Issue #1146 Business

Issue no: 1146/178

• APRIL 30 - MAY 2, 2019

FOCUS ON WASTE MANAGEMENT The waste management tariffs explained.

PAGE 6

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

Agri Review, April 2019: FDI in Agriculture ISET PAGE 4

Startup Grind Presents Valeri Chekheria, CEO of Adjara Group BUSINESS PAGE 7

DVV Int’l Opens 11th Adult Education Center for Lifelong Learning in Kharagauli

Image source: Getty Images

Initial Figures from the New Accumulative Pension Scheme

BY SAMANTHA GUTHRIE

BUSINESS PAGE 9

L

ast week, Director of the Pension Agency of Georgia Levan Surguladze, released the first statistics on the country’s new pension system. In the first quarter of 2019, in the first three months of the program, 747,774 people enrolled in the new accumulative pension system, contributing approximately 175 million GEL ($64.8 mln) to the fund, including interest.

Of those enrolled in the scheme, about 25% work in the public sector, and the rest in the private sector.

Continued on page 3

GTF 2019: 21st Georgian Tourism Fair BUSINESS PAGE 13

Ana Goguadze on Beating the Sterotypes Image source: Parliament of Georgia

SOCIETY PAGE 15 Prepared for Georgia Today Business by

Markets As of 25ͲAprͲ2019

w/w

m/m

Price

w/w

Bank of Georgia (BGEO LN)

GBP 16.62

Ͳ0,2%

+1,0%

GEOROG 04/21

103.64 (YTM 4.81%)

+0,0%

+0,2%

Georgia Capital (CGEO LN)

STOCKS

GBP 10.06

Ͳ1,6%

Ͳ4,6%

GEORG 04/21

105.85 (YTM 3.74%)

Ͳ0,0%

+0,0%

GBP 2.10

+2,4%

+7,0%

GRAIL 07/22

107.40 (YTM 5.21%)

Ͳ0,0%

+0,0%

GBP 15.90

+4,3%

+4,5%

GEBGG 07/23

101.95 (YTM 5.48%)

Ͳ0,1%

+1,8%

CURRENCIES

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

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

Price

BONDS

m/m

Price

w/w

m/m

Price

w/w

m/m

74,99

+4,2%

+11,6%

GEL / USD

2,6975

+0,1%

+0,5%

1 277,88

+0,2%

Ͳ3,3%

GEL / EUR

3,0070

Ͳ0,5%

Ͳ1,0%

GEL / GBP

3,4837

Ͳ0,4%

Ͳ1,7%

INDICES

Price

w/w

m/m

GEL / CHF

2,6468

Ͳ0,1%

Ͳ2,3%

FTSE 100

7 432,40

Ͳ0,4%

+3,6%

GEL / RUB

0,0417

Ͳ1,2%

FTSE 250

19 873,10

+0,2%

+5,7%

GEL / TRY

0,4547

Ͳ2,0%

Ͳ6,0%

DAX

12 281,97

+0,5%

+8,2%

GEL / AZN

1,5927

+0,3%

+0,6%

DOW JONES

26 460,54

Ͳ0,4%

+3,7%

GEL / AMD

0,0056

Ͳ

+1,8%

8 130,41

+1,7%

NASDAQ

Ͳ0,7%

+6,5%

GEL / UAH

0,1017

+1,4%

+2,0%

172,44

+0,1%

+2,3%

EUR / USD

0,8982

+0,9%

+1,6%

MSCI EM

1 084,52

Ͳ0,7%

+3,5%

GBP / USD

0,7754

+0,7%

+2,3%

SP 500

2 924,63

+0,7%

+4,5%

CHF / USD

1,0204

+0,5%

+2,8%

MSCI FM

2 691,98

Ͳ0,7%

Ͳ0,9%

RUB / USD

64,7277

+1,3%

+1,2%

GT Index (GEL)

1 582,68

Ͳ

Ͳ

TRY / USD

5,9410

+2,5%

+7,0%

GT Index (USD)

1 208,13

Ͳ

Ͳ

AZN / USD

1,7001

Ͳ

Ͳ

MSCI EM EE

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NEWS

GEORGIA TODAY

APRIL 30 - MAY 2, 2019

@entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you: Another go-to destination for wine enthusiasts in Tbilisi is ‘Wine Factory #1’, where guests can choose from more than 1000 wine varieties from renowned producers and small family cellars. The shop is located in the historic building of the city’s first wine factory at 1 Petriashvili Str., built in 1896 and included on the list of the Cultural Heritage of Georgia. The founder of Wine Factory #1 states that the promotion of family wine cellars is one of their major goals. There are also a number of unique limited editions available.

The demand for wooden houses is on the rise. Having this fact in mind, Irakli Lomidze, the founder of Kohi.ge offers the construction of wooden cottages, mini hotels and houses. Each building is produced in a factory and then delivered to the specific location. After receiving its quality certificate, the company is to start preparing for export to the European Union. Next year, the company is to introduce its products to potential clients in southern Europe.

Kutaisi has recently welcomed a new hostel, with the interesting name of Black Tomato.

Two young ladies, Elene Zamtaradze and Mariam Ramishvili, are the authors of the initiative, who decided to start their business and become entrepreneurs without leaving their home or giving up their current jobs.

Even though they have to manage the hostel from 200 km away, the girls are making a success of their new endeavor- it all comes down to self-confidence and bank loans!

Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on business@entrepreneur.ge

Georgian Diplomas & Qualifications to Be Recognized by EU

BY THEA MORRISON

A

fter the decision of the Presidium of the European Association for Quality Assurance in Higher Educ a t i o n ( E N QA ) , t h e National Center for Educational Quality Enhancement of Georgia will become a member of the Association, which means that Georgian diplomas and qualifications will be recognized in the European Union states.

The agency reports that the ENQA Presidium made a decision on membership of Georgia on April 25 at the annual forum held in Estonia. According to them, only technical procedures remain and Georgia will officially become an ENQA member from autumn 2019.

The Georgian center officially announced in February 2018 that it was willing to join the ENQA and last August presented a self-assessment report to the organization.

The Head of the National Center for Educational Quality Enhancement of Georgia, Giorgi Vashakidze, says this is a great achievement for the higher education system - a kind of recognition that the standards and procedures of education quality in Georgia today are relevant to the European standards.

“The Center's membership in the ENQA means increased confidence towards the higher education institutions operating in Georgia and means it can attract more foreign students, professors and teachers, and of course recognition of Geor-

Image source: nairtejas.com

gian diplomas in Europe,” he explained.

Georgia’s Ministry of Education reports that in accordance with the Association Agreement between Georgia and the European Union, the country has taken the obligation to bring Georgia's higher education system closer to European standards.

The ministry says that the implementation of European mechanisms and standards for higher education quality in Georgia was especially important in this direction.

“This task has already been fulfilled and in Georgia today, harmonized authorization and accreditation standards and procedures exist with ESG-2015 standards and guidelines for quality of European Higher Education,” the statement reads.

The European Association for Quality Assurance in Higher Education, formerly

the European Network for Quality Assurance in Higher Education, was established as an organization to represent quality assurance and accreditation for organizations from the European Higher Education Area and internationally.

The ENQA promotes European cooperation in the field of quality assurance in higher education and disseminates information and expertise among its members and towards stakeholders in order to develop and share good practice and to foster the European dimension of quality assurance.

Before being accepted or being reconfirmed as a member, an applicant agency must satisfy to the Board that it meets the criteria for membership: the European Standards and Guidelines for Quality Assurance in the European Higher Education Area (ESG).

NEWS

GEORGIA TODAY APRIL 30 - MAY 2, 2019

3

Total Assets of Georgian Commercial Banks Amount to GEL 39.4 Bln

BY THEA MORRISON

T

he banking sector in Georgia is represented by 15 commercial banks, including 14 foreign-controlled banks, as of April 1, 2019.

In March 2019, compared to the previous month, the total assets of Georgian commercial banks increased by 464.7 million GEL (1.2%) and constituted GEL 39.4 billion. The banking sector’s own funds (equity capital) equal GEL 5.3 billion, which makes up 13.4% of the commercial banks’ total assets.

The information was released by the National Bank of Georgia (NBG) on April

25. The NBG says that the total volume of non-bank deposits in the country's banking sector increased by 0.9 % or by GEL 209.4 million compared to March 1, and constituted GEL 23.1 billion by April 1.

The regulator reports that in March, the volume of term deposits decreased

by GEL 157.4 million and demand deposits increased by GEL 366.8 million (2.8%).

“The Larization ratio of total non-bank deposits constituted 38.15% by April 1, and increased by 0.48 percentage points compared to March 1,” the statement of the national bank reads.

In addition, the NBG says the annual average weighted interest rate on term deposits constituted 5.6%. In particular, the interest rate for national currency denominated deposits was 7.3 % and the

interest rate for foreign currency denominated deposits 2.7 %.

Further, the share of the US dollar in the total volume of foreign currency denominated deposits equals 84.2% and the share of the Euro equals 14.3%.

