Caucasian Business Week #66 by Caucasian Business Week

The next issue of the newspaper will be published on September 8

DISTRIBUTED FREE OF CHARGE

BUSINESS WEEK August 11, 2014 #66

August 11, 2014, Issue 66

WWW.CBW.GE caucasian business week www.facebook.com/CBW.ge Partner News Agency

caucasian1

BE INFORMED, DO BUSINESS

Roman Pipia pean Some of the European countries, I believe, ve, need ook at to take another look Georgia and re-evaluate all of the potential benefits of doing business with this country Pg. 4

GEORGIA RATING OF COMMERCIAL BANKS DUE TO ECONOMIC INDICATORS

iquidity of the banking sector in the annual context has reduced. At the end of the first half of the current year ratio of the liquid actives to the overall actives equaled to 24,9% (01/07/13 -28,3%). By Q2 Liberty has the most excess liquidity among banks with the largest actives. Pg. 2

REAL ESTATE MARKET RECORDS ANNUAL 3.9% GROWTH

CIS LUKOIL SELLS OFF GAS STATIONS TO HUNGARY, SLOVAKIA, CZECH REPUBLIC

ussia’s second largest oil producer Lukoil is going to sell a network of gas stations across the Czech Republic, Slovakia, and Hungary as it continues to slim down assets in Central Europe. Pg. 10

AZERBAIJAN ACCESSBANK GETS $15MLN FOR ENERGY EFFICIENCY PROJECTS

he Green for Growth Fund is providing a $ 15 million loan to AccessBank to substantially increase bank’s financing of energy efficiency projects and foster its role as a pioneer in energy efficiency financing in the country. Pg. 11

WORLD NEWS WHO IS HIT HARDEST BY RUSSIA’S TRADE BAN?

ermany and Poland will lose the most trade with Russia, and neighboring Finland and Baltic states Lithuania and Latvia will lose a bigger proportion of their GDP. Pg. 13

Pg. 5

THE MOST PROBLEMATIC CONSTRUCTION ASSETS IN TBILISI The Caucasian Business Week (CBW) starts publishing the rating of problematic and failed development projects in Tbilisi and all over Georgia. At this stage, we offer 6 ongoing and suspended projects that are considered the most problematic projects by real estate field specialists. 1. CENTER POINT’S ONGOIG PROJECT BEHIND TBILISI CITY HALL Construction works have been long suspended. The buildings may be even dismantled. The company owner, the Rcheulishvilis family, is accused of having cheated customers. The company has sold “air”, but failed to complete the project. 2. ORTACHALA BEAUTY, ARCI COMPANY. The project has been suspended. Apartments bought by customers have been mortgaged by Bank of Georgia. Arci management assures the company has covered the loan, but the commercial bank has redirected the transfer for covering other loan. 3. OLYMPIC STAR PROJECT ON SHARTAVA STREET The construction works have been suspended because of financial crisis. The previous government imposed a 27 million GEL fine on the company. The company founders are Olympic champions MP Zviad Zviadauri and former MP Giorgi Asanidze.

4. CHINESE HUALING GROUP PROJECT AT TBILISI SEA, OLYMPIC VILLAGE The main problem of the project is related to unfulfilled investment liabilities. The disputable agreement concluded by the previous government and rumored settlement of 126 000 Chinese nationals in the complex. 5. DIRSI RESIDENTIAL COMPLEX, AS GEORGIA AZERBAIJANI COMPANY The major problem of the project is related to inconvenient location – the complex is being built on the former trash dump. At the same time, the sales pace is very low (about 10% of the apartments). 6. TWINS NEAR THE KING TAMAR BRIDGE, REMAS COMPANY. The construction works are being carried out by Soso Orjonikidze, the former partner of Moscow Mayor Yuri Luzhkov. The works have been completed. Sales are not launched yet. Real estate specialists note the major problem of the complex is its location on the cliff and the building becomes fragile.

Aieti Kukava We have identified around 33 projects which have a return on investment of around 25 percent on average, with the overall annual generation of 3,260.4 GWh Pg. 4 George Tsikolia New State Program Details Pg. 2

Irakli Kverghelize Expects Millions of Investments after Changes in Pg. 7 Tax Code

MAIN EVENTS August 11, 2014 #66

caucasian business week

CIGARETTE PRICE RISES AGAIN

T JULY RECORDS 55 MILLION GEL RISE IN GEL TURNOVER

mount of the national currency in circulation increased by 55 million in July, to 2,264 billion GEL (06/14 - growth by 45). According to data of National Bank of Georgia (NBG), by August 1 deposits of

1.637 billion GEL are placed in NBG (01/07/141,638 billion GEL). The data includes remaining on the corresponding accounts of the banks and required reserves (1,027 GEL), share of which equals to 63% of the deposits (01/06/14 -1,017 billion /62%).

RATING OF COMMERCIAL BANKS DUE TO ECONOMIC INDICATORS

non-interest expenditure/overall income) Republic, Bank of Georgia and TBC are leaders. For the total sectors Return on Actives (ROA) is 2,6% (Q2/2013 - 2,4%), Return on Actives (ROE) -15,1% (Q2/2013 - 13,6%). Supervision capital coefficient (supervision capital/weighted actives according to risk, S.C.C) is 17,9% (Q2/2013 - 17,7%). Top-5 banks:

6,2 TONS OF AGRICULTURAL PRODUCTS HAVE BEEN EXPORTED FROM GEORGIA TO RUSSIA

n the first half o the year 2 338 tons of fruit and vegetables have been exported to Russia. According to statistic of National Food Agency, in 6 months 2 258 tons of fruits and 80 tons of vegetables have been exported to the newly opened market. Also, 2 567 tons of citrus, 188 tons of tea, 1 062 tons of bay leaves and

1 tons of spices have been exported. The Russian market has bounced cranberries, tea, nuts, tangerines, lemons, fruit tea, concentrated tangerine juice, natural fruit juice, tomatoes, bay leaf, a seasoning, early potatoes, apples, cherries, peaches and nectarine have been exported to the Russian market. Besides, export of peach and nectarine continues.

RUSSIA’S RATION IN GEORGIA’S WINE EXPORTS SLIGHTLY DROPS

ine export equaled to 31 376 279 bottles (0,75L) in 7 months. Compared to January-July of last year, growth is 95% (01/07/14 - 136%

growth). National Wine Agency informs that in the value expression growth is 117% (01/07/14 -159%) and products of $102 186 500 (cash) have been exported. Russia is a leader among export markets with 65% share (20,5 million bottles), though in MayJune its share reduced (01/05/14-70%). On the

5th place Belorussia replaced China. Georgian wine is exported in 35 countries. 1. RUSSIA 2. UKRAINE 3. KAZAKHSTAN 4. POLAND 5. BELORUSSIA in 7 months brand export to 12 countries equaled to 6 455 295 (0,5L) bottles. Cognac of $23 million (cash) has been exported. It’s 66% more compared to the same period of last year. Ukraine (3 342 000 bottles) is a leader among brand exporter countries. Russia ranks second (2 600 000 bottles).

BUSINESS WEEK caucasian

The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW DISTRIBUTED FREE OF CHARGE Director: Levan Beglarishvili Mobile phone: 591 013936; 577965577 Commercial Department: Irakli Lekvinadze Email: caucasianbusiness@gmail.com WWW.CBW.GE

he excise tax on tobacco will rise again in the near future, which will cause a rise in the cost of cigarettes. A gradual increase in the excise tax is envisaged in an association agreement with the European Union. When and how much the excise will increase and therefore the cost of cigarettes, is unknown, but the fundamental decision has already been made. According to Finance Minister Nodar Khaduri, a decision about an increase in the excise tax has not been made yet. However, he notes that the issue is being discussed. The Minister states that the government approved a tobacco control strategy last year, which envisages a gradual increase in the excise tax, but so far he cannot say anything specific. Government officials say that the Association Agreement provides for a gradual excise growth. As a result, it will bring the budgetGEL 60 million in income .

At this point the filter cigarette excise tax amounts to GEL 0.75, non-filtered - GEL 0.20 and GEL 0.90 for a cigar. Director of the National Centre for Disease Control Amiran Gamkrelidze says that this is an effective mean of preventing starting of smoking. He estimates that 22% or 11 thousand deaths annually in Georgia are caused by complications associated with tobacco use. Recall that the cigarette excise tax rate increased on September 1, 2013. According to the amendments, excise tax on a box of locally produced and imported filter cigarettes increased from GEL 0. 60 to0.75, and non-filter cigarettes- from GEL 0.15 to 0.20. An increase in the excise tax has led to cigarettes prices rise. The issue of the tobacco excise tax was discussed in the IMF’s recent report, according to which, in order to reduce the budget deficit to 3% of GDP by 2015, the government resorts to a variety of measures, including an increase in the excise tax on tobacco.

NEW STATE PROGRAM DETAILS The Government has initiated another project on business development in rural areas - in particular, each villager can get GEL 5 000 from the state if decides to start a business and invest in it property worth GEL 1 000. The program also aims at integrating three neighbors, which in this case will receive GEL 15 000 on creating a common business. The project aims to give impetus to the development of local business, although it has examples that show that such initiatives rarely bring positive results. GEORGE TSIKOLIA, Acting Director at Georgian Entrepreneurship Development Agency, talks about the detail of the project. - Why did you decide to issue funds directly, it can be said as a gift, bypassing the banking system? And if there is a danger that money will be spent for other purposes? - First, we should clarify that this project is not exclusively agricultural. Its goal is to develop business in the region and not only in agriculture - it could be any other kind of activity. Furthermore, the project aims to promote microbusiness. And we are not talking about the gift - we just stimulate regional population. Unfortunately, if you look at the statistics, about 80% of business turnover falls on Tbilisi, while on the regions - not more than 22-24%. - Nobody argues that in the regions business activity is low, as evidenced by a fact that rural incomes are 4-5 times lower than in urban areas. Obviously, economic activity should beincreased, but we also have many examples of how the money was used for other purposes - for example foe the purchase of cars. Where is the guarantee that the same will not happen now? - Nobody is going to massively distribute the money. There is a program under which it is planned to hold tenders in the regions, respectively, there will be the requirements for those who wish to get help they will be required to show specific business plans. In the course of the tenders companies or microfinance organizations that implement programs in the regions will be identified. In other words, we, as a state structure, does not intend to participate in the grant making. In addition, we will provide training and advice to those who wish to start their own business in orderthey to be able to write a business plan, learn a lot of important details, increase their skills, study accounting on the minimum required level of, etc. - If the program has a specific timeline? - The program will last for three years. During the first four months, we will engage in preparatory

activities and collection of projects that can be financed, conduct training, etc. The rest of the time we will monitor grants, control how the business develops for which we allocated funding. Naturally, the success of any project depends on the management and which is why we believe thatmonitoring is a very important process. Mainly we will monitor the spending of the allocated money, and if we see that funds are spent inappropriately, the project will be suspended. In short, the financing depends primarily on how the business goes. - When an entrepreneur gets the credit, he has a significantly higher level of motivation, since besides the profit from the business, he must repay the loan. As for a grant, such motivation is much lower. How will you control that money will be spent just on the project that was presented? - Under this program, beneficiaries will have to pay part of the project from its own funds that will increase the extent of their liability. Therefore, it will be very important for each of them to have asuccessful business. We are talking about people who have been deprived of the opportunity to somehow be involved in economic activities for years, who live in the regions and usually have no chance even to find any work. Just this program will give them the opportunity to realize themselves. - What is the budget of the program? - The program’s budget is 20 million GEL, which will be distributed among the regions. According to our calculations, the program could fund 3 200 micro-businesses. Our goal is to make so that within 2-3 they could be transformed into a larger and more profitable business. The main thing is that people will start the implementation of good and useful ideas and we should encourage its commercialization. Ultimately that is what will increase the income of the population in the regions.

