commission member and Georgia Today GM, George Sharashidze.

"Its time to get outdoors and look after our public spaces which belongs to all society. I expect some very interesting projects, the best of which will be selected for the maximum benefit of our city and the environment."

Projects can be submitted until July 9, 2018. The results of the competition will be announced no later than 30 July 2018.

fter two Georgian airline companies, Georgian Airways and TCA, received authorization from the European Aviation Safety Agency (EASA) in 2016, GEO SKY, Georgia’s cargo airline, has become the third local company to be granted the right to operate in 28 EASA member European Union countries and in four from the European Association for Free Trade - Iceland, Liechtenstein, Norway and Switzerland.

EASA is an agency of the European Union responsible for civil aviation safety.

It carries out certification, regulation and standardization, and also performs investigation and monitoring. It collects and analyses safety data, drafts and advises on safety legislation, and coordinates with similar organizations in other parts of the world.

The EU safety authorization for foreign air operators (PART-TCO) confirms the full compliance of the airline operator with International Civil Aviation Organization (ICAO) and EU standards, as well as highlighting the safety and supervision of international safety standards.

The permit is valid until the operator meets the PART-TCO regulation standards or the state issuing of the Airborne Operator's Certificate (Georgia) stops or cancels the relevant certificate.

Image source: Flickr

The Georgian Civil Aviation Agency (GCAA) reports that EASA's Air Safety Security will enable GEO SKY to operate on the European aviation market and will also promote the airline's further development.

The authorization permit has been mandatory for any non-EU country operator wishing to fly into the territory of the European Union since 2016. It means that before a newly developed aircraft model may enter into operation, it must obtain a certificate from the EASA, responsible for the certification of aircraft in the EU and for some European non-EU Countries since 2003.

The certificate testifies that the type of aircraft meets the safety requirements set by the European Union.

Other missions and tasks of the EASA are to: • Ensure the highest common level of safety protection for EU citizens; • Ensure the highest common level of environmental protection; • Single regulatory and certification process among Member States; • Work with other international aviation organizations and regulators; • Certify and approve products and organizations, in fields where EASA has exclusive competence; • Promote the use of European and worldwide standards; • Cooperate with international actors in order to achieve the highest safety level for EU citizens globally.

6

BUSINESS

GEORGIA TODAY

JUNE 19 - 21, 2018

MAY: Average Hotel Prices in Georgia and Hotel Price Index

I

n Georgia, the average cost of a room1 in a 3-star hotel was GEL 137 per night in May 2018. The most expensive 3-star hotels in May in Georgia were found in Tbilisi (exceeding the average price by 15%).

The average cost of a room in a 4-star hotel in Georgia in May was GEL 232 per night. The most expensive 4-star hotels in May were in Tbilisi (exceeding the average price by 13%).

The average cost of a room in a 5-star hotel in Georgia in May 2018 was GEL 399 per night. In Tbilisi, the average price was GEL 610, followed by Kakheti- 358 GEL, Samtskhe-Javakheti-GEL 354, and Adjara-GEL 269.

In May 2018, the average cost of a room in a guesthouse2 in Georgia was GEL 72 per night. The highest daily rates for guesthouses like previous months were found in Kvemo Kartli and Guria.

In terms of apartments, on Airbnb in Georgia among self-governing cities the highest average cost of an apartment in May was recorded in Batumi-US$48, followed by Tbilisi-$44, Poti-$42, Kutaisi-$28 and Rustavi-$20.

HOTEL PRICE INDEX In May 2018, the hotel price index3 increased by 0.9% compared to April 2018. The daily rates for standard double

Table 2: Distribution of monthly average number of visits made by inbound visitors of age 15 and older by visited regions, thousand, Geostat

Table 1: Percentage change of prices in May 2018 over April 2018

hotel rooms increased mostly in Adjara (6.5%), while the daily rates decreased the most in Kakheti region (8.1%).

In May 2018, compared to April 2018 the number of international travelers increased by 6.1%, of these international travelers, the proportion who stayed in Georgia for 24 hours or more (classified as tourists) increased by 29.4%4.

The 3-star, 4-star and 5-star hotel price index increased by 2% in May 2018 compared to April 2018. In these types of hotels, the highest price increases were recorded in Adjara, whereas the prices for standard double hotel rooms decreased the most in Mtskheta-Mtianeti compared to the previous month.

