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September 5, 2016 #159
September 5, 2016, Issue 159 - www.cbw.ge
Econo-mix Demand for Tobacco Products Grows because of Higher Excise Tax Rate Pg. 4
Company Rompetrol Georgia Congratulates Rio Pg. 12 Olympic Games Champions on Victory
Harvest 2016 How Winemaking Companies Are Getting Ready?
PR PR Campaigns in Georgia Lack of Comprehensive Conceptual Purpose
Pg. 13
Populism in Election Pledges Political temperature rises along with coming parliamentary elections. Consequently, political parties compete with each other in terms of economic and other promises. Generous promises frequently remain on the election program papers and therefore, our population remains disappointed because of unfulfilled promises. Economic promises made by various political parties frequently become the subject of active discussions by politicians, economists and ordinary citizens. Consequently, the Golden Mean between unreal and pragmatic economic pledges is permanently discussed in the society. In this article, we introduce the list, to our thought, populist pledges made by various political parties. All analysis is presented in substantiated form, as far as possible. The article does not cover the Georgian Dream’s election program, because official documents have not been published yet. Pg. 13
Inevitability Of Punishment Doing business by unwritten rules, experiencing it as a service to family or friends with lacking business planning is a very common phenomenon in Georgia which too often results in conflict, including the case of a foreign investor and entrepreneur and his local partner. Inevitability of punishment is, in my opinion, the most important issue, the key link which would help getting Georgian economy out of the existing condition and up to a better future. The heart of the problem when dealing with a business conflict is ultimately as follows: who wins in the end? The scrupulous and honest party or its opposite, brazen and unscrupulous? Make no mistake: the judicial and legal system in today’s Georgia works, even though unintentionally, in the interests of business people with no ethics. For example, I am an investor or a businessman who got cheated. Let’s say, the other party simply defaulted on contractual payments for delivered goods or provided services. Pg. 13
2 GOVERNMENT
NEWSROOM Chinese Corporations Tend to Invest in Construction Industry of Georgia PM of Georgia made respective statement during the meeting with President of Hualing Group Mi Enhua and representatives of other Chinese corporations.
Georgia to Finance Each Finalist of Startup Georgia by 100 000 GEL Your victory has brought victory to whole Georgia, because our country relies on you, Georgian Prime Minister Giorgi Kvirikashvili addressed the Startup Georgia winners.
ECONOMY
Annual Inflation Falls in Georgia In August 2016 the monthly inflation rate amounted to 0.4 percent in Georgia. Compared to the same month of the previous year, the Consumer Price Index change (annual inflation rate) posted a 0.9 percent increase.
ADB Allocates $100 million in Georgia Agreement between Georgia and Asian Development Bank (ADB) Improving Domestic Resource Mobilization for Inclusive Growth Program (Subprogram 3) has been signed.
BANKING
Overdue loans increase by 44.3 million in July According to the National Bank, the volume of loans of this type equalled GEL 418.6 million. Their share in the commercial banks’ credit portfolio was 2.5%. It is notable that 36.9% of the overdue loans are denominated in local currency.
Current Condition Of Commercial Banks’ Loan Portfolio The volume of lending by commercial banks in July 2016 increased by 224.1 million GEL or by 1.4 percent compared to the previous month and constituted 16.6 billion GEL by August 1, 2016.
BUSINESS
Insurance Sector Finished 1H16 by 12.4 million GEL Profits The Georgian insurance industry has ended the first half of 2016 by 12.4 million GEL profits, as compared to 2.26 million GEL losses in the same period of 2015.
Georgian hotels served 1.8 million guests last year Hotels and hotel-type establishments in Georgia served 1 854 500 guests in 2015, which constitutes a 33.3% annual increase. 63.1% of guests in Georgian hotels came from abroad, and 36.9% from Georgia.