The weekly is distributed to top companies, banks, embassies, state sector, Tbilisi and Batumi hotels, Tbilisi, Batumi and Kutaisi Airports, as well as in the town of Marneuli. The newspaper will also penetrate Azerbaijan in the near future

PUBLICITY August 11, 2014 #66

caucasian business week

INTERVIEW caucasian business week

August 11, 2014 #66

ROMAN PIPIA - SOME OF THE EUROPEAN COUNTRIES, I BELIEVE, NEED TO TAKE ANOTHER LOOK AT GEORGIA AND RE-EVALUATE ALL OF THE POTENTIAL BENEFITS OF DOING BUSINESS WITH THIS COUNTRY ROMAN PIPIA - Founder of Loyal Capital Group Led by entrepreneur Roman Pipia, Loyal Capital Group is involved in real estate development projects and private equity investments. In 2011, Pipia became president of FC Dinamo Tbilisi, one of Georgia’s biggest and most recognisable brand names. He met with The Report Company to talk about the football scene in Georgia, as well as appraise his country’s advantages as an investment destination.

- You have made a huge investment into FC Dinamo Tbilisi. What led you to take this step? - FC Dinamo is a club with great history in which all of Georgia takes pride. The club had a lot of success during Soviet times, but because of poor infrastructure it had been in terrible conditions for many years. After my purchasing of the club, the main attraction has become its academy. It was opened a year ago by one of the best players in the world, Cristiano Ronaldo. We are pleased with the results and many professionals from other countries have confirmed it is up to and even exceeding international standards. If we were in England or France for example, I probably would have had to spend much less money on infrastructure because football is something that is already very much adopted by the people and a way of life. In Georgia football was always a big sport, but for a long time football lost its way in this country so we have really had to relaunch the football atmosphere. - Why did football lose its way in Georgia? - After the collapse of the USSR, the funding for any sport dropped dramatically and the quality of football dramatically decreased. There was no infrastructure, no grounds to play on and the problem which arose in Abkhazia prompted the loss of many particularly good players who were from the region. All of this together had a significant influence on people’s morale. A new way of thinking and operating started in around 2003 in Georgia. Subsequently this had a great influence on the revival of football. My initial motivation for the purchase of the football club was not to gain profit, but to develop, enhance and enrich Georgian football by training a new generation of football players, who

will bring back people’s interest and will advance not only in the country but internationally. This is a longterm investment for ten plus years, while the first ten years are pretty much a social project; at the academy 600 kids will play and eat for free. Most businessman are motivated from an economic standpoint, but this investment stands for something different for me. My goal first and foremost is to improve Georgian football. We need another five to six years for our team with the aid of the new generation, the kids who are at the academy, to really achieve the level that we are hoping we can get back to. The future of football in Georgia is the young kids. As a realist, I know that achieving this will take time and will not happen in the next two to three years, but everything great takes time and hard work. - You have worked and invested in the greater region; how would you say Georgia compares to other countries in terms of its business environment? - I think it’s very hard to compare Georgia to the neighbouring post-Soviet Union countries. Georgia has made a huge leap forward. There are major banks and investor groups here who are trying to really use the full potential and deploy all the capital they can allocate to such a small country to make it grow in every sector. Georgia has the same principles as Europe. There is a very high level of security, which is very important for investors, because you never fear for your assets. It’s something that you cannot find in other post-Soviet countries. I and many of my friends lost many properties and assets in other post-Soviet countries, so in this sense Georgia is quite ahead compared to its neighbouring countries. - Where do Georgia’s challenges lie and where do you see room for improvement? - Georgia needs to be closer to the European Union because this will give new perspectives to Georgian investors. The situation in the country was unstable for many years after the collapse of the Soviet Union, so the people are really longing for stability and the guarantee for a more certain future. These people have struggled for centuries, being in a strategic location between the East and West, and they really deserve a brighter and more promising future. - What does Georgia have to offer to the EU? - Georgia is one of the oldest civilisations. The first European skull was found in Georgia and wine making is claimed to have begun here, dating back to 8,000 BC. Georgia can provide stability and become an important bridge and gateway between Europe and Asia. Europe needs to be certain about the Georgian economy and the Georgian government, otherwise it will be very hard to have confidence in the energy resources that pass

through the country. Georgia, because of its geographical positioning, can guarantee energy resources for Europe with the pipelines that are already in place. All of the neighbouring countries can potentially put pipelines through Georgia because it’s the shortest distance to the European market and Georgia is the only reasonable choice. If we were a little bit closer to Albania or Macedonia, Georgia’s EU membership would not be in question; we would have already been a EU country. We’re less than five million people, and yet we are involved in every military mission with our international partners. If you compare the ratios and the numbers of the troops sent by Georgia to those sent by other NATO members, you will be surprised, because you’ll see that while some other countries send 15 troops, while Georgia sends thousands. We are always contributing to the safety of the European Union. Georgia has come very far and today we are at this breaking point where we really need to tell people where we stand. It’s either Europe or it’s not. Nobody can change the geography; we’re not able to relocate. Our history is clear through our location, and it is well known to everybody what Georgia has been through because of its neighbouring countries. Georgia has really demonstrated that it is ready to commit and to sign the agreement with the EU in June and it has already proven to Europe that it will be on the side of Europe whenever it’s needed to be of help. - What can you tell us about your industrial investments? - Our portfolio includes the Rustavi Azot fertiliser factory. This is a very old factory that was built back in the times of the USSR, but the quality and quantity of production is comparable to a similar new plant abroad. It’s a huge factory and we are looking forward to doubling its production. Despite being such a small country, Georgia accounts for one percent of the entire fertiliser production in the world, and after Canada we are the number one supplier to the US. We also sell to a vast number of European countries. - You also have a Hyatt hotel. How would you appraise the tourism sector in Georgia? - I believe that tourism and agriculture are the two potential paths for Georgia to really achieve that massive GDP growth that we’re looking forward to. There is a large number of tourists who come to Georgia. Every year it almost doubles. We have a very warm way of hosting people and getting them to love Georgia so that they want to come back and they want to spread the word, and I think that it’s working. We have both winter resorts and summer resorts but

there is still a lot to be done. There are a couple of good hotels in Georgia, which is great, but the problem is that there are not enough rooms to accommodate all of the incoming tourists, important delegations and guests. This, in turn, raises prices, because supply does not meet the demand. There are less than 15,000 hotel rooms in Tbilisi, which is a quite small number. Some new hotels have already been announced and they are in the construction phase. Our group is also constructing two hotels. - What future investments are you looking at? - I am very motivated to move forward and grow our portfolio. I believe there are some prospective sectors that are quite interesting. There are some plans in the energy sector, which is something that is very rapidly growing in this country. I lost a very substantial amount of my investments because of the war in 2008 so I need certainty to continue investing. All that investors like me need is the promise for tomorrow. - How does Georgia reconcile its European and NATO aspirations with normalising relations with Russia? - Russia is our neighbour and significant trading partner. The two nations share a significant history, and culturally have a lot in common. I hope there comes a time when Georgia’s occupied regions will return and reunite. That being said, we must ensure we foster a reliable and stable relationship with Russia. It is necessary to maintain harmony, open communication and diplomacy for the economic benefits of both sovereign nations. - Are you confident for the future of Georgia? - Of course. I believe that Georgia will be a very, very attractive country in ten years. Georgia has suffered and lost a lot throughout its long history, so the future success is a necessity. We really are motivated to get there. The economic outlook of Georgia is very promising. Some of the European countries, I believe, need to take another look at Georgia and re-evaluate all of the potential benefits of doing business with this country. We take pride in the new generation who have graduated from western schools, speak foreign languages and are influenced by western culture. It is easy to find an English speaker in any shop in the capital. Georgians are very understanding of cultural differences and have a great respect for diverse societies. I believe that Georgia will be a valuable member of the EU and will not be integrally different from many of its member nations. Georgians are very European in their way of thinking. I honestly believe that the time has come for Georgia to be closer to Europe and it’s just up to Europe to evaluate and take another look and see the potential. the-report.net

AIETI KUKAVA - WE HAVE IDENTIFIED AROUND 33 PROJECTS WHICH HAVE A RETURN ON INVESTMENT OF AROUND 25 PERCENT ON AVERAGE, WITH THE OVERALL ANNUAL GENERATION OF 3,260.4 GWH AIETI KUKAVA - CEO of JSC Alliance Group Holding In 2005, investment and consulting firm JSC Alliance Group Holding was founded. The company manages seven subsidiary companies with diversified core businesses in various financial and consulting sectors from microfinance to leasing, investments, real estate, energy, IT, business information and credit ratings. The Report Company met with the company’s founder and CEO Aieti Kukava to find out more.