For guesthouses, the price index

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.

decreased by 1.8% in May 2018 compared to April 2018. Among regions, in this type of accommodation, the biggest percentage price increase for standard double rooms was recorded in Guria, the biggest percentage price decrease in Kakheti region.

of inbound tourists increased significantly in Imereti (by 66%) and MtskhetaMtianeti (by 47%).

Of all visits to Georgia in the first quar-

ter of 2018, only 3.4%were recorded in Samegrelo-Zemo Svaneti, Guria, RachaLetchkhumi and Shida Kartli regions combined.

NUMBER OF VISITS MADE BY INBOUND VISITORS BY REGION The National Statistics office of Georgia has published the breakdown of the monthly average number of visits made by inbound visitors aged 15 and older for each region. The results are based on a survey of inbound visitors conducted at border checkpoints. In the first quarter of 2018, the regions of Tbilisi, Adjara and Mtskheta-Mtianeti were the three most popular destinations for inbound visitors.

In the first quarter of 2018, compared to first quarter of 2017, the monthly average number of visits made by inbound visitors aged 15 and older increased in every region except Kvemo Kartli, which recorded a decrease of 12%. Although, it has to be noted that, during the first quarters in the last four years, the number of visits made in Kvemo Kartli by inbound visitors is quite high. This can partially be explained by the borders with Armenia and Azerbaijan. Many of the visits to this region are from people from neighboring Armenia and Azerbaijan who are visiting family members5.

In the first quarter of 2018, compared to the first quarter of 2017, the number

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 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)).

4 According to the Georgian National Tourism Administration, in April 2018, 596,703 international travelers visited Georgia. Of these, 278,032 travelers stayed in Georgia for 24 hours or more. In March 2018, the number of international travelers was 578,514, of whom 292,017 travelers stayed in Georgia for 24 hours or more.

5 44.7% of Kvemo Kartli population are ethnic Georgians, 45.1% azeris, 6.4%-Armenians. Source: http://kvemokartli.gov.ge)

MRDI Unveils $2 Billion Road Construction Project

BY KYRA DEVDARIANI

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n June 12, the Ministry of Regional Development and Infrastructure (MRDI) of Georgia has unveiled an infrastructure development plan that focuses on East-West and North-South automobile routes.

The First Deputy Minister and Chairman of the Roads Department, Irakli Karseladze, addressed the diplomatic corps, business associations and donors, outlining the main features of the ambitious plan.

The large-scale project is being financed by the European Investment Bank (EIB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), Japan International Cooperation Agency (JICA), World bank (WB) and the Government of Georgia (GoG) with the total estimated cost of the construction reaching 2 billion USD. The East-West corridor development envisions construction of 52 km of a 4-lane asphalt-beton road from Chumateleti to Argveta, in the central part of Georgia. The total estimated cost of East-West direction is 1.2 Billion USD. The Rikoti pass road construction is

broken into 4 portions that will be put up for tender separately. The four lots will have various degrees of difficulty: ADB-financed F2 has 35 bridges and 20 tunnels in its 12.2 km interval, while F1, jointly financed by WB, EIB and the Government of Georgia, of roughly the same length, has 20 bridges and 3 tunnels. Among the benefits of the Chumateleti-Argveta corridor are the reduction of road length by up to 30km, reduction of travel time by 50% and increase in

driving speed.

The North-South corridor connects Kvesheti and Kobi, located on two opposite ends of Gudauri Recreational Area.

The construction is financed by ADB, with the invitation for prequalification notice for the larger lot posted on their website on June 5. The 12.72 km 2-lane road will have 4 tunnels and 6 bridges, among them – the 426m long arched bridge. The deadline for submission of prequalification applications is July 18,

2018, and ADB eligibility rules and procedures will govern the process. The second lot, with a 9km tunnel, is expected to go under an Advanced Construction Notice shortly. The construction works are estimated to be completed in 2021, just in time for the 2023 Freestyle Ski and Snowboard World Championships that Georgia will host. In May 2018, International Ski Federation (FIS) has announced that Georgia’s winning bid was based on ski resorts of Gudauri and Bakuriani. FSS championships aside, numerous benefits of Kvesheti-Kobi road include improved experiences and safety for both visitors and local population, with destinations such as Kazbegi National Park, spectacular valleys and picturesque villages opening up for hikers and campers from all over the world.