The national bank also informs that the volume of lending by commercial banks in March increased by GEL 316.7 million or by 1.2% compared to the previous month and constituted GEL 26.8 billion by April 1. The volume of loans in the national currency increased by GEL 226.8 million and the volume of loans in foreign currency increased by GEL 89.9 million in the same period.

Furthermore, by the end of March, the total volume of national currency denominated loans issued by commercial banks

Image source: discover.com

amounted to GEL 3.5 billion and foreign currency denominated loans to resident legal entities constituted GEL 8.5 billion.

The national bank added that during March, the volume of lending to resident individuals increased by 0.5 % or GEL

68.7 million, and constituted GEL 14.1 billion by April 1, 2019.

“The Larization ratio for total loans constituted 43.29% by April 1 and increased by 0.34% points compared to March 1,” the NBG said.

Initial Figures from the New Accumulative Pension Scheme Continued from page 1 Nearly 40% (294,852 people) of participants are over the age of 40, and thus eligible to opt-out of the scheme. Of those, 26% are public sector workers. So far, 2,915 people have opted out of the pension system the vast majority of whom were public sector employees.

“In two years, we expect to accumulate 1.5 billion GEL in the pension system, in six years – about 5 billion GEL, 80% of which should benefit the country’s economy,” Surguladze told the members of the Parliamentary Sector Economy and Economic Policy Committee. He also mentioned that the scheme will contribute to the development of the domestic capital market by creating the largest investment capital base in the country.

The new law on pension reform, establishing the accumulative pension system, was enacted on January 1 of this year. The

long-awaited change is designed to give Georgians a retirement savings account that is more proportional to their earnings while they were working by taking a percentage of their pre-tax salary, ensuring financial support for retirees, and to further develop the Georgian capital market.

The new system has several phases.

The first phase automatically enrolled all people working in Georgia under the age of 40, apart from self-employed people, into the new pension scheme. Workers 40 years and older and self-employed people could choose to voluntarily participate. While the automatic enrollment component was somewhat controversial, employees under the age of 40 will have the opportunity to opt out of the program starting in June of this year, which will return the pension contributions made on his or her behalf to the respective contributors.

Technically, it is a three-party invest-

ment scheme: employees contribute 2% of their pre-tax salary, the employer contributes an amount equal to 2% of the employee’s pre-tax salary, and the Georgian government contributes an amount equal to 2% of the employee’s pre-tax salary. If an employee’s salary is greater than 24,000 GEL ($8,888) per year, the government contributes only 1%, and if an employee’s salary is greater than 60,000 GEL ($22,222) per year, the government does not contribute at all.

The self-employed can participate with a 4% personal contribution.

When Georgians reach the official state retirement age – 60 for men and 55 for women – they will gain access to their pension funds, distributed in monthly installments. The new pension scheme will not affect the current system, only supplement it, by which every retired Georgian is eligible to receive 200 GEL ($75) a month – a rate which increased

by 20 GEL from January 1.

The funds contributed by the three parties are invested domestically in the hope that the funds will grow over time, keeping up at least with inflation. Currently, participants are only able to select a low-risk portfolio, but after five years, participants will have three options – low, medium, or high risk, correlating to the level of risk, and subsequent potential reward, of the investments for which a participant’s contributions will be used.

The move has been praised by many international observers, including Francois Painchaud, IMF Resident Representative in Georgia. Painchaud promoted investment and savings as an opportunity for Georgia’s development in an op-ed titled ‘Georgia’s Challenges & Opportunities,’ published in The Economist’s The World in 2019 Georgian edition. He wrote that, “The funded pension scheme will improve the living standards of future

retirees and promote savings and businesses’ access to long-term Lari funding.”

In March, the Pension Agency announced an international competition to select the five members of the investment board who will be responsible for determining the investment policy of the Agency over the next five years, developing an investment policy document to be submitted to the Pension Agency Director for approval, modifying investment policy documents, quarterly monitoring and evaluation of all pension investment activities, assessing the compliance of investment activities with the investment policy document, and selecting specialized depositors and asset management companies.

The current pension fund is being kept in the National Bank of Georgia (NBG) and commercial banks until the investment board is staffed and investment activities begin.

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BUSINESS

GEORGIA TODAY

APRIL 30 - MAY 2, 2019

Agri Review, April 2019: FDI in Agriculture

I

n 2018, FDI in agriculture constituted 15.9 mln. USD. While the total FDI in 2018 was lower than in 2017, FDI in agriculture has significantly increased (by 28.2%).

The highest FDI in agriculture was observed in the second quarter of 2018, while there was divestment (negative FDI) in the first quarter of 2018. The divestment was quite small and was followed by a significant increase in other quarters. Given that demand for food is likely to increase in the future, FDI in agriculture is critical for the expansion of agricultural output.

Traditionally, FDI in agriculture is very low compared to FDI in other sectors.

During the last decade, the share of FDI in agriculture ranged between 0.5% 1.5% of total FDI in Georgia. The only year when the share was relatively high was 2009. In 2009, FDI in agriculture constituted 3.4% of total FDI and more than doubled in absolute terms compared to 2008 (10.6 mln. USD in 2008 and 22.3 mln. USD in 2009). In 2018 FDI in agriculture constituted 1.3% of total FDI (Figure 1). The low attractiveness of the sector for FDI is caused by land constraints, outdated technologies, lack of business-oriented producers, and lacking contract farming practices, as well as the lack of specialists in this field.

lished the preliminary data on plant growing according to which the domestic production of vegetables in 2018 increased compared to 2017. It appears that the increase in domestic production of vegetables was not enough to balance the effects of trade flows on prices.

INTERNATIONAL PRICES In March 2019, international prices maintained a downward trend. The Food Price Index, measured by the Food and Agriculture Organization (FAO), decreased

by 3.6%, compared to March 2018. Price decreases were observed for vegetable oil (-18.6%), meat (-4.9%), sugar (-2.8%), and cereal (-0.4%).

However, the Dairy Price Index experienced a significant 3.5% increase compared to March 2018. The main drivers were increased Whole Milk Powder (WMP) and cheese prices, reflecting increased import demand in anticipation of a tightening in export availability from Oceania due to declined production. A slight decrease in Skim Milk Powder

Figure 1. FDI composition in 2018

DOMESTIC PRICES On a monthly basis, the country’s price levels have increased slightly. The Consumer Price Index (CPI) in March 2019 was 1.0% higher compared to the previous month. While in comparison to March 2018, the CPI experienced a 3.7% increase. For food and non-alcoholic beverages, the month-over-month prices increased by 1.3%, contributing 0.4 percentage points to the change in total CPI. The main drivers were price fluctuations in the following sub-groups: vegetables (8.2%), fruit and grapes (5.1%) and milk, cheese, and eggs (-1.1%). From an annual perspective (March 2019 vs. March 2018), the prices of food and non-alcoholic beverages increased by 4.8%, contributing 1.5 percentage points to the change in total CPI. In March 2019, the sharpest price changes on an annual basis were observed within the following subgroups: vegetables (19.8%), fish (12.9%) and fruit and grapes (-23.3%).

Figure 2. Trade in vegetables

TRADE HIGHLIGHTS In March 2019, Georgia’s agricultural exports (including food) equaled approximately 53 mln. USD, roughly 21% of the total Georgian export value. When comparing this indicator to March 2018, the share has decreased by almost 2 percentage points. As for imports in March 2019, Georgia’s agricultural imports equaled 90 mln. USD, which is almost 15% of all

Georgian imports. Year-over-year (compared to March 2018), agricultural imports were slashed by one third.

SUGAR AND SUGAR CONFECTIONERY TRADE 2019 started with sharply declining imports of sugar and sugar confectionery (HS code 17XX), which was accompanied by marginally increased exports (+0.06 mln. USD in Q1 2019 compared to Q1 2018) in the same product group. Consequentially, the trade surplus in the last three months improved from negative 16.4 mln. USD to negative 7.5 mln. USD. At the sub-group level, from January 2019 through March 2019 sugar (HS code 1701) imports amounted to 3.8 mln. USD, which is just one third of the corresponding value in 2018 (11.7 mln. USD). Moreover, sugar imports decreased on a month-to-month scale for the first three months of the current year, as well (from 1.5 mln. USD in January 2019 to 1.1 mln.

USD in March 2019). Changes were also significant in the sugar confectionery not containing cocoa, incl. white chocolate (HS code 1704) sub-group, but imports have dropped only on the year-to-year scale here. In the first three months of 2019, in order to purchase sugar confectionery not containing cocoa, incl. white chocolate on the international market, Georgia spent 22% less (3.6 mln. USD) than it did in Q1 2019 (4.6 mln. USD), while on a month-to-month scale the imports had an upward trend (0.9 mln.

USD in January 2019 versus 1.5 mln. USD in March 2019).

As for exports, total exports of sugar and sugar confectionery from Georgia amounted to approximately 0.3 mln. USD in the last three months. A more detailed breakdown of the monthly trade data is given in the Figure 3 below.

POLICY WATCH

VEGETABLES IN THE SPOTLIGHT In March 2019, prices in the vegetable category increased by 8.2% compared to the previous month. On an annual basis, prices in this group experienced a significant 19.8% increase. According to GeoStat data, the sharpest annual increases were observed for cabbage (166%), greens (70%), and onion (61%).

