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Issue no: 932/71
• MARCH 28 - 30, 2017
• PUBLISHED TWICE WEEKLY
FOCUS ON THE EU
Georgia Celebrates 60 years of the EU as its citizens go visa-free
PRICE: GEL 2.50
In this week’s issue... Georgia Celebrates Visa-Liberalization Entry
PAGE 3
NEWS PAGE 3
In Georgia Education Matters (But Probably Won’t Make You Rich) ISET PAGE 4
Source: Information Center on NATO and EU
UN Human Rights Council Adopts Resolution on Cooperation with Georgia
OPEN LETTER: The Problem of Values in Georgia, From the Founders of Broadcasting Company Rustavi 2 PAGE 6
King David Complex Sets New Standards in Luxurious Living
BY THEA MORRISON
T
he United Nations (UN) Human Rights Council (HRC) adopted the Resolution on Cooperation with Georgia at the 34th session held on March 24 in Geneva. The Resolution, initiated by Georgia, was co-sponsored by 43 states. Georgia’s Ministry of Foreign Affairs (MFA) reports that this is the first resolution adopted with respect to Georgia by the UN Human Rights Council – the UN body primarily responsible for protecting human rights. Continued on page 2
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Exclusive Development Project - Gergeti Rise Residence Operated by International Company Ginza Project PAGE 11 Prepared for Georgia Today Business by
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NEWS
GEORGIA TODAY
MARCH 28 - 30, 2017
UN Human Rights Council Adopts Resolution on Cooperation with Georgia Continued from page 1 Georgia became a member of the UN Human Rights Council last year. “In the resolution, the UN Human Rights Council reaffirms its commitment to the sovereignty and territorial integrity of Georgia within its internationally recognized borders,” MFA reports. Moreover, the UN HRC recognizes with appreciation the efforts of the Government of Georgia to strengthen democracy, the rule of law and the promotion and protection of human rights. “The UN Human Rights Council welcomes the cooperation of the Government of Georgia with the Office of the High Commissioner for Human Rights, as well as with the special procedures of the Human Rights Council,” the document reads. In the resolution, the HRC expresses serious concern over the human rights and humanitarian situation in the occupied regions of Georgia with special emphasis on reported kidnappings, arbitrary detention, interference with property rights, restrictions on access to education in one’s native language, free movement and residence, as well as continued discrimination on the grounds of ethnic origin in both regions. “The Council expresses concern that internally displaced persons and refugees continue to be deprived of the right to return to their homes in a safe and
dignified manner,” the resolution reads. Furthermore, the document highlights that the Office of the High Commissioner and other international and regional human rights mechanisms have no immediate access to Abkhazia, Georgia and the Tskhinvali region. The Council, in this context, recognizes the need for objective and impartial assessments and periodic reporting of the situation in these regions. The Council calls for immediate access for the Office of the High Commissioner to Abkhazia and the Tskhinvali regions and requests the United Nations High Commissioner for Human Rights continue to provide technical assistance and to present its reports on the human rights situation in Georgia’s Abkhazia and Tskhinvali regions at the Council’s 35th and 36th sessions. The Russian Federation occupied 20 percent of Georgian territories after the August 8, 2008 war, which displaced 192,000 people in Georgia. Many were able to return to their homes after the war but more than 20,200 people still remain displaced. After the August 12 ceasefire agreement, which obliged Russia to withdraw its troops, Russia to some extent completed this requirement by withdrawing most of its troops, however, it did not leave Abkhazia and South Ossetia and on August 26 that year, Russia recognized Abkhazia and South Ossetia as separate republics.
Foreign Affairs Minister Visits Washington, Brussels BY THEA MORRISON
W
ithin the framework of the recent visit to Washington, United States (US), Georgia’s Foreign Minister Mikheil Janelidze took part in the Global Coalition Conference which was attended by 68 countries with the aim of agreeing on the next steps needed to defeat ISIL. Janelidze told the Georgian edition of Voice of America that Georgia has been a member of the coalition since 2014, when it was established. “Our participation in this coalition is a confirmation of our contribution to global and regional security,” he stated. The minister noted that Georgia is an important partner for the international community in fighting the global challenge of terrorism, and specifically the Islamic State group, “which created a huge crisis in the civilized world, and is the biggest challenge today.” Within the official visit, Janelidze met his Australian counterpart, Foreign Minister Julie Bishop. The Georgian FM expressed his gratitude for the role Australia has played in terms of raising awareness of Georgia
in the South Pacific region. The ministers also spoke about the successful co-operation within the framework of international organizations, with the Australian side reaffirming its strong support for Georgia’s sovereignty and territorial integrity, expressing concern over the so-called referendum to be held in Tskhinvali. The ministers also spoke about the possibilities of developing economic cooperation between the two countries. The Georgian Foreign Minister updated his Australian colleague on Georgia’s investment and economic potential, emphasizing the importance of the country as a hub between Europe and the East. The necessity of exchanging highlevel visits was noted. Moreover, Janelidze met US Senators Tod Young and Lindsey Graham and Congressman Gerry Connolly, the latter reaffirming the support of the US House of Representatives for Georgia and highly praising the ongoing reform and democratization process in the country. The minister in turn thanked Congressman Connolly for his activities as Co-chair of the Georgia Caucus in the US Congress. The sides paid special attention to the situation in Georgia’s breakaway Abkhazia and Tskhinvali regions. Connolly criticized
Russia’s occupation of the Georgian territories and reaffirmed his strong support for Georgia’s sovereignty and territorial integrity. He highly evaluated Georgia’s Euro-Atlantic integration process and pledged further support for Georgia. The Georgian FM awarded Congressman Connolly the Presidential Order of Merit for his important support for Georgia. After completing his visit to Washington, Janelidze headed to Belgium to participate in the Brussels Annual Conference where he delivered a speech as part of the 6th Plenary Session dedicated to Eastern Europe and Caucasus issues. Georgia’s occupied territories, war in Ukraine, security architecture changed by Russia, the European choice and challenges in that regard where among the main topics during the discussions. Euro-Atlantic security and challenges in the international arena were also discussed during the conference. Within the visit to Brussels, Janelidze met US Senators John McCain and Ron Johnson. The sides positively assessed GeorgianUS cooperation in various directions. It was also announced that a delegation of US Congressmen will participate in the NATO Parliamentary Assembly session scheduled for May in Tbilisi.
Georgia’s PM Attends Meeting of GUAM Country Government Heads BY THEA MORRISON
G
eorgian Prime Minister Giorgi Kvirikashvili participated in a meeting of the heads of the governments of the GUAM countries in Kyiv, Ukraine, on Monday. The GUAM Organization for Democracy and Economic Development is a regional organization of four post-Soviet states: Georgia, Ukraine, Azerbaijan, and Moldova. The initiative to hold a meeting of the heads of governments was made by Azerbaijan who chaired the organization in 2016. This year, Georgia is a chair country of the format. Kvirikashvili delivered a speech at the meeting, saying stronger coordination between the GUAM member states is necessary. He thanked his Ukrainian counterpart for hosting the event and expressed hope that the meeting would enhance political and sector cooperation among
PM Kvirikashvili at the GUAM forum in Kyiv, Ukraine, this week
the GUAM member states. “We can strengthen GUAM and our countries by our joint efforts; we should clearly realize what we want to achieve together, because success, first of all, depends on our consistent and coordinated cooperation,” he said. Moreover, the Georgian PM said that development of sectoral cooperation will strengthen the political interaction among member states and will help to achieve the joint or individual economic interests of the member states. “At present, there is a wide range of possibilities opened up to expand trade and economic ties, and to deepen economic integration, not only among the GUAM Member States, but also with the other interested countries,” he noted. Kvirikashvili welcomed the signing of documents aimed at improving the functioning of the GUAM Free Trade Zone and enhancing the competiveness of the GUAM Transport Corridor. He stressed that territorial integrity is one of the most painful problems and challenges for the all GUAM member countries.