“It is important that the design of the road creates one continuous flow, and is very sensitive to environmental issues and social impact”, said Karseladze while the 3D clips showing the design of each interval were played to the audience. It is not just the main roads and the quality of their surfaces, or the designs of bridges and tunnels, but also the auxiliary infrastructure such as exits, service roads, maintenance areas and ventilation requirements. The selection of the firms working on the design of the project

shows excellent expertise in high-altitude areas and relief specifics. The project was designed in full compliance with modern European regulations and best practices, by the designers representing firms from Italy, Spain, UK and Turkey.

Breaking with the post-Soviet traditins of shady dealings in the construction industry, compromised quality and safety, MRDI has shown its willingness to ensure transparency on every step of the way, from pre-tender announcements, to the final delivery of the project by the contractors. The openness of the Ministry is a welcome change, as is the call to the diplomatic corps and business associations to encourage reputable construction companies to enter the Georgian market.

“Increase in the number of strong construction firms participating in the tenders will give us a deeper, more competitive field, leading, in turn, to better results”, said Karseladze. “The Ministry is expecting to attract top construction firms that will become our reliable partners.”

Among the pre-requisites for the firms entering the bidding process, the Chairman of the Roads Department mentioned experience in construction of mountainous relief-specific elements, a history of successful management of large-scale projects, financial stability and excellent reputation.

BUSINESS

GEORGIA TODAY JUNE 19 - 21, 2018

7

TBC Capital Releases Report on Fixed Income Securities in Georgia

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n June 15, TBC Capital presented a research report on “Fixed Income Securities in Georgia”. The report describes the Bond Market in Georgia and discusses its future development trends.

According to the report, the treasury

securities market is well developed in the country. On the other hand, the corporate fixed income securities market is at the early stage of development. The bond market has experienced tangible progress since 2014, when the National Bank of Georgia (NBG) launched a new regulation enabling the commercial banks

to provide local publicly placed bonds as collateral for NBG loans. Despite the impressive growth over the last three years, publicly issued bonds outstanding was only GEL 232m at YE 2017. Market capitalization of corporate bond market in Georgia is 0.6% of GDP, much less than that of the selected peers.

The report also discusses the supporting factors for bond market development, including tax breaks, expected increase of corporate governance and transparency and improved regulations on the market. According to the TBC Capital team, the pension reform will further foster the corporate bond market development. Based on TBC Capital’s assumptions, it is expected that approximately 4% of pension assets will be invested in local corporate bonds and during the medium-term, the outstanding corporate bonds are expected to grow to GEL 1bn.

“The corporate bond is a relatively new product on the Georgian financial market,” says Irakli Elashvili, TBC Capital’s Managing Director. “There are various key factors, including tax breaks and National Bank of Georgia’s pledge rules, which play a pivotal role in supporting corporate fixed income market development in Georgia. The corporate bond market is at the development stage and we believe that more local corporations will consider financing their business activities via the issuing of corporate bonds. The increased appetite from corporations for bond financing is already prominent. Additionally, we believe that the pension reform will play a significant role in market development, creating an additional long-term GEL supply on the market.”

The Business Forum, organized by TBC Capital, was attended by representatives of the public and private sectors. The international rating agency, Scope Ratings GmbH, held a presentation on the

The increased appetite from corporations for bond financing is already prominent corporate bond ratings process. During the business forum, TBC Capital, NBG, the Georgian Stock Exchange, JSC Silknet, BLC Law Office, Scope Ratings and ISET held a panel discussion on the challenges and opportunities within the fixed income securities market in Georgia.

The report will be published on the following link: www.tbcresearch.ge TBC Capital is TBC Bank’s whollyowned investment banking subsidiary and licensed brokerage firm. In 2017, TBC Capital became an integral part of TBC Bank’s Corporate and Investment Banking franchise. Its main lines of business include corporate finance and credit rating advisory, debt and equity capital markets, brokerage, and private research.

TBC Capital is also a shareholder in the Georgian Stock Exchange and plays an active role in the development of its infrastructure.

8

BUSINESS

GEORGIA TODAY

JUNE 19 - 21, 2018

Armenian Delegation to Hold Talks in Tehran to Increase Gas Imports from Iran WinExpo Georgia 2018 Held in Tbilisi

BY THEA MORRISON

T

he 11th International Exhibition of Wine and Spirits WinExpo Georgia 2018 took place in Tbilisi on June 14-16.