The increase in vegetable prices might be the result of a shortage in supply.

Trade statistics reveal that both the import value and quantity of vegetable trade flow decreased on an annual basis.

In March 2019, the import value amounted to 3.6 mln. USD, 28% lower than the 5.1 mln. USD of March 2018. Within the same period, the quantity of imported vegetables decreased by 36%, from 16.3 thousand tons to 10.4 thousand tons. On the other hand, the quantity of exported vegetables in March 2019 increased by 13% (from 2.4 thousand tons to 2.7 thousand tons) compared to the previous year (Figure 2). Typically, both—a decrease in import as well as an increase in export—could cause a shortage in supply and contribute to an increase in the price of vegetables.

It is worth noting that GeoStat pub-

(SMP) prices could not even out the upward pressure on dairy prices.

Figure 3. Trade in sugar and sugar confectionery

The United Nations’ Food and Agriculture Organization (FAO), with the support of the MEPA scientific-research center and the European Union, is launching a project to implement a certification system for planting materials.

The project is comprised of two main components: improvement of the certification system and legislative basis and strengthening nursery opportunities, including supporting the establishment of a seedlings/producers’ association, and training representatives of nurseries. It is noteworthy that the qualification of nursery farming, which is the prerequisite for certification in planting materials, began in 2017. Representatives of MEPA’s scientific-research center granted 85 nurseries throughout the country the status of qualified nursery as a result of field inspections.

For more information follow the link: https://commersant.ge/ge/post/sargavimasalis-sertificirebis-danergvis-proeqtiiwyeba A memorandum of understanding was signed with Cyprus in the field of agriculture.

Minister of Environment Protection and Agriculture, Levan Davitashvili and Minister of Foreign Affairs of the Republic of Cyprus Niko Christodoulides signed a Memorandum of Understanding in Agriculture. The aim of the Memorandum of Understanding is to ensure the development of cooperation between the parties and the implementation of joint activities and projects in agriculture.

For more information follow the link: http:// mepa.gov.ge/En/News/Details/9455/

BUSINESS

GEORGIA TODAY APRIL 30 - MAY 2, 2019

A Gently Fermenting Revolution - Women in the Georgian Wine Business

Image Source: National Wine Agency

BY LISA MAIER

W

ine is deeply rooted in Georgian culture and the 8000 year old wine vessel found in 2017 brought final evidence that Georgia is the motherland of wine. International interests in Georgian wine are steadily increasing and offering a possibility for the improvement of the country’s economy.

The wine sector, still mainly dominated by men, is facing a gentle but revolutionary change. Women were always involved in winemaking as the invisible parts of their men’s businesses,but since 2010 more and more women have been stepping out of the shadows to become leading entrepreneurs in Georgian winemaking.

“Let’s make it a successful day for women in winemaking,” Eva Knirsch, spouse of the Ambassador of Federal Republic of Germany in Georgia, said when opening the conference ‘Women in the Georgian Wine Business’, which took place on April 23 at the National Wine Agency.

Supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, the National Wine Agency organized the event to foster the gentle feminization of winemaking. The discussion of women’s role in the economy and especially in winemaking was the main aim of the conference.

“It is important to discuss women’s role in winemaking and especially talk about such challenges as the lack of access to finances, knowledge and resources. After that we can slowly overcome impeding factors for young women,” said Elene Otarashvili, Deputy CEO of the Georgian Wine Holding and founder of the Georgian Business Tourism Association.

One of the highlights of the event was the presentation of the book ‘A Gently Fermenting Revolution – Women in the Georgian Wine Business’ written by Keto Ninidze and Nino Natroshvili on

No matter if we are men or women, grapes and wines are everybody’s business behalf of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, who initiated and financed the whole project. The book aims to present, collect and highlight the fruitful work of women in the wine business to date. “The book not only seeks to show women’s stories but aims to highlight how they changed the traditional area of Georgian winemaking by introducing new, creative and innovative approaches,” Ninidze stated.

Over centuries and in countless poems, the male perspective was recited; the book aims to broaden this one-sided perspective and bring a completely new understanding of how winemaking can be seen and done from a female point of view. It is an inspiring collection of females becoming in a male dominated business; it further aims to motivate young women when choosing a profession.

Other highlights of the event were a live video conference with the German Women in Wine Association and a Presentation of the Georgian Association of Women Winemakers.

All the speakers emphasized, it is important for Georgia to overcome the impeding stereotypes of the sector and focus on how the economy can benefit from a female approach. “We have to work together to contribute to the country’s development by following one vision. No matter if we are men or women, it is in all our identity. Grapes and wines are everybody’s business,” Tamar Gerliani, owner of Malati Wines concluded.

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BUSINESS

GEORGIA TODAY

APRIL 30 - MAY 2, 2019

Taking Responsibility: On Introducing Waste Management Tariffs in Georgia system that works in practice implemented.

BY KETEVAN KVARATSKHELIYA

HOW WILL YOU INCREASE PUBLIC AWARENESS OF THE IMPORTANCE OF WASTE MANAGEMENT TARIFFS?

E

ver wonder what happens to the waste you throw out, who is responsible for its disposal and how much it costs to get rid of it? Or, more importantly, who pays for it?

There are several stages to the system for it to be complete and sustainable.

The waste management system includes proper disposal, collection, transportation, and placement in a landfill, including proper operation of the landfill, all of which have their associated costs which cover street-sweeping services, workers’ wages, transportation, equipment, fuel, rent, etc. International practice shows that this is usually covered as part of your regular monthly bills, just like electricity and water. In Georgia, however, this is, in the vast majority of cases, subsidized by the central government and does not yet include landfill operation costs. The existing waste tariff calculation system is somewhat outdated and based on the waste collection normative system which, in today’s reality, is far from accurate. In addition, tariffs, in most of the municipalities, do not consider the waste disposal (gate fee), and waste recycling fees are not included anywhere as yet. This naturally raises the question of sustainability, particularly when Georgia is set to move to a waste separation system and building landfills that comply with modern standards.

Therefore, it is necessary to calculate the costs accurately. This requires a comprehensive methodology to project the potential tariffs for waste management. If the waste management system is self-sufficient, the funds can be easily allocated to other national priorities such as healthcare, infrastructure or education.

As per the National Waste Management Action Plan, the USAID WMTR program implemented by CENN has developed a methodology for the determination of waste tariffs in accordance with modern requirements, and proposed a cost recovery system that will ensure the sustainability of solid waste management systems at the Municipal level.

GEORGIATODAYspokewithKakhaber Kuchava, Chairman of the Environment and Natural Resources Committee at the Parliament of Georgia and find out more about the waste management tariffs system in Georgia.

WHAT ARE THE CRITICAL ISSUES IN THE WASTE MANAGEMENT SECTOR AND HOW ARE THEY RELATED TO TARIFFS? Proper waste management is vital for building sustainable cities, but it remains a challenge for many countries, including Georgia. The absence of environmental monitoring and poor waste man-

agement has its implications on the environment and, consequently, on quality of life in general. Currently, the Environment Committee has an on-going committee inquiry solely concentrating on municipal waste management in Georgia. To ensure the participation of all relevant stakeholders in the process, the Environment Committee received written evidence and held public hearings, which allowed the Committee to identify a number of critical issues in waste management. More precisely, the key challenges were discussed, such as lack of tariffs and law enforcement in municipalities, waste recovery and disposal, the needs of municipalities and capacity building issues, and environmental education concentrating on waste management. To reap the environmental and economic benefits of the circular economy, the Environment Committee will issue a report which will set recommendations and deadlines for each relevant state agency which will allow an intensification of the much-needed policy reform process and help to step up action on the ground.

These issues are closely connected with tariffs, as efficient waste management is expensive and operating municipal service requires integrated systems that are efficient, sustainable, and socially supported. The progress is essential and possible if the respective public authorities take action, such as effective separate collection to guarantee high-quality recycling, efficient Extended Producer Responsibility schemes, and improved data quality.

WHY ARE TARIFFS ESSENTIAL FOR WASTE MANAGEMENT? A socially acceptable tariff structure and an effective billing mechanism are of the utmost importance when designing tariff systems. Implementing financially sustainable and resource-efficient waste management is crucial. Subsidizing might be a temporary solution to the issue.

However, it is not a long-term answer to the challenge. To that matter, the primary

regulation to fill in the gaps related to the tariff system is “the polluter pays principle.” It is an economic principle through which external costs can be internalized. The principle is a way of allocating costs for pollution and it would seem fair that the polluter pays the costs for the pollution which he has contributed to.

Assessing and continuously tracking the full-service is essential for improving the efficiency of waste management. Tariffs in the waste management sector can directly address the failure to consider environmental impacts, enable lowestcost solutions and provide an incentive for innovation. The “polluter pays” principle can thus serve as justification for a tariff for waste management.

WHAT REGULATIONS ARE TO BE IMPLEMENTED TO INTRODUCE A NEW TARIFF SYSTEM AND WHAT GAPS DO THEY ADDRESS? The main regulation to fill in the gaps in the area of waste management is applying the “polluter pays” principle. This principle is fundamental in light of the Association Agreement. At present, in the frame of the on-going committee inquiry, the Committee is consulting on giving precise recommendations in order to ensure practical implementation of an appropriate and efficient tariff system.

