Issue #890 Business

facebook.com/ georgiatoday

Issue no: 890/50

• OCTOBER 25 - 27, 2016

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

First Japanese Garden Opens in Tbilisi

PAGE 2

The Shortest Road to the Strawberry Field Isn’t Always the Sweetest, or the Quickest

FOCUS

ISET PAGE 4

ON GROWTH

IMF calls for reforms to help Post-Soviet economies

PAGE 6

Juha Kähkönen, Deputy Director of the IMF’s Middle East and Central Asia Department

Choice, Sustainability and Impact in a Modern City PAGE 5

Georgia’s Kvirikashvili Meets World Bank Regional Director

BY THEA MORRISON

G

eorgia’s Prime Minister, Giorgi Kvirikashvili met with the World Bank Regional Director Mercy Tembon in Tbilisi.

According to the PM’s Press Office, World Bank (WB) is pledging support towards the Four Point Reform Plan being implemented by the Georgian government.

The WB Regional Director in the South Caucasus underlined that Georgia had conducted October 8 elections “in a free and democratic environment.” Moreover, WB representatives positively assessed structural reforms recently implemented in Georgia, further, that the International Financial Institution (IFI) is ready to continue its support of Georgia in this direction.

Tembon noted she was pleased with the achievements made through the development of business and entrepreneurship in the country, say-

ing these achievements would be adequately reflected in the World Bank Annual Report on the Ease of Doing Business, to be released soon.

Also, the WB delegation pointed out PM meets World Bank Regional Director Mercy that Georgia has Tembon (center) made significant progress in terms of poverty reduction over the last four years.

The governmental Four Point Reform Plan, actively discussed at the meeting, was first introduced by PM Kvirikashvili in February this year, aiming to modify Georgia's income tax rules, improve governance, accelerate infrastructure projects and develop higher education.

INTERVIEW: Philip Wei, Managing Director of BTL Hospitality and Hotels & Preference, Asia Pacific PAGE 7

Dechert OnPoint: Construction of Power Plants in Georgia PAGE 10

BP Prefers Agency-Recruited Employees Not to Join Labor Union PAGE 11 Prepared for Georgia Today Business by

Markets As of 21ͲOctͲ2016

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

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GBP 13.00

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1 266,46

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MSCI EM

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2 541,53

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RUB / USD

62,3730

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GT Index (GEL)

908,54

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TRY / USD

3,0810

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+4,3%

GT Index (USD)

757,15

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1,6338

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2

BUSINESS

Fourth International Accessible Tourism Conference Held in Batumi

GEORGIA TODAY

OCTOBER 25 - 27, 2016

First Japanese Garden Opens in Tbilisi

BY THEA MORRISON

A Giorgi Chogovadze at the conference

BY NINO GUGUNISHVILI

A

ccessible tourism for economic development and social responsibility was the main topic of the fourth international conference held in Batumi last week.

Organized by the center of accessible tourism, Parsa, and the European Network for Accessible Tourism (ENAT), it aimed at sharing existing international experience in creating an adapted and inclusive environment according to international standards in the sphere.

Giorgi Chogovadze, Head of the Geor-

gian National Tourism Administration (GNTA), introduced the projects that were already considered as successully implemented, giving an example of Mtskheta, the former ancient capital of Georgia and one of the most popular touristic destinations in the country, now fully tailoring to the needs of people with disabilities. As Chogovadze noted, Tskhaltubo- a balneological resort in Georgia, is next on the list, with trainings for private sector representatives now being regularly organized.

“Tours throughout the country are also being planned and, in cooperation with Sighnaghi, Kvareli and Telavi Municipalities, packages for accessible tourism are already set,” Chogovadze said.

Japanese garden opened in the National Botanic Garden of Georgia in Tbilisi on Saturday.

The garden is located over a 250 sq. m. area in the valley behind the Sololaki ridge and features Japanese traditional art features, including a Torii Gate, a symbol of beauty in Japan, and a Tasoutou style stone tower, believed to be the sculpture of happiness and luck. A Kasuga stone lantern and a traditional Japanese scarlet red bridge are also present in the garden.

The main feature of the garden is a Fuji Mountain sculpture made from parts of the lava of the Fujisan slopes, specially brought to Georgia from Japan.

The opening ceremony was attended

by Tbilisi Mayor, Davit Narmania, Deputy Foreign Minister of Georgia Davit Jalagonia, Japanese Ambassador to Georgia Toshio Kaitani and other important officials.

The opening ceremony was chosen to be held on the International Day of Tree Protection and to celebrate, the attending officials planted a number of trees in the garden: Japanese maples, Japanese Cherry (Sakura) trees, firs, pines and others.

Designed and developed by Japanese company Kosugi Zohen, the garden is to be cultivated according to all the prin-

A traditional Japanese tea ceremony was also held in the garden

ciples of real Japanese gardens.

The Japanese Government allocated 200,000 GEL (USD 85,294) for Georgia to build the garden in Tbilisi. The project was implemented with the support of the Mayor’s Office of Tbilisi, JAPAN EXPO’70 FUND and JTI Company.

The Tbilisi Mayor noted that the new garden would attract many Georgians and foreign visitors.

“This Japanese garden is the symbol of Japan…I am sure this garden will become a popular place for both Georgians and our visitors,” Narmania stated at the ceremony.

According to Georgia’s Foreign Ministry, the garden represents a symbol of

good relations between Georgia and Japan.

“In addition to the centuries-old history and traditions of the two countries, Japan and Georgia also have common fundamental values, like democracy, freedom, human rights and the rule of law,” the Deputy Foreign Minister stated.

The Georgian side also underlined the importance of moral and material support of Japan to Georgia, which is a special contribution to the country's economic and democratic development.

A traditional Japanese tea ceremony was also held in the newly-opened garden, hosted by the wife of the Japanese Ambassador.

BUSINESS

GEORGIA TODAY OCTOBER 25 - 27, 2016

Georgia’s Constitutional Court Judges Elect New Chair

G

eorgia’s Constitutional Court has a new Chair, Zaza Tavadze, who was supported by five judges out of eight members on Thurs-

day.

Tavadze, 41, replaced former Chairman Giorgi Papuashvili, whose 10-year term expired in late September. The Chairperson of the Constitutional Court is usually elected for five years but Tavadze will hold the position for the next three years and seven months as his 10-year term as a judge of the Constitutional Court expires in June, 2020.

Another candidate for the position was Irine Imerlishvili, who was appointed as a judge by President Giorgi Margvelashvili in late September.

During the Chairperson elections, Imerlishvili received only three votes.

A minimum of five votes is necessary for a constitutional court candidate to become a Chairperson of the Court.

The new Chair was disapproved by the opposition parties, who claim Tavadze was appointed through government interference in order to influence the Court.

Georgia’s main opposition party, United National Movement (UNM), says that billionaire oligarch Bidzina Ivanishvili, who is former Prime Minister and founder of the ruling Georgian Dream (GD) party, had paralyzed the Court.