COMPANY
Saknakhshiri to contribute GEL 11 million to the budget Magti company offers a new campaign for the Internet services. The monthly price of 20 megabyte package is 19 GEL and the tariff will be active up to the end of 2016.
Gori wind park powers Georgia
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inal installation and preparations are ongoing at Georgia’s first wind energy project – a 20MW wind power plant in Gori municipality in central Georgia’s Shida Kartli region. The country’s Minister of Energy Kakha Kaladze published images from the construction field on his official Facebook page. Our ‘first bird’, wind in Georgia’s service,” reads Kaladze’s emotional comment of the project, which will revolutionise Georgia’s energy sector. The $34 million USD project is being funded by the Georgian Energy Development Fund (GEDF), a joint stock company established by the Government of Georgia together with the European Bank for Reconstruction and Development (EBRD). The EBRD and Georgia signed an initial agreement on this project in May 2015. The European Bank provided a loan of $24 million for the project – the first of its kind in Georgia.
The total installed capacity of the Gori wind farm will be 20MW and it expected to annually generate 85GW of power. “As the EBRD’s first engagement in wind power generation in the Caucasus region, the project will support the Georgia’s Government strategy to foster low carbon generation and cover the country’s seasonal winter demand,” underlined the EBRD Bank while assessing the transition impact of the project. It is the first wind energy project to be implemented in Georgia and thus set an important precedent for further development, unlocking the wind energy potential in Georgia.” Want to know more about energy efficiency in Georgia? Read the article of Genevieve Helliwell ‘How can Georgia become more energy efficient? EBRD explores Georgia’s energy efficient future’ in Special Reports section on Agenda.ge. According to the EBRD’s Renewable Development Initiative, hydro power was Georgia’s most dominant
energy resource but wind and geothermal energy sectors were promising resources. The EBRD estimated Georgia’s wind power potential could reach two GW, while other industry sources estimated the country’s wind potential could reach five GW - almost half the nation’s annual energy use. A feasibility study by Tbilisi’s Karenergo Wind Energy Scientific Centre revealed rich wind resources in the Chorokhi River Gorge, Paravani Lake, the Likhi mountain range, Mukhrani field, the outskirts of Kutaisi, parts of Tbilisi, the outskirts of Rustavi and the areas between Khashuri and Gori. Meanwhile one small wind turbine was currently operational in Skra village however the facility could only produce 22,000 KW of energy per year - enough for only a couple of households. The project to establish this wind turbine cost about $25,000 and was funded by United States Agency for International Development (USAID).
World Bank: Georgia’s poverty rate dropped 10.2% in 2012-2014
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ive hundred thousand people in Georgia who used to live below the poverty line managed to escape the poverty and to improve their living , says the World Bank. An assessment report titled ‘Georgia: Recent Trends and Drivers of Poverty Reduction’ showed the number of people living in poverty in Georgia had significantly decreased in recent years. Specifically Georgia’s poverty rate dropped 14.4 percent in four years from 2010 to 2014. The report was published by the World Bank on August 29, 2016. Compared to 2010 when 46.7 percent of Georgia’s population lived on less than $2.50 USD per day, this number had decreased to 32.3 percent in 2014, and trends showed this number would continue to drop according to World Bank expert forecasts. The poverty rate dropped a considerable 10.2 percent from 2012 to 2014, while the reduction between 2010 and 2012 was 2.2 percent. Georgia’s economic growth has translated into improvements in living conditions for everyone in the country, especially for those at the bottom of income distribution,” said the World Bank report. “In 2014 poverty decreased for
BUSINESS WEEK caucasus
The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Address: Aleksidze Street 12 Director: Levan Beglarishvili WWW.CBW.GE
September 5, 2016 #159
Mobile phone: +995 591 013936 Email: caucasianbusiness@gmail.com