The event was organized by Exhibition Center ExpoGeorgia Fairground in Tbilisi and supported by the Ministry of Agriculture of Georgia and National Wine Agency of Georgia.

WinExpo is the only international Wine and Spirits Fair in Georgia and the whole Caucasus region, presenting the full range of wine industry products and services. It creates a unique chance for producers and exporters to build success and use new business opportunities.

The exhibition, which lasted for three days, saw 150 companies from 12 countries taking part, from: Georgia, France, Italy, Spain, Portugal, Austria, the USA, Germany, Hungary, Ukraine, Armenia and Russia.

WinExpo Georgia 2018 was opened by Giorgi Khanishvili, Deputy Acting Minister of Environmental Protection and Agriculture of Georgia. He thanked Expo Georgia, which had organized the exhibition for the 11th year already.

"This exhibition gives a great opportunity for consumers interested in Georgian wines to taste the best wine and alcoholic beverages. In addition, WinExpo is an excellent opportunity for business entrepreneurs to get acquainted with the development trends and innovations of the Georgian and

foreign wine sectors, and the historical-traditional values of Georgian wine,” he stated at the opening of the exhibition.

The Deputy Chairman of the National Wine Agency, Andro Aslanishvili, also delivered a speech and welcomed the participants of the exhibition.

"We will always support such events which contribute to the development of viticulture and winemaking. This exhibition is important for raising awareness of Georgian wine. The competition jury members are world-renowned wine experts, specialists and wine journalists. Their assessments and recognition will promote the popularization of Georgian wine on the international market,” he stated.

WinExpo Georgia, held every year in Tbilisi, creates a profitable climate for: • Taking advantage of historical recognition and decades of cumulative investment in the Georgian brand in the huge wine market of Eastern Europe; • Blending of the best of both western and traditional Georgian practices in winemaking; • Encouraging the formation of a wine cluster in Georgia using Western expertise and machinery; • Attracting a large number of buyers and experts from CIS countries and others through a highquality visitor promotion campaign.

Within the frames of WinExpo Georgia 2018, the 10th International Wine Competition was held.

Members of the international jury revealed "Trophy", Gold, Silver and Bronze medals to 22 winner wines in several categories. Around 250 samples from 60 companies were nominated for the competition.

BY DIMITRI DOLABERIDZE

T

he Armenian delegation will leave for Tehran this week to negotiate new prices and increase gas exports from Iran to Armenia, noted Behzad Babazadeh, Director of International Affairs of the Iranian National Gas Company.

He added that the Yerevan Thermal Power Plant is asking for an increase in the volume of supplies of “blue fuel” from Iran.

Noting that the contract between the Iranian National Gas Company and the Yerevan Thermal Power Plant concerns the exchange of gas for elec-

tricity, Babazadeh said that Armenia is asking for an increase in natural gas supplies from 1 million to 1.6 million cubic meters, something, he says, that Iran is willing to agree to.

The Iranian side notes that Iran's pipelines are capable of pumping more gas into Armenia, and Iran has no problems increasing the volume of gas exports since Yerevan can pay or give Iran more electricity in return.

Iran and Armenia in 2004 signed a contract on the exchange of gas for electricity for a period of 20 years.

The National Iranian Gas Company was established in 1965 as one of the four principal companies affiliated to the Ministry of Petroleum of the Islamic Republic of Iran.

Georgian Railway, Deutsche Bahn Become Official Partners

BY ANNA ZHVANIA

G

eorgian Railway and Deutsche Bahn entered a new stage of cooperation in an agreement signed by David Peradze, CEO of Georgian Railway, and Alexander Doll, Member of the Board of Management for Freight Transport and Logistics at Deutsche Bahn, in Berlin. The agreement lays the foundation for future joint projects in the rail freight sector. By signing the agreement, Georgian Railway and Deutsche Bahn embark on a strategic partnership to strengthen the European and Asian multimodal transportation corridors.

“This strategic alliance is mutually beneficial and marks a cornerstone. Maintaining close ties with Georgian Railway will help us to further grow our business as it puts us closer to the Asian market and opens up new perspectives for future endeavors,” said Doll.

“Georgian Railway is very active in developing the Europe-Asia corridors,” Peradze noted. “Therefore, it is logical that we partner up with Deutsche

Bahn. Together with DB, we are going to team up and foster international freight transportation and offer competitive products. This will certainly benefit us and increase the competitiveness of the Georgian logistics market.”