“I believe that GD and Bidzina Ivanishvili managed to subordinate the Constitutional Court, which was the only

Coral Travel Names Best Tourist Companies at Starway 2016

BY NINO GUGUNISHVILI

C

BY THEA MORRISON

New Chair of Georgia’s Constitutional Court, Zaza Tavadze.

Source: Constitutional Court of Georgia

mechanism resisting Ivanishvili’s whims,” Sergo Ratiani, member of the UNM, stressed.

The Free Democrats are also sceptical about Tavadze, saying he used to adjourn hearings in order to deliberately delay some high-profile cases.

The ruling team rejected the allegations and called on the opposition not to interfere in the Court’s decision.

“This is the choice of judges and the government did not interfere in this process,” Parliament Vice-Speaker and GD member, Manana Kobakhidze, stated.

As for the new Chair, Tavadze believes he will be able “to maintain balance between the governmental branches.”

“All the cases are of the same importance for us and we will act according to the law,” he said.

The scandal surrounding the Constitutional Court began in July when then Chairman Papuashvili publicly stated that certain Court judges were being watched and blackmailed by elements within the ruling party to rule in favor of the current government in a number of outstanding cases.

Papuashvili’s claims were followed up by an investigation under the jurisdiction of the Prosecutor General’s Office, but it the mid-term results of the investigation reported none of the judges had confirmed Papuashvili’s allegations.

3

oral Travel awarded the best tourist companies with Starway Awards at its annual ceremony last week.

The Starway Award is an event initiated by the company Coral Travel fourteen years ago with the aim of acknowledging the most successful and professional partner companies in tourism.

The prestigious Starway Award is well-known among tourist agencies, thousands of which competed to receive it in 2016, while only 320 were named as the best in the business. There were 430 attendees at the ceremony itself.

The awards were given in two categories: Best and Perfect.

The award ceremony, held in Amara Dolce Vita 5*, was opened by the Commercial Director of Coral Travel.

The following agencies were awarded

for the highest sales: Global Travel, Good Travel, Sun Express, Via Travel and Toy Travel.

Royal Flight was awarded as the best charter carrier company. The award winners received memorable gifts and prizes with a special award: a sunrise in the background of a sea wave, the sun being a part of the Coral logo.

Apart from the two award ceremonies in the Best and Perfect category that were held in Gloria Golf Resort 5* and Amara Dolce Vita 5*, business trainings were also organized during Starway 2016, giving a possibility for attendees to learn about the latest trends in the most popular hotels in Turkey and hear useful tips on managing a successful tourist business. Almost 60 hotels participated in the workshop.

Starway 2016 also offered an entertainment package for guests which included a visit to Rixos World The Land Of Legends Aquapark, a Karaoke party, and a team building workshop “Wild West”.

Goga Pirosmanashvili, Good Travel and Maria Badalova, Coral Travel

4

BUSINESS

GEORGIA TODAY

OCTOBER 25 - 27, 2016

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.

The Shortest Road to the Strawberry Field Isn’t Always the Sweetest, or the Quickest

BY IRAKLI (RATI) KOCHLAMAZASHVILI AND ERIC LIVNY

N

ino Kvirkvelia and her husband Irakli Todua are not exactly your typical Georgian smallholders.

Both spouses are welleducated (both hold economics and business degrees from reputable Georgian institutions). More importantly, in the context of Georgian agriculture, the couple owns 28(!) hectare of arable land in Georgia’s horticultural heaven, Samegrelo, best known for its hazelnuts. This is a fantastic amount considering that the average size of agricultural plots in Georgia is only slightly above 1ha.

A natural born entrepreneur, Irakli was among the first Georgians to benefit from a government-subsidized loan in 2013 and venture into the then-new bay leaf nursery business, which has since become a Cinderella story of Georgian agricultural exports. It was only natural that Irakli and Nino did not think twice when a new opportunity presented itself at their doorstep in village Guriphuli (Khobi municipality) in the form of an ENPARD consortium representative.

ENPARD, which stands for European Neighborhood Program for Agricultural and Regional Development, sought to promote agricultural cooperatives as a means of bringing the badly needed scale and efficiency to Georgia’s terribly fragmented fields. And, indeed, the opportunity was about getting some new business going in the form of an agricultural co-op, with the help of an ENPARD grant and additional support from the government’s Agricultural Cooperation Development Agency (ACDA).

The opportunity was too good to pass on, but there was literally no time to think twice (or even once); the first ENPARD messenger arrived in Khobi in March 2014, with only a few weeks remaining till the deadline of ENPARD’s “business idea” competition. The couple quickly agreed that the new business would be Nino’s to develop and manage.

A refugee from Abkhazia (her family escaped the war and settled in Samegrelo

ROUTING

TBILISI - ISTANBUL ATATURK AIRPORT

ISTANBUL ATATURK AIRPORT - TBILISI TBILISI - ISTANBUL SABIHA GOKCEN AIRPORT ISTANBUL SABIHA GOKCEN AIRPORT - TBILISI BATUMI - ISTANBUL ISTANBUL - BATUMI

when she was 9), Nino remembered her love for growing (and gobbling) strawberries. And thus her business idea was born: a modern strawberry greenhouse to compete with low-quality imports that inundate the country in the offseason period.

To qualify for an ENPARD grant, Nino invited four locals to contribute their labor to the cooperative effort. The cooperative (“Shamatia”) was formally registered with ACDA in the summer of 2014, after Nino’s business idea passed the first stage of the ENPARD competition. Given Nino’s clear leadership role and the fact that practically all assets in the cooperative’s ownership (starting with land) were contributed by Nino and Irakli, the couple acquired a controlling stake (more than 2/3) in the business, with four other members sharing the rest.

SUCCESS HAS MANY FATHERS… “Shamatia” was among the first ten cooperatives selected for ENPARD’s funding and technical support. The latter included business training and expert consultations, but what mattered most for Nino, Irakli andtheirpartnerswas,ofcourse,ENPARD’s financial contribution, a so-called “recoverable grant” of about 46 thousand GEL. The term “recoverable” suggests that the entire grant amount would have to be paid back at some point in the future, but given the lack of legal and procedural clarity (pay back when, how much, to whom; sanctions in case of non-payment?), the team could get the impression that a recoverable grant is just … a grant.

ENPARD funding and Shamatia’s own contribution of 17 thousand GEL brought the total initial investment to about 63 thousand GEL, enough to build two stateof-the-art greenhouses (540 m2 each), equipped with a modern drip-irrigation system, ventilation, and heating ovens operating on hazelnut shells (as appropriate for a greenhouse built in Samegrelo). Complete with storage and drainage, a security booth, and even a mini-tractor (purchased at a 25% discount provided by ACDA), by April 2015, the two greenhouses were ready to receive the first seedlings of the “San Andreas” strawberry variety, four thousand of them.