“Unresolved conflicts in the GUAM region continue to impede political, economic and social development. In this regard, the GUAM voice should sound as loud as possible. All of us should more actively use the GUAM potential for gaining wider international support,” Kvirikashvili said. Within the working visit to Ukraine, the Georgian PM will also hold bilateral meetings and attend a business forum organized by the Georgian Chamber of Commerce and Industry. The GUAM format was created by four post-Soviet states in 1997 during the summit of heads of states of the EU in Strasburg. In 1999, Uzbekistan joined the format and four years later withdrew. In 2006, Ukraine and Azerbaijan announced plans to further increase the GUAM member relations and established its headquarters in the Ukrainian capital. GUAM plays an important role in ensuring regional security, as it contributes significantly to the development and strengthening of dialogue between the countries of the region.
NEWS
GEORGIA TODAY MARCH 28 - 30, 2017
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Georgia Celebrates Visa-Liberalization Entry BY THEA MORRISON
G
eorgia’s Prime Minister, Giorgi Kvirikashvili, has announced that special festive events are being arranged throughout the country to celebrate the policy of visafree travel to the European Union, which will begin on March 28. “As you know, the EU has finalized all relevant legal procedures. We will hold special events on March 26, 27, and 28, to celebrate this achievement throughout the country and to thank our partners," the PM said, adding that on March 28 he will leave the country for Athens and Brussels with Georgian students. “On March 28, in the company of students, I will travel to Athens, an
ancient capital of European civilization, followed by Brussels, Europe's political capital, to celebrate the visa waiver for Georgia, a crucially important event,” he said. The main location for celebrations on March 26 was the renovated Agmashenebeli Avenue in central Tbilisi, where festivities started in the morning and the Avenue was turned into "European Street”, decorated in the colors of the European Union. Specially invited Chefs cooked Georgian and European dishes to serve visitors. On March 27, the Tbilisi TV Tower and Bridge of Peace were illuminated in the colors of the EU flag and Georgian and EU flags were also projected onto the building of the Government Administration. Banners have been installed along streets and Tbilisi and Kutaisi international airports are decorated for the
occasion. Georgia’s Airports Union says that special gifts and surprises are waiting for passengers. A special installation with Georgian and EU flags was illuminated on Europe Square at 9 pm followed by a gala concert at 9:10 pm. The concert ended with a large firework display at 11pm. The PM is calling on Georgians to follow the visa-free requirements and not to violate the time limits. Kvirikashvili said that a special application will be installed at the border checkpoints which will automatically notify the Ministries of Justice and Interior in case of violations. “We will notify the EU member states and launch a proactive search of non-returnees to ensure the activation of readmission procedures. Of course, all expenses will be covered by the State. In due course, however, the violator will be fined to cover the cost," the PM said.
Georgia Marks EU 60th Anniversary BY THEA MORRISON
O
n March 25, the European Union (EU) celebrated the 60th anniversary of the bloc’s founding treaty. The 27 national leaders gathered in the Campidoglio Palace Rome, where the six founding states signed the Treaty of Rome on March 25, 1957. In connection with the EU jubilee and
the 10th anniversary of Tbilisi State University Institute for European Studies, a special event ‘EU 60- Past, Present and Future’ was held at the NATO-Georgia Information Center in Tbilisi. The event was hosted by the European and Euro-Atlantic Integration Minister of Georgia, Victor Dolidze, and NATOEU Information Center Director, Nino Bolkvadze. “Georgia is a vivid part of Europe and I am sure it will become a member of the European and Euro-Atlantic community,” Dolidze said.
Guests were also addressed by the Deputy Head of the EU Delegation, Carlo Natale; the Italian Ambassador to Georgia, Antonio Bartoli; and Tbilisi State University rector, Giorgi Sharvashidze. An exhibition was presented at the event which showed the main stages and achievements of the EU history through photographs, texts and documents. At the end of the event, discussions were held regarding the EU-Georgia Deep and Comprehensive Free Trade Agreement (DCFTA).
Slovakian FM: Georgia Worthy of its Visa-liberalization BY THEA MORRISON
T
he Minister of Foreign and European Affairs of Slovakia, Miroslav Lajcak, commented on Georgia’s visa liberalization with the European Union (EU), which went into force on March 28. “From 28 March, Georgians can travel to Schengen [Area countries] without a visa for a period of 90 days. Thumbs up! Well deserved & long overdue!” Lajcak tweeted. With the activation of the visa-free policy, all Georgians holding biometric passports will be able to enter the Schengen Area for 90 days within any 180-day period for vacation, business, or any other purpose except work. Georgians will be able to travel without visas to 22 EU member states: Belgium, Austria, Germany, Denmark, Spain, Estonia, Italy, Latvia, Lithuania, Luxembourg,
Malta, The Netherlands, Poland, Portugal, Greece, France, Slovenia, Slovakia, Hungary, Finland, Sweden, and Czech Republic. The new regime also refers to four non-member states of the EU: Iceland, Lichtenstein, Norway and Switzerland, and four Schengen candidate countries: Bulgaria, Cyprus, Romania and Croatia. The exceptions are Ireland and the United Kingdom. In order to travel freely, the citizens of Georgia will need to provide a biometric passport. The Georgians will lose this freedom to travel if the EU witnesses any or all of the following: 1. Georgians suddenly start making numerous asylum requests 2. Georgians stay in the Schengen Zone for more than 90 days at a time 3. Georgians create an increase in the risk of public policy and internal security If such problems persist, the suspension can be extended up to 18 months, with European Parliament involvement.
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BUSINESS
GEORGIA TODAY
MARCH 28 - 30, 2017
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.
In Georgia Education Matters (But Probably Won’t Make You Rich) BY DAVIT KESHELAVA
I
t is widely recognized that education is the key to the future. In general, educated people have higher earnings and lower unemployment rates, and highly-educated countries grow faster and innovate more than the other countries. Therefore, in the recent economic literature, education is considered as a good investment. The cost of education is the value of time (opportunity cost) and money (tuition fee and other fees) people spend to acquire a secondary school certificate, professional education certificate or university diploma. While the benefit of gaining an education is premium in earnings for graduates (there are also other benefits like better working conditions, recognition and achievement at work), empirical literature suggests that there are two channels from which education affects earnings. First, it improves workers’ skills that, in turn, raises productivity of labor and lead to higher wages. Second, higher education provides the credentials that signals to employers that the candidate has the appropriate skills for a certain job.