“One of the central issues addressed during the Committee Inquiry is environmental education concentrating on waste management. It is indisputable that in addition to appropriate legislation, strong technical support and adequate funding, a critical component in waste management is public awareness and participation in the decision-making process. Generally speaking, waste is the result of human activities, and everyone needs to have a proper understanding of waste management issues, without which the success of even the best-conceived waste management regulation becomes questionable. The Environment Committee as well as having an inquiry on the topic will closely cooperate with CSOs and public agencies, and has already started study visits at the Parliament of Georgia with the Environmental Education and Information Center to raise awareness on environmental matters.”

GEORGIA TODAY also met with Archil Lezhava USAID/CENN WMTR II program, Waste Tariff Policy Elaboration Team Leader to discuss the issue of tariffs in detail.

WHAT IS THE METHODOLOGY INTRODUCED BY THE USAID WMTR II PROGRAM IMPLEMENTED BY CENN? The General Methodology for Establishing Tariffs and a Cost Recovery System in Georgia was developed by the USAID WMTR II program implemented by CENN in cooperation with an international expert. It is specially designed for modern Georgian reality that also includes a calculation tool that gives municipalities a way to calculate their tariff on an

annual basis by using indicators such as street and public area cleaning; waste collection; gate fee as well as a waste recycling fee. It is based on the Full Cost Accounting (FCA) Method, the current international “best practice” or “modern method” for accounting in the solid waste management field. FCA is defined as a systematic approach for identifying, summing and reporting the actual revenue and costs of solid waste management. It takes into account past and future outlays, overhead (oversight and support service) costs, and operating costs. The methodology includes the breakdown of costs for Labor; Vehicles & Equipment Operating Expenses; Consumable Supplies; Rent or Lease Payments; Contract Services; Loan Repayments; Depreciation and/or Principal and Interest Payments/Capital Investments in addition to Unclassified Costs.

It is based on principles that include: Legal Requirements; Cost Recovery; Financial Viability; Horizontal Equity; Vertical Equity and Poverty Alleviation; Administrative and Technical Feasibility; Polluter Pays Principle and Transparency.

DOES THE METHODOLOGY INTRODUCED BY USAID WMTR II MEET THE CRITERIA TO BE UTILIZED IN THE MUNICIPALITIES? They meet every single criteria to be utilized in the municipalities. It was tested by the WMTR II team in 3 target regions of the program (Adjara A.R., Kakheti and Shida Kartli). As a result, local employees acquired knowledge how to use the calculating tool and the Kvareli Municipality adopted waste tariffs based on the methodology mentioned above. The WMTR II team is open to any municipality from its target regions to recalculate the tariffs if there is motivation and a will to utilize the modern methodology.

HOW DID THE PARLIAMENT / YOU BECOME INVOLVED IN THE PROCESS OF TARIFF SYSTEMS? During my public meetings in the municipalities, it became obvious that lack of proper waste management was one of main concerns for locals. To follow-up on the issue and obtain information from all relevant stakeholders, the Environment Committee initiated a Committee Inquiry which has been successful in extending parliamentary oversight functions and ensuring a thorough understanding of the challenges in the sector.

This, in turn, will ensure the appropriate recommendations are issued and a tariff

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BUSINESS

GEORGIA TODAY APRIL 30 - MAY 2, 2019

7

Startup Grind Presents Valeri Chekheria, CEO of Adjara Group

BY AMY JONES

I

n a packed auditorium at Tbilisi Conservatoire, 500 young entrepreneurs gathered at Startup Grind Tbilisi to listen to an interview with Valeri Chekheria, CEO of one of the most world-famous Georgian companies, Adjara Group.

Adjara Group is the mastermind behind some of Georgia’s best-known hospitality brands: Stamba, Fabrika, Lolita, Rooms Kazbegi, and Rooms Tbilisi all belong to the brand. Startup Grind organizer Colin Donoghue sat down with Valeri Chekheria to talk about his past, vision, and advice for budding entrepreneurs.

Chekheria grew up in a Tbilisi emerging from the Soviet Union. “I grew up in the 90s when we had this big trouble living,” he tells Colin. “We didn’t have basic needs: no electricity, no gas, no water… it was a very difficult time.”

He went on to study law before work-

Over 80% of the food served in Adjara Group restaurants is Georgian

ing in the Ministry of Finance after the Rose Revolution. Despite being only 24, these were formative years of his life as he worked his way from the position of intern to working alongside the Minister of Economy. “We were a generation who never knew the taste of money from corruption,” says Chekheria. “We might make many mistakes, but we would be the generation who didn’t allow corruption to happen.”

Chekheria was then lucky to be based to New York for six years where he studied a Masters at Colombia University. It was here that he met his future investor and learned the working habits of the wider world.

After securing a job as General Manager of Holiday Inn in Tbilisi, he aimed to implement these work ethics in Georgia: “I remember the first day,” says Chekheria. “I said, daily meeting from 8am from tomorrow. That didn’t last long.” Instead, he turned to focusing on the basics, working alongside housekeepers to ensure that quality was maintained throughout the hotel.

Chekheria began to change the hospitality industry in Georgia by offering a quality service and local experience.

This is how the Rooms brand idea was born. The first Rooms hotel opened in Kazbegi, but it wasn’t without its difficulties. “It wasn’t very popular to go into hospitality, especially for the younger generation.”

To interest the local younger generation in hospitality, staff members of the hotel would play sports with the local kids, encouraging them that it was, in fact, cool to become a waitor.

Chekheria stressed the importance of involving the local community in

his hotels and being a “good neighbor.”

“We buy lots of local products, we contracted local farmers,” says Chekheria. “We benefit from each other: we buy fresh products from the locals and they get new jobs.”

Three years ago, Adjara Group took this one step further by collaborating on projects with Georgian farmers.

After the collapse of the Soviet Union, farming became unpopular and many agriculturers left the profession.

Chekheria, realizing the need for local-grown fresh produce in his hotels, contacted the Head of the Farmers Association. Together, they convinced Georgian farmers to begin farming again. Many chefs now work together with the farmers to ensure that the produce is the best quality it can be.

In addition, the group has invested in more than 3000 hectares of land in Khaketi where they are growing almonds. Today, over 80% of the food served in Adjara Group restaurants is Georgian.

Other restaurants have begun following their example and are now buying fresh products from farmers, says Chekheria. After all, not only does the food taste better, but it’s a good story to tell to tourists.

The Adjara Group now employs 3000 staff across Georgia and has transformed the Georgian hospitality industry. When asked how he maintains such a strong team, his answer is simple: new ideas and a friendly working environment.

“Any employee who comes to work at my company should be happy,” he says.

“If they’re not happy and proud to work there, then they will not provide a good service.”

Image source: Entrepreneur Georgia

Fuel Prices Go Up in Georgia

BY THEA MORRISON

O

ver the last few days, fuel prices have significantly increased in Georgia. The changes refer to the cost of all types of petrol and diesel which, according to petrol importers, is connected to increased prices on the global market.

According to the Georgian Union of Importers of Oil Products, from the beginning of the current year, oil prices have risen on the London InterContinental Exchange Futures Europe oil stock on average by $17.18 per barrel, which is a 29.9% increase in price, which today stands at $74.51 per barrel.

The fuel prices on the world market increased after the United States imposed sanctions on Iranian oil.

Importers do not make any positive predictions, while experts advise the Georgian government to reduce the

Experts advise the Georgian government to reduce the excise tax

Image source: The Independent

excise tax, which was increased from GEL 0.25 to 50 per liter in 2017. Specialists claim that if the taxes and tough regulations are removed, the fuel price will be reduced.

Experts also believe that the increased fuel price will bump up the price of other products too.

Vano Mtvralashvili, Chairman of the Union of Importers of Petroleum Products, says that the devaluation of the national currency GEL against of the US Dollar is not the main factor and does not affect the prices of oil products in Georgia.

“At the beginning of the year, the offi-

cial exchange rate of the GEL against the Dollar was 2,6727 and now one dollar is 2,6981 GEL. It is quite stable at present,” he stressed.

Mtvralashvili also said that during the last two weeks the price of fuel has increased on branded petrol stations on average by 7-10 Tetri per liter.

The Union of Oil Products Importers informs that the average retail price of fuel at the branded petrol stations in Georgia is as follows: Regular – 2.30-2.39 GEL / liter; Premium – 2.41-2.49 GEL / liter; Super – 2.49-2.59 GEL / liter; Euro diesel – 2.53-2.64 GEL/ liter

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BUSINESS

GEORGIA TODAY

APRIL 30 - MAY 2, 2019

March 2019: Average Hotel Prices & Hotel Price Index in Georgia

were spent in hotels - 39.6%, 26.5% of nights were spent in friends and relatives house, while in guesthouses - 12.7% and in apartment - 11.7%.

The share of nights spent in friends and relatives house in total nights spent by international travelers in Georgia has

I

n Georgia, the average cost of a room1 in a 3-star hotel was 125 GEL per night in March 2019.