- What is the main focus of the group? - The philosophy of Alliance Group Holding is to make measurable difference through our diversified services in financial and consulting sectors. We finance unbanked segments with microfinance and micro-leasing as well provide solutions for bigger companies through our investment banking services. These serve the needs of much bigger companies who need refinancing of bigger loans which the local banking sector cannot finance. They need to issue bonds, attract foreign direct investment, increase equity and find partners, so we help them with that. In 2011, we started to grasp the opportunities in energy sector, which is becoming one of the most popular sectors for foreign direct investments in the country since

Georgia has one of the largest untapped hydro resources per capita in the world. Together with our partners, we are currently working on building the portfolio of hydro power plants. Our first project will be constructed at the end of July, 2014. In addition, we have been involved in business information sector for the past decade. In 2003, we have started the only credit bureau in the country. We have been working with Dunn & Bradstreet, KOMPASS and others and based on our experience, we have created the largest and continuously updated business information database (www.bcat.ge) encompassing information on more than 15,000 most active companies registered in Georgia. Thus, if any investor wants to know, for example, who are players in any industry, BIA can provide that information. - What do you think makes Georgia attractive to foreign investors? - Georgia is very close to Europe. It’s a crossroad between Asia and Europe. For the past decade, Georgia has proved to be one of the most open and dynamically growing economies in the region. We have ranked the World’s Top Reformers list for the past several years. Due to its rich nature and friendly people, it is also a very good tourism destination. Georgia also often serves as the regional headquarters for multinational companies. - Where do you see opportunities to work and partner

with foreign investors? - In energy sector and real estate. Georgia has utilized only 18 percent of its energy project opportunities in hydropower and we have opportunities in solar and wind as well. We are at this stage concentrating on hydropower projects. We have identified around 33 projects which have a return on investment of around 25 percent on average, with the overall annual generation of 3,260.4 GWh. Hydropower projects are one of the most solid investments because domestic as well as international demand on energy increases dramatically. Georgia has now joined the middle-income countries, so the population will also keep consuming more energy. We also have our neighbour Turkey who are massive consumers of energy. They have one of the world’s highest energy prices and we can easily sell to them so any investor who looks at these statistics will already be persuaded to invest in energy projects in Georgia. Our company has already signed an electricity trade agreement with European leading energy trading company and we are able to sell electricity produced in Georgia to Europe through Turkey. - What’s the average size of these energy projects? - We have 33 projects which are in three categories; one is up to 10MW and this usually requires from US$1.5-2 million investment, and then there are 10MW-40MW projects and 40MW-600MW projects. Anyone can put

as low as US$100,000 and become a co-owner of these larger projects and once other investors join, you can either resell your shares or remain as a shareholder, so this is interesting for any individual or big corporation. We already have American, European and Asian private equity funds as partners and are also open to attract others interested in these projects. - As Georgia moves closer to the EU, what do you think EU members stand to gain from having Georgia as a partner? - As one of the ancient countries, rich with nature, culture, food and friendly people, we believe Georgia has been part of European civilization for centuries. During the time of the Soviet Union, Georgia has been quite strong economically and had one of the highest standards of living as well. We were receiving around 40 percent of the Soviet Union’s tourists and exporting a lot of agricultural products including tea, fruits and Georgian wine. We had and still have 5 percent of the world hazelnut market and export capacity of Georgian wine and mineral water increases every year. Georgia is not only a nice place for tourism, but for business as well. Due to its liberal regulations and minimum bureaucracy as well as geographical location, Georgia can serve as a crossroad between Western and Asian businesses. the-report.net

RATING August 11, 2014 #66

caucasian business week

THE MOST PROBLEMATIC CONSTRUCTION ASSETS IN TBILISI

nfinished construction works, bankrupt and arrested developers, suicides – this is the merciless reality on Georgia’s housing market and this quite old story in this segment. The Authorities and the government-controlled commercial banks led development companies to bankruptcy because of the crisis after the 2008 August war. By the way, a major part of cheated customers and unfinished assets in the housing sector was registered for CenterPoint company, but the company property was not seized and constructions were not destroyed. Moreover, Dexus company appeared as a Center Point savior. However, in exchange for freedom, Rusudan Kervalishvili, one of the founders of Center Point, was made a political hostage by the previous Authorities. The freedom of sisters Kervalishvilis was threatened and Vakhtang Rcheulishvili, a spouse of Maya Rcheulishvili, opened all cards and shifted responsibility for Center Point liabilities to high-ranking officials of the previous Authorities. Those officials used to manage Dexus company. “Gigi Ugulava and Kadagidze, a president for the national bank of Georgia (NBG), announced the decision agreed with Adeishvili that we were to go to home and Dexus would perform the work for us. They expected financial inflows from Rusudan after she became a MP. They saw the ruling party was not receiving finances and after that they showed interest in the company. They considered the company to be a good resource and appropriated it”, Rcheulishvili noted. The management of Olympic Star development company has also talked about the interests of Tbilisi City Hall and the prosecutor’s office in Dexus company. The unfinished construction project was a well-known problem for the management. However, the Dexus plans in relation to this company remain unfulfilled even after the power change. Lela Razikashvili, a PR manager for Olympic Star, has explained the details of the Dexus scheme for the Center Point property appropriation and the incomplete asset on Shartava Street. The asset construction was to end in 2009. “After Dexus carried out a certain reincarnation of Center Point, it showed interest in Olympic Star too. They included unfinished apartments on Shartava Street in their list of sales. In reality, this company was constructing no asset on Shartava Street”. Dexus had got information on the Olympic Star problems with the Authorities and the company took decision to appropriate the company. As a result, Dexus announced Center Point apartments as its own ones and put out them for sales”, Lela Razikashvili noted and explained the reasons the company has failed fulfillment of the liabilities: “Before 2008 Olympic Star had got no problems. Construction works were to end soon. But after the war, all projects were suspended. We took decision to take an about 5 million GEL loan from Bank of Georgia. We had also joined Tbilisi City Hall project – New Life of Old Tbilisi. We were able to serve the loan from the Tbilisi City Hall project revenues. But the process for taking the loan lasted for several years. By the way, it is paradox but the company was made to pay interest rates for untaken loan. And Dexus appeared when the bank was retarding the loan issuance without grounds. Therefore, this chain became manifest: Dexus planned to appropriate Olympic Start like Center Point”, Lela Razikashvili noted. The power has changed, but the development company is unable to settle the problem and to take a loan from Bank of Georgia. At this stage, the company representatives have already introduced due arguments to the board of disputes to write off the fine that had been imposed on the company without any ground. To this end, the company’s financial audit has started exploring the roots of the 27 million GEL fine that was imposed by the previous Authorities. “The continuation of the operation of Olympic Star depends on whether the loan is written off, because commercial banks will issue loans after the problem is removed. After the fine is zeroed, we will complete the construction project on Shartava Street and about 300 families will receive new apartments”, Lela Razikashvili said and added about 10 million GEL is required for the construction works completion. Other major development company Arci also accuses Bank of Georgia of unfulfilled obligations and to have led the company for suspending the construction works. The company has not finished Ortachala Beauty project yet. The company has sued the commercial bank to a court. According to the development company information, Arci transferred money to Bank of Georgia to serve the loan that had been taken for the Ortachala Beauty project implementation. But Bank of Georgia charged the transfer for other liabilities; as a result, the loan remains still unpaid. “We argue that the bank should remove the mortgaging on the apartments that are owned by Ortachala Beauty, because the transfer was incorrectly shared over loans. The legislation also backs the company. Namely, the 1st sub-article of 387 clause on the turn of paying money transfers gives the following explanation: “If the debtor is obliged to pay several similar loans to the creditor because of different liabilities and the performed transfer is not sufficient to cover the total loan, then the transfer will cover the liability chosen by the debtor at the moment of making the transfer. But if the debtor does not choose the liability for covering, then the transfer will cover the debt that is the due at that moment”. The dispute continues in Georgia, but the company names the supposed date for completing the construction project anyway. Tiko Ratiani, a head for Arci PR Service, told the Caucasian Business Week, at this stage the case is probed by the Court of Appeals, but the company is working on alternative rehabilitation plans. “The dispute against Bank of Georgia is continued at the Court of Appeals. The first stage of the construction project included 5 residential buildings, of which 3 ones have been already completed. In September we will start works for completing the remaining two buildings. If the dispute with

the commercial bank is not resolved by September, we are able to complete the project thanks to the third party. At this stage the rehabilitation project is continued to resolve the very problem”, Tiko Ratiani noted. No problems were recorded with commercial banks and the previous government, but other large-scale project of the socalled Chinese settlement caused protests in certain part of our citizens and after the power change the implementation of the so-called China Town project became questionable. The issue is of a special economic zone to the west of Tbilisi Sea that is being constructed by Chinese Xinjiang Hualing Industry & Trade Co. The Georgian government and the Chinese company concluded a due agreement in summer 2012. The investment volume is at least 150 million USD. The zone is exempted from taxes for 10 years for business stimulation. The socalled China Town will introduce fashionable villas in the residential complex and apartments for the real estate market for sales, as well as coastline recreation zone hotels and houses for the 2015 Tbilisi Youth Games. It is worth noting in relation to the construction of an Olympic village and complex for the 2015 youth Olympic festival, different information is spread in media and internet space. The information as if the Chinese company had got plans for settling 126 000 Chinese nationals in the complex caused public pretests and rallies. The agreement signed by the previous government with the Chinese corporation raised questions to the new government team members too. Under the agreement, the Chinese company is liable to invest at least 150 million USD, construct 50 000 square meter residential buildings for 3 800 athletes, a five-start hotel with 200 suites, a 100 000 square meter international shopping mall and 50 000 square meter residential apartments. During the Olympic Festival, the Olympic Village will be handed over to the Georgian side for a period of 3 months. In relation to the ongoing construction works at the Tbilisi Sea, the information was spread in media and various internet forums as if 126 000 ethic Chinese would be settled in the zone after the project completion and this information caused protest rallies in the society. Even Georgia’s ex Prime Minister Bidzina Ivanishvili made comments on the complex construction and available settlement of 126 000 Chinese at the November 22, 2012 news conference. “There is a project for constructing such a strange complex near the Tbilisi Sea. We are exploring the issue. I would not like to make comments in advance. I suppose our citizens would not like to see a compact settlement with 126 000 Chinese citizens. All states have got due legislation over the issue….The contract does not give the ground for doubts that have arisen. The agreement may be of conditional character. We will cast light on the issue”, Ivanishvili said. Georgian Economy Minister Giorgi Kvirikashvili also pointed to the ambiguity of the contract. He also expressed discontent with certain clauses in the agreement. “The company founders have promised assets will be sold openly, but I repeat open sales is a market process and we are unable to forecast results in advance”, Kvirikashvili said. Finally, however, the company representatives seem to have persuaded the government there are no plans for settling 126 000 Chinese nationals and the project will be a success for Georgia. Tinatin Shishinashvili, a PR manger for Hualing Group, told CBW at this stage the company has no obstacles and it is completely oriented on fulfilling the liabilities. “The construction works follow the plan without considerable problems and complications. Main accents are made on completing the works in line with obligations in terms of time factor (the date of completion is the 15th of March and it must be handed over a three month before the Olympic Festival), as well as on quality and standards protection (according to the Olympic Committee standards). The project is of development character, commercial spaces are rented at the shopping mall, while apartments will be sold by open sales as practiced in Georgia. We are implementing a commercial project for receiving profits and carrying out further development. Therefore, settlement of Chinese citizens here is absurd and false information. The Authorities have got precise information on the project, know our company, they are sure in our investment potential and they express only support”, Tinatin Shishinashvili noted. Georgia’s current Prime Minister Irakli Gharibashvili appraised Chinese investments as interesting and be of vital importance several days ago when visiting the so-called Olympic Village. The Prime Minister also announced interesting information. “We are conducting negotiations on purchase of 8 buildings for IDPs. After the completion of the negotiations, the buildings will be handed over to IDPs”, Irakli Gharibashvili said. Unlike the domestic development companies, investors seem to have no problems with financial resources. Besides Chinese capital, Azerbaijani investments are also boldly enhancing roots in Georgia. Dirsi company has dismissed rumors as if the company had problems with sales and the management was going to shrink the project. The first phase of constructing a micro district on the former trash damp will end in September 2014 and the management assures all liabilities will be performed ahead of schedule. There are no problems with completion of the so-called Twins of Remasi company that looks down from the cliff to the King Tamar bridge. The population, however, shows different positions to the fashionable building on the cliff. The development company assures the building is firm. The complex has got three additional underground floors that maker the complex stronger. As to the sales, prices are very expensive in elite buildings and the value of a square meter makes up 3500 USD. Anyway, the demand for the so-called Twins apartments is growing. The asset will be put into eexploitation in late September 2014. Maka Dekanosidze