With Deutsche Bahn, the largest rail freight provider in Europe, Georgian Railway cooperates with a reliable and strong business partner. In the context of this cooperation, Georgian Railway will be responsible for cargo transports with the destination Middle East and India, coming from Constanta and passing through Georgia and Azerbaijan, as well as for transports to East Asia via the Caspian Sea. Deutsche Bahn will be responsible for organizing transports within the EU by rail freight. Multimodal transports will be handled by its subsidiary DB Schenker.

The newly-formed partnership will foster mutual support between the companies in multiple ways, including the exchange of resources such as knowledge, expertise, information as well as employees.

The partnership of Georgian Railway and Deutsche Bahn sets an outstanding example considering the continuous growth of the Asian-European rail cargo market.

10

BUSINESS

GEORGIA TODAY

JUNE 19 - 21, 2018

Quarterly Report Shows Georgia’s Real Estate Hot Spots

Image source: mela.work

BY SAMANTHA GUTHRIE

T

he ISET Research Institute, in partnership with TBC Bank, recently released a quarterly report as part of the Real Estate Laboratory Report series.

The report showed a slight positive growth of 0.1% in the first quarter of 2018 from Q4 2017 in the Georgian real property market. Year-on-year (y/y), there was a 27.2% increase compared to Q1 2017. In total, there were 27,495 properties sold in Georgia in the first three months of 2018. Tbilisi drove the increase, with 41.6% of total sales nationwide this quarter. Regionally, the large, eastern region of Kakheti, dominated by agricultural land, had the second highest portion of sales with 11.1%.

The Adjara region followed, with 9.9% of sales.

The region with the highest y/y sales growth was Racha-Lechkhumi and Kvemo Svaneti, which saw an enormous 105% increase, followed by Guria at 66.9%, and Kakheti with 31.7%. More than half of all sales in Georgia were registered in Tbilisi and Batumi – the two largest cities. In Q1 2018, real property sales in the capital grew y/y by 37.1%, with the national market, excluding Tbilisi, growing by 21%.

In Q1 2018, the real property markets in Batumi and Kutaisi decreased by 11.0% and 6.1%, respectively, from the previous quarter. Batumi and Kutaisi are the second and third biggest cities of Georgia after Tbilisi. Batumi saw 2,377 property transactions and Kutaisi had 677. In Q1 2018, the average sale prices in Batumi increased by 2.4 % quarter

over quarter, to $772 per square meter, and in Kutaisi increased by 4.4% quarter over quarter to $391 per square meter.

The report also included detailed data on sales within Tbilisi and revealed the most popular and most expensive neighborhoods. Saburtalo saw the highest number of sales with 2,924 properties, followed by Vake with 1,978, and Samgori with 1,286.

148 new properties were constructed in Tbilisi in Q1, totaling 200,200 m2, which is down from the first quarter of 2017 - 23.7% in the number of properties and 33.5% in area built.

Regarding real estate prices, Tbilisi saw continued increases from the previous quarter both in the sale and rental markets. Property sales increased by 5.1% from Q4 2017 and rental prices increased by 1.4%. The average sale price citywide was $860– $906 per square meter, and rentals were an average of $6.7– $7.7 per square meter per month. Prices of course vary by neighborhood. For residential properties, Mtatsminda tops the list for sales and rentals, with sales averaging $1,078 per square meter.

The lowest average prices for residential properties were in Samgori (sales at $529 per square meter) and Gldani (rentals at $4.40 per square meter).

Buying an apartment in Saburtalo, cost an average of $874 per square meter, and Vake, the capital’s second most popular neighborhood, cost an average of $998 per square meter.

After three quarters of falling commercial sale prices, Q1 2018 saw a 12.2% increase from Q4 2017.

The rental price index, however, continues to decrease. In Q1 2018, one square meter of commercial property sold for an average of between $1,099 and $1182, or rented for between $8.7 and $9.6.

Head of Armenian Ministry of Agriculture Talks of Boosting ArmeniaIran Cooperation in Agriculture

Image source: caucasianchallenge.com

BY DIMITRI DOLABERIDZE

O

n June 14, Armenian Minister of Agriculture Artur Khachatryan stated during a meeting with the Iranian Ambassador to Armenia Seyed Kazem Sadzhadi, that “It's time for the Armenian-Iranian relations to be built on a practical basis.”