And then the trouble started…

The locally purchased strawberry seed-

FLIGHT NUMBER

TK 379 TK 387 TK 383 TK 386 TK 382 TK 378 TK 381 TK 381 TK 380 TK 391 TK 393 TK 390 TK 392

WEEK DAYS

EVERYDAY

EVERYDAY 1/2/4/5/6/7 3 EVERYDAY 1/2/4/6/7 1/3/4/5/7 1/2/4/6/7 1/3/4/5/7

DEPARTURE

ARRIVAL

02:35 06:35 22:55 01:40 18:10 21:15 04:25 05:05 19:40 10:35 20:15 06:25 16:20

04:05 08:05 00:30+1 04:55 21:30 00:30+1 05:50 06:30 22:55 11:40 21:20 09:20 19:20

lings were doing just fine for the first 10 days, but then started to wilt. Many local “experts” offered their opinions and suggestions for treatment, but the four thousand San Andreas seedlings would not live another day. A post-mortem examination of the seedlings, as well as the local soil and water samples in a European laboratory, revealed that the seedlings were infected with a lethal decease.

The cost of laboratory tests (€400) brought the total amount of damages to well over 15 thousand GEL, including the loss of six months’ worth of income.

LEARNING FROM OWN MISTAKES This could have been the end of Shamatia, but Irakli and Nino had the financial stamina for a fresh start, this time guided not only by sweet childhood memories, but also first-hand experience and advice arriving in the form of a qualified international expert provided by the Georgian Association of Berry Producers. The entire plot under the greenhouses was disinfected. Three thousand new strawberry seedlings, about 50% of total Shamatia capacity (to reduce the risk of another grand failure), were ordered from Spain at the rather attractive price of 1.2 GEL per seedling. The second round of planting took place in October 2015, following proper preparation of the soil (mixing it with straw).

Currently, the future of Shamatia seems to be bright. The productivity of San

10 Galaktion Street

Andreas strawberry plants peaks after two years, but the plants may last 4-5 years, allowing the team to accumulate sufficient financial resource for replanting and additional investment. While the first harvest, in February-March 2016, was rather modest, the next one, planned for March-July 2017, may reach 2 tons, i.e. about 0.5gk per seedling (compared to the maximum capacity of 1.2kg for the San Andreas variety.). Another harvest is expected in November and early December. Achieving higher productivity would require continuous harvesting during 10 off-season months through the use of heating. This, however, does not (yet) make sense in Georgia’s specific strawberry market situation.

COOPERATION IN MARKETING? A very important business dilemma facing Shamatia is the choice of the harvesting period. Strawberries fetch the highest prices (up to 10 GEL) in winter time, yet producing during the cold season would require switching on expensive heating. Unfortunately, Shamatia’s modest production volumes do not allow it to sell through modern supermarket chains, most of which will only work with suppliers able to deliver 80-200 kg of standardized strawberry on a daily basis. Thus, Shamatia’s only choice is to sell in the local markets (Khobi, Senaki and Zugdidi) at the much lower price of 3.5-5 GEL. At this price point, there is no reason for Shamatia to switch on an

expensive heating system and expand the harvesting period.

Importantly, a small farming enterprise may be locked into this kind of “bad equilibrium;” in the absence of resources to expand production volumes to meet modern retail (and certainly export) requirements, small farms (and small production cooperatives) may be forever doomed to supply only the local markets, competing with each other rather than with importers.

Given the sheer size of their agricultural holdings, Irakli and Nino may be able to break out of this vicious cycle.

To this end, they plan to add two more greenhouses (including a hydroponic one!) and plant open field strawberries to keep themselves busy during the warm seasons. As far as their smaller competitors are concerned, the only way out is to come together in the form of a regional marketing cooperative. For the moment, the ENPARD is supporting four strawberry production cooperatives, including Shamatia, in the Samegrelo and Guria regions, for a total of nine greenhouses. If/when all of them reach full capacity, they may be able to produce 15-25 tons of strawberries, enough to qualify for a lucrative, long-term supply contract with Georgian supermarket, hotel or restaurant chains. Making this dream become a Georgian reality will require a lot of planning and coordination, not to mention real agronomical expertise and business calculation.

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

BUSINESS

GEORGIA TODAY OCTOBER 25 - 27, 2016

Choice, Sustainability and Impact in a Modern City

Fabrika, an innovative urban community in central Tbilisi, based in a Soviet-era sewing factory building.

Source: cbw.ge

BY ZYGIMANTAS KAPOCIUS

T

he city as an entity constitutes the most productive economic, cultural and social environment in a globalized society, playing an essential role in human development. By 2050, according to a UN study, two thirds of the global population are estimated to live in urban areas. This rapid urbanization, however, comes at a cost: the trends of urban sprawl have serious implications on the city commons. These often prove to be unsustainable, omitting the most vulnerable groups and distorting the urban social fabric. GEORGIA TODAY delves deeper into the nexus between the citizens, the institutions and the business community in an attempt to understand what could constitute an inclusive city in Tbilisi and beyond.

Tbilisi’s Agmashenebeli Avenue and its vicinity has recently become a playground for the capital’s young, ambitious and trendy. From a techno club sheltered in the basement of Dinamo Stadium, to sophisticated restaurants offering Korean delicacies, the once-forgotten part of Tbilisi finds itself amid a full-fledged urban revival. Georgia’s capital is fast embracing global urban trends, including the controversial process of gentrification, when more affluent residents move to deteriorated neighborhoods. This transformation of urban space proved to be both a blessing and a curse in other metropolitan areas like New York and Berlin. While the implantation of new businesses and artistic communities conditions for a more vibrant, attractive and safe environment in these neighborhoods, vulnerable social groups inhabiting the affected areas tend to be pushed out due to inflated real estate prices and loss of affordable housing.

Fabrika, a multifunctional space targeting aspiring artists and entrepreneurs, is an interesting case in point. Based in an abandoned Soviet sewing factory, it seeks to become a venue for exchange of ideas and socialization among creative minds from Georgia and abroad. In addition to a 400-bed hostel, several bars, cafés, art studios and exhibition halls, this urban community also houses Impact Hub Tbilisi, part of an international network of innovation labs, business incubators and social enterprise community centers. The people behind this community are all young Georgian professionals, taking pride in their Tbilisian upbringing, diverse education and impressive experience. Inaugurated just earlier this month, Impact Hub Tbilisi dedicated one of its first panels to discussing the challenges, the responses and the success stories of inclusive cities.

Curiously, the pathways of gentrification in Tbilisi were not always driven by communal innovation and individual ambition, as observed in other urban metropolises. In a bid to transform the Georgian capital into a ‘European city’ following the 2003 Rose Revolution, the government endorsed ‘policy-driven gentrification’, which was particularly manifested in Tbilisi’s Old Town. In 2009, the Municipality of Tbilisi launched a scheme titled “New Life for Old Tbilisi.” The policy emerged as a response to the 2008 housing bubble burst that left USD 700-million-worth real estate development projects in suburban Tbilisi unfinished. With a view to tackling this issue, the municipality suggested subsidizing the completion of the residential blocks and offering them to the inhabitants of

the Old Town in exchange for land in the historic quarters. In turn, the vacant properties were due to be put on tender for property developers, which allowed them to use the profits to pay off toxic debts and revitalize Tbilisi’s crumbling real estate market.