While the average cost of a room1 in a 4-star hotel in Georgia was 227 GEL per night. It has to be noted that the most expensive 3-star and 4-star hotels were found in MstkhetaMtianeti since January 2019. In March 2019, the average cost of a room in a guesthouse2 in Georgia was 73 GEL per night.

The average cost of a room in a 5-star hotel in Georgia in March 2019 was 486 GEL per night. In Tbilisi, the average price was 599 GEL, followed by Adjara – 471 GEL, Samtskhe-Javakheti - 385 GEL, and Kakheti - 355 GEL. In March 2019, the minimum price of a room in a 3-star hotel in Georgia was 48 GEL per night, the maximum price - 350 GEL. The minimum and maximum price distribution among 4-star hotels in Georgia were accordingly 85 and 620 GEL, while for guesthouses - 18 GEL and 300 GEL. In Tbilisi, among the 3-star hotels registered on booking.com website the highest share of prices ranges between 50-150 GEL, for 4-star hotels 150-300 GEL, while for guesthouses - 0-150 GEL.

more (classified as tourists) increased by 32.6%4.

In March 2019, compared to March 2018, in Georgia the hotel price index increased by 1.1%. This was mainly due to price increases of guesthouses. The number of international travelers in March 2019, compared to March 2018, increased by 6.4%, while among the international travelers the proportion who stayed in Georgia for 24 hours or more (classified as tourists) increased

been decreasing since 2015. During 20152017, the highest share of nights spent by international travelers were spent in friends and relatives house. 2018 was the first year, when share of nights spent in hotels exceeded the share of nights spent in friends and relatives house5.

by 4.3%.

In March 2019, compared to March 2018, the 3-star, 4-star and 5-star hotel price index increased by 1.2%, while for guesthouses, the price index increased by 3.5%.

DISTRIBUTION OF NIGHTS SPENT BY INTERNATIONAL TRAVELERS In Georgia, in 2018, by international travelers, the highest share of nights

HOTEL PRICE INDEX In March 2019, in Georgia the hotel price index3 increased by 5.1% compared to February 2019. The 3-star, 4-star and 5-star hotel price index increased by 3.2%, while for guesthouses, the price index increased by 6.1%.

In March 2019, compared to February 2019, the increase of hotel prices in Georgia, can be linked to the increased number of tourists trips. In March 2019, compared to February 2019, the number of international travelers trips in Georgia increased by 31.9%, while among the international travelers, the proportion who stayed in Georgia for 24 hours or

1 The results are based on the surveying of standard double hotel room prices of 3, 4, 5-star hotels and guesthouses in 10 regions of Georgia. Hotels were chosen arbitrarily according to random sampling principle. The study contains 71% (312) of all 3, 4 and 5-star hotels and 25% (456 guesthouses) of all guesthouses registered on www.booking. com The 3, 4 and 5-star hotel price data was collected by contacting hotels individually, while the prices of guesthouses were taken from booking.com. The average prices are arithmetic mean of standard double hotel room prices.

2 Guesthouse: a type of accommodation that is characterized by having a small number of rooms and services are usually offered by the resident family.

3 The calculation of the hotel price index is based on the recommendations given by the International Monetary Fund (IMF). The elementary aggregate price index is calculated

by Jevons index (Consumer Price Index Manual-Theory and Practice (2004), Practical Guide to Producing Consumer Price Indices (2009)).

4 Source: GNTA 5 Source: GNTA 6 * Preliminary results

BUSINESS

GEORGIA TODAY APRIL 30 - MAY 2, 2019

9

DVV Int’l Opens 11th Adult Education Center for Lifelong Learning in Kharagauli

BY LIKA CHIGLADZE

W

ho says learning shouldn’t continue into adulthood? Adult education and lifelong learning is an essential part of the development of society and the country. Consequently, there is an urgent need to ensure those on society's margins have access to adult education.

On April 24, a new adult learning center was opened in Kharagauli, Georgia. The center was officially opened by Ambassador of Federal Republic of Germany to Georgia Hubert Knirsch, DVV international Regional Director of Caucasus and Turkey Maja Avramovska, Director of DVV International Georgian Office Lali Santeladze and Kharagauli Municipality Hall Mayor Nikoloz Topuridze.

The center was established through the funding and effort of the DVV international Georgian Office. The initiative was also supported by the Administration of State Attorney-Governor of Imereti and Kharagauli Municipality Hall. The core aim of the center is to develop the field of adult learning as well as help to produce more qualified workers. The center enables those interested to advance their qualifications and skills in different directions for free, and eventually help them to become competitive employees on the market.

This is not the first such educational center opened by DVV international in the country- it has built ten others, all based on the German mode, in different regions of Georgia, primarily to respond to the needs of Internally Displaced Persons (IDPs). They offer, among other

things, courses in the realm of basic education and vocational training. For the adult population in these regions, the centers often provide the only chance for further education. The centers were opened in Akhaltsikhe and Akhalkalaki (Samtskhe-Javakheti), Daba Jvari and Senaki (Samegrelo), Keda (Adjara), Chokhatauri (Guria), Leliani (Kakheti), Koda and Shaumiani (Lower Kartli) and in Ambrolauri (Racha). These centers are aimed at raising awareness among the public about the importance of lifelong learning and give individuals the chance to gain new skills and expand their knowledge. The vocational and professional development classes offered by the learning centers gives an opportunity for socially vulnerable residents to acquire professions in-demand on the market as well as master those fields in which they are already working, meaning they can equip themselves with new essential skills and knowledge that would significantly improve their chances of getting hired.

Further, they get to take part in various cultural, social or civic activities.

“Georgia and Germany cooperate in many fields, including culture, economics, education, and I’m extremely pleased that we have yet another example of such cooperation in Kharagauli,” said Ambassador Knirsch. “This opening is of huge importance for the locals as well as for the development of the region itself. Such relations are important to Germany as well, since here we make new friends, establish new friendly relations and undergo new stages of cooperation. I have seen how such learning centers established in Georgia by DVV International function and I know that these centers will significantly benefit the local inhabitants. Students of these

centers will acquire the knowledge they need. In Germany, such learning centers have a long tradition. Recently, the 100th anniversary of such learning centers was marked in Germany. The idea behind creating learning centers in Germany was to have good schools, good universities and public education centers throughout the country to serve the citizens,” the Ambassador noted.

The centers offer vocational and personal development courses, among them IT, English and German classes, tour guiding, project management, accounting, financial managing, conflict management, various kinds of handcraft- enamel arts, batik, sewing; cosmetology, hairstyling, furniture design, agricultural professions, gold jewelry-making, beekeeping, construction professions, and cookery. The courses are tailored to suit people of any age, gender, social status and preference. Such activities increase the opportunities for middle aged (40+)

and elderly people (60+) to get an education and gain new skills. The annual reports from the centers demonstrate that the age of the recipients varies from 40 to 87. Every year, more than 7000 beneficiaries take part in the centers’ programs, 8-11% of which go on to get jobs. From 2006 to date, 100,000 beneficiaries have used the service, including 30,000 IDPs and 15,000 representatives of ethnic and religious minorities. In total, more than 150,000 people have taken part in the projects carried out by the Georgian Office of DVV International.

“DVV International is a member of a big family in Germany that incorporates around 900 public universities and federal unions,” DVV’s Avramovska stated.

“These organizations represent the largest-scale and most important adult learning centers in Germany. DVV International is a member of an international family as well, since it operates in Europe, Asia and Latin America by cooperating

with 200 local partners on the spot. This year marks the 50th anniversary of DVV International’s establishment. In 1969, DVV International was founded as a center cooperating with developing countries on adult education issues.

Today, it is an institute that fights poverty in more than 30 countries around the globe and fosters education together with its partners. We, together with citizens, educational organizations and governments, create sustainable adult learning systems. As a result, in cooperation with our partners, we establish lifelong learning centers,” the Regional Director said.

DVV International is running the project with the support and financial aid of the Ministry for Economic Cooperation and Development of Germany, Ministry of Foreign Affairs of Germany and the EU. Between 2002-2019, the amount of funding from the donors amounted to EUR 10 million.

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BUSINESS

GEORGIA TODAY

APRIL 30 - MAY 2, 2019

First Qvevri Marani & Georgian Traditional Winemaking Museum Launched in UK wine in the Plumpton Marani under the supervision of Sarah Midgley, Plumpton’s winemaker. The Georgian student will be invited to attend classes at Plumpton free of charge.

The Plumpton Marani and the Qvevri Museum offer a unique opportunity for students of the winemaking department to learn about the Georgian Qvevri winemaking method, which is on the UNESCO World Heritage list.

ABOUT THE PLUMPTON COLLEGE WINE DEPARTMENT The Plumpton College Wine Department is a leading educational body in the UK. The transformation of Plumpton from a small agricultural college to a training ground on the international wine map took place alongside the growth in both reputation and commercial prospects of English wine. A high proportion of the undergraduates and postgraduates at the Plumpton College Wine Center are people seeking to switch careers and move to the wine industry. The College started offering wine production courses in 1988 with the arrival of Chris Foss, the current Wine Division Manager, whose mother is from Bordeaux and whose family had a vineyard in the Entre-Deux-Mers region. When he first arrived, there

T

he first Qvevri Marani (cellar) and a Georgian Traditional Winemaking M u s e u m h ave b e e n launched in the UK in a project supported by the Plumpton Agricultural College Wine Department.