1. CENTER POINT’S ONGOIG PROJECT BEHIND TBILISI CITY HALL

2. ORTACHALA BEAUTY, ARCI COMPANY

3. OLYMPIC STAR PROJECT ON SHARTAVA STREET

4. CHINESE HUALING GROUP PROJECT AT TBILISI SEA, OLYMPIC VILLAGE

5. DIRSI RESIDENTIAL COMPLEX, AS GEORGIA AZERBAIJANI COMPANY

6. TWINS NEAR THE KING TAMAR BRIDGE, REMAS COMPANY.

ECONOMY caucasian business week

August 11, 2014 #66

IMF - CAUCASUS AND CENTRAL ASIA REGIONAL ECONOMIC OUTLOOK

BUSINESS August 11, 2014 #66

caucasian business week

REAL ESTATE MARKET RECORDS ANNUAL 3.9% GROWTH

ccording to official data of Public Registry Agency, in July 2014 number of real estate registration transactions increased by 9,3% in comparison with the same month of previous year and equaled to 49 081 throughout the country. July of the current year is distinguished with the growth in comparison with the same month of 2010-2014: compared to July 2010 (32 485 units of registration transactions_ growth is 51.1%, compared to July 2011 (39 581 units of registration transactions_ growth is 24.0%, compared to July 2012 (44 461 units of registration trans-

actions) growth is 10,4% and compared to July 2013 (44 888 units of registration transactions) growth is 9.3%. Compared to previous month number of registration transactions increased by 7.2%: growth both in primary (17.0%) and secondary (4.9%) registration transactions. As for ratio of primary and secondary registration transactions, compared to the same month of previous year share of primary registration transactions increased: in July of the current year 79,4% of the total registration transaction were secondary, 20,6% - primary ones (in July 2013 respectively 82.4% and 17.6%).

“MARIGROUP” TO INVEST USD 12 MLN IN HOTEL BUSINESS IN BATUMI

ariGroup” company will invest USD 12 million in hotel business in Batumi. The company owns “Sanapiro” and “Marina” hotels and opens another four-star hotel “Marina Coliseum’’ in Batumi. According to the company’s Director Alexander Akhvlediani, the Coliseum- shaped hotel will be

a 10 - storey building and will consist of 107 rooms. The project is being carried out on the territory of 14 427 square meters . An average price in hotel will make 100 USD. Construction of the building of “Marina Coliseum’’ hotel has been completed and at this stage facing work is in progress. The project launched in September 2012 will be completed in March 2015.

“RIXOS” HOTEL TO OPEN IN DECEMBER

five-star “Rixos” hotel will open in Likani in December. Irakli Kovzanadze, Director of the Partnership Fund (PF), told “Commersant”. A 152 -room hotel will be located in the territory of the former Fourth Division. The project is jointly carried out by the Partnership Foundation and the Kazakh state oil and gas

company “KazMunaiGas”. A total investment volumein the complex amounts to USD 38.5 million, the Partnership Fund’s contribution is 50%. The Kazakh company acquired the object in Likani for $ 10 million to build a hotel and spa complex. The well-known Turkish brand “Rixos” will ensure the functioning and development of the complex.

BUSINESSMAN EXPECTS MILLIONS OF INVESTMENTS AFTER CHANGES IN TAX CODE

usinessman Irakli Kverghelize from Orbi Group positively evaluates new initiative of Ministry of Finance. According to his evaluation. “Generally, idea of the tourist enterprise and the refined mode, which had been initiated by the government, is extremely important not only for business, but also for the state. We, one of the companies, assume that it’s basis for the investment of several millions of dollars in Georgia. It’s noteworthy, that the approach and the initiative of the government will give opportunity to business to create tourist infrastructure in any tourism zone and any tourism place. The new model entitles the business subject to create tourist objects, tourism infrastructure, construct hotels and sell its rooms and then get it back for management for the hotel business. This interest is trilateral - includes state, business and consumers. The company, which will create tourism infrastructure for its further realization and management, is exempt of VAT by the time of supply. It’s a considerable benefit for the companies. For Individuals, which will purchase hotel rooms

in these tourism objects, income tax rate will be determined at 5%. It will cause construction boom in Georgia, as the price will become very competitive, also the conditions will be competitive to other regions and countries. The fact, that all these will bring several hundred million, is evident from the made researches and it’s not a verbal figure. Compared to the real estate purchase in any other country, our country will create very competitive conditions and will become attractive for the foreign buyers”, - Businessman Irakli Kvergheladze stated. The government approved the tax initiative on Thursday.

FLY VISTA STARTED TBILISITEHERAN FLIGHTS

ista Georgia started Tbilisi-Teheran flights by the brand of Fly Vista. The newly established company provides flights to Teheran twice a week (average price of one-way ticket is $99). From August 28 they start Tbilisi-Kiev flights 3 times a week. The flights are planned to the other direction, at first - to Almaty and Moscow, then to Europe. Boeing (N737300) plane serves to the flights. “I am black to announce start of the Flyvista flights. Market research reveals that there is a sufficient passenger

flow between Georgia and neighboring countries and also to Tbilisi-Teheran direction. I’m sure that friendly and competitive travel alternative will promote tourism activities in Georgia”, - executive director of Flyvista Gregory Pomerantsev stated. Jumber Iakobidze and Afand Lakhialov are founders of the air company. Aerovista is partner of Flyvista. It’s a provider company for plane leasing and management issues with head office in Dubai. From 1999 it works with domestic and regional airlines on the markets of CIS, Middle East and North Africa.

PRESENTATION caucasian business week

August 11, 2014 #66

BANKING NEWS August 11, 2014 #66

caucasian business week

TBC ENDS 1H14 IN 48.933 MILLION GEL PROFITS

BC Bank completed first half of the year with 48,933 million GEL profit (Q1 - 21 million). Its share equals to 23% among the profitable banks. According to loan portfolio (2,8 billion GEL) its share is 24% (Q1 - 2.637 billion, 24.1%). According to actives (4,338 billion) its share

is 23,7% (Q1 - 4,074 billion 23,2%). Liquidity coefficient is 25,8%, asset profitability - 9,23%, Return on Actives (ROA) - 2,37%, Return on Equity (ROE) - 15,56%. Primary capital coefficient (≥8%) equals to 14,4%, supervision (≥12%) - 17,7%. Stock capital of the bank is 785 million GEL.

RUSSIA’S VTB BANK EXTENDS PROMO CAMPAIGN ON UNITED LOANS

TB Georgia announced about extension of the promo action about the united loans and relates it to the high interest of the consumers. The product enables clients to cover other banking obligations and get united

loan for 12,9%. Annual loan rate equals to 11,9% with secured real estate. Besides, uniqueness of the promo is that the problem client who had problems in the payment of the obligations due to job loss, reduction of the revenue or for other reasons, they offer special product. The bank made the offer on July 1. During 1 month over 2000 loans have been issued. Compared to previous month, growth of the consumer loans equaled to 51%. The Bank’s supervisory board members are Vasil Titov, Mikheil Yakunin, Igor Piun, Grigol Lomidze, Vsevolod Smakov. VTB Georgia stakeholders are as follows: Russian VTB Bank (96.80%) and LLC Lakarpa Enterprise Ltd (1.80%). The Russian government holds a 59% stake in Russian VTB.

FINCA BANK POSITIVELY EVALUATES 1-YEAR WORK

inca positively evaluates 15-years operation on Georgian market, among them 1-year banking activities. Former micro-finance organization, which was presented in lending to small and medium-sized business, holds a banking license from August 6, 2013.

During 1 year the network was expanded and currently it serves to 55 000 clients through 39 service centers. The bank completed fist half of the year with 3,2 million GEL profit. Actives equal to 153,7 million GEL (share in the total actives - 0,8%), loans - 124,3 million GEL. International Financial Corporations, German Development Fund Netherlands Development Bank and other international financial organizations are partners of Finca. It is represented in 23 countries and has over 1,5 million clients.

PROCREDIT BANK ENDS 1H14 IN 9.066 MILLION GEL PROFITS

roCredit Bank completed first half of the year with 9,066 million GEL profit (Q1 - 3,4 million). Its share among the profitable banks equals to 4,2%. According to loan portfolio (748,3 million GEL) it equals to 6,6% (Q1 - 2.637 billion; 6,4 %). An-

nual growth of the total loans equals to 3,3%. According to actives (1,017 billion) its share is 5,6% (Q1 - 1,011 billion; 5,7%). Liquid actives/overall actives is 18,3%, profitability of actives (0veral interest income/average annual actives) - 9,6%. Stock capital of the bank equals to 123,7 million GEL.

BANK REPUBLIC ENDS 1H14 IN 15.9 MILLION GEL PROFITS

ank Republic completed 2 quarters of 2014 with 15,9 million GEL profit (Q1 - 6,869 million). By July 1 deposits (nonbanking) portfolio equals to 520.3 million GEL (Q1 - 504,7 million), loans - 723,09 million GEL (Q1 - 701,3), overall obligations - 863 million GEL (Q1 - 792 million).

In the Q2 deposits increased by 3%, loan portfolio - by 3,1%. Bank’s actives equal to 1,026 billion GEL, market share - 5,6% (Q1 - 946 million, 5,4%). The bank operates since 1991. Shareholders are SOCIETE GENERALE (93,6%) and EBRD (6,36%). Stock capital of the banks equals to 163,09 million GEL (Q1 - 154 million).

RATIO OF ASSETS IN GDP MARKED 65.7% AS OF JULY 1

y July 1, according to statistic of National Bank of Georgia, ratio of the actives of commercial banks to Gross Domestic Product (GDP) equals to 65,7% (01/07/13-56,7%). Deposits/GDP is 29,8%, loans/GDP equals to 38,9% (01/07/13 -26,1%; 33,8%).

NBG guided data of Q4 in determination of these indicators. By Q1 2014, GDP equals to 6,319 billion GEL. Compared to the Q1 2013 growth is 7,1%. Compared to April-June of previous year, preliminary data of the Q2 growth equals to 5,1% (in the same period of last year, growth was 1,5% in comparison with the Q1 2012).