While the scheme was hailed for creating new jobs and providing better housing for poor families in the Old Town, critics were quick to point out the aggressive pace at which the policy was implemented with little regard to authenticity, heritage, and the social fabric. Swaths of the Old Town were subject to a “Disneyfication” as historic buildings were demolished and replaced with cost-effective replicas. Nato Tsintsabadze, the Secretary General of the Georgian National Committee of International Council on Monuments and Sites (ICOMOS), observes that such ventures are symptomatic of “the post-Soviet nihilism towards the local communities,” as institutions end up being unaccountable for their actions. Since 2000, ICOMOS is involved in a multidimensional revitalization project of the Beltemi quarter of the Old Town, which aims to mobilize the local community in the context of heritage conservation. As opposed to “New Life for Old Tbilisi,” the initiative is oriented towards creating collective awareness and expertise of local house owner associations, particularly with respect to traditional building techniques and fundraising strategies to finance restorations. Alas, the initiative is considerably limited by the neglect of institutions, emblematic of the absence of a sustainable urban strategy framework in Tbilisi.

Ukraine’s Ivano-Frankivsk is fast emerging as a success story in the context of urban development strategies in the post-Soviet space. The potential of this small Ukrainian city was energized by a platform Teple Misto (Ukrainian for ‘Warm City’), which brings together citizens, businesses and the local municipality to take part in the urban transformation processes. The platform aims to debunk the stereotype of ‘a city for tourists’ and instead adapt a ‘city for residents’ approach. According to Yuri Fylyuk, the CEO of Teple Misto, 80 percent of the funds garnered through financial contributions of investors are distributed along numerous urban development and social impact projects, ranging from the visual rebranding of the city to urban education initiatives. Administrative costefficiency and transparency are described as key values of Teple Misto, a distant reality for many other urban development schemes in the postsocialist countries. What makes the initiative unique is the rare organic consensus between the private and the public sectors, which, as evidenced by the recent success of Teple Misto, could condition for a productive ground for inclusive and sustainable urban development. Fylyuk, inspired by the success of the platform in Ivano-Frankivsk, hopes to expand the initiative to Ukraine’s capital Kyiv, a metropolis of almost 3 million inhabitants.

Modern cities prove to be attractive and productive not merely because of world-class infrastructure, but also because of the diversity of choice, either cultural, professional or economic. A successful, sustainable city is not defined by its skyscraperpacked skyline, but by the ease of pursuing an individual impact that opens rather than closes the doors of opportunity for fellow citizens. Thus, to condition for a more inclusive concept of urban development, it is necessary to balance out the often diverging interests of different stakeholders, namely the local communities, businesses and institutions.

5

6

BUSINESS

GEORGIA TODAY

OCTOBER 25 - 27, 2016

IMF Calls for Reforms to Help Post-Soviet Economies Margarita Simonyan with Russian President Vladimir Putin in RT's Moscow bureau. Source: Kremlin.ru

UK Bank Closes Accounts of Russia’s Controversial News Network RT

BY NICHOLAS WALLER

R

ussia’s controversial statefunded English news network RT (formerly Russia Today) announced earlier this week that its banking services in the UK had been abruptly frozen, claiming the British government was trying to muzzle the Kremlin-controlled channel.

“Long live freedom of speech!” Margarita Simonyan, the 36-year-old ethnic Armenian editor-in-chief of RT, wrote sarcastically on her Twitter account, adding that the bank refused to allow the network to appeal the decision, the New York Times reported.

RT claimed that NatWest – the UK’s largest commercial bank – abruptly froze their existing bank accounts and refused to provide an explanation for the decision.

The Bank – which is a subsidiary of the Royal Bank of Scotland Group – released a statement saying that RT’s accounts were not being frozen, but would be closed by December 12 following a decision by the group’s board of directors.

Immediate after the release of the bank’s statement, RT reversed its story and

confirmed that the bank was simply closing the accounts and would allow the broadcaster to continue to deposit and withdraw funds until the December cutoff date.

The British government has denied any involvement in NatWest’s decision saying in an official statement, “the U.K. government hasn’t changed the sanctions and obligations related to Russia since February 2015. For that reason, this is a decision that only NatWest has made, possibly based on their own risk appetite.”

RT’s Simonyan blasted the bank’s decision, calling it “incomprehensible and without warning.” She added that the move was part of a concerted effort in Britain, “to ostracize, shout down or downright impede the work of a free and independent network like RT.” NatWest’s decision comes after RT’s accounts with Barclay’s, the network’s principal bank in the UK, were closed in July 2015.

Several members of RT’s staff, including the president of its parent company – Kremlin ally Dmitry Kiselyov – have been included on the EU and US’ sanctions list for their support of the invasion of Ukraine and annexation of Crimea.

The network was launched in 2005 at the behest of Kremlin-insider and former Media Minister Mikhail Lesin.

RT evolved from a network of soft

programming that highlighted Russia’s cultural and economic traits into a virulently anti-Western Kremlin mouthpiece that portrays the West as a grim, divided, brutal, decadent society, with absurd claims that it is overrun with violent immigrants, Fascists and predatory homosexuals.

Reports on RT often fawn over President Vladimir Putin and his handling of affairs at home and abroad. The network's journalists generally castigate the EuroAtlantic integration ambitions of Georgia and Ukraine, claiming the democratically elected governments in both countries are merely puppets of the US. RT's reporters are also known to lionize the causes of pro-Russian separatists in Ukraine's Donbass, Georgia's occupied regions Abkhazia and South Ossetia and Moldova's breakaway Transnistria region.

The network - the shrill Simonyan, in particular - has gained a reputation for coming down hard on RT journalists who refuse to tow the Kremlin line.

It has openly backed the Republican nominee for the US Presidency, Donald Trump, and campaigned vigorously for a Brexit vote earlier this year.

RT regularly features conspiracy theorists and guests who are sympathetic to Putin's view of the West - including UK Labour Party leader Jeremy Corbyn and Wikileaks founder Julian Assange.

The International Monetary Fund headquarters in Washington, USA. Source: jamaicaobserver.com

BY THEA MORRISON

T

he Caucasus and Central Asia (CCA) region is embarking on one of its slowest economic recoveries since independence, the International Monetary Fund (IMF) announced on Friday, calling for more reforms in the region in order to help post-Soviet economies.

The IMF released its Regional Economic Outlook for the Middle East, Central Asia and CCA on October 19 in Dubai, United Arab Emirates, and October 21, in Almaty, Republic of Kazakhstan which forecasts the region’s growth in 2016 to be 1.3 percent, lower than in any other year since 1998.

According to the report, deepening conflicts, low oil prices, and spillovers from the slowdowns in Russia and China continue to weigh on economic growth in the Middle East, North Africa, Afghanistan, Pakistan (MENAP) and the CCA region.

“This growth rate is being particularly weighed down by the region’s oil exporters—Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan—who are facing growth of 1 percent this year,” the document reads.

However, the IMF says the situation is better in the region’s oil importers— Armenia, Georgia, the Kyrgyz Republic, and Tajikistan, whose economies are forecast to grow at 3.7 percent, unchanged from 2015.