the fourth consecutive year but it still affects close to one third of the country - 32 percent of the population living at less than $2.50 per day.” The Government of Georgia lauded the report and said it proved strong action had been taken to improve the lives of Georgian citizens. “This report proves that the Georgian Government’s economy reforms brought these results. We have seen a real drop in the poverty rate but this number is still exceptionally high,” said Georgia’s Minister of Economy Dimitry Kumsishvili. About 1.4 million people still live on less than $2.50 a day and we have to do a lot to reduce this number further. But at the same time more than 500,000 people managed to escape poverty thanks to our efforts starting from 2012,” he underscored. The report mentioned several areas that contributed to the reduction in the poverty rate. The Government’s redistributive policies continue to play a significant role in lifting households out of poverty. Those with per capita spending above $5 per day line are better integrated into the services sector, especially in highskilled jobs, than households living on per capita spending of between
$2.5/day and $5/day (“vulnerable households”),”reads the report. “Between 2010 and 2014 households’ income from economic activities played a significant role in reducing poverty. This is in contrast to the pre-2010 period when income from economic activities played a limited role and income from social transfers were more important for poverty reduction.” The World Bank Group named several drivers of poverty reduction in its report. These were: - Inclusive access to economic opportunities - A deeper look at the rural economy - The role of the fiscal policy Real incomes increased across rural and urban areas in 2010 to 2014 as the drivers of poverty reduction are similar both in urban and rural areas, said the World Bank. “Income increase was driven by income from economic activities (paid work and agriculture) and social transfers. Economic activities and transfers also explained most of the poverty reduction observed between 2010 and 2014. This is in contrast to the results before 2010, when government transfers were by and large the largest driver of poverty reduction.”
Editor: Nutsa Galumashvili. Mobile phone: 595 380382 Reporters: Nino Kuparashvili, Lazare Gvimradze; Shiva Parizad. Designer illustrator: Ilia Chrelashvili. Technical Assistant: Giorgi Kheladze
Source: www.commersant.ge, www.bpi.ge, www.gbc.ge, www.agenda.ge, www.civil.ge
September 5, 2016 #159
PUBLICITY
GEORGIAN RAILWAY URGES YOU TO CROSS THE RAILWAY TRACK IN ONLY SPECIALLY ALLOTED ZONES AND TAKE CARE OF YOUR LIFE! Crossing the railway track in the unpermitted places violates article 106 of the Georgian Code of Administrative Offences and this lawbreaking results in due sanctions.
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ECONO-MIX
Demand for Tobacco Products Grows because of Higher Excise Tax Rate
Hila Peled CEO of Topishare
Why I Invested Time and Money in Building a New Social Network
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Merab Janiashvili Economic Analyst
ver the past 3 years cigarette excise tax rate has doubled, however, tobacco products sales have increased by 14% anyway.
non-filter cigarettes increased to 30 Tetri from 15 Tetri. This signifies the excise tax rate doubled and the new proportional excise tax rate was added to it that totaled 10%.
Over the past 3 years, starting from September 1, 2013 excise tax rate on tobacco products, on both filter and non-filter cigarettes grew 4 times. As a result, the sale price of cigarettes has doubled. Despite this fact, higher excise tax rate and higher price on tobacco products have not reduced smoking level in the country.
The objective of growth in excise tax rate is to tighten tobacco control mechanisms and minimize the smoking level in the country and harmonize the Georgian legislation with European instructions. However, outcomes of excise tax grow suggests that the policy intended for smoking level reduction in the country has brought opposite results.
Tobacco excise tax rate grew at the beginning of 2016. On January 1, 2016 excise tax rate on filter cigarette (20 pieces) increased by 0.20 GEL to 1.10 GEL, while the rate on non-filter cigarette (20 pieces) increased by 0.05 GEL to 0.30 GEL.
Regretfully, no annual statistics is carried out on quantity of smokers in Georgia. However, smoking level may be appraised due to the volume of sold cigarettes. Over the past years tobacco products imports have been growing. A little contraction was recorded in 2015 as compared to 2014. According to the 1H16 indicators, Georgia imported 55.5 million USD cigarettes, up 3.5 million USD compared to the same period of 2015. At the same tie, tobacco imports have increased by 15% since 2012 as compared to 2015. This signifies over the past 3 years the excise tax rate doubled. As a result, retail price doubled, but smoking level increased, instead of reduction.