NBG: IN GEORGIA, LOANS ARE CHEAPER THAN IN MANY COUNTRIES

he notion that in Georgia interest rates for loans are almost the highest in the world is not true - the President of the National Bank of Georgia (NBG) George Kadagidze states. “In our society a stereotype has formed that in Georgia there are almost the highest interest rates on loans in the world, and so on. In fact, it is not so. We commissioned an international organization KPMG to conduct a study which showed that in Georgia the interest rates are usually lower than in most countries in the region, including in Eastern Europe. Of course, they are much higher than in Western Europe, but, respectively, level of our economy is much lower. In general, there is a trend of declining interest rates. For example, in 2013, interest rates on loans for legal entities amounted to of 11-12%, which is 2% lower than a year earlier. Interest rates on loans for individuals have also decreased, especially for mortgage loans in GEL - from 15-16% to 9%, “- NBG President says. According to him, in 2013, despite the slowdown in economic growth, the quality of banks’ loan portfolio has grown due to several factors - in particular, the improvement of risk management in the banking sector. “In the current situation, one of the main tasks of the National Bank is to increase the effectiveness of monetary policy, the main problem of which is currently a high level of dollarization. In this area we have a lot of success, particularly in terms of reducing the level of dollarization of deposits -

the share of the national currency in total deposits increased from 32% to 40% in 2013 as well as the share of loans in GEL- from 31 to 38%. At the same time in the backdrop of monetary policy easing, despite the decline in demand, in 2013 the volume of loans grew by 21% and amounted to GEL 9.8 billion, which is 37% of GDP. The impetus for the growth of lending was the decline in interest rates and flexible system of instant installments. For example, in 2013 the volume of installment doubled “- NBG President adds.

INTEREST RATES ON LOANS IN GEORGIA ACTUALLY REDUCED

he NGO “Society and Banks” has decided to double-check the statement of the President of the National Bank of Georgia Giorgi Kadagidze that interest rates on loans in the country have been declining and are the lowest in the region. The organization KPMG conducted a study commissioned by the National Bank of Georgia in which it compared the interest rates on loans in Georgia and 11 countries of the region - it was mainly about the interest rate on 9 main types of banking products. It showed that the interest rates - both nominal and real, are indeed lower in Georgia than in most countries, as the NBG President says. “Society and Banks” rechecked the World Bank data to complete the picture. From 2009 to the present day, interest rates have steadily declined in Georgia, which is also con-

firmed by the National Bank - today interest rates on loans are not so high in the country, as is commonly believed, and they are constantly declining. As for the current period, in January 2014 the interest rate on loans in USD, in average, totaled 12, 9%, in February - 11, 6%, in March - 11, 8%, in May - 12, 1%, in June – 11.5%. Veracity of the statement made by the NBG President is also confirmed by a comparison of interest rates in Georgia with some other countries. So, in 2013, the average interest rate on loans in dollars was 13, 6% in Georgia, 16% - in Armenia, inAzerbaijan- 18, 2%, in Moldova - 12, 3%, in Romania - 10.5%, in Russia - 9, 5%, in Serbia17 1%, inUkraine - 16, 6%. Thus interest rates in Georgia are not the highest. Of course, the situation changes compared with developed countries - for example in the U.S, the average interest on a loan is 3.3%, in Britain- 0.5%.

CREDIT CARD - ONE OF THE MOST PROBLEMATIC BANKING PRODUCTS IN GEORGIA

credit card is one of the most popular, but at the same time costly banking products in Georgia – a research conducted by the nongovernmental organization says. According to the NGO “Society and Banks”, only 8 of 21 Georgian banks issue credit cards. Terms of almost all banks are the same - the average fee for cashing amounts to 3-4%, grace period is usually 55 days, the annual interest rate - 18% -36% depending on the method of cashing. It should also be noted that almost all cards of Georgian banks provide points accumulation system whose aim is to promote cashless payments. Credit cards are in demand not only in Georgia, but throughout the world, but international experience shows that the conditions of credit cards are usually very flexible and customer-focused as much as possible. Accumulation system is much more organized and loyal, and most importantly - shopping is the main function of credit cards in the developed countries - cashing of a credit card is a rare phenomenon - 90% of customers focus on cashless payments.

At the same time in Georgia everything is quite the opposite - most customers just cash an amount from a credit card, not realizing that it leads to additional costs - 4% for cash, and the maximum interest rate of 36% per year. As of May 2014, 1.5 million people enjoy credit cards in Georgia; this is a rather high figure when you consider that the population is about 4, 4 million people. Credit card boom began with “OrangeCard” issued by “Bank of Georgia”. Credit cards were always issued by a very simplified procedure – even unemployed and students could get them - it was enough just to come up with the name of the organization in which they allegedly worked, and no one even tried to check them. As a result, credit card users prevail in the list of defaulters on loans in the “Credit-info” database. The situation has relatively improved in recent years, when banks tightened rules for issuing a credit card, but in spite of this, credit cards together with the installments, continue to be the most popular banking product in the country.

CIS caucasian business week

RUSSIA HALTS UKRAINE TRANSIT FLIGHTS, CONSIDERS US AND EU RESTRICTIONS

SWITZERLAND TO ENFORCE EU SANCTIONS ON RUSSIA

he Swiss government has extended sanctions to include 26 people in Russia and Ukraine, as well as 18 organizations, so the country isn’t used as a channel to avoid EU and US sanctions. Switzerland itself hasn’t imposed any sanctions, but some of the EU measures will now apply in the country which is surrounded by the European Union. The Swiss Federal Department of Economic Affairs, Education and Research released a list of those affected on Tuesday, and said it was because of Russia’s perceived intervention in the Ukraine crisis. Now, over 87 individuals and 20 companies are banned from transferring assets into Switzerland or starting new business relationships. A travel ban also exists. The new names include Donetsk People’s Republic’s VicePremierAlexander Boroday and the Security Minister Alexander Khodakovsky, top Russian security officials such as former Prime Minister Mikhail Fradkov and Nikolai Patrushev, and Chechen President Ramzan Kadyrov. The sanctions come into effect on August 5 at 8:00pm Moscow time. Switzerland is home to an estimated $15.2 billion

August 11, 2014 #66

R in Russian assets as of 2012, and oil exchanges in Geneva account for 75 percent of Russian crude exports, Reuters reports. Many Russians live in the country. Over the weekend, Switzerland’s Economy Minister Johann Schneider-Ammann said his country wouldn’t simply duplicate EU sanctions against Russia. Choosing a side in the conflict discredits the country’s role as a mediator, the minister said. The EU toughened its stance on Russia last week when it announced sanctions targeting Russia’s banking, energy, and defense technology sectors. READ MORE: EU sanctions some of Russia’s biggest banks including #1 Sberbank Known for its neutrality, Switzerland has delayed imposing sanctions, and didn’t heed America’s call in March to respond and sanction Russia over Crimea’s reunification with Russia. The EU’s sectorial sanctions are its most serious step against Russia to date. European leaders have been increasing pressure on the Russian government for several months by imposing visa bans and asset freezes on a number of individuals the EU considers responsible for Moscow’s policy toward Ukraine.

ussia has decided to ban some transit flights across the country by Ukrainian airlines and is considering imposing a ban on flights from the EU and US, Russian Prime Minister Dmitry Medvedev said Thursday. “Russia will cancel all transit flights for Ukrainian airlines through its airspace into Georgia, Azerbaijan, Armenia and Turkey,” Medvedev said during a government meeting on Thursday. Russia is considering closing its airspace to EU and US airlines as a part of the countermeasures to Western sanctions which affected Aeroflot subsidiary Dobrolet, Prime Minister confirmed. “The measures include a ban on transit flights by European and US air carriers to Southeast Asia, and to the Asia-Pacific Region,” ITAR-TASS quotes Medvedev. “We are looking at changing the so-called points of entry and exit from our airspace for scheduled European air carrier and charter flights,” Medvedev said, adding that this would have an effect on flight costs and hence impact the prices of tickets sold by Western companies. Russian Foreign Minister Sergei Lavrov on Wednesday said Russia’s plans to impose restrictions on flights of foreign commercial aircraft over Siberia are rumors. “I don’t want to comment on rumors, but everybody knows how actively Russian airspace is used by foreign airlines, including those from Europe, the United States and Asia,” the minister stressed.

At the same time, Lavrov said the Russian government is considering a number of retaliatory steps. The government is also “potentially ready” to introduce protective measures in a number of industrial sectors including the automobile industry, shipbuilding and aircraft production, Medvedev said, however stressing that Russia will “perform them meaningfully.” However the final decision to apply the measures has not been confirmed. EUROPEAN ‘TIT FOR TAT’ In an interview with Deutsche Welle published Wednesday Richard Kuhnel, the European Commission representative in Germany, said Europe was ready for a “tit for tat” action against Russia, and could close its airspace to Russian airlines if Moscow decided to block flights to Asia over Siberia Air routes are arranged internationally and Russia is obliged to follow the rules the same way it follows the rules of organizations like the WTO. It means that Russia can’t unilaterally apply measures without violating international law, Kuhnel emphasized. Another option for the EU would be applying to the relevant international bodies. The European Commission said it was not commenting on moves until they become official. On August 4 Dobrolet suspended flights, citing the EU sanctions. The move came after European contractors terminated the leases on aircraft, technical maintenance, insurance and navigation contracts because of the European Union’s economic sanctions against Russia.

KAZAKHSTAN CHOOSES 590 COMMUNAL COMPANIES FOR PRIVATIZATION

azakhstan has chosen 590 companies among 6,000 communal enterprises and social corporations operating in the country for privatization.

The news was announced by Chairman of the Agency for Competition Protection Galim Orazbakov on August 4. “Of course, one of the main criteria while making a decision on the need of the privatization of the communal enterprise is physical entities or private legal entities engaged in similar activity on this market,” he said at a briefing in Astana. “Thus, the organizations rendering the services on language learning were recommended for privatization,” he added. The companies will be sold as part of the second wave of privatization ordered by President Nursultan Nazarbayev. Holding the second stage of privatization is aimed at reducing the state’s presence in the entrepreneurship. The second wave of privatization planned for 2014-2016 will involve 853 state companies.

KAZAKHSTAN PRODUCES 5,650 TONS OF URANIUM

azakhstan produced 5,650 tons of uranium in the second quarter of 2014. This figure corresponds to the planned indicators, Kazakhstan’s national operator Kazatomprom Joint Stock Company reported. Kazakhstan produced 5,590 tons of uranium in the second quarter of 2013. The volume of uranium production of Kazatom-

prom amounted to 3,278 tons in the second quarter of 2014. Also, Kazatomprom continued works in the field of conversion, enrichment and production of nuclear fuel in the second quarter. Kazakhstan possesses 0.85 million tons of uranium reserves. It ranks second in the world in terms of the reserves, and first in terms of uranium mining. All the uranium produced in Kazakhstan is exported, particularly to China and Europe. Kazatomprom is Kazakhstan’s national operator for the export of uranium and its compounds, rare metals, nuclear fuel for nuclear power plants, special equipment, technologies and dual-use materials. Its principal activities are geological exploration, uranium production, the initiation of the nuclear fuel cycle, the production of construction materials, energy, science, social welfare and training. Kazatomprom is an active participant in the development of renewable energy in Kazakhstan. Kazatomprom is amongst the leading uranium mining companies in the world.