The document says that the CCA region has been hit by large and persistent external shocks since 2014, particularly the slump in commodity prices and slowdown in its key economic partners.

“Medium-term prospects are weak, with growth projected to average 4 percent in 2018–2021, half that of 2000–2014,” the report reads.

With many countries opting for more exchange rate flexibility, the IMF says that the need to strengthen monetary policy frameworks has become a priority.

“This must be complemented with further steps to contain risks to financial stability and intermediation, including capital injections, restructuring and closing of troubled banks, and revamping of lending practices, as well as strengthening of financial surveillance and macro-

The economies of the region’s oil importers Armenia, Georgia, the Kyrgyz Republic, and Tajikistan are forecast to grow at 3.7 percent, unchanged from 2015 prudential and crisis management frameworks,” the IMF says.

Moreover, the IMF recommends that the CCA countries undertake wide structural reforms of their economic models, especially to strengthen governance, accountability, property rights, and financial intermediation, all of which are areas the region lags behind on compared with other emerging markets.

The Deputy Director of the IMF’s Middle East and Central Asia Department, Juha Kähkönen, said that the CCA countries need to pursue the right mix of policies and structural reforms.

“For these countries, the immediate priorities are to direct what spending is available toward pro-growth areas—such as education, training, and health care.

At the same time, these countries need to prepare and implement medium-term fiscal consolidation plans to preserve fiscal space,” Kähkönen said, adding that such actions will help to support growth in the near term, while boosting competitiveness and keeping inflation and debt levels in check.

As for the global growth, according to the report, it is projected to slow to 3.1 percent in 2016 before recovering to 3.4 percent in 2017.

BUSINESS

GEORGIA TODAY OCTOBER 25 - 27, 2016

7

INTERVIEW: Philip Wei, Managing Director of BTL Hospitality and Hotels & Preference, Asia Pacific

BY NATIA LIPARTELIANI

H

otels & Preference Hualing Tbilisi is a 5 star Hotel offering visitors a broad variety of facilities, including dining outlets with Asian, European and local cuisine, a recreation center with a 25 m-long indoor swimming pool, a gym, 3D golf simulation, 246 guestrooms and unique Meeting Facilities.

BTL Hospitality owns the master franchise rights of French top luxury international hotel group HÔTELS & PRÉFÉRENCE and was founded in 2012. BTL Hospitality aims to mix the elegant French style with the tradition with local characteristics of China in order to build a new concept in hotel management.

On the 14th of October, Hotels & Preference Hualing Tbilisi celebrated its one year anniversary. The

event was specially attended by Managing Director of BTL Hospitality, Mr. Philip Wei. GEORGIA TODAY met with Mr. Wei to find out more about BTL hospitality and its future plans.

famous Chinese hospitality companies in the world.

WHAT ARE MAIN ORGANIZATIONAL OBJECTIVES AND MISSIONS OF BTL HOSPITALITY?

I think one of the important benefits is that BTL Hospitality is a Chinese company and China has an industry which has been growing rapidly over the last 30 years. The Chinese industry is already ready to have a strong Chinese brand to approach the international market with. The advantage of Hotels and Preference is that it has existed for 15 years and has a sufficient amount of experience in the hotel industry to share its practice with us and provide us with European standards of elegance and eloquence.

BTL hospitality is the company that I created four years ago. I’ve been working for 25 years in this industry, in almost every department and positionfrom room service guy to Vice President, from 4 star hotel to luxury resorts. After attaining a great deal of experience in this industry, four years ago I finally decided it was time to do something on my own, instead of working for some big international companies. The same year I contacted Hotels & Preference and we signed the franchise agreement for our mutual benefit. My mission involves setting up a 20 year-long target: in twenty years I want our company to be among the top ten most

WHAT IS THE MAIN ADVANTAGE OF BTL HOSPITALITY AND THE HOTEL CHAIN HOTELS & PREFERENCE?

WHY WAS THE GEORGIAN MARKET ATTRACTIVE TO YOU? I think the Georgian market has high potential for growth; it is a growing market, like China. There have, of course, been times when the economy was at a standstill, but recently I have seen growth that indicates to the huge potential for us foreign investors. Additionally, Georgia is famous for its hospitality, delicious food, beautiful scenery, attractions for tourists – everything that is necessary for the hospitality sector.

WHAT MAIN LOCAL FACTORS NEED TO BE TAKEN INTO THE CONSIDERATION WHEN OPENING A BRANCH IN TBILISI? I think here we face with same challenges that China was facing 25 years ago. As for our brand, as we aim to develop the highest luxury standard, I would not say that challenges are associated with any one country or market, but with the whole system. Our slogan is "tradition with elegance", in every country we try to keep traditions and enrich it with French elegance- sort of similar to the concept of ‘globalization-’ but our activities are not too standardized. We aim to celebrate the difference, but also keep the standards.

HOW DO YOU AS AN ORGANIZATION

KEEP UP WITH THE INDUSTRY TRENDS? It is very important to keep an eye on industry trends as they are changing so rapidly. Where, before, the biggest travelers were from the western world, nowadays there are from Asia. It is important to know your market and always have up-todate information. We always work with international companies in that sense, like STR, for example.

IS YOUR GROWTH AS A HOTEL COMPANY LIMITED BY HOW MANY HOTELS YOU BUILD? I would say it is an important part of our mission.

I have set out my targets. I am targeting 3000 hotels in the world. It is difficult to keep the relevant standard and quality but it is very much possible, with dedication and the right attitude.

WHAT ARE YOUR FUTURE PLANS FOR HOTELS & PREFERENCE HUALING TBILISI? We aim to build two more hotels in Georgia. We are planning to continue our business relationship for the long term.

8

BUSINESS

GEORGIA TODAY

OCTOBER 25 - 27, 2016

Phoka Monastery Nuns and their Magical “Laboratory”

BY MAKA GOGALADZE, CHAIKHANA

Aladasvhili’s Renewed Clinic Offers High-quality Medical Services to Patients

BY NATIA LIPARTELIANI

O

ctober 21 saw the celebration of the anniversary of the Alexander Aladashvili renewed clinic, attended

by Minister of Health, Labor and Social Affairs, David Sergeenko.

“Today, we are present in a historical place, in a clinic which is over a century old,” the Minister said, addressing attendees. “Generations of doctors were brought up here. And a lot has changed in the clinic, fortunately for the good. I am very glad that now, with new technology, old wisdom, and new knowledge, more patients can be treated and better results can be achieved."

The renewed clinic is a multi-clinic medical institution, the history of which begins in 1880, meaning it has been serving the country’s capital for almost 140 years. The last two years have seen its full restoration, renovation, and equipping with ultra-modern equipment.

Clinical Director of the Alexander Aladashvili clinic, Professor Tamaz Chkhikvadze, says that it offers both in-patient and emergency assistance. “The service area has been expanded with neurosurgery, traumatology, orthopedics, eye surgery other areas being added,” he said.