Present at the opening were HE Ambassador Tamar Beruchashvili and Head of the Plumpton College Wine Department, Chris Foss, along with the Head of Georgian Church in London, who blessed the Marani.

“Plumpton College is delighted to be hosting a real Georgian Marani next to its Wine Center,” Foss told GEORGIA TODAY. “Our students come from all over the world to learn vinegrowing, winemaking and the business of wine in our modern facilities, so the Marani gives another dimension to our curriculum. It has clearly demonstrated that excellent wine can be produced using the ancestral Qvevri winemaking techniques from Georgia.”

The Marani will be open for public visits, lectures and wine tasting events on the weekends.

The Museum of the Qvevri History and Traditional Georgian Winemaking is sponsored by the Shumi Winery, which sent artefacts and Qvevri winemaking tools for the museum display and will be curating the exhibition.

Henry Mchedlishvili, Georgian by origin but living in Britain since the 90s, founder and Director of the Artisan Cru Winery (the first English Qvevri Wine), started to work on this project 18 months ago. His 2017 harvest had excellent results and Artisan Cru wines are now listed in London restaurants and boutique wine shops.

“For me, it’s a great responsibility and honor to work with the Plumpton College Wine Department. The Plumpton Marani is a unique collaboration of traditional Georgian Qvevri method wine production using English grapes,” Mchedlishvili said.

The Museum and Marani will give guests the chance to taste Shumi Qvevri wines as well as Artisan Cru English Qvevri wines and Plumpton wines made from local grapes.

The aim of the project is to promote traditional Georgian winemaking technology in the UK and worldwide and to give wine department students the chance to learn about the ancient Georgian Qvevri winemaking history.

This project is managed and supported by the British Georgian Chamber of Commerce and the National Georgian Wine Agency.

We heard from H.E. Tamar Beruchashvili, Ambassador of Georgia to the UK. “The opening of the first ever Qvevri Marani and the Georgian Traditional Winemaking Museum in the UK is a truly memorable occasion and a great opportunity to raise the profile of the Qvevri winemaking tradition in the UK,” she said. “The Georgian Embassy in the UK actively promotes Georgian wine through regular presentations, trade events and collaborations with various partners. It’s no secret that wine is Georgia’s finest ambassador.

Currently, Georgian wine is exported up to 50 countries worldwide, promoting Georgian culture and tradition.

Among others, the UK is one of the most promising markets for Georgian wine and the interest of British consumers, as well as our wine export, is growing continuously from year to year.”

The Ambassador noted that the UK is a strategic market for Georgian wine export and the Georgian Embassy in the UK, together with the National Wine Agency, has been actively promoting Georgian wine and winemaking culture for more than three years. “As a result, the export of Georgian wine to the UK grew by 33% in 2018 and by 110% in just the first month of 2019,” she noted.

As a part of the project, Plumpton College is planning to launch a winemaking scholarship through which a year-2 Plumpton BSc (Hons) Viticulture and Oenology student will be selected to work in a Shumi winery during the following harvest, accompanied by a Georgian wine student selected by Shumi. The two students will return together to Plumpton by the beginning of October and make

were only two rows of vines, and Chris started teaching six students in a classroom located in the Poultry Department, making wine in Demi-Johns with bought-in grapes.

The Wine Division now has four principal activities: 1) Four full-time undergraduate courses in wine business and production (delivered in association with the University of Brighton) attended by over 100 students. These are the only undergraduate courses in wine delivered in the UK, and the only such courses delivered in English in Europe.

20% of students come from outside the UK and graduates can be found in many wine-producing areas, all over the world.

2) The WineSkills industry training project, delivering courses all over the UK to around 500 students a year.

These consist of the highly successful Principles of Vine growing and Principles of Winemaking programmes and one-day workshops and masterclasses.

The latter are delivered by experts with international reputations.

3) A commercial wine production facility, Plumpton Wine Estate, producing around 30 000 bottles of wine a year in a fully equipped commercial winery, from 8 hectares of vineyard, much of it recently planted.

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BUSINESS

GEORGIA TODAY

APRIL 30 - MAY 2, 2019

Element Construction Launches New Coca-Cola Factory to be allocated for outdoor parking and other facilities.

The premium quality of the final products is of paramount importance for Element Construction. The CocaCola factory, carrying regional importance, is to be no exception. Through the use of the latest technologies and internationally recognized construction methodologies, the company has put a lot of effort into presenting an exemplary production unit, built in accordance with European Standards, which will be capable of catering to Georgia, as well as for other countries.

Along with Element Construction, the ALL-P Group has also being engaged in the construction process of the new factory, having poured and set the con-

BY KETEVAN KVARATSKHELIYA

W

ith a century-long history, Coca-Cola is one of the most famous global brands, boasting billions of loyal customers. The Georgian branch of the company has been operating for multiple years and Georgia is among those countries which does not import Coco-Cola drinks, but produces them locally.

After a number of years of success,

Coca-Cola’s Georgian administration decided to revive and expand the production unit and build a new factory close to the capital city, in Natakhtari.

In order to be guaranteed high quality, the brand entrusted the implementation of the job to one of the most prestigious Georgian construction companies, Element Construction.

Founded over a decade ago in 2007, Element Construction is a company which, through the hard work of a professional and motivated team, offers clientele diverse services, including design, construction, renovation, and industrial construction. The company

crete and polymer floors in the indoor area of the factory and carrying out concrete pouring works on the outdoor territory.

The brand new Coca-Cola factory, guaranteeing high-quality products and all the necessary elements for fruitful work, will welcome its employees in the near future.

With this kind of successfully implemented and crucial projects, the Element Construction Company is blazing a path to a great variety of interesting opportunities. In addition, such hard work and a focus on details means the company is contributing to the development of the country’s economy by raising the bar in the construction industry.

has already strongly established itself on the Georgian construction market and has carried out a number of major projects for various companies including such well-known brands as: McDonald’s, Sarajishvili and Chateau Mukhrani.

The modern enterprise of Coca-Cola, the construction of which is in the final stage, sprawls across a huge territory of 18,000 m2 and is also to boast 760 m2 of office space, laboratories equipped with the latest technologies, and other technical spaces after completion. The new headquarters of the company will occupy 2000 m2, while 15,000 m2 are

Minister of Economy Visits Kazakhstan, Emphasis on Energy

Image source: Ministry of Economy and Sustainable Development of Georgia

BY SAMANTHA GUTHRIE

L

ast week, the new Minister of Economy and Sustainable Development of Georgia, Natia Turnava, made an official visit to Kazakhstan. Within the framework of the visit, the 10th meeting of the Intergovernmental Commission on Economic Cooperation between Georgia and Kazakhstan was held. Turnava and her counterpart, the Minister of Industry and Infrastructure Development of the Republic of Kazakhstan, Roman Sklyar, signed a protocol con-

firming continued cooperation in several key areas.

The meeting was also attended by representatives of ministries and interested companies of the two countries. Main topics of discussion included bilateral trade, attracting investment, agriculture, transportation, communications, information technology, innovation, science, tourism, healthcare, and industry.

“We have discussed many strategic issues, including our transit corridor, the further development of the concept of the so-called ‘middle corridor,’ as well as transparent tariffs that will make freight cargo movement easier in the corridor and utilize the transit function

of our countries more,” said Turnava.

The parties positively evaluated the work that has been done so far on developing the Trans-Caspian transport route. They agreed to continue efforts to develop the two countries’ transit potential through several avenues, including establishing competitive tariff conditions, reducing delivery times, and increasing the volume of freight traffic along the TransCaspian corridor.

She emphasized that both Georgia and Kazakhstan play an important role in attracting cargo flows from China to Europe via the Black and Caspian Seas.

Turnava noted that the parties also “discussed the intensification of ferry traffic on the Black and Caspian seas, as it is a part of the middle corridor.”

Sklyar praised ongoing mutual efforts to promote exports, which resulted in a 29% increase in turnover in the first two months of 2019 to $13 million. Overall, the ministers agreed that the Intergovernmental Commission on Economic Cooperation between Georgia and Kazakhstan has established itself as an effective mechanism and platform for discussing and resolving important issues of bilateral cooperation.

Also during her time in Kazakhstan, Turnava met with Kazakh Energy Minister Kanat Bozumbayev. At their meeting, the pair discussed the potential for Kazakh investments in Georgia. Bozumbayev discussed the possibility of investing in a petrochemical plant in Georgia aimed at exporting products to third countries, which Turnava fully supported,

saying “We have achieved an agreement to work jointly on this investment and this project may play a crucial role in the petrochemical industry.”

In a press conference after the meeting, Turnava said that “the energy sector is one of the priority sectors for Georgia-Kazakhstan cooperation. Amid the growing volume of oil extraction, it is of crucial importance for Kazakhstan to have the opportunity to diversify oil supplies to western markets.

In this respect we have common interests. We have discussed how to expand Georgia’s transit potential and increase the attractiveness of the Georgian mar-

ket for our Kazakh partners.”