According to the ministry's press service, during the meeting, the head of the Ministry of Agriculture noted that relations with Iran are of vital importance for Armenia and the Republic is ready for any mutually beneficial cooperation in the field of agriculture.

"I think that the agreements reached earlier will be implemented," Khachatryan said.

Seyed Kazem Sadjadi, in turn, noted that in Armenia and Iran there is much untapped potential in the field of agriculture. Among the most realistic directions of the Armenian-Iranian cooperation, the ambassador noted seed-growing, livestock, fish farming, horticulture, floriculture, automation of the agricultural sector and the introduction of modern agricultural machinery.

The sides also discussed the issues of growing pistachio, olive and other agricultural crops with the assistance of Iranian specialists in Armenia.

Ambassador Sajjadi said that the Iranian side will put a tomato paste factory into operation in Armenia in the near future.

BUSINESS

GEORGIA TODAY JUNE 19 - 21, 2018

Economy & Nationalism: Changes in the Russian Western Borderlands ANALYSIS BY EMIL AVDALIANI

A Focus on Element Construction

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N

ATO expansion in eastern Europe as well as the former Soviet space constitutes a problem for Russia.

The logic goes that the powerful military alliance engulfing Russia’s western borderlands could potentially constrain Moscow’s actions as regards exerting its geopolitical influence in Ukraine, Belarus and elsewhere.

The military threat to Russia emanating from Europe was essential in Russian geopolitical thinking. Historically, Europeans mounted large scale campaigns and there were even cases when the dismantling of the Russian state was almost in sight. Quite logically, when the Russians see the modern NATO expansion, Western exercises and the US military equipment sent to Kyiv and Tbilisi, they remember what happened under previous European leaders in earlier centuries.

However, in geopolitics, it is better to think and view the events from a longerterm perspective. NATO expansion is significant, but it is still a military alliance and, like every other alliance in world history, it will stop operating one day. What can be longer-lasting though, are those changes which have taken place in Ukraine and Belarus over the last three decades. Among them nationalism and economics are major phenomena.

I have written previously that both Ukraine and Belarus are essential for Russia as buffer states against the West.

A major means for Moscow to exercise this policy was to try to assimilate the Ukrainians and Belarusians and keep the lands in the Russian economic orbit.

The Romanov dynasty constrained nascent Ukrainian and Belarussian nationalism. The late 19th century was crucial as it saw the Russian imperial authorities realize that nascent Ukrainophilism had transformed into a full-scale movement for attaining larger rights for Ukraine.

The Soviet period was relatively calm, but it was evident that the western half of Ukraine was nationalistic and that it

Ukrainian flags at the pro-EU demonstration. By Sarantis Michalopoulos

was only a matter of time before Ukraine would try to split from its Russian neighbor.

What is seen today in Ukraine, following the Maidan revolution of 2014, is the splitting of the state from Russia, perhaps the final stage to what began in the 19th century. For the Russians, NATO in Ukraine is a difficult issue to stomach, but the Ukrainian sense of independence from the Northern Slavs is more fundamental. Whatever the problems are in the European Union or with US support, Kyiv will likely remain deeply anti-Russian, as half of the country is nationalistically charged while the other is at best neutral or even slightly pro-Russian.

The maximum the Russians can hope for is some additional territories in the east of Ukraine, still much less than what Russians controlled historically.

The same goes for Belarus. While it is true that nationalism in the country is nascent and religious, cultural as well as economic relations with Russia prevail. But if we look at the Belarusian independence from a wider – centuryold perspective – it will be difficult for Russia to dominate this section of its western borderlands. It is only a matter of time (perhaps years or even decades) before Belarusian nationalism will be

invigorated. That is not to say that this will happen necessarily against the Russians, but it will nevertheless make the geopolitical reality more difficult for them.

If nationalism constituted a virtual limitation of Russia’s influence in its western borderlands, economics plays no less a role. The protection of Belarus and Ukraine from the Western economic influence was one of the fundamentals of the Russian power. But this is also changing. Ukraine is now more and more related to the EU, did not become a member of the Eurasian Economic Union (EEU) and it is for the moment unlikely that this will happen any time soon.

With Belarus, it is a different story. The country in in the EEU, but nevertheless there are signals that Minsk also wants to widen relations with Western partners and China.