The human capital approach is based on the idea that individuals have to compare these costs and benefits and decide at which degree to stop. If the benefits are not large enough to compensate the costs, the individual might think that it is not worthwhile to gain an additional degree. Therefore, while we consider the decision of ordinary people about how much to invest in education, it is important to determine what the earning premium is of an additional degree. But the world is not that simple and there are plenty of other socioeconomic factors that play an important role in the decision to continue studying or dropping out (Lemieux, 2001). This blog-article will try to measure the effect of education on earnings in Georgia by controlling the main socioeconomic factors that might have a significant influence on wage distribution. Georgia is a transition economy, with massive structural changes in the first decade of the transition process that significantly worsen the socioeconomic situation. Following wars, unsuccessful institutional reforms, hyperinflation, inefficient taxation system and permanent budget sequester, building a sound education system became a low priority for the Georgian governments. Therefore, before the Rose Revolution, there were three main problems
Source: Authors calculation using Integrated Household Survey (IHS)
Table 1 – Results of the modified Mincer equation
in the education system: corruption, low access to education and low quality of education. Despite such a poor condition, there was high demand for higher education. After the revolution, the corruption and affordability problem was successfully solved, while the quality of education still remains one of the most challenging areas. Much of the economic literature on the effect of education on earnings has been inspired by the seminal work of Mincer (1974) and Becker (1975) on human capital. Mincer (1975) captured the return to education by estimating simple OLS regression, where log earnings is considered a dependent variable that is explained by the number of years of education, potential experience and squired term of potential experience. This blog-article considers modification of the classic Mincer equation by controlling large numbers of socioeconomic factors that also contribute to people’s earnings. As a dependent variable, we used log of earnings, where earnings are defined as: wage of the hired worker based on the written or oral agreement, the income of the entrepreneurs working on their enterprises and farmers’ income, earnings of the people working without hiring in the non-agricultural sector (manufacturing, trade, transportation, construction, handcraft, repair or professional activity – a reporter, a medical diagnostics, treatment and consulting). Moreover, the main interests of this research are two dummy variables that represent professional education and higher education (other lower levels of education are considered as a base). We controlled experience of people by age, gender of the individuals, ethicality, and rural-urban distribution of people, marital status and sectors of employment. This simple OLS analysis is based on the yearly data of the Integrated Household Survey (IHS) from 2008 to 2014 provided by Geostat.
EDUCATION PREMIUM Among all the people presented in the sample, 20% to 24% have some form of tertiary education, while the same number for employed who earn any income is much higher at 42%. In addition, the proportion of people with some type of professional education is 20% to 22% in the whole sample and around 25% among employed people. Georgia is distinguished by low levels of illiteracy, as only 0.5% to 1.15% do not know how to read and write. Corresponding statistics again indicate that gaining higher education is very popular among Georgians. However, the main question is how professional and higher education helps people to earn more. The main findings of the regression analysis are presented in Table 1 (some variables that were controlled are not presented on the table, to avoid overload).People with higher education earn 40% to 51% more compared to those with a general education. However, earning premium fluctuates over time and does not reveal a clear pattern of increase or decline. While higher education is a big driver of earnings, professional education is shown to contribute relatively little- 4% to 6% - and again reveals no clear trend over time. Despite tertiary education having a significant earnings premium, the rate of return on that additional year of schooling is still low compared to
other countries (Jugheli, 2012). If we decompose earnings into four groups for different levels of education (0-150 GEL monthly low earnings, 150-435 GEL lower than medium earnings, 435-1000 higher than medium earning, and 1000 and above high earnings), we will discover that as education level increases, the people concentrated in the low earning groups shrink significantly, while high earning groups increase. This finding again supports the idea that education has an earnings premium. Yet, the share of individuals with comparatively high earnings is higher in the Bachelor’s or Master’s degree group, though the indicator itself is low even for these groups, showing that only 5% and 10% of individuals who have a Bachelor’s and/or Master’s degree respectively, earn above 1000 GEL monthly. Although IHS underestimates earning, this distribution still gives us information that the wage level in the country is low even for individuals who have higher education. Therefore, we can conclude that people without a diploma of higher education have difficulties competing with people with tertiary education for highly paid jobs, but that a diploma itself does not guarantee high earnings. Furthermore, it is important to estimate earning premium for higher education in different cohorts. Therefore, we divided the total sample into three cohorts. The first represents people with soviet education. The second represents people who gained higher education after the collapse of the Soviet Union and before the Rose Revolution. The third cohort is the new generation that gained an education after the Rose Revolution. As there is a huge amount of retired people among the first cohort, we decided to focus on the other two. People with higher education in the second cohort earn 40.6% more compared to those with general education in the same cohort. While, the same measure is slightly higher, 43.4%, for the third cohort. Therefore, we again see that there is no significant difference between earning premiums among the generation. This finding again indicates that the third problem in the educational system – low quality education - is still relevant.
WHAT ARE THE OTHER FACTORS AFFECTING THIS RELATIONSHIP? There is a significant gender gap in Georgia, with males earning 26% - 45% more compared to women with more or less similar characteristics. Despite the large figures, the gender gap is closing over time. There are two main reasons for the high wage gap: low salaries in the sectors that are dominated by women, such as education, health and social security, and restaurants and hotel service (horizontal segregation) and lack of women in leading positions (vertical segregation) (Sefashvili 2011). The wage premium from higher education differs with gender. Males with higher education earn 39% to 41% more compared to men with general education. The same measure is higher- 49% to 52% -for female workers. This phenomenon can be explained by the fact that men without higher education are highly concentrated in the sectors with higher earnings than women without higher education. Earnings in rural areas are 2.5% - 18% lower than earnings in urban areas rather than the capital of the country. The average earnings of people living in Tbilisi are 25% - 34% higher than in other urban areas. However, the cost of living in Tbilisi is much higher than other areas and much of the high proContinued on page 5
BUSINESS
GEORGIA TODAY MARCH 28 - 30, 2017
Joint Projects of Russia & Iran in Energy, Transport BY DIMITRI DOLABERIDZE
T
he largest Russian project in Iran is the nuclear power plant in Bushehr. This is a unique building which has no analogues elsewhere in the world. The construction of the station was started in 1974 by the German Kraftwerk Union AG (Siemens / KWU) but in 1980, the government of West Germany joined the US sanctions imposed on Iran after the 1979 Islamic revolution and construction was discontinued. Russia became the only country to agree to help Iran to complete the Bushehr nuclear power plant. In August 1992, an agreement was signed between the governments of Russia and Iran on the construction of the plant, and in January 1995 a contract was signed to complete the construction of the first power unit of the station. Russian “Atomstroyexport” and its contractors managed to integrate Russian equipment into the construction under the German project and, in addition, to use about 12,000 tons of German equipment. The first block of the Bushehr nuclear power plant was connected to Iran's national energy system in September 2011. In April 2016, the block was finally transferred to Iran in operation and signalled the official completion of the project. Rosatom services the unit and provides it with nuclear fuel. In November 2014, Russia and Iran signed a contract for the construction of the second and third units of the Bushehr plant (Bushehr-2). The launching ceremony took place on September 10, 2016. The total capacity of the two new units is 2.1 thousand MW. The construction of the second block is planned to be completed in 2024, the third block - in 2026. In March, construction and installation work began on the site of the future Bushehr-2 nuclear power plant. In accordance with the intergovernmental agreement on the North-South international transport corridor (2000), Russia, Iran and Azerbaijan are implementing a project of direct overland communication along the western coast of the Caspian Sea with the construction of a new line of the Kazvin-Astara (Iranian) - Astara (Azerbaijan) rail-