LUKOIL SELLS OFF GAS STATIONS TO HUNGARY, SLOVAKIA, CZECH REPUBLIC

ussia’s second largest oil producer Lukoil is going to sell a network of gas stations across the Czech Republic, Slovakia, and Hungary as it continues to slim down assets in Central Europe. Lukoil signed an agreement with Hungarian oil and gas company Mol Plc and Norm Benzikut, it said in a press release on Monday. “The decision to sell the assets was taken as part of the effort to optimize Lukoil’s business in petroleum product marketing,” the statement said. Lukoil President Vagit Alekperov last week told Reuters that the company is looking to sell off assets in Europe in order to better focus on Russian projects. Last week, Lukoil announced it will offload 240 service stations in Western Ukraine to Austria’s AMIC Energy Management GmbH. The decision came after Right Sector nationalists blocked and demanded free gas from several stations in western Ukraine.

However, analysts believe the company is selling off European assets to minimize risks associated with EU and US sanctions. Alekperov, commenting on sanctions, said Lukoil is preparing for investment cuts and is looking at various contingency plans for continued access to finance and loans. “The sanctions are related to the country, we are a Russian company. This will impact us, just like everyone else,” Alekperov told Reuters. According to him, Lukoil has about $20 billion invested in international projects. The targets of sanctions, so far, are companies that are more than 50 percent state-owned, while Lukoil is independently owned. Lukoil bought over 1,300 gas stations from Getty Petroleum in the US in 2000, and currently operates 500 Lukoil branded service stations in New Jersey, Pennsylvania, and New York. In March, activists in New Jersey tried to boycott a local gas station as Crimea was preparing to rejoin Russia.

EBRD SHOWS INTEREST TAJIK FREE ECONOMIC ZONES

he issues of cooperation were mulled between the head of Tajik Sughd Free Economic Zone and representative of Municipal and Environmental Infrastructure Department of the European Bank for Reconstruction and Development Umed Saidov. The meeting was held in the administration of Sughd Free Economic Zone. The parties also discussed the implementation of projects in Sughd FEZ and new prospects for cooperation. The issue of construction of infrastructure such as water supply project and new micro

districts of the city of Khudjand were discussed in detail as one of the priority areas of cooperation. Moreover, the work of existing companies and prospects of increasing production, financial activities of the Administration, and its interaction with the regulatory authorities as well as attraction of foreign experience in order to develop the infrastructure on the basis of Public Private Partnership were discussed. Sughd Free Economic Zone presented the priority projects which may be implemented through PPP on its territory.

AZERBAIJAN August 11, 2014 #66

caucasian business week

ACCESSBANK GETS $15MLN FOR ENERGY EFFICIENCY PROJECTS

he Green for Growth Fund (GGF) is providing a $ 15 million loan to AccessBank to substantially increase bank’s financing of energy efficiency projects and foster its role as a pioneer in energy efficiency financing in the country. The investments are expected to result in annual energy savings of over 43,500 MWh and improve the ecological environment in the country with CO2 emission reductions of over 21,000 tons, AzerTag state news agency reported. “We see particular opportunities for equipment and machinery investment by micro, small and medium enterprises (MSMEs),” commented Kenan Aghayev, Executive Director of AccessBank for SME Lending/Corporate Services on the

transaction. “We are thrilled to launch our work in Azerbaijan with the market leader in MSME financing,” said Christopher Knowles, Chairman of the Green for Growth Fund, Southeast Europe. “As AccessBank is clearly focused on this sector, this investment will quickly have an impact on the energy consumption of this country.” GGF is a European public-private partnership fund dedicated to enhancing energy efficiency and increasing the use of renewable energy sources in Southeast Europe, as well as in the nearby European Eastern Neighbourhood region. In addition to its loans GGF provides special support with its Technical Assistance Facility for energy efficiency assessments.

AZERBAIJAN’S SHARE IN GEORGIA’S IMPORT ON RISE

eorgia imported around $294.1 million worth of products from Azerbaijan in January-June 2014, Georgia’s National Statistics Office reported. “The volume of import from Azerbaijan to Georgia has raised by 7.7 percent in a year,” the report said. By comparison, Georgia imported about $273.2 million worth of Azerbaijani products in the first half of 2013. Azerbaijan continues to rank third among the countries from which Georgia imports products. The share of Azerbaijan’s export in the total volume of the products imported to Georgia stands at 7.3 percent.

The main part of Georgia import comes from Turkey. The volume of Georgia’s import from this country in January-June, stood at $827.2 million, or 20.5 percent of the total import volume. China ranks second with 8.7 percent share ($349.6 million) in the total volume of Georgia’s import. Georgia mainly imports gasoline, oil products, construction materials, electricity, glassware and other products from Azerbaijan. The trade turnover between Georgia and Azerbaijan in January -June 2014 amounted to $584.3 million, or 3.7 percent less than in the same period of 2013. By comparison, this figure stood at $605.98 million in January -June 2013.

GASOLINE PRICE INCREASES IN AZERBAIJAN

hanges in the prices for Premium (AI-95) and Super (AI-98) gasoline is a result of fluctuations in the prices of oil and oil products in world markets, a source in Azerbaijan’s oil market told Trend on August 6. The price of Premium (AI-95) gasoline increased from 0.93 manats to 0.97 manats in several gas stations of the country on August 6. The Tariff Council said “Premium Euro-95” petrol is being imported. So its price is not regulated by the state. Based on a decision of the Cabinet of Ministers in March 2014, the imported AI-95 and higher brand gasoline that meet the environmental standards of Euro-5 are not included in the list of the goods regulated by the state.

Last year, retail prices of gasoline have been set at 0.7 manats for AI-92, and 0.8 manats for AI-95 petrol. Currently, these brands are purchased in the international markets. Therefore, the changes of the prices come based on their final costs, the source said. The State Oil Company of Azerbaijan (SOCAR) has not given any recommendations to the owners of gas stations in the domestic market about changing the prices of gasoline, as it is outside the company’s competence. Alongside with other suppliers, SOCAR Petroleum company imports gasoline to Azerbaijan. Earlier, Azerbaijan’s Cabinet of Ministers reduced the rates of customs and excise duties for the import of high ecological standard gasoline at lower prices. This made it possible to import Premium Euro-95 and Super Euro-98 gasoline at lower prices and selling them at free market prices. After starting the import of 95 octane gasoline, the prices of this fuel increased from 0.8 manats to 0.93 manats per liter. In turn, the prices of 98 octane gasoline decreased from 1.5 manats to 1.03 manats per liter. AI-95 and AI-98 gasoline brands account for approximately 10 percent of total consumption in Azerbaijan and these brands are not used in the spheres of production and services.

RUSSIA BLOCKS FLIGHTS FROM UKRAINE TO AZERBAIJAN

ussia imposed restrictions to air flights from Ukraine to Azerbaijan. Dmitry Medvedev, Russian Prime Minister stated today at the meeting of Russian Government that

Russia banned transit flights over its territory for Ukrainian Airlines. “The Government has taken one more decision. Transit flights of Ukrainian Airlines over Russia’s airspace to a number of countries: Azerbaijan, Georgia, Armenia, and Turkey will be banned”, - Medvedev said. Azerbaijani governmental sources inform in their turn that this situation will not have any negative effect to Azerbaijan’s air market. “Azerbaijan Airlines CJSC (AZAL) are able to increase frequency of flights to Ukraine if need arises. Azerbaijan also may provide transit corridors through its airspace for Ukrainian Airlines”, - the source said.

AZERBAIJANI OFFICIALS VISIT TURKEY’S LEADING PETROCHEMICAL COMPLEX

resident of Azerbaijan’s state energy company SOCAR Rovnag Abdullayev and Economy and Industry Minister Shahin Mustafayev visited Petkim Petrochemical Complex in Aliaga district of Izmir Province, Turkey. Petkim Petrochemical Complex, in which SOCAR owns equity shares, is the leading petrochemical company of Turkey. Founded on April 3, 1965, the main plant complex is located in Yarımca, Izmit. The Azerbaijani officials were informed about the activities and achievements of the Petkim. The Azerbaijani delegation also attended the opening ceremony of Plastic Packing Factory of the company. They also familiarized themselves with the progress of construction of a container port in the company. Then, Abdullayev and Mustafayev visited the construction area of the Star oil refinery plant. The Star refinery, with the expected production capacity of 10 million tonnes per year, will provide the Petkim Petrochemical Complex with naphtha. The major part of the refinery’s products will be sold in Turkey’s domestic market and the

rest will be exported to South Europe and Mediterranean Sea countries. The first products of the refinery company Star will be ready by the end of 2017. SOCAR will become the third largest company of Turkey in the energy sector of the country after launching “Star” factory. Total project cost of the refinery, which was launched in 2011, exceeds $5 billion. It is one of the largest investment projects of Turkey.

COSTS REACH 67.5% OF REVENUE GENERATED BY AZERBAIJANI BANKS

ow marginality of the banking sector of Azerbaijan is linked with the high operating cost of business: costs reach 67.5% of the generated income. The Central Bank of Azerbaijan informs that by 1 July the country’s banks generated revenue for AZN 1.3 bn (AZN 1.09 bn on interest and AZN 218.68 million on non-interest income). At that, their operating costs were estimated at AZN 887.04 million (AZN 473.36 million on interest and AZN 413.68 million on non-interest expenses). As a result, banks’ net income as of 1 July was estimated at AZN 426.6 million: net interest income amounted to AZN 621.3 million with AZN 194.7 million of non-interest loss. As a result, the net return on assets (banks had AZN 22.569 bn of

assets) made up 1.89%, and capital equal to AZN 3.76 bn - 11.34%. At that, the generated income (AZN 1.3 bn) in the first half of 2014 was equal to 5.82% of assets and 34.91% of the capital. It is obvious that without drastic reduction in the cost of doing business (operating expenses) Azerbaijani banks will not be able to achieve greater marginality of their business. Also, without this there can be neither a significant increase in profit (before taxes, it reached AZN 224.4 million or 52.6% of net gross income for the first half), nor adaptation to the real sector of the rates (the average loan rate is 3-4 times higher than the CBA accounting rate). The latter allows saying that precisely inefficiency of the banking sector does not allow them to fulfill the political will of the country’s government to increase funding for the real sector of the economy.

REAL DEPOSIT RATE IS 7.41% IN AZERBAIJAN

ver Jan-Jun the average deposit rate of the Azerbaijani banks exceeded by 3.01% the upper limit of the interest rate collar of the Central Bank (6%) against 2.42% by the end of the last year and 2.99% by the end of 2012. According to the CBA, for Jan-Jun the average deposit rate of the Azerbaijani banks made up 9.01% in local currency against 9.42% by the end of 2013 and the real deposit rate (minus annual inflation of 1.6%) reached 7.41% against 7.02%. The average deposit rate in for-

eign currency was equal to 9.5% at the end of May against 9.66%. According to the CBA data, the average rate of bank deposits of juridical persons in national currency was equal to 5.7% against 5.74% and the real rate – 4.1% against 3.34%. The enterprises’ deposits rate in foreign currency made 3.69% against 2.98%. The average rate of private persons deposits in the banks in national currency was equal to 9.45% against 9.81% and the real rate – 7.85% against 7.14%. The retail deposit rate in foreign currency made up 10.6% against 10.23%.