"Today is notable for three reasons,” Chkhikvadze added. “We were able to revive the old traditional hospital to attract a high professional level of specialists, and to equip our hospital with new technologies. Today we employ 351 people. We continue tradition and we want to expand our services. We are heading towards even more innovations!”

On the anniversary day, the bas-relief of Alexander Aladashvili’s son, Professor Vakhtang Aladashvili, was opened.

Additionally, the site where Mikhail Chachava conducted lectures was named after him.

The Alexander Aladashvili building is located at Uznadze Street #103 (former Kamo Street) and is on the list of the city’s historical and cultural monuments.

It’s motto? “The tradition of innovation!"

F

ive nuns and one novice live in St. Nino’s Nunnery, which opened in 1992 in the village of Phoka, Samtskhe-Javakheti, led by Mother Elisabed. They produce a European style of Georgian cheese, honey, chocolate and other products. The nuns also work on enamel and make mosaics.

In 1988, the Catholicos-Patriarch of Georgia, Ilia II, during a trip through the Javakheti region, bought a house near a church which had been built in the 11th century.

In 1992, the leader of the nunnery, Mother Elisabed, went to Phoka with two novices and started living in the house of the Catholicos-Patriarch with an Armenian family who lived there illegally. They shared the space, which was separated by just a curtain.

The nunnery first started to broaden its activities in 2001, producing a greater variety of products, the leading field being cheese-making.

The nuns produce 16 different types of cheese with European technology. They initially started by producing Georgian cheese, however, the harsh winter and closed roads made selling cheese very difficult, and it often became spoilt. The nuns were especially interested in Blue Cheese culture, first brought to the region

by Catholic missionaries in the 18th century, where the older the cheese is, the more precious it becomes. Mother Rakil and Mother Shushanik visited a nunnery in France to learn this particular cheese-

making method and when they returned, they started experimenting. Five years later, they started producing it themselves.

Next, the crafty nuns started producing artisan jams from local fruit. Now they produce approximately 40 types of jam. They also have honey in the nunnery- Mother Sidonia takes care of the bees.

The nuns also produce a few types of chocolate, available to buy in the little shop in the nunnery yard.

The 11th century church was renovated in 2000 and is now fully functional, decorated with enamel and mosaic, handmade by the nuns. The nuns started working on enamel in Phoka from 2002.

Later on, a school was opened in the nunnery in order to allow the nuns to form a better bond with the local community. Approximately 60 students learn Georgian and English there, totally free of charge. A lot of students have chosen

to get a higher education in the Georgian language after graduating from the school.

This article was originally published on Chai Khana: www.chai-khana.org Chai Khana, winner of the 2015 EU Prize for Journalism for most informative online media, and the International ADAMI Prize for Cultural Diversity in Eastern Europe, is a multimedia platform seeking to revitalize the development of independent media in the South Caucasus for a more informed and engaged citizenry.

BUSINESS

GEORGIA TODAY OCTOBER 25 - 27, 2016

9

ESOMAR Member Companies Organize Meeting with Industry Professionals

BY NATIA LIPARTELIANI

O

n October 18, GIPA (Georgian Institute of Public Affairs, School of Social Science), the association ESOMAR and its Georgian member companies, met with Georgian marketing professionals and students.

The participants had an opportunity to find out more about successful research cases conducted by Georgian research companies and to learn of international standards that exist in the field. They also got the chance to listen to the online presentation of invited speaker, Dr. Stephen Needel, and ask him questions.

Keti Javakhisvhili, representative of IPM research, Tako Basilashvili of ACT Georgia, Giorgi Abramishvili of Marketing Intelligence Caucasus- TNS’ official licensee, and Nino Gogoladze, Managing Director of TV MR GE Nielsen Television Audience Measurements official licensee, all shared their experiences with participants through PowerPoint presentations and Q&A sessions.

Since 1948, ESOMAR has been aiming to promote the value of market and opinion for effective decision-making. ESOMAR is a large organization with 4,900 members in over 130 countries. In Georgia, only 5 companies are members of this association: IPM research, CT Georgia, Marketing Intelligence Caucasus: TNS’ official licensee, TV MR GE Nielsen Television Audience Measurements official licensee and Research House Georgia.

Through industry-specific and thematic conferences, a large pool of publications and best practice guidelines, ESOMAR aims to raise international standards in the field of marketing research. Further, it provides ethical guidance and promotes self-regulation in partnership with a number of associations across the globe.

ESOMAR also helps its members when

Source: SIS International Market Research

dealing with legal problems in the countries in which they operate. Nino Gogoladze gave the example of when ESOMAR helped Nielsen Georgia to win a dispute with the Government of Georgia. The governmental body wanted the company to give out information on research participants that, according to ESOMAR guidelines, were confidential, thus the association provided strong legal and ethical support for its member company to win the dispute.

Gogoladze also discussed a number of research findings on TV audiences this year, presenting a list of the most active companies in terms of placing televised advertisements, which included Bank of Georgia, PSP, Natakhtari, Zedazeni, TBC bank, Geocell, Net Credit, Elit Electronics, Tolia and Magti. The list is especially important for advertising agencies and Georgian broadcasting companies, in order to know who their biggest potential customers are, as well as for companies themselves to know who their main competitors are in terms of promotion and marketing.

Gogoladze went on to present Nielsen’s Internet Audience Measurement system in Georgia, as well as social media reach and average frequency. Facebook was presented as the widest used platform (with 81.46% reach), while the usage of LinkedIn, Twitter, and Pinterest are relatively insignificant in Georgia. This might be important information for digital marketers and advertisers seeking to know which new media platform they should be targeting in order to penetrate the Georgian digital market.

As technology evolves, a large volume of data is gathered on a day-to-day basis.

Yet there is still no definitive answer among scientists, researchers or business professionals how to use and analyze this “Big Data” in order to achieve better decisions and make rational strategic business moves.

“Even though large organizations, such

as Google, IBM, and SAS, all use Big Data in terms of marketing (when it comes to Google), finance (IBM), info tech (IBM, SAS) and operations (IBM, SAS), using Big Data in research and business operations has its downsides in terms of validity,” said guest speaker Dr. Needel.

“Using Big Data in science in order to conduct successful business operations is not realistic, as in science deterministic behavior is being assumed, while Big Data assumes that there is behavioral consistency or homogeneity of domain,” Dr. Needel said. “Shoppers, for example, are not consistent or homogenous, in fact, they can be irrational; they seek variety and are subject to mood, thus simply having more information does not necessarily guarantee the utility of it. Causality is unclear. It is also unclear in having one data set, according to which characteristic that data should be organized. Big Data does not create its own statistical models; results need to be checked for anomalies and rationality. Further, there are questions with competency as using Big Data has no obvious context for results and data crunching companies do not always have the expertise to interpret,” he added.

The presentation at GIPA also saw a number of Georgia-relevant success cases being presented. Representative of ACT Georgia, Tiko Basilashvili, talked about the successful utilization of research that ACT Georgia carried out for PSP, the Georgian pharmaceutical company, in order to find out why its customers were switching to its competitor, GPC. The research outcomes elicited the need for improvements in customer service, 24-hour service, better organization of physical space, new design of the logo, and better distribution of the products.