road. An agreement was signed between the three countries on the creation of a consortium for the construction. The estimated carrying capacity of the railway will be up to 10 million tons at the first stage and will be further increased to 15 million tons per year. In October 2012, Russian Railways completed the first project, the Tabriz-Azarshahr line, about 46 kilometers long in Iran, and electrified five stations. In November 2015, Russian Railways International and Iranian Railways signed a contract to supply equipment and construction materials for the electrification project of the Garmsar-Ince Burun railway section. The length of this railway section is 495 kilometers. The city of Garmsar is in the center of Iran, 80 kilometers east of Tehran, Ince Burun - on the border with Turkmenistan. The contract value is estimated at EUR 1.2 billion. The project will be financed from the state export credit of the Government of the Russian Federation to the Government of the Islamic Republic of Iran. Russian Railways is preparing to open a representative office in Iran. The head of the Ministry of Energy of the Russian Federation, Alexander Novak, estimated the total value of the possible contracts of Russian Railways for the implementation of projects for the electrification of railways in Iran at $5-6 billion. In December 2015, a deal was approved by the Iranian transport company Nasim Bahr Kish for a controlling stake in PJSC Astrakhan Port. "Astrakhan Port" is the most important transit point on the route "North - South". In November 2015, an agreement was signed to build a thermal power plant with a total capacity of 1.4 thousand megawatts in the city of Bandar Abbas. The contract for this project is being worked out by the company Tekhnopromexport. In December 2016, Russia and Iran signed a memorandum on joint work in the field of oil and energy. The document consists of 23 items, including provisions on exploration, production, development of deposits, and swap operations. In the memorandum are agreements on cooperation in the delivery of gas and conducting research. Iran and Russia will also work together in the field of technology in the production of equipment needed for the oil industry. A Memorandum of Understanding (MoU) between
Gazprom and the Iranian NIGC has also been signed, which envisages cooperation in the field of exploration, production, production of LNG, supply of gas pipe, including to India, as well as the implementation of swap operations. The agreement is a framework, with specific projects to be discussed by companies at the corporate level. In particular, Gazprom is negotiating to participate in the development of Iran's Farzad gas field (located on the Farsi block about 100 km into the Persian Gulf, the estimated production is 10.3 billion cubic meters of gas per year). In turn, Gazprom Neft signed a MoU with NIOC on the fields of Cesmeh Khosh and Changule. The parties agreed to study, evaluate and prepare technical proposals, in the future, a contract for development and production may be signed in case of agreement between the parties. Currently, LUKOIL and Tehran are discussing a return to the Anaran project. The company sent its proposals for the study of the largest deposits at the Anaran block in late 2015. Russia and Iran adopted a five-year road map for industrial development, which involves the implementation of more than 70 projects. The main directions fixed in the road map are engineering and car building. In 2016, the products of the United Carriage-Building Corporation and Uralvagonzavod began to be shipped to Iran. At present, the countries are discussing the delivery and subsequent organization of joint production of helicopters in Iran, as well as the promotion of Russian automakers - AvtoVAZ, KAMAZ, GAZ Group, Sollers - to its market. The issue of creating a joint venture in Iran with localization of production of trucks and cars is under consideration. Tehran also expressed its readiness to establish a joint venture with Russia to manufacture helicopters. Holding "Helicopters of Russia" is negotiating the supply of multi-purpose helicopters Ansat and Ka-226T to Iran. Iran is interested in purchasing 12 Sukhoi Superjet 100 aircraft. Russia suggested that Iranian partners also establish a joint production of the modernized turboprop Il-114. Inter RAO and Silovye Mashiny expressed interest in modernizing Iran's hydropower plants and thermal power plants, in particular, the Ramin TPP, which was built by Soviet specialists in the 1980s.
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In Georgia Education Matters (But Probably Won’t Make You Rich) Continued from page 4 ductive and highly paid sectors are situated in the capital. Furthermore, the earnings premium of higher education in Tbilisi, other cities and rural areas are much closer, amounting to 46.3%, 42.8% and 41.9%, respectively. It is important to determine the effect of the sectorial distribution of workers on their earnings. In our model, the base sector is agricultural, and all the other sectors are compared to it (some sectors are not presented in the table so as not to overload it). It is clear that the agriculture and education sectors are characterized by the lowest wage premium. The agricultural sector has the highest concentration of people without higher education (65% have a maximum of upper secondary education) that partially explains lower productivity and relatively lower wages in this sector. In the education sector, more than 75% of people have higher education and 14.57% professional education, but the earnings premium is still extremely low. In addition, according to the recent statistics of Geostat, the education sector was the lowest paid sector in the fourth quarter of 2016, where the average salary of hired workers was only 589.2 GEL, that is 71 GEL lower than the average salary of the second lowest agricultural sector, 476.7 GEL lower than the average salary of the country and 3.43 times lower than the average salary of the highest paid financial sector. This statistic again gives us reason to be concerned, as low paid teachers and lecturers lose motivation to teach students and young talented undergraduates have no incentives to become teachers or lecturers. Furthermore, lower motivation and lack of qualification leads to low quality education. Only the relatively less skilled undergraduate students (of course, with the exception of talented enthusiasts) will choose this profession, further reducing motivation and the qualification of future teachers and lecturers. Therefore, Georgia is in a vicious circle and should try its best to find a way out. This blog is based on the research performed by ISET-PI team for the Asian Development Bank “Good Jobs for Inclusive Growth” project.
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BUSINESS
GEORGIA TODAY
MARCH 28 - 30, 2017
OPEN LETTER: The Problem of Values in Georgia, From the Founders of Broadcasting Company Rustavi 2
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e, Jarji Akimidze and David Dvali are the founders and the former owners of one of the major independent private TV companies in Georgia, Rustavi 2. We are writing this letter because of the latest developments surrounding this TV channel and on which a hearing was held in the European Court of Human Rights in Strasburg (Application No 16812/17. Rustavi 2 Broadcasting Company Ltd v. Georgia). The recent processes have directed the focus of national and international attention to the values on which Georgian Democracy and society are based. Therefore, we, as the founders of Rustavi 2 Broadcasting Company, consider it our obligation to clear some major misconceptions and to contribute to the understanding of the truth. We are writing this letter, because the latest disturbing events made it clear to us that the long story of injustice with Rustavi 2 that started in 2004 with the Government of Georgia forcefully taking the company away from us, evolved in something well beyond the story of “ordinary” injustice. There is a sense that something is fundamentally wrong with the understanding of the concepts of truth, justice and Western Values in general in the current opinion-forming circles of Georgian Society, with virtually almost no exception in major political circles and/or non-governmental organizations that have publicly expressed their opinion or carried out action about these matters. This letter, therefore, is our attempt to contribute to the truth.