Thus, when we discuss what constituted Russian fundamental influence in the western borderlands, we should always remember that Russian economic dominance as well as weak Ukrainian and Belarusian nationalisms were backbones to Russia’s state power. This has been changing since the collapse of the Soviet Union in 1991 and there are signs that the process is quite fundamental.

11

hen it comes to choosing a construction company for your project, we know there are many companies who say they can meet the requirements. But when you start comparing the services, capabilities and experience these companies bring to your project, the list narrows considerably. And at the top of every list, we believe you will find Element Construction: a leader in the construction industry since 2007.

Our company is committed to the principals of quality construction in order to achieve 100% customer satisfaction.

At Element, we use construction technology to guarantee more than flashy presentations. We are constantly analyzing trends in the marketplace to find practical, effective applications of modern construction technology that result in a superior experience for our clients.

Element’s commitment to construction technology includes a wide range of applications for virtual modeling and project management, many of which are standard features on our projects.

Technology constantly evolves and is rapidly changing the landscape of many different industries, including construction. Embracing technological advancements and integrating them into our processes has given Element an edge over the competition. Our implementation of construction technology streamlines our processes and creates more efficient and effective day-to-day operations on all our projects, providing direct value to our clients.

THE HIGHEST QUALITY STANDARDS Element’s commitment to quality is evident in every aspect of our work, from the planning of our projects to the performance of construction and all the way through final acceptance. Our goal of doing it right the first time results in cost efficiencies and schedule savings for our clients.

project-specific quality management plans that include detailed work plans, outlines of task-specific means and methods, and fully-coordinated specifications and contract documents. To further eliminate errors and nonconformities, we encourage stakeholder participation at every level of our quality management process to provide feedback and ensure standards are not only met but exceeded.

CONTINUOUS IMPROVEMENT A core component of Element’s quality management program is continuous improvement. We communicate lessonslearned throughout the organization to provide standardized solutions to qualityrelated challenges. This practice, combined with our experience in many challenging construction markets, allows us to forecast and mitigate issues related to quality before they arise during construction.

COMMITMENT THROUGHOUT Each project undergoes a quarterly Project Performance Review (PPR), which is evaluated by Element’s executive team.

This ensures that quality permeates all levels of the organization.

CERTIFICATION AND TRAINING Element’s commitment to quality includes comprehensive training and certification requirements for project staff, including our subcontractors, to ensure quality work is a top priority.

CORE VALUES Our goal is to earn each client’s designation as their “Builder of Choice.” At Element, success is measured by the degree to which we exceed our client’s expectations and the achievement of their project goals and objectives. We earn this privilege by providing the utmost service, value, and quality throughout every client relationship.

PLAN THE WORK. WORK THE PLAN. To achieve this goal, Element develops

Discover What Forte Village Has to Offer this Summer ment room and three pools, guests are guaranteed the chance to immerse themselves in paradise. Moreover, visitors can enjoy morning yoga at the Ayurvedic Park in a secluded corner of the garden, or relax in the Winter Spa, a thalassotherapy pool open year-round.

With an endless choice of gourmet and buffet restaurants, Forte Village has added thefamousMichelin-starrestaurantIlLuogo Aimo e Nadia, a Peruvian traditional dining option at Peruvian Restaurant, the vegetarian restaurant Cookies Cream, tropical lunch café Mahiki and cocktail bar Piazza.

And the resort offers don’t end there, as it boasts numerous fun activities to engage guests in a complete day of amusement, including the Fencing Academy, Swimming Academy,HockeyAcademy,Bowlingspace, Nursery and Forte World – exhibiting the history of Forte Village with a new flagship store in the piazza.

Don’t have plans for summer? Visit www. fortevillage.com and discover your dream getaway resort.

BY ANNA ZHVANIA

F

orte Village has announced excitingnewexperiencesforitsguests this summer. Sitting among 47 hectares of stunning gardens along the beach, the Forte Village offers luxury five-star hotel, premium fourstar hotels and lavish villas on the coast of Sardinia. The newly renovated resort now offers luxury bungalows with private verandas, making it ideal for couples, families or small groups of friends. The recently enhanced Aquapark also creates an atmosphere of fun for kids.

Forte Village offers numerous swimming pools with the newly added choice of a private spa. The Private Spa offers an exclusive and elegant experience in the lush gardens of Aquaforte SPA, making it perfect for families and small groups of friends.

With the privacy of a separate entrance, changing rooms, Hammam, sauna, treat-

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