Another major outcome of Turnava’s visit: after meeting the Kazakh Deputy Prime Minister Zhenis Kassymbek, an agreement was made that Kazakhstan will considerably increase grain imports to Georgia, the Georgian minister noted after her meeting with the Deputy Prime Minister of Kazakhstan. “As a result of our negotiations in Kazakhstan, the Kazakh Government will subsidize the transportation of grain to Georgia and lower tariffs to 50%,” Turnava announce, noting that the agreement will help diversify Georgia’s grain market, reducing reliance on Russian imports.

BUSINESS

GEORGIA TODAY APRIL 30 - MAY 2, 2019

GTF 2019: 21st Georgian Tourism Fair

T

he Exhibition Center ExpoGeorgia is to hold the 21st Georgian Tourism Fair ‘GTF 2019,’ on 3-5 May. At the 11th pavilion, visitors will able to get information about all the regions of Georgia in one space, including all their new touristic destinations, the discount festival, workshops, and lectures/seminars on tourism and services.

Over the years of its existence, the GTF has grown consistently and has earned a superb reputation for offering a centralized marketing platform for tourism industry players. Apart from presenting a highly effective showcase for exhibitors operating in tourism, the organizers have revitalized the exhibition by the year by expanding the event and the spectrum of the presented products.

The Georgian Tourism Fair offers the perfect opportunity for all companies within the industry to promote and market their products and services to fellow industry workers as well as the general public. It is also a great spot to explore tourism investment opportunities in Georgia and gain direct access to exhibitors and suppliers of services from the tourism sector, from Georgia and worldwide.

For organizers, this will be another big step forward in supporting tourism in the country and enhancing specific directions. For visitors, it will be a space to check out the novelties. Those who plan on discovering and traveling to exciting new places will be able to find specific tours with discounts throughout the three days.

The exhibition has two directions: B2B and B2C. Buyers from different countries who are interested in cooperation with Georgian companies in the future will be at the exhibition, exploring opportunities. A special area will be set up for companies

to arrange business meetings and negotiations.

In addition to the standard format, the exhibition will be packed with educational events: seminars, lectures and master classes. During the three days, specially invited speakers will talk about the hot topics and issues of tourism. With the support of online magazine Marketer.ge, talk show “Let’s Talk about Tourism” will be held – the speakers will talk about travel, services and other important issues related to tourism.

May 4: • How to create an outstanding touristic product • Digital Marketing in the HoReCa Sector • VR trips to Georgian regions • Panel discussion on the topic: Psychology of the Modern Tourist May 5: • The classification of Hotels and Restaurants • How to develop a brand from a family-owned guesthouse • Your destination does have stories. Find and tell them. We will help you to discover the stories behind your properties and destinations to market your product in a unique way • Hotel and restaurant software - the modules we need to take into consideration while developing new software for small and medium hotels and restaurants • Booking.com as one of the most important tools for selling hotel services. The insights behind the most popular platform Exhibition Center ExpoGeorgia Tel: 032 234 11 00 Marketing@expogeorgia.ge www.expogeorgia.ge

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BUSINESS

GEORGIA TODAY

APRIL 30 - MAY 2, 2019

Georgian Have & Have Nots.

Who’s to Blame & What to Do?

BY ERIC LIVNY AND FLORIAN BIERMANN

E

BRD's 2016-17 Transition Report, subtitled “Equal opportunities in an unequal world”, draws attention to the inconvenient truth that Georgia has performed exceptionally poorly when it comes to inclusion and social mobility.

In fact, when compared to all other transition nations, Georgia finds itself on the extreme right (both literally, on the chart, and figuratively) by failing to equalize the opportunities for its (largely urban) haves and (rural) have-nots.

Based on a survey of 51,000 respondents in 34 countries (with Germany, Italy, and Czech Republic serving as comparators), the chart shows how income inequality (on the vertical axis) correlates with inequality of opportunity (on the horizontal axis). As can be seen, the two variables are strongly and positively correlated: income inequality in a country is very much a function of the extent to which its education system, and labor and financial markets, allow for upward social mobility. According to EBRD calculations, 20% to 50% of income inequality in the EBRD region is due to circumstances at birth: urban/rural place of birth, parents’ level of education and membership in the Communist Party (i.e. belonging to the old elite), gender, and ethnicity.

On average, this may not seem like a major disaster – inequality of opportunity is an even more serious issue in the US and most emerging economies. Georgia’s specific problem, however, is that it is well above the regional average.

According to the EBRD data, the future social and economic status of Georgians is almost predetermined by their circumstances at birth: the inequality of opportunities limits social mobility and perpetuates the society’s rigid divisions into those who are integrated into the modern economy, and those who survive in traditional subsistence farming and other forms of self-employment and

underemployment. What are the reasons for this frustrating situation, and how can it be changed?

ARE GEORGIANS PROUD, LAZY OR WHAT? A key paradox of Georgia’s economic development since the Rose Revolution has been the almost complete lack of expansion in the country’s hired labor force. Despite growing demand, the share of hired labor remains constant at about 13% of the population, of which 5% are employed in the public sector – teachers, army, police, local and national administration (GeoStat). 13% is a staggeringly low share. For comparison, of Germany’s population of 80 million, about 53% are employed.

It is crucially important to understand that formal employment remains stagnant not due to a lack of jobs. If anything, jobs are not created for lack of suitable

e.g., IT technicians, production line workers, tractor operators, sales, kitchen and hotel management personnel. On the other hand, they are also looking for staff culturally adjusted for employment in the service industry, able to communicate in their own and foreign languages, able to read and follow instructions, operate computers and exhibit basic discipline, attention to detail and timeliness in the performance of various tasks.

Georgian employer surveys show that, for most companies, availability of qualified labor is THE binding constraint for business expansion (it is consistently ranked as the #1 or #2 factor hindering business development, e.g., in the latest Global Competitiveness Report). And as demand for hired labor outstrips supply, wages in the modern sector of the economy have been growing by between 5% and 12% per year since 2011 (GeoStat), increasing the income gap between those

Chart 1: Income inequality and inequality of opportunity in the transition region. Note Georgia’s location in the upper right corner with the least equality of opportunity and very high income inequality.

labor. Georgia has seen a lot of investment in the modern sector of the economy: banking, tourism, trade, transport, manufacturing, modern industrial agriculture, and food processing. On the one hand, employers are hungry for people with specific professional qualifications,

who have jobs and those who do not.

If Georgia’s economy is to remain competitive, something must be done to facilitate and encourage the transition out of low productivity agriculture and other traditional activities (e.g., housekeeping) into modern sectors of the

economy. The remedy for lack of social mobility is not only vocational training, as many pundits keep saying at every opportunity, but also investment in early learning systems targeting the rural population.

Given the incredibly low starting point, there are a lot of gains to be made.

Improvement in early learning must start with an effort to bring new blood and new ideas into the system, including technology, young teachers, and young role models (Georgian and international).

Examples of such new role models are American Peace Corps volunteers, and teachers enlisted in the innovative Teach for Georgia program.

While highly successful, these two recruitment models are limited in scope.

For example, there are currently only 111 Peace Corps volunteers serving in Georgian schools and NGOs. To provide a mass of underprivileged kids growing in Georgia’s periphery with something resembling equal opportunity, we would have to scale up existing programs or come up with new ideas, based on existing best practices from around the world.

There is no need to reinvent the wheel.

One easy possibility would be to institute civil service as an alternative to military service. Additionally, Georgia could create a mechanism to engage its best and brightest, who study with governing funding, to give back to remote communities in Georgia’s small towns

and villages.

The deep rift between Georgia’s traditional and modern economies is not only a key bottleneck for its economic development. It is also a threat for its fledgling democracy. Not all inequality in wealth and income is equally disturbing. If people had more or less the same chances to realize their potential, inequality would only reflect differences in performance (and a bit of luck), and would not be much of a social and political problem.

On the other hand, “inequality at the starting gate,” i.e. a radical lack of equal opportunity at young age, threatens the legitimacy of any economic and political system.

Bridging this rift and creating the conditions for spatial and social mobility is the only way to break out of the vicious circle reproducing functional illiteracy, poverty and inequality, in which a very substantial part of Georgia’s population finds itself since independence. There is no time to waste.

ABOUT THE AUTHORS: Eric Livny is Founder and President at Tbilinomics Policy Advisors and Chair of Economic Policy Committee at the International Chamber of Commerce (ICC Georgia). Florian Biermann is a lecturer at Nottingham Trent University's Business School. Until 2017, he taught at the International School of Economics at Tbilisi State University.

After Criticism, China Vows to Improve its ‘Belt & Road’ Initiative

Image source: EPA/bbc.com

BY EMIL AVDALIANI

C

hina has recently been under heavy criticism from major world countries including the US and members of the EU, for its ‘Belt and Road Initiative’ (BRI). The latter is a multibillion-dollar project according to which

the country’s east will be reconnected (as in ancient times) to Europe through the shortest distance, whether via southern Russia, Central Asia, or the South Caucasus and the Black Sea (although that is not the only corridor the Chinese are working on).