SOME PRE-HISTORY In the early 90s, we, being young enthusiasts, together with our co-founder Erosi Kitsmarishvili, created the company from scratch, fully relying on our own resources. The shortage of finances was compensated by our technical and innovative skills, and unlimited energy and enthusiasm. Despite pressure from the government, we - with support from the international community that included the US Embassy in Georgia - managed to create an independent, pro-Western TV company that rapidly became very popular in the country. The independence of our TV company played a major role in the success of so-called Rose Revolution as a result of which the party "National Movement" came to power. Just like many, we expected from the new government a change towards more democracy and strengthening of Western values. Unfortunately, that sense of hope was
replaced by a sense of disappointment almost immediately. It became clear that the new government had chosen the following innovative strategy: While declaring the adoption of Western values and a desire for Euro-Atlantic integration on the international front, at home they started an absolutely vicious consolidation of power and wealth, using numerous ways to silence their opponents. These methods would vary from most straightforward use of brute force to much more sophisticated blackmail, bribe and other forms of “soft” pressure. Throughout the years, an enormous number cases have been documented and reported in various media and human rights reports. They have also been reflected in international lawsuit cases against the Georgian government. Such a strategy, on the one hand requires a loyal press to constantly support the actions of the governing party and present them in a favorable light of democracy. On the other hand, one needs to silence the opposition - and most importantly - the independent media. However, all the above had to be done with minimal damage to the international image and the declared Western course. Obviously, it is fundamentally impossible to fully reconcile the external image of democracy with the totalitarian style of internal governing. Thus, as the “optimal” solution, the following “hybrid” scheme was adopted by the government of “National Movement”: Gather all major media coverage in loyal hands, but at the same time keep some opposition media alive. However, the latter should be maintained at the minimal level in order not to represent any significant threat to the governing party while being visible enough to Western partners in order to justify the adopted image of the country as a pro-Western Democracy. The above represented a most straightforward and cynical betrayal of the values of Western democracy, but the “National Movement” government did not care as long as this betrayal was not noticed by its Western partners. In order to mask it, a whole set of strategies (or tricks) were developed and carried out. One such simple but surprisingly efficient trick is to non-stop repeat, using all possible means, that the government is a pro-Western democracy, while at the same time keep accusing critics of being opposed to democracy. This is a strategy which is virtually impossible to counteract: An individual or a small group
of intellectuals is essentially unprotected against a propaganda machine that accuse them of exactly what they are trying to criticize. In addition, such accusations were supplemented by other forms of pressure, ranging from job-denial all the way to physical brutality and jailing under pretext of invented criminal cases. Being the largest truly pro-Western and independent TV company, with the widest coverage in the country, Rustavi 2 was the ideal prey and the first victim of the above hybrid strategy. Being an independent medium, our TV company did not have any supporting political force or other strong groups of influence. In fact, in the existing political climate,
an independent media was not a very likable entity. Hence, paradoxically, being a major pro-Western force, we became completely unprotected against the government that formally declared adoption of Western values. As the first step, we were told to abandon ownership of our TV channel in favor of someone loyal to the governing party. When we refused, the pressure intensified and soon became unbearable. Finally, we were forced to abandon the company for a laughable “compensation”. We shall not describe here the details of the story. The case has been fully documented with supporting evidence, including witness accounts, and later filed to the Prosecutor’s Office. One of the factors that speeded up the extortion process was our idea to distribute the company shares among the staff of Rustavi 2. Obviously, the last thing the government needed was an independent broadcasting company collectively-managed by its staff. Such a company would be essentially impossible to control.
The filing of the case took place in 2012, after the government of "National Movement" was out-voted in the wake of a so-called “Prison Scandal” in which a large amount of absolutely shocking and disturbing material was revealed by journalists and other sources. (Paradoxically, as an immediate reaction, the responsibility for “misconduct" was partially even accepted by the “National Movement" government, but no political statement of apology was ever made). One of the slogans of the new governing party, called "Georgian Dream" which came to power in 2012, was “restoration of Justice". Thus, in 2012 upon the change of government, we immediately appealed to the Prosecutor's Office with the demand they investigate the crime committed in 2004 by the "National Movement" government against the founders and the owners of 60 percent share of Rustavi 2, Akimidze and Dvali. The fact of the crime demonstrated abuse of power, coercion and extortion from the then highest government officials (Article 333, 150 and 181 of the Criminal Code of Georgia, respectively). Although an investigation was launched, evidence was gathered, dozens of witnesses were interviewed and the fact of crime was clearly demonstrated, the investigation authority has not charged any person committing the crime until now. Moreover, the Prosecutor's Office has yet to come up with any conclusion to the investigation. Without such a conclusion, it is impossible to move the case into the Georgian Court. Therefore, the State violated Article 13 of the European Convention on Human Rights, according to which everyone whose rights and freedoms as set forth in this Convention are violated shall have an effective remedy before a national court, notwithstanding that the violation has been committed by persons acting in an official capacity. The lack of any concluding statement from the Prosecutor's Office after almost five years leads to the legitimate supposition that the present government wants to delay or simply stop the process of the appeal. This fits into the unified picture that we shall describe below.
NEW PROTAGONISTS After being taken from us, the Rustavi 2 TV company changed hands several times, both during and after the governance of the "National Party", but every time to an owner evidently loyal to this
ROUTING
TBILISI ISTANBUL ATATURK AIRPORT ISTANBUL ATATURK AIRPORT TBILISI TBILISI ISTANBUL SABIHA GOKCEN AIRPORT ISTANBUL SABIHA GOKCEN AIRPORT TBILISI BATUMI - ISTANBUL ISTANBUL - BATUMI
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Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge
party. Whenever the loyalty of a particular owner became questionable, the company would change hands almost immediately. In 2014, a lawsuit was filed by one of the temporary owners (Kibar Khalvashi). The claim of this owner, that received wide media coverage, was that the property was taken away from him as a result of an unfair deal, presumably after his loyalty to the governing "National Movement" party became questionable. We must stress that it is not the goal of this letter to question the legitimacy of the claims of this particular person. It would be absolutely compatible with our knowledge of the methods by which the "National Movement" operates, that Khalvashi fell as one of the victims of their conduct. In this respect, we sympathize with all victims of the unfair and brutal schemes of the “National Movement”. However, the restoration of justice with respect to Rustavi 2 cannot be concluded by restoration of the rights solely of an intermediate link in the long chain of injustice and illegal suppression of the freedom of media and property rights that was initiated by the “National Movement" by taking away independent Rustavi 2 Broadcasting Company from us and by converting it into a source fully loyal to their party. Therefore, the restoration of property rights of Kibar Khalvashi could only be considered as the first step towards the restoration of rights of the founders of Rustavi 2. That the latter is a common sense is demonstrated by the public statement by Khalvashi that he would be ready - in case of victory - to deliver 50 percent of shares of the company to its founders. Although this declaration carries no legal weight per se, it is highly informative for understanding the ethical side of the case. Our goal is to help shed light on the truth. One of the problems with the truth in the Rustavi 2 case is that, with the conclusion of the latest lawsuit by Kibar Khalvashi, the media has literally been flooded by statements that represent a complete shift and misrepresentation of the meaning of Western values. This misrepresentation has far-reaching goals and its purpose is to by all means prevent the unwinding of the chain of injustices committed against free-media, first by the “National Movement" and later by the “Georgian Dream” government all the way to the first victims: the founders of Rustavi 2. Here is how this is done… To read the full letter, please visit georgiatoday.ge
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BUSINESS
GEORGIA TODAY MARCH 28 - 30, 2017
Economy Minister Tours Georgian Resorts
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Fierce Competition Between Supermarkets?