AZERI OIL TRANSPORTATION VIA BTC EXCEEDS 17.087 MILLION IN 2014

he State Oil Company of Azerbaijan Republic (SOCAR) has renewed statistical data on Azerbaijani oil export via the major pipeline BakuTbilisi-Ceyhan (BTC) named after Heydar Aliyev. In July 2014 oil pumping via BTC increased by 8.5% against June. The SOCAR informs that 2.544 million tons of Azeri oil was carried via BTC to Turkey’s Ceyhan port in July against 2.343 million tons in June and 2.725 million tons in May (the best index for 2014), In the first quarter of 2014 oil export made 7.004 million tons, while in the second quarter - 7.539 million tons. The best monthly index for 2013 was registered in May (2.865 million tons).

In 2012 the best pumping was registered in May (2.8 million tons), in 2011 - in January (2.9 million tons) and in 2010 - in May (3.5 million tons). “In 2014 Azeri oil transportation via BTC has made up 17.087 million tons,” it was reported. In 2013 the index totaled 29.7 million tons and in 2012 - 29.67 million tons. Oil pumping via BTC totaled 32.224 million tons in 2011. In 2010 oil pumping via BTC totaled 37 million tons against 36.2 million tons in 2009. The highest figures of pumping in 2009 were registered in May and June (by 3.3 million tons). From the very start of the BTC operation in mid2006 to 1 August 2014 the pipeline delivered 252.228 million tons to Ceyhan.

PUBLICITY caucasian business week

TBILISI INTERNATIONAL FESTIVAL OF THEATRE International Program

with elegant touch of reality… SEPTEMBER 20 - OCTOBER 8

26 SEPTEMBER Philipp Hochmair Company, Germany Franz Kafka

AMERIKA Directed by Bastian Kraft

„In his performance, brilliant Philipp Hochmair relates about a distant reclusive country” Tobias Langenbach, Münchner Merkur

ABOUT PERFORMANCE In Kafka’s vision of a globalized and profit-oriented world, the young Karl Rossmann experienced a steep degradation of his social status although it was not his fault. Nevertheless, the more he tries to live up to the demands of the market and his brutal mechanism, the less remains of his dreams and wishes - and hereby of himself. In “Amerika” Kafka tells a story of failure. Glimmers of hope remain because Karl disappears in a bizarre vision at the end. In this vision Karl finally discovers the imagined new world, which appears

like heaven and states “Everyone is welcome!” In a complex staged play with an original composition of the composer Michael Maierhof from Hamburg, Philipp Hochmair shows the young Karl Rossman as a restless seeker and a contemporary homeless, who is “pushed aside” (Kafka) from life. Duration: 75 Minutes, without intermission Web-site: www.philipphochmair.com www.tbilisiinternational.com www.facebook.com/ TbilisiInternational

August 11, 2014 #66

WORLD NEWS August 11, 2014 #66

caucasian business week

THREE WAYS EUROPE CAN RESTORE GROWTH

any Europeans have come to believe that they have weathered the economic and financial storm. In the past two years, deficits and debt have stabilized. Yields on the sovereign debt of the eurozone periphery’s weak economies have fallen sharply. Portugal and Ireland have exited their bailout programmes. Talk of Greece leaving the euro has subsided. All of that is true, but there is a big catch: economic growth in the European Union remains anemic. GDP in Holland and Italy shrank in the last quarter, and France’s barely budged. Forecasters are revising down their estimates for 2014 eurozone growth to just 1% year on year. Unemployment remains at a staggering 11.6% in the eurozone as a whole, compared with 10% in the United States at the worst of its Great Recession. It is above 25% in Greece and Spain – and even higher among the young. Europe’s economy remains shackled by three problems: sovereign debt, the euro and wobbly banks – despite several new policy backstops: the European Stability Mechanism (ESM); the European Central Bank’s easy-money policies and holdings of sovereign debt; and the ECB’s takeover in November of supervision of the 130 or so largest pan-eurozone banks. None of these reforms has been sufficient to restore the stronger growth that Europe desperately needs. Widespread economic discontent is reflected in recent political instability. The European Parliament election in May shocked Europe’s elites, as parties of the far right, assorted eurosceptics, and even leftists made strong gains in many countries, fuelled in part by popular frustration with the European Commission’s concentration of power. Great Britain may be headed for a referendum on EU membership in 2017 unless certain terms of its membership are revised. Elected leaders face a daunting task: enacting difficult structural reforms of labour markets, pension systems and taxes. All were long overdue prior to the crisis, and they remain in the very early stages, at best, in most countries, while the high-debt countries’ fiscal condition has improved only modestly. And Italy and France demand relief from the eurozone’s budget deficit and debt rules. Economists are not certain whether there are short-run costs or benefits to rapid fiscal consolidation. My view is that it depends on facts and circumstances, such as the size, credibility and timing of the consolidation; the mixture of spending and tax cuts; whether consolidation is mostly permanent and structural (for example, a change in pension formulas); and, of course, the stance of monetary policy. Given most European countries’ increasingly daunting demographic outlook, the current pace of structural reform is woefully insufficient. Italy and Germany are headed toward a ratio of one

retiree per worker; without more rapid GDP growth, new immigration policies, higher retirement ages and efforts to stem the increase in welfare spending, taxes will inexorably rise from already damaging levels. Europe has three broad options. The first is the status quo – which would entail cobbling together responses to future mini-crises as they arise, following the pattern of the past few years. Given the divergent interests and problems facing different countries within the eurozone and the EU, together with cumbersome governance structures and the difficulty of treaty changes, this is the path of least resistance for elected leaders – and thus the one most likely to be followed. The second option is serious, concerted structural reform. This would include, at a minimum, reforms of labour rules, pension systems and anti-growth provisions of tax codes. It would also include an aggressive attempt to reduce the sovereign-debt overhang that remains a major impediment to growth and continues to threaten some European banks. Existing debt agreements are not sufficient without a decade of strong growth, which appears unlikely, to say the least. European governments and banks ultimately will need a solution similar to Brady bonds, which worked quite well in overcoming the 1990s Latin American debt crisis and the threat that it posed to highly exposed US money-centre banks. As was true then, a menu of exit options and credit extensions will have to be negotiated. The politics of this approach will be difficult, particularly in the rich countries; but, structured properly, concerted structural reform could help restore growth, which would feed back into healthier budgets, more jobs, better balance sheets and less financial risk. The third option is rethinking and reworking the EU itself, from the euro to its basic institutions. As a free-trade arrangement, the EU has been a major success. But the euro makes economic sense only for a subset of its current members, not for countries such as Greece in its current situation. Some economists have proposed a two-track euro, with “problem” countries using a “euro-B” that floats against the “euro-A” until they abide by the economic and financial rules and earn re-entry. Enhanced labour mobility has been another great benefit brought about by the EU. But the European Commission’s rigid bureaucratic diktats have taken some regulation too far, and efforts to force lower-tax countries to “harmonize” their rates would be devastating to their citizens and companies. While it is unlikely that much progress will be made along the lines of the second or third options in the near future, Europe’s elected leaders should constantly test what makes sense and what needs to be reformed. The recent election was a wake-up call; Europe’s leaders need to open their eyes.

WHO IS HIT HARDEST BY RUSSIA’S TRADE BAN?

ermany and Poland will lose the most trade with Russia, and neighboring Finland and Baltic states Lithuania and Latvia will lose a bigger proportion of their GDP. Norway will see fish sales to Russia disappear, and US damages would be very limited. Russia has banned imports of fruit, vegetables, meat, fish and dairy products from the 28 countries of the EU, the US, Canada, Norway, and Australia for one year. EU trade is heavily dependent on Russian food imports. Last year Russia bought $16 billion worth of food from the bloc, or about 10 percent of total exports, according to Eurostat. In terms of losses, Germany, Poland and the Netherlands- the top three EU food suppliers to Russia in 2013 - will be hit hardest. Food for Russia makes up around 3.3 percent of total German exports. French Agriculture Minister Stephane Le Foll said his government is already working together with Germany and Poland to reach a coordinated policy on the new Russian sanction regime. Last year, Ireland exported €4.5 million worth of cheese to Russia, and not being able to do so this year is a big worry, Simon Coveney, the country’s agriculture minister, said. Farmers across Europe could face big losses if they aren’t able to find alternative markets for their goods, especially fruit and vegetables. Some are already demanding their governments provide compensation for lost revenue. “If there isn’t a sufficient market, prices will go down, and we don’t know if we can cover the costs of production, because it is so expensive,” Jose Emilio Bofi, an orange farmer in Spain, told RT. KEY FOOD SUPPLIERS TO RUSSIA

The largest opposition party in Greece is urging its government drop sanctions against Russia, even if the move isn’t supported by other EU states.

In 2013, Denmark supplied Russia with $628 million worth of products which are now banned. European Agriculture commissioners will set up a task force to address Russia’s sanctions, on Monday. BORDER STATES Lithuania and Finland, which both share a border with Russia, could be hit hard by the new restrictions. Now a member of the EU and NATO, Lithuania is still closely linked economically with Russia. Banned exports account for 2.5 percent of the country’s GDP, according to an estimate by Capital Economics. Vegetable and foodstuffs are among Lithuania’s top five exports. Finland’s dairy industry stands to lose up to $535 million (€400 million) in the trade spat. The country depends on Russia for 14 percent of its trade. Both Finland and Lithuania have already contacted Brussels with complaints. Scandinavian neighbor Norway, a large exporter of fish and seafood to Russia, will lose out to domestic fish companies, which have seen their share prices soar after the introduction of the trade restrictions. AMERICA NOT BOTHERED For the US the effect will be very limited, as agricultural exports to Russia are about one tenth of one percent of total US gross domestic product of about $144 billion, according to the US Department of Agriculture. US food exports to Russia in 2013 amounted to less than 1 percent of the country’s total agricultural exports, the US Department of Agriculture said to RIA Novosti. Conversely, Russian exports to the US and European markets are 13 percent of its GDP. In 2013, the US exported $1.3 billion of food goods to Russia, about a quarter of which were poultry products. So far the US, EU, Canada, Australia, and Norway haven’t responded to Russia’s retaliatory measures. WHAT’S IN THE BAN FOR RUSSIA? The immediate trade restrictions will create a $9.5 billion gap in Russia’s food market that needs to be filled. Russia is in talks with Latin American countries on how to fill this hole with meat from Brazil and cheese from New Zealand. Russia is also holding talks with Custom Union members Kazakhstan and Belarus, which it will ask to prevent any transit of Western goods into Russia. Promising to develop its own industries and protect the economy, Russia will support the new measures at home, and has already allotted $50 billion to farmers. However, some analysts fear it won’t be enough, and that food prices will rise, further worsening Russia’s inflation problem. Higher inflation will not only hurt those buying groceries, but also Russia’s export sectors- oil, gas, metals, and mining. Restaurants will have to adapt, as they source nearly 50 percent of their produce from abroad, according to OAO Rosinter Restaurants Holding, which operates 370 restaurants in Moscow, Bloomberg News reported.