The western countries claim that Beijing is using dubious methods to trap small Asian and African countries in debt and thus easily manipulate them

on the world stage. One of the most notable examples is Sri-Lanka, which gave up its largest and most strategically important port to China due to indebtedness to Beijing.

It is against this background that delegations from around the world traveled to Beijing this week to take part in a forum on China's BRI. The three-day forum assembled representatives of more than 100 countries, including 40 heads of state and government seeking to benefit from the projects. From Georgia’s neighborhood, the Russian, Uzbek, Azerbaijani and Belarusian presidents attend the forum.

The summit is crucial for Chinese leaders as they will try to persuade the world leaders that the BRI bears no potential harm for Eurasian economies. The Chinese understand that one of the pillars of BRI’s success will be a level of trust.

A lack of trust or fear of being ensnared in Chinese debts will undermine the BRI. The Chinese concerns are reflected in

what was said during the first meetings of the summit. China’s President Xi Jinping said that "we will overhaul and abolish unjustified regulations, subsidies, and practices that impede fair competition and distort the market". He added that China “will treat all companies, enterprises, and business entities equally and foster an enabling business environment based on market operation and governed by law."

According to the Chinese President, the BRI will focus on transparency and clean governance. He also stressed that infrastructure and trade created by the BRI should also engender economic growth for each participatory country.

China was criticized for being overly protective of companies and having quite a negative stance on foreign companies participating in tenders in China. Xi Jinping also promised to allow foreign companies freer participation across the country.

The Russian President once again supported the BRI by stating that the ini-

tiative is perfectly aligned with the Russian pet-project ‘Eurasian Economic Union’. There are many hidden negative undercurrents in China-Russia relations, but Putin’s yet another public approval of the BRI enhances the appearance of cooperation between the two countries.

Overall, it can be argued that China took a conciliatory tone towards those existing misunderstandings which appeared between Beijing and Europe and the US over the past year.

Xi’s speech is also notable as it comes right before the final chapter of large trade negotiations between Beijing and Washington. Also, the forum serves to dissipate fears across the world of Chinese G5 technologies. The US has so far worked hard to warn its allies to ban use of G5 as it is deemed in the West to be fragile security-wise.

It is unclear how many will buy into the Chinese softer rhetoric on the problems surrounding the BRI. But the very fact that Beijing decided to talk about it means that problems do indeed exist.

SOCIETY

GEORGIA TODAY APRIL 30 - MAY 2, 2019

15

Ana Goguadze on Beating the Sterotypes TRANSLATED BY KETEVAN KVARATSKHELIYA

T

he dream of the wonderful Georgian writer, Nodar Dumbadze, came true at the end of the 1980s when an incredible picturesque park for children named Mziuri was built on the banks of the River Vere. The major aim in launching the park was a desire to create a healthy and pleasant environ for the most important members of society, the children. However, as a result of various political battles, shifts in government and natural disasters, the uniqueness and high potential of the park was for a time almost forgotten. It was only in 2006 that changes came, with youngsters, full of energy and innovative ideas, deciding to try and give a new life to Mziuri.

Ana Goguadze, the founder of the New Mziuri Café, spends most of her day at the café and is aware of every single detail, including the workings of the kitchen, as well as the target audience and their interests. The New Mziuri Café is a reflection of her dreams and ideas.

13 years ago, 18-year-old Ana, inspired by the works and persona of Nodar Dumbadze, launched the first ‘Sun Festival’ on June 1, Children’s Day. She gathered resources and energy throughout the year prior, striving to find sponsors and explaining to them the need for such a festival, for just one day, where hundreds of children and their parents would have a chance to gather and have fun. It was a bright and colorful success. But once the guests and entertainers had gone, the park turned black, white and dull once more.

AN ‘UNIMAGINABLE’ PROJECT “There were left only ruins of the current New Mziuri Café building. The

concept of ‘social enterprise’ was still a novelty back in 2015,” Ana tells us. “I decided to transform those ruins into a café which would give back the original function to Mziuri. However, from the start there were a lot of sceptics claiming the idea would fail and the café would close within three months.”

When Ana found out there was no-one else willing to give the idea a try, she decided to start it anyway.

Along with the organizers of the ‘Sun Festival’, Ana prepared a public project, promoted it via social media and addressed Tbilisi City Hall with the request to give them the ruins with the purpose of launching a social enterprise there. As the income of social enterprises is rarely capable of paying even tenancy fees, the initiators of the project had to look for government support.

A SOCIAL CAFÉ FOR EVERYONE The project generated a lot of interest.

The number of signatures in support shot up, the media caught on and spread the word- all of which helped Ana to make her dream about the New Mziuri Café come true.

“City Hall accepted the request and handed the territory over to us for free for a duration of two years,” she remembers. “It also took the responsibility for the renovation works. The donations from private companies amounted to 200,000 GEL, with TBC Bank allocating 50,000 GEL for our initiative.”

The indoor area of the New Mziuri Café can cater to 30 people while the sunny semi-walled yard is full of visitors from spring to late autumn. The Cafe hosts various workshops, public lectures, meetings and film screenings for guests.

And they are always open to non-commercial initiatives.

Heading to City Hall with the roundup report, the organizers were able to boast more than 250 events having been

held at the café within two years. In 2018, there were 135 initiatives. These impressive numbers encouraged City Hall to agree to extend the cafe permit by another two years.

“This area is dedicated to children, their parents, and to students. We host numerous events, have the menu in braille, and are the first café to adopt a homeless dog, Murada. Murada has his own “club,” and pet owners come to meet and discuss various topics. We aim to create a pleasant and comfortable space which is of value to the city.”

Raising public awareness about crucial issues and bringing up a new generation free from stereotypes has also been a major aim of the New Mziuri project.

“We engage in various projects. For example, within the framework of ‘Green Gift,’ we collect paper waste and send it to recycling points. The youngsters coming to the café are never surprised to see people in wheelchairs. We also often launch initiatives for animal protection,” Ana says.

A STRUGGLE FOR SURVIVAL The only concession for the New Mziuri Café is the fact that it does not have to pay a tenancy fee. All other taxes apply.

Winter is the most difficult season as the number of visitors plummets at this time and there is very low income respectively. However, Ana found a solution by introducing a catering service and delivering their delicious fresh food to various events and celebrations.

“My enthusiasm is the only reason for the existence of the New Mziuri Café.

It needs tremendous moral strength to get through all the challenges and pay the bills. But it’s worth it for such an important mission,” Ana tells us. “If, within 10 years, there are more such cafés, the public will be better aware of their social responsibility and more actively engaged in the civic activities.

They will understand that they are the ones who have to take care of their streets and their city. I think New Mziuri Café has played an important role in this case.”

HAMMERS TO BREAK THE STEREOTYPES Along with managing the New Mziuri Café, Ana also works for the marketing consulting company ‘Anagrama’, launched by the former marketing team of Geocell.

Anagrama’s main aim is to break the stereotypes regarding women. For this reason, the company introduced a new campaign for March 8 and sent handpainted hammers as gifts to various women as a symbol that they should

keep up the fight to overcome the social stereotypes.

“I think the idea that the purpose of a woman is motherhood is the biggest stereotype. Both parents must share their responsibilities equally,” Ana states.

Years ago, she had to face the negative results of a number of well-established stereotypes. Yet it was one of the catalysts that pushed Ana to become socially active and to ultimately come to play such an important role in bringing the needed changes to Georgian society. And the mission goes on.

Original interview in Entrepreneur Georgia magazine.

Ajara TV Announces Contest for New Director

BY THEA MORRISON

T

he Ajara Public Broadcaster has announced a contest for a new Director after the board dismissed the previous one on April 19.

Candidates are able to submit their applications until May 24. The new director will be selected by June 4, through interview.

The director will take the post for three years.

Former director Natia Kapanadze stressed that the board did not study the documents properly and made a hasty decision when dismissing her. She is going to appeal the decision and start a

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GEORGIA TODAY

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Editor-In-Chief: Katie Ruth Davies

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legal dispute.

A complaint requesting Kapanadze’s impeachment was lodged with the board of advisors on April 10 by two board members, Giga Chkhartishvili and Irakli Dartsmelidze. They pointed to Kapanadze’s “disrespect of and miscommunication with the advisory board, as well as at financial mismanagement of the company.”

Later, four out of five members of Ajara Public Broadcaster supported the impeachment of the Director.

The decision of the board was slammed by the NGOs who released a statement expressing concern regarding the recent developments in the media company.

The Public Defender noted the case may be politically motivated and media experts claim the recent developments

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might be linked to the upcoming 2020 parliamentary elections.

Kapanadze was elected to the post in October 2016, and her three-year term was to expire in October 2019.

In 2018, the Tolerance Center of the Public Defender’s Office awarded Natia Kapanadze an award of tolerance, saying the television broadcasted and balanced well the issues of ethnic and religious minorities and promoted diversity.

During Kapanadze’s leadership, Ajara TV was also positively assessed in the 2018 report of the Human Rights Watch Report and this year, OSCE/ODIHR final report mentioned that Ajara TV is the only broadcaster in the country that offered the audience a neutral comparison of the Presidential candidates in autumn 2018.

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