In the end, PSP was able to successfully bring back its customer base. Such cases illustrate how relevant and clear research design can have an important influence on strategic business decisions.

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BUSINESS

GEORGIA TODAY

OCTOBER 25 - 27, 2016

Dechert OnPoint: Construction of Power Plants in Georgia

D

echert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Ruslan Akhalaia and Irakli Sokolovski, as well as Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper to provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.

The Ministry of Energy of Georgia (the “Ministry”) has recently released Georgia’s Energy Strategy for 2016-2025 (the “Strategy”) that sets out the national energy policy of Georgia for the next decade. The Strategy focuses on the potential of the country to effectively exploit the existing hydro, wind, solar, biomass and geothermal resources. By attracting domestic and foreign investments, the Strategy aims to reduce the dependence on imported energy resources and to increase export potential in order to transform Georgia into a regional hub for clean energy production and trade.

This OnPoint article reviews the rules and procedures of expression of interest for construction, ownership and operation of power plants in Georgia.

EXPRESSION OF INTEREST On 7 September, the Government of Georgia (the “GoG”) introduced amendments to the Decree of the GoG on Approval of the Rule of Expression of Interest for Technical and Economic Feasibility Study, Construction, Ownership and Operation of Power Plants in Georgia (the “Decree”) in order to attract investments into the energy sector.

According to the Decree, a list of potential power plants approved by the Ministry is published on its official web-page along with basic information about each power plant (the “Approved List”).

Based on an investor’s initiative or application, the Ministry makes a decision to announce the expression of interest for a particular project (the “EOI”) from the Approved List. The terms and conditions of EOI shall be published on the official web-page of the Ministry, covering details of the requirements, including but not limited to the technical parameters, the estimated investment costs and the terms for the commencement and commissioning of the power plant.

According to the Decree, an interested party shall submit an application to the Ministry with the relevant information and documentation requested by the terms and conditions of the EOI. The applicant shall also submit its proposed price for electricity to be sold to the state-owned Electricity System Commercial Operator (“ESCO”) and financial model, which determines financial indicators, including investment expenditures, corresponding to the suggested price (the “Financial Model”).

Additionally, the interested party shall present a bank guarantee in favour of the GoG in accordance with the total installed capacity of the power plant in the amount of USD 5,000 or equivalent in Euros per MW (the “Preconstruction Guarantee”). The Preconstruction Guarantee shall be issued by a bank licensed in Georgia and/or by a member of the Organization for the Economic Co-Operation and Development. The total amount of the Preconstruction Guarantee shall not exceed 15% of the share capital of the issuing authority.

SELECTION OF THE WINNER Only a legal person or a consortium of legal persons is eligible to apply for the EOI. The application, the submitted documentation and the Preconstruction Guarantee of an interested party shall comply with the terms and conditions set out in the EOI. The winner of the EOI (the “Winner”) is determined by resolution of the GoG. If the number of

applications submitted in accordance with the terms and conditions of the EOI does not exceed one, the GoG may declare such participant as the Winner. In the event that more applications are submitted, the GoG shall announce as Winner the applicant that proposed the lowest electricity price based on the corresponding Financial Model. If there are two or more applications with equal lowest prices and corresponding financial models, the GoG shall grant applicants additional time to submit improved proposals and then select the Winner based on the same criteria.

At the end of the selections process, the Ministry shall return Preconstruction Guarantees to all participants of the EOI, except the Winner. Based on a resolution of the GoG, a memorandum of understanding will be executed between the GoG, ESCO and the Winner (the “Memorandum”).

The GoG is also authorized to conclude a Memorandum regarding the power plant that is not included in the Approved List based on the interest of the investor. Terms and conditions of such proposal are set out by an individual administrative act of the Ministry.

MEMORANDUM OF UNDERSTANDING The Memorandum is composed of two phases: (i) a Preconstruction Phase; and (ii) a Construction Phase.

In the Preconstruction Phase, in addition to the obligations set out in the Memorandum, the Winner shall complete the technical and economic feasibility study of the project and environmental impact assessment report.

In the Construction Phase, in addition to the obligations set out in the Memorandum, the Winner shall: (i) obtain the right to use the land within the area of the project; (ii) obtain any and all necessary permits for the implementation of the project; (iii) commence the construction of the power plant; (iv) conduct the construction works in accordance with the construction, environmental and safety regulations of Georgia; (v) complete the construction works; and (vi) commence operation in accordance with the respective rules of Georgia.

At the same time, in the beginning of the Construction Phase the Winner shall submit a construction guarantee in favour of the GoG (the “Construction Guarantee”) for either (i) USD 100,000 or its equivalent in Euros per MW for the power plant with 100 MW or less total installed capacity; or (b) USD 50,000 or its equivalent in Euros for the power plant with more than 100 MW installed capacity. The submitted Construction Guarantee shall meet the criteria set forth for the Preconstruction Guarantee.

MANDATORY SALE OF ENERGY The Winner shall have the obligation to sell to ESCO the full volume of electricity generated in the January-March and the September-December periods of each year for ten consecutive years from the commissioning and commencement of the operation of the power plant.

In other words, for a period of 7 months per year, ESCO is obliged to buy and the newly build power plant is obliged to sell to ESCO full amount of generated electricity.

After three months from commencement of operation of the power plant, the Winner shall ensure, at its own cost, the preparation of an audit report carried out by an audit company approved by decree of the GoG (the “Audit Report”). The Audit Report shall estimate reasonable investment expenditures related to the construction and commissioning of the power plant (the “Reasonable Expenditures”). The Winner shall reflect such Reasonable Expenditures in the Financial Model.

The Winner shall sell the energy to ESCO in accordance with the price suggested during the EOI. In accordance with the Reasonable Expenditures, the Audit Report may suggest lower price for mandatory sale of energy. After reflecting Reasonable Expenditures in the Financial Model, the Winner shall assess the profitability of investments over a period of time through the internal rate of return. The price shall be reduced once if the Audit Report suggests a lower price and internal rate of return of the project remains the same. The Memorandum shall be amended respectively. *** Note: this article does not constitute legal advice.

You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice.

Dechert Georgia is the Tbilisi branch of Dechert LLP, a global specialist law firm that focuses on core transactional and litigation practices, providing world-class services to major corporations, financial institutions and private funds worldwide.

With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit www.dechert.com or contact Nicola Mariani at nicola.mariani@ dechert.com.

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BUSINESS

GEORGIA TODAY OCTOBER 25 - 27, 2016

11

BP Prefers Agency-Recruited Employees Not to Join Labor Union

BY THE GEORGIA TRADE UNION CONFEDERATION

T

he dispute between BP Georgia, its Human Resources Recruitment Agency (HRRA), and HRRA-contracted employees might soon shift from the Ministry of Labor, Health and Social Affairs of Georgia to the Civil Court of Georgia. There are already two lawsuits against BP and one against its contractor-recruitment agency accusing them of discrimination in the workplace, violation of freedom of expression and violation of freedom of assembly and association.