BY NINO GUGUNISHVILI
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iorgi Gakharia, Minister of Economy and Sustainable Development of Georgia, met with tourism sphere representatives while on a visit to Batumi last week. “Thanks to your outstanding work we’ve reached a record-breaking number of tourists in Georgia and that’s why we would like to hear from you what else can be done to achieve even more success,” Gakharia told the audience at Hilton Batumi, where preparations for the upcoming summer season and its challenges were discussed by the minister, Head of Adjara Government Zurab Pataridze, and the owners of local tourism businesses. Ketevan Bochorishvili, Deputy Minister of Economy, who also attended the meeting, offered a presentation on the projects that were already realized and are planned for the future in the tourism sphere. Gakharia noted the importance of the tourism industry for the country’s development and pointed out that the involvement of the private sector and regular meetings with people employed in the tourism sphere are essential. “We hosted six million tourists in 2016 and we have ambitious plans for 2017. We’re trying to start the preparations early and that’s why we’re meeting with tourism sector representatives prior to the summer season to listen to them and plan future activities together,” Gakharia said. “Tourism sector representatives are here to suggest what services could be
R
etail food prices in Tbilisi supermarkets increased by 1.4% m/m (that is, compared to the middle of February) and 3.8% y/y (that is, compared to March of 2016). On a biweekly basis, the biggest price increases happened for eggplants, onions and rice (price increased by 34.3%, 21.7% and 19.2%, respectively). As to the biggest drops in prices, cucumbers, buckwheat and vegetable oil experienced the most significant price decreases (31.8%, 12.4% and 3.1% respectively).
MORE FOOD RETAILERS ON THE FLOOR developed and what can be done to improve existing infrastructure, including the introduction of new programs,” Pataridze noted. “As the summer season approaches, the tourism sector has to be ready,” said Sulkhan Glonti, Head of Adjara Tourism Department. “We’re expecting a large amount of tourists on May 20 for the Aerosmith concert and we want Adjara to meet tourists at its best”. Further to visiting Batumi, Minister Gakharia went to Svaneti’s Tetnuldi and Hatsvali mountain resorts in Svaneti, where he met with Des Alpes company representatives to discuss the potential of mountain resorts development in Georgia. “We plan to have new ski lifts connect-
ing Mestia and Hatsvali for next year and this will be a step forward for the development of the resorts and for increasing the economic strength of the region,” Gakharia said. Frederic Marion, a Des Alpes company representative, stressed the potential Svaneti has, mentioning that Des Alpes will be sharing its experience in strengthening the safety of ski resorts and ensuring the new norms are set. Gakharia also visited the Anaklia and Ganmukhuri area where, together with local government representatives, he viewed infrastructure works, hotel constructions, and the territory where the Gem Fest electronic musical festival will take place throughout a whole month this summer.
Although worldwide food prices have been steadily decreasing over the last couple of years, food prices in Georgia have increased y/y. This increase was captured both by the National Statistics Office of Georgia (Geostat) and ISET’s Retail FPI. According to Geostat’s latest report on inflation, food price inflation in Georgia in February reached 5.5% y/y (that is, compared to the last year’s February). For Tbilisi it was even higher, and reached 5.8% y/y. ISET’s Retail FPI, which looks at supermarkets only, also shows an increase in food prices. However, it is a bit smaller (2.0% in February and 3.8% y/y in March). One possible explanation for the smaller increase can be heightened competition among food retailers (supermarkets) in
Tbilisi. The number of such retailers has clearly increased over the years. From 2014 until today, Nikora has increased the number of its branches from 92 to 106, the number of SMART supermarkets expanded from 10 to 16, Furshet grew from two to eight stores, and Carrefour has gradually increased its outlets to six. Other retailers like Fresco and Spar have also expanded their branch numbers. Not only have existing food chains increased the number of their branches, but some new retailers have emerged in the food market as well. AgroHub is the latest addition to the retail food market in Georgia. AgroHub promotes itself as the first hypermarket of Georgian food products, and is offering consumers the unique experience of not only buying food, but trying it while shopping, as well. Moreover, most products sold in this hypermarket are produced by the farms and food processing factories owned by AgroHub itself. One can argue that a high level of competition leads to the price convergence among supermarkets, which according to the diagram happened mostly after 2016. The price range (difference between maximum and minimum retail FPI) shrinks as more supermarkets enter the market. Hopefully, this trend will continue, and the Georgian food retail market will become more diversified and combine large supermarkets with traditional small shops.
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BUSINESS
GEORGIA TODAY
MARCH 28 - 30, 2017
Welcome to Café #2Run by Teens for the Whole Community
INTERVIEW BY KATIE RUTH DAVIES
C
afé #2 in the mountain town of Dilijan, Armenia, population 17,000, is the first youth and community café in the region and an example of social entrepreneurship. It was established with the support of IDeA Foundation, the Dilijan Development Fund and the TUMO Center of Creative Technologies. The idea of the café was to be a unique socializing platform in Dilijan for local teens, students of United World College (UWC) Dilijan and students of other educational institutions to communicate and develop social activism and grassroots initiatives in the grounds of the café. It recruits teens aged 14 years and above to work as waiters and assistants, making it, for some, the very first place they work, giving them a chance to try out the hospitality area and learn key skills in customer service. GEORGIA TODAY spoke to Katya Bredikhina, one of the founding members, who came from Russian to Dilijan for the love of seeing such projects bloom. She has lived in Dilijan for 1.5 years and works as a Project Manager in UWC Dilijan, trying to build up the alumni development platform for under-graduates and post-graduates, to build up the partnership and scholarship program for the students and also actively helps in developing and expanding the Café. “I used to work for Skolkovo Business School, which is where I met Ruben Vardanyan (founder of UWC) there helping to launch new educational projects. The last project was to launch a research center on urban development. Through that I heard about UWC Dilijan. They were looking for volunteers and I was invited to join them.”
TELL US ABOUT THE CAFE The idea of the Café was to establish a platform in Dilijan in the middle of the town so that the local and UWC communities can do some joint activities. It’s
It recruits teens aged 14 years and above to work as waiters and assistants, making it, for some, the very first place they work
the only place in Armenia where teenagers from the age of 14 work legally, contracted, with work hours determined by age and parental permission. This is a place for them to give the hospitality business a try, which can help them support themselves once they move to Yerevan to study at university. We can accommodate up to 300 people standing during concerts and have 50 seats renovated by local teen, and we’ll expand that space into the yard in summer.
DILIJAN WAS ONCE A POPULAR RESORT Yes. Famous composers used to come and rest here and drink the mineral waters- Shostakovich, for example. And that popularity as a health resort will come back, with more guest houses, cafes, hotels, souvenir shops and places of interest for tourists. After the collapse of the Soviet Union, working in the hospitality and service sectors became shameful but this is changing. Both boys and girls work in the café and then go on to train their friends. We just started the second training, with our current teen staff providing in-house training ready for the summer season. There’s also a musical college, art college, and vocational college for restaurant service in the town.