PUBLICITY caucasian business week

APARTMENT

Every Wednesday At 21:00 On GDS TV Full of humor

Anchors â&#x20AC;&#x201C; Kotiko Toloraia, Levan Gogoreliani will offier refined humor, provide good mood and invite interesting guests for the program audience. The program consists of three parts: the first block offers humor and apolitical monologue with funny video clips, pictures and so on. The second and third blocks are dedicated to famous public figures that will be invited as guests. The show will start Wednesdays at 21 oâ&#x20AC;&#x2122;clock and it will cover all interesting issues excluding politics to guarantee good mood for the audience.

Guests: Chele, Nutsa Mestumrishvili, Nuka Orjonikidze, Qeti Jaoshvili, Ruska Chumburidze, Tamuna Morchiladze

August 11, 2014 #66

TBILISI GUIDE August 11, 2014 #66

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 16 Akhmeta Str., Avlabari, 0144 Tbilisi. E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: +995 32 2 75 21 11, Fax: +995 32 2 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 15 Gorgasali Exit, 0105 Tbilisi, Georgia Tel: +995 32 291 01 94; +995 32 291 01 95 Fax: +99 532 291 02 70 Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08; E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze Av., Tbilisi Tel: 225-20-72/73/74/76 E-mail: turkemb.tbilisi@mfa.gov.tr Address: 8, M. Abashidze str. Batumi, Georgia tel: (8-88-222) 7 47 90 Republic of Azerbaijan Embassy Kipshidze II-bl . N1., Tbilisi Tel: 225-26-39, 225-35-26/27/28 E-mail: tbilisi@mission.mfa.gov.az Address: Dumbadze str. 14, Batumi Tel: 222-7-67-00 Fax: 222-7-34-43 Republic of Armenia Embassy 4 Tetelashvili St. Tbilisi Tel: 95-94-43, 95-17-23, 95-44-08 E-mail: armemb@caucasus.net Web: www.armenianembassy.ge Consulate General, Batumi Address: Batumi, Gogebashvili str. 32, Apt. 16

caucasian business week Kingdom of Spain Embassy Rustaveli Ave. 24, I floor, Tbilisi Tel: 230-54-64 E-mail: emb.tiflis@maec.es Romania Embassy 7 Kushitashvili St., Tbilisi Tel: 38-53-10; 25-00-98/97 E-mail: ambasada@caucasus.net Republic of Poland Embassy 19 Brothers Zubalashvili St., Tbilisi Tel: 292-03-98 Email:tbilisi.amb.sekretariat@msz.gov.pl Web-site: www.tbilisi.polemb.net Republic of Iraq Embassy Kobuleti str. 16, Tbilisi Tel: 291 35 96; 229 07 93 E-mail: iraqiageoemb@yahoo.com Federative Republic of Brazil Embassy Chanturia street 6/2, Tbilisi Tel.: +995-32-293-2419 Fax.: +995-32-293-2416 Islamic Republic of Iran Embassy 80, I.Chavchavadze St. Tbilisi, Tel: 291-36-56, 291-36-58, 291-36-59, 291-36-60; Fax: 291-36-28 E-mail: iranemb@geo.net.ge United Nations Office Address: 9 Eristavi St. Tbilisi Tel: 225-11-26/28, 225-11-29/31 Fax: 225-02-71/72 E-mail: registry.geo@undp.org Web-site: www.undp.org International Monetary Fund Office Address : 4 Freedom Sq., GMT Plaza, Tbilisi Tel: 292-04-32/33/34 E-mail: kdanelia@imf.org Web-site: www.imf.ge Asian Development Bank Georgian Resident Mission Address: 1, G. Tabidze Street

Freedom Square 0114 Tbilisi, Georgia Tel: +995 32 225 06 19 E-mail: adbgrm@adb.org; Web-site: www.adb.org World Bank Office Address : 5a Chavchavadze Av., lane-I, Tbilisi, Georgia Tel: 291-30-96, 291-26-89/59 Web-site: www.worldbank.org.ge Regional Office of European Bank for Reconstruction and Development Address: 6 Marjanishvili St. Tbilisi Tel: 244 74 00, 292 05 13, 292 05 14 Web-site: www.ebrd.com Representation of the Council of Europe in Georgia Address : 26 Br. Kakabadze, Tbilisi Tel: 995 32 291 38 70/71/72/73 Fax: 995 32 291 38 74 Web-site: www.coe.ge

Hotels in Georgia TBILISI MARRIOTT Tbilisi , 13 Rustaveli Ave. Tel: 77 92 00, www.marriott.com COURTYARD MARRIOTT Tbilisi , 4 Freedom Sq. Tel: 77 91 00 www.marriott.com RADISSON BLU HOTEL, TBILISI Rose Revolution Square 1 0108, Tbilisi Tel: +995 32 402200 radissonblu.com/hotel-tbilisi RADISSON BLU HOTEL, BATUMI Ninoshvili Str. 1, 6000 Bat’umi, Georgia Tel: 8 422255555 http://radissonblu.com/hotel-batumi SHERATON METECHI PALACE Tbilisi , 20 Telavi St. Tel: 77 20 20, www.starwoodhotels.com SHERATON BATUMI 28 Rustaveli Street • Batumi Tel: (995)(422) 229000 www.sheratonbatumi.com HOLIDAY INN TBILISI Business hotel Addr: 1, 26 May Square Tel: +995 32 230 00 99 E-mail: info@hi-tbilisi.com Website: http://www.hi-tbilisi.com BETSY’S HOTEL With Marvellous Tbilisi Views Addr: 32/34 Makashvili St. Tbilisi Tel: +995 32 293 14 04; +995 32 292 39 96 Fax: +995 32 99 93 11 E-mail: info@betsyshotel.com Website: http://www.betsyshotel.com

Restaurants CHARDIN 12 Tbilisi , 12 Chardin St. , Tel: 92 32 38 CAFE 78 Best of the East and the West Lado Asatiani 33, SOLOLAKI 032 2305785; 574736290 BREAD HOUSE Tbilisi , 7 Gorgasali St. , Tel: 30 30 30 BUFETTI - ITALIAN RESTAURANT Tbilisi , 31 I. Abashidze St. , Tel: 22 49 61 DZVELI SAKHLI Tbilisi , 3 Right embankment , Tel: 92 34 97, 36 53 65, Fax: 98 27 81 IN THE SHADOW OF METEKHI Tbilisi , 29a Tsamebuli Ave. , Tel: 77 93 83, Fax: 77 93 83 PICASSO Tbilisi , 4 Miminoshvili St. , Tel: 98 90 86 SAKURA - JAPANESE RESTAURANT Tbilisi , 29 I. Abashidze St. , Tel: 29 31 08, Fax: 29 31 08 SIANGAN - CHINESE RESTAURANT Tbilisi , 41 Peking St , Tel: 37 96 88 VERA STEAK HOUSE Tbilisi , 37a Kostava St , Tel: 98 37 67 BELLE DE JOUR 29 I. Abashidze str, Tbilisi; Tel: (+995 32) 230 30 30 VONG 31 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 BRASSERIE L’EXPRESS 14 Chardin str, Tbilisi Tel: (+995 32) 230 30 30 TWO SIDE PARTY CLUB 7 Bambis Rigi, Tbilisi Tel: (+995 32) 230 30 30 LOFT 11. I. Mosashvili str, Tbilisi Tel: (+995 32) 230 30 30 RESTAURANT NERO 21 Abano Street, Tbilisi Tel: (+995 32) 292 10 15

SH. RUSTAVELI STATE THEATRE Tbilisi. 17 Rustaveli Ave. Tel: 93 65 83, Fax: 99 63 73 TBILISI STATE MARIONETTE THEATRE Tbilisi. 26 Shavteli St. Tel: 98 65 89, Fax: 98 65 89 THEATRE OF PANTOMIME Tbilisi. 37 Rustaveli Ave. Tel: 99 63 14, (77) 41 41 50 Z. PALIASHVILI TBILISI STATE THEATRE OF OPERA AND BALLET Tbilisi. 25 Rustaveli Ave. Tel: 98 32 49, Fax: 98 32 50

Galleries ART GALLERY LINE Tbilisi. 44 Leselidze St. BAIA GALLERY Tbilisi. 10 Chardin St. Tel: 75 45 10 GALLERY Tbilisi. 12 Erekle II St. Tel: 93 12 89 GEORGIAN NATIONAL MUSEUM - PICTURE GALLERY Tbilisi. 11 Rustaveli Ave. Tel: 98 48 14 KARVASLA’S EXHIBITION HALL Tbilisi. 8 Sioni St. Tel: 92 32 27, KOPALA Tbilisi. 7 Zubalashvilebi St. Tel: 99 99 02, Fax: 99 99 02 MODERN ART GALLERY Tbilisi. 3 Rustaveli Ave. Tel: 98 21 33, Fax: 98 21 33 M GALLERY Tbilisi. 11 Taktakishvili St. Tel: 25 23 34 ORNAMENT - ENAMEL GALLERY Tbilisi. 7 Erekle II St. Tel: 93 64 12, Fax: 98 90 13

Akhvledianis Khevi N13, Tbilisi, GE. +995322958377; +995599265432

Cinemas AKHMETELI Tbilisi. “Akhmeteli” Subway Station Tel: 58 66 69 AMIRANI Tbilisi. 36 Kostava St. Tel: 99 99 55, RUSTAVELI Tbilisi. 5 Rustaveli Ave. Tel: 92 03 57, 92 02 85, SAKARTVELO Tbilisi. 2/9 Guramishvili Ave. Tel: 8 322308080,

Theatres A. GRIBOEDOV RUSSIAN STATE DRAMA THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 93 58 11, Fax: 93 31 15 INDEPENDENT THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 98 58 21, Fax: 93 31 15 K. MARJANISHVILI STATE ACADEMIC THEATRE Tbilisi. 8 Marjanishvili St. Tel: 95 35 82, Fax: 95 40 01 M. TUMANISHVILI CINEMA ACTORS THEATRE Tbilisi. 164 Agmashenebeli Ave. Tel: 35 31 52, 34 28 99, Fax: 35 01 94 METEKHI – THEATRE OF GEORGIAN NATIONAL BALLET Tbilisi. 69 Balanchivadze St. Tel: (99) 20 22 10 MUSIC AND DRAMATIC STATE THEATRE Tbilisi. 182 Agmashenebeli Ave. Tel: 34 80 90, Fax: 34 80 90 NABADI - GEORGIAN FOLKLORE THEATRE Tbilisi. 19 Rustaveli Ave. Tel: 98 99 91 S. AKHMETELI STATE DRAMATIC THEATRE Tbilisi. 8 I. Vekua St. Tel: 62 59 73

THE BEST GEORGIAN HONEY OF CHESTNUTS,ACACIA AND LIME FLOWERS FROM THE VERY HART OF ADJARA MATCHAKHELA GORGE IN THE NETWORK OF GOODWILL, NIKORA AND SMART

PUBLICITY caucasian business week

August 11, 2014 #66