Moreover, proportional rate on filter and non-filter cigarettes (20 pieces) rose to 10% from 5%. It should be noted that on September 1, 2015 the so-called mixed system of cigarette excise tax was introduced in Georgia. Excise tax rate on tobacco products both in quantity and weight is determined in compliance with the retail sales price. According to the so-called mixed system, excise tax rate on filter and non-filter cigarettes will be the sum of the excise tax rate determined by the tax code and the percentage of the retail-sale price of this product determined by the government
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e all hear it a million times, there’s a new start-up and they’re going to change the world. The show Silicon Valley jokes about in almost every episode, and this recent blog on medium talks about how making it easier for someone to order pizza from home might perhaps be a nice idea, but isn’t in fact ‘changing the world’. For the past two years I have been working non-stop (and I mean, literally, non-stop) to build and shape a start-up company that I know will change the world, that is (cliché, cliché) ‘revolutionizing’, and that is tackling an actual problem. Topishare has many several different sides, but what it basically does is that it gives anyone the possibility to create their very own social network without knowing any coding. One side of it, the one that is very close to my heart, are actually the implications topishare has for businesses and media. With it, I am fulfilling a long awaited dream of mine: to give tools to businesses and organizations that will grow their business, for free. Ok, I know, I’ve also read Jon’s article on why this can’t really be a ‘passion’, but let me explain. From when I was only eight years old, I went every Thursday with my father to his business meetings. Every Thursday. It’s where I was first exposed to the business world, and I still keep those memories in a special place in my heart. It’s where my journey in the business world started, and it has guided me when I was older for 15 years as employee (VP marketing of a major company), and 15 years after that as entrepreneur. And this is why the tools topishare offers business are so important to me. During the years I’ve witnessed a major shift in business relationships. Basically, businesses put time and effort in creating personal relations with their customers, and the customers were treated with respect: “the customer is always right”. The customer, on the other hand, could get direct personal access to the business owners. It’s when I was VP marketing that I realized the importance of a personal relationship when I got stuck with a wrong order of apple sauce. Our storage manager had ordered much more than we were distributing. So I decided to visit one of our customers, an elderly home which usually took a lot of apple sauce, and asked the manager for a favor. And he laughed. And he took the full order. I am not sure this would have happened if we hadn’t built such a good relationship before that. But technology and social media have changed this. It’s supposed to be easier to connect with your customer, but as a result it has actually lost the personal connection it used to have. For example, Facebook pages, which don’t let media and businesses connect with their customer and customers connect with them, because of algorithms set in place by Facebook to force big pay for little engagement. And that’s just plain wrong if you ask me. It’s wrong because we are all losing out, both the businesses and the customers. And that’s what my company is tackling. Through topishare businesses can create their own social network which they can embed directly to their site. It’s a place where customers can directly communicate with the company, and where the company has direct access to its customers, without worrying they can’t reach them because of algorithms and other hurdles on the road. And the best thing: you are in control of creating it, what tools you need, and in shaping the perfect social network tailored to your specific needs. You can increase engagement with at least 20%, increase time spend on your site by 60%, and it’s a free service! Really, what do you have to lose? After two years of hard work we’ve launched the beta version, and we are currently testing and upgrading the platform, so it can actually fill all the needs you have. We’re operating from Tbilisi, Georgia, and are currently translating our platform to Russian.