In August 2015, BP employees hired through the HRRA requested their employers review their salaries and adjust them according to the inflation and GEL devaluation rate (45%) in Georgia. Notable is the fact that BP had approved the same salary review and correction in Azerbaijan, another country of the AGT (Azerbaijan-Georgia-Turkey) Region, and satisfied their employee’s demands.

In Georgia, all of the requests from employees were denied; moreover, health insurance was reduced from 100% coverage to 80%. Disappointed, the group of employees created a primary union under the Georgian Gas and Oil Workers Trade Union (a GTUC affiliate) to defend their legal rights.

Unionization was not taken well by either BP or their HRRA authorities. BP country head Chris Schlueter, who is experienced working with Labor Unions, gave his consent to HRRA Director Nodar Shurghaia, who forwarded an e-mail to all employees saying that “BP’s preference is for HRRA employees not to join the Union”. Such negative indication from company top management was considered a blunt form of coercion by many of the employees, who, as a result, decided not to join the Primary Labor Union or to leave if they had already enlisted. The remaining employees who were brave enough to “go against the threat and moral pressure” joined ‘Pipeline Union’ - a professional organization of laborers working for the HRRA and for all South Caucasus region energy carriers.

Since it is mandatory for an employer to engage in collective bargaining with a trade union, in case the latter comes forward with such an initiative (Article 41, #4, Georgian Labor Code), the Committee of the Pipeline Union (affiliate of the Geor-

There are already 2 lawsuits against BP and 1 against its contractor-recruitment agency accusing them of discrimination in the workplace, violation of freedom of expression and violation of freedom of assembly and association

gian Gas and Oil Industry Workers Trade Union) prepared a draft agreement with the terms and conditions, in accordance with Georgian Law, and forwarded it to their employers for review and approval.

BP and HRRA lawyers have dragged out the process and have yet to sign the agreement. In the draft collective bargaining, the employers' put such conditions that made it impossible for union members to arrange meetings. In particular, they highlighted in the agreement that union members could meet during working hours only and their time spent on labor union affairs would not be reimbursed. Since most of the union members, as well as the committee members, work in different regions of Georgia, the limitation of two hours made it impossible for union members to organize a meeting. There was willingness to meet after working hours but the employer determined that the meeting room would not be accessible for employees after working hours. After 11 months and numerous attempts from the Union, the collective bargaining has still not been signed between the parties.

When the Pipeline Union faced such an organized level of coercion from BP and their recruitment agency, they decided to use their legal right and referred to the Ministry of Labor, Health and Social Affairs (MoH) of Georgia for help, asking the government for official Labor Dispute Mediation. Although BP refused to participate in the mediation, HRRA agreed and attended the mediation opening on July 14.

11 demands were reviewed and preliminarily agreed on by participants of the mediation but within two weeks the employers had broken off the talks. As the Head of the Department of Labor and Employment Policy of MoH, Elza Jgerenaia, stated in her official letter (N01/77433) to the Pipeline Union, management of HRRA Ltd. had “challenged the lawfulness of the government mediation process and, despite our numerous efforts to meet with company management to continue the negotiations, it has been impossible to do so.”

“It is regrettable when a British company, whose country is the founder of the first Trade Union, employs such methods of coercion and, when challenged, avoids negotiation of any kind,” said Vakhtang Pirmisashvili, Deputy Chairman of the Pipeline Union. “Doubting a country’s governmental regulations and blaming them for unlawfulness leaves me totally speechless.”

Following the above-mentioned letter from the HRRA director and BP country manager, some of the BP middle management authorities started “friendly talks” with their HRRA-contracted employees, emphasizing the disadvantages of joining the Labor Union and citing lower chances for career development and progression. Disciplinary actions were attempted against the Deputy Chairman of

PUBLISHER & GM

George Sharashidze COMMERCIAL DEPARTMENT

Commercial Director: Iva Merabishvili Marketing Manager: Mako Burduli

GEORGIA TODAY

EDITORIAL DEPARTMENT:

Editor-In-Chief: Katie Ruth Davies

Journalists: Tony Hanmer, Zaza Jgarkava, Maka Bibilashvili, Karen Tovmasyan, Dimitri Dolaberidze, Maka Lomadze, Tim Ogden, Joseph Larsen, Vazha Tavberidze, Nugzar B. Ruhadze, Nino Gugunishvili, Thea Morrison, Natia Liparteliani

the Pipeline Union over several months, resulting in a so-called “reorganization” and dismissal. The legality of the dismissal is currently under civil court review.

“Pipeline Union members tried to use all legal means to protect their rights, without any success, leading to Pirmisashvili suing BP and HHRA in Civil Court for violation of freedom of expression and discrimination in the workplace,” said Gocha Kvitatiani, Head of Georgia’s Gas and Oil Industry

Workers Trade Union. “The Pipeline Union Committee supports Mr. Pirmisashvili and hopes that the Georgian Civil Court will consider the factual circumstances of the case independently and impartially and deliver a fair judgment.”

Eteri Matureli, Vice President of the Georgian Trade Unions Confederation (GTUC) says: “BP and their [Recruitment] Agency have committed inconceivable actions against their unionized employees. This case is subject to review in the Annual Report of the Georgian Trade Union Confederation to the Committee of Experts and the Committee on Freedom of Association of the International Labor Organization (ILO), Geneva, Switzerland. The case has also been reported to the experts who draft the annual Human Rights report of the US State Department, to be published in spring 2017. It will also be brought to the attention of the Public Defender of Georgia (Ombudsmen) as it considers the obvious facts of discrimination in the workplace.”

GEORGIA TODAY received the following comment from BP representatives: “BP fully respects an individual’s right to join a Trade Union and, when they do so, commits to work within the law and in good faith with them. However, BP expresses preference to work with the employees directly without an additional administration layer. The case is in court and we are waiting for its lawful conclusion. Please note that the unionized employees are not BP employees.”

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Georgia Welcomes European Standard two-floor Stadler Kiss Train

JS Georgian Railway prepared a special surprise for its passengers with twofloor European standard Stadler Kiss model electro trains beginning to run in the direction of the Black Sea resort cities.

The four new trains from the Swiss company Stadler Bussnang AG are equipped with ultramodern security systems. The 400seat trains fully fit the current sizes of the Georgian railway, with the width of the railway 1520 mm.

Each train is 101.7 m long, 3400 mm wide, and 5240 mm high. Georgian Railway worked together with Deutsche Bahn experts and German specialists on the technical parameters.

The Stadler Kiss model train takes into consideration the needs of people with limited abilities who will have lifts in the train and easy-access toilets. Bathrooms onboard also offer changing tables for parents with babies.

Train crews serving onboard have been through special retraining courses abroad.

The first new train entered Georgia at the beginning of July and successfully ran its first trip to Batumi.

It will run to and from the Black Sea cities non-stop and will stop only at seaside resorts Batumi, Kobuleti and Ureki.

The same model of train operates in Switzerland, Belgium, Germany, Austria and other countries throughout Europe.

www.railway.ge