WHERE DO THE PROFITS FROM THE CAFÉ GO? We’re aiming to reach operational sustainability, but at present all the profits go into the Armenia Foundation Fund (AFF) to support other initiatives in Dilijan.
WHAT DID THE LOCALS FIRST THINK ABOUT THE CAFÉ? At first they were skeptical but once they saw it up and running they became more willing to get involved and take over from us. They enjoy the events and cultural exchanges that happen here, as well as the coffee!
HOW DO YOU SEE DILIJAN IN FUTURE? In Soviet times there was a factory producing electronic parts. Now, it is a re-developing summer tourist resort- loved especially by Armenians for the mild climate, though as I said, famous composers also used to come here. More work needs to be done to keep tourists here for longer periods. Since Café #2 opened, another café, a pastry shop and one restaurant have opened, plus the number of guest houses is increasing by the year. When you see results and changes, it keeps you going. Anna, Café #2 Waitress, 22: “I’ve worked here for six months. My friends are here and I get a chance to practise my English, Russian and French with guests. The café is a new chapter for the town and a meeting point for the people. For young people it’s a good chance to learn the skills needed to work in a restaurant. In future, I want to stay in Dilijan. It’s not easy to find work but things are changing here.
BUSINESS
GEORGIA TODAY MARCH 28 - 30, 2017
9
King David Complex Sets New Standards in Luxurious Living BY NINO GUGUNISHVILI
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e live in a world of constantly changing tastes and new trends, where customers have nearly every comfort they could wish for at their fingertips, and Georgians are no exception. The King David complex sets new standards in luxurious living, creating new demand on the Georgian market. Ambitious as it may sound, the King David project, which unites two 31 and 19 floor towers, is the first condominium residence project built in Georgia. The higher tower called King David Residence will have solely living apartments, whereas the lower tower--King David Business--will be comprised of first class business center and hotel. The two towers are connected by six floors, where the largest part (40 %) of the amenities will be situated including, a 28 meter swimming pool, a spa and fitness center, a beauty salon, an entertainment area and playground for children, and a recreational green zone opening onto a 1400 metre terrace accessible from the swimming pool. The residential tower will have a lobby with a bar and a concierge. The King David Business Center will also have a separate lobby for business meetings, an event hall, and a restaurant.Parking space will be provided underneath the building on the first and second floors. A five star restaurant with a panoramic view of Tbilisi is planned on the 31st floor of the King David Residence tower. The project will have five restaurants
overall. In addition to regular apartments, studios, duplexes, and penthouses will also be available in the residential tower, starting from 1500 USD per sq. meter, which according to the company is considered as a rather competitive price for the Georgian market. The entire King David Tower Complex, built on a cliff in the heart of the city, is a 70 Million USD investment. The construction should finished in July, 2017. The project was designed for people who prioritize their time and their quality of life, and according to its creators it’s where one can find everything: a space for living, business, or entertainment, surrounded by a relaxing atmosphere. Although the construction process started in 2011, the company sees it as an advantage, since at all stages, its foundation and construction were constantly checked by the Georgian and international organizations. The facades of the buildings were completed and supervised by the German company SCHUCO. Then tested in Germany, showing that the facades can resist many types of natural disasters, even a nine
magnitude earthquakes. The construction and fire safety of the buildings comply to all existing international standards, something that’s been noted among the advantages of the King David Residence and Business complexes. It is also equipped with alternative water and electricity supplies, with power generators and water reservoirs. The project is said to be energoeffective due to the “Guardiangalss” solution offered by an American company. From March 20th, King David offers simplified conditions for buying the apartments at the residence, lowering the initial fee by 10% and a special discount will be applied for certain types of apartments till April 30th. One sq.m price from 1500 USD. The minimal living space is 65sq.m. At the prestigious annual International Property Awards, attended by the leading experts in the real estate sector from around the world, the King David complex won the Best Mixed-use Development Georgia nomination, and it was named best multi-functional complex in Georgia by the European Property Awards.
Georgian Wine Tasting Held in Monaco BY NINO GUGUNISHVILI
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even Georgian wine companies: Schuchmann Winery, Shalauri Wine Cellar, Kakhuri, Vita Vinea, Teleda, Peradze Wine Cellar and Winiveria were presented at a wine tasting in Monaco, organized on the initiative of Dominique Milardi, Vice-President of
the Sommelier Association of Monaco, and with the assistance of the Georgian National Wine Agency and support of Georgian wine promoter and importer in France, Ilia Kakhoidze. Guests were introduced to both traditional and European made Georgian wines, to various grape varieties and were presented the wine making traditions of Georgia. The tasting gathered over 85 sommeliers, wine makers and media representatives.
Welcome to Indian Punjabi Restaurant Sanjha Chulha 1 Mobile +995 596 56 13 13 Phone +995-322-95-96-14 Skype: SANJHA CHULHA Facebook: sanjha chulha indian restaurant mail: order@sanjhachulha.ge Website: Sanjhachulha.ge Agmashenebeli Avenue 130, Tbilisi 0112 Georgia Delivery service are available
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BUSINESS
GEORGIA TODAY
MARCH 28 - 30, 2017
Bulc: Make a Difference for the Future, Think Long-Term, Think EU BY KATIE RUTH DAVIES
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t the 23-24 March conference on Transport Investment in Sofia, Bulgaria, the Commissioner for Transport, Violeta Bulc, spoke extensively on the challenges faced by the European Union (EU) and how it is working to increase awareness of the numerous investment possibilities available to project makers, especially those from cohesion countries and the Eastern Partnership. She began by speaking about the challenging conditions under which the EU Commission has had to operate in the last two years: the social post-effects of the economic crisis (which, she claims, is now over- “official indicators show that member states recognise that only EU investments and innovation can secure the prosperity of each member state”); the refugee crisis which, “though not an issue completely solved, one we are confident we now know how to address;” terrorist attacks, which triggered fear and doubt over the concept of the EU and its ability to protect; Brexit (Great Britain’s announcement of its intent to leave the EU) the negotiation for which, Bulc says, the Commission for Transport will be fully engaged in, “in order to ensure transparency, nondiscrimination, reciprocity, and continuity for all transport stakeholders;” and climate change, which is a “global challenge, crossing borders, the main focus of which is decarbonisation.” “The EU is dedicated to being a force and player to ensure that we minimize the effects- that our transport is no longer [seen as] a dark force that pollutes the planet but is one which drives innovation, improves the world for future generations, and creates jobs, sustainable solutions and healthy conditions for people to develop in the long-term,” Bulc said. She went on to explain how the Commission encourages new models and new investments to make transport an enabler of development and not an obstacle. “The trend of investment is positive,” she said. “1% spending on conventional investments- transport, energy, digitalization- can lead to 1.5% GDP increase over four years. If you do it well, and efficiently, that can go up to 2.4%. Such
measurable, tangible stimulation has a positive effect on people’s lives”. The new investment plan for Europe, announced in February, is clearly much needed, aimed at reigniting enthusiasm to work together, create fresh sources of money that can be engaged, and to push the EU back onto the path of sustainability. “At the first stage, we are mobilizing EUR 350 billion of fresh investment. So far, the improved EIB operations are expected to trigger EUR 177 billion additional investment in just two years. That will represent, in the future, a vital, dynamic force with which to achieve even more ambitious goals,” Bulc said. The Commission’s proposal is to extend the European Financial Strategic Investment (EFSI) program to engage EUR 500 billion of fresh investment in the European market by 2020. “Transport is one of the drivers of the civil market, with connectivity and trade between countries raising standards and increasing the competitiveness of the economy both locally and globally,” Bulc pointed out. Core ambitions the EU Commission has in its aim to boost investment and development: Digitalization- 80% of the EU population lives in cities. Today, civilization is driven by technology and this needs to be capitalized on- smart mobility and urban solutions, connecting rural areas with cities, and making better use of resources, hand-in-hand with de-carbonization. Safety- The biggest silent killer in Europe is road accidents. 70 people die a day on European roads. By working with the UN, with concrete initiatives from the EC, and with the Declaration on Road Safety EU ministers will be signing this week in Malta, the expectation is that the statistics will be radically improved within the next two years. “Road fatalities and serious injuries, including the rehabilitation cycle, are costing the EU EUR 100 billion annually,” Bulc said. “That’s four times more than the transport grant budget for six years. Imagine putting this money into education, investments in social welfare… we have to focus on people, on things that are changing, improving conditions, positioning ourselves in an important global role. The EU is the largest economy in the world. Period. Sometimes I feel we behave like one of the poorest.
Other regions look to us- what we are doing, how we deal with diversity, how we implement changes, and how we deal with the challenges of restructuring sustainable concepts”. There are a lot of good projects out there (though many need to make use of the European Investment Advisory Hub to get them finalized for application) but there is not enough money to implement them all. In comes EFSI to bridge the transport infrastructure financial gap. The 2014-2020 budget to mobilise financing for transport is as follows: Connecting Europe Facility (CEF) - EUR 24.05 billion from the EU budget, EIB around EUR 14 billion/year, EFSI - EUR 70 billion from the EU budget, and Horizon 2020 - EUR 6.3 billion from the EU budget. The above, once blended with financing from National Promotional Banks or private sector investors, is expected to go a long way to solving the current oversubscription of projects unable to be funded but still considered of essence to EU development. The European plan for strategic investment functions in cooperation with the European Investment Bank (EIB) to
mobilize finance for investment and raise awareness of the diversified set of financial tools available to project promoters- such as development loans from commercial banks for projects with clear business outcomes and a low level of risk. But to get things done and moving forwards, the Commission knows that it cannot only invest in low-risk projects. So part of EFSI is there to provide guarantees which lower the risk factor of projects which it considers of strategic importance, “though sometimes even that is not enough, especially in cohesion countries, so we came up with new ideas to bring them on-board, by encouraging private institutional investors to invest in infrastructure projects,” Bulc elaborated. Blending, as this system is called, is a way for Member States to make use of EFSI and CEF grants alongside Public-Private Partnership (PPP). There seems to be a lack of competence in Member States to create quality investable projects and the Commission is working to improve capacity and competences to better use innovative financial mechanisms. “The clean transport facility, launched in December 2016, targets the better organization of transport, especially in urban areas,” Bulc told the conference audience. “Spain, France, and Latvia already picked it up. We need [you] to shift priorities in transport.” Also launched at the end of 2016 was the Green shipping guarantee, now in its pilot phrase in France, The Netherlands and Scandinavia, with roll-out phases available in all interested countries under EFSI financing. Drones and drone related technologies are also of interest to the Commission, and a legal framework is being established in this regard. Commisioner of Transport Violeta Bulc, who is looking forward to visiting Georgia in October this year to talk about the One Road, One Belt- Silk Road project, closed the Investment in Transport conference with appeals to each group present: “To project promoters- I have no doubt there is a high number of good transport projects which might be good candidates for EU investment. They need sound
realistic technical and financial engineering, proper preparation before entering implementation and financing phase. Please work on these capacities. You are experts at using European grants. Become now experts at using innovative financial mechanisms. Make use of the Blending initiative which offers both economic and social benefits, and be educated on what is available through INEA, DG Move and the European Investment Advisory Hub. “To governments and public institutions- I strongly encourage you to proactively support and promote projects, to establish a robust pipeline of projects. Foster the conditions in the country for the projects to be invested in. Technical and financial engineering knowledge needs to be raised within the ministries for capacity building. “To ministers and administrations- We must continuously shape our regulatory framework; we need to continuously bring onboard the changes necessary for transparency and simplification to speed up the processes in order to ensure efficiency and time-effectiveness. What we’ve done so far to stimulate PPP is: 1) Capital charges have been lowered for insurer investment in infrastructure projects; 2) Proposed to reduce charges for investment in infrastructure companies; 3) Proposed to reduce charges four times for banks for certain infrastructure assets in order to improve commercial bank engagement; 4) Introduced guidance for public procurement. Help us to recognise what else we need to do to continue walking this path of higher investments in European organizations, European transport and infrastructure, and improving the conditions for European businesses to flourish and be globally competitive. “And last, to investors- Continue following our progress. Keep pushing us to do the right things. Be our partners, be present in the developmental environments. Show interest and patience in the process of developing projects, and give us public support for further liberalization and the establishment of a single European transport area”.
BUSINESS
GEORGIA TODAY MARCH 28 - 30, 2017
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Exclusive Development Project - Gergeti Rise Residence Operated by International Company Ginza Project
T
he Project is located in the historic part of ancient Tbilisi with the amazing views over the 1600 years old capital and it is on the slope of Mtatsminda (Holy Mountain). It is only 3-5 minutes’ walk to the funicular station, St. David’s Monastery, House of Parliament, Rustaveli Theatre and Freedom Square. The Project is being carried out by CRADLE OF DEVELOPMENT LTD. Its managing partner Nika Tsiklauri says, that the he wanted to create a precedent, when the international management company would operate a residential complex in Georgia and Ginza Project had been selected to this end. Ginza Project owns and operates several hundred restaurants and boutique residential complexes in London, Moscow, New York, St. Petersburg, Los Angeles etc, will exclusively manage the residential complex of GERGETI RISE RESIDENCES in Tbilisi. “The project with its characteristics can compete with its any high-class analogue in any part of the world,” he said, in particular: The complex is completely surrounded by pine trees and a recreation zone with no traffic. All apartments boast stunning views from their huge, fully-equipped garden terraces. The project calls for creating ecologically clean environment and special micro climate. The residence comprises 5 residential floors and 20 luxury apartments and 12 meter height atrium in huge lobby with natural rocky wall. The residence will be built by Western European high quality construction materials, including the sliding aluminum profiles with energy efficient glass, installed centralized heating and condi-
tioning systems, two panoramic elevators etc. There is two-storied underground parking space with a car wash too. The complex will also have an outdoor Jacuzzi and a swimming pool with elements of spa, a sauna, a library and a business center, also private cinema/ media center and kids’ club, wine cellar, conference hall, gym and a contemporary landscape design around the complex, including the playground for kids and relaxing zones, 24-hour service of
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concierge and security service, also a doorman, valet, gardener, baby sitter and other services. At the same time there is two-storied underground parking space for 60 cars, with a car wash service. Cradle of Development together with Ginza Project Holding plans to implement several other large scale projects in hospitality sphere all over Georgia. The construction of the Project has been started and scheduled to be completed in autumn 2018.
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