September 5, 2016 #159
Growth in cigarette taxes cannot narrow smoking level in the country or this mechanism brings only unimportant effect
The Government raised tobacco excise tax rate on September 1, 2013, for the first time. Excise tax rate on one box of domestic and imported filter cigarettes increased from 60 Tetri to 75 Tetri, while the excise rate on nonfilter cigarettes increased to 20 Tetri from 15 Tetri. Since then tobacco products excise tax rate increased three times. At the same time, as noted above, the proportional excise tax rate was introduced in 2015 and the rate marked 5% for one box of cigarettes. In a year this rate doubled to 10%. As a result, over the past 3 years the excise tax rate on filter cigarettes rose to 1.10 GEL from 60 Tetri, while the excise tax rate on
The international experience suggests that growth in cigarette taxes cannot narrow smoking level in the country or this mechanism brings only unimportant effect. Economists know that cigarette is an irrelevant product in relation to prices and growth in cigarette prices cannot reduce the smoking level, like all other products, and smokers have to buy lower-quality cigarettes. Therefore, if we have real intention to reduce the smoking level in the country, this process should be carried out through educational, pedagogical policy, like many other countries, not through growth in product prices, even more so we know this mechanism is useless. Excise tax, like VAT, is an indirect tax and the consumer has to pay it. As a result, ordinary smokers have to cover the increased tax rates.
“Starting 2013 the excise rate has been growing year by year, in practice. The year of 2014 was an only exception, when the excise rate did not increase. Naturally tobacco price depends on excise rate. When the excise rate grows, the process also affects prices” Iva Khasia JTI communications specialist
September 5, 2016 #159
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HARVEST 2016
September 5, 2016 #159
How Winemaking Companies Are Getting Ready? Intense preparatory works are underway in the Kakheti Region for the coming vintage. This yearthe Kakheti Region expects to pick about 200 000 tons of grapes of which, according to preliminary forecasts, 150 000 tons will be used for industrial processing. Giorgi Samanishvili, head of the vintage coordination center and chief of the national wine agency, noted that about 100 winemaking companies will join the vintage process. To assist physical bodies in grapes sales, the government will issue subsidies to physical bodies, who will sell grapes to winemaking companies, in the following amount: The Kakheti Region 1 kg of Rkatsiteli – 0.45 GEL 1kg of Kakhuri Mtsvane – 0.45 GEL 1 kg of Saperavi – 0.20 GEL The Racha-Lechkhumi and Kvemo Svaneti Region: Mujuretuli/Aleksandrouli – 2 GEL How are winemaking companies getting ready for the vintage season? What a volume of grapes do they expect to pick and what prices will run The CBW has tried to clarify all these details.
Telavi Wine Cellar Telavi Wine Cellar founder Zurab Ramazashvili noted that the company started accepting grapes from its own vineyards on August 24. As to purchase of grapes from population, this process has not started yet. Therefore, it is unclear how much the company will pay for gpraes this year. In 2016 the company will process 4-5 thousand tons of grapes, of which 1 500 tons will be purchased from the population, Ramazashvili said. The company is expected to start purchasing grapes from population in several days. At this stage, the company exports wines to 28 countries, Ramazashvili noted. Shalauri Wine Cellar This year the company will buy grapes in small volumes, only 5-6 tons of rare species, not Saperavi and Rkatsiteli, contrary to previous years, Shalauri Wine Cellar head David Buadze said. “We plan to buy Kisi and Khikhvi grapes. As to prices, It is a little early to talk about this. We are getting ready for the vin-
tage in active regime. We are seeking good grapes”, Buadze said. Kisi and Khikhvi grapes ripens a little later. Therefore, the company will start buying grapes later. In 2015 the company bought Rkatsiteli and Saperavi grapes and the company has wine reserves of these grapes even today, Buadze said.
population and the company will pick the remaining part in its own vineyards, Shumi head Kaki Tsopurishvili noted. The company holds its own vineyards on 60 hectares. As to prices, the market will regulate them, Tsopurishvili said.
Badagoni
The company will start accepting grapes on September 10 and process 600 tons of grapes, including 150-200 tons of Saperavi and the remaining part of Rkatsiteli and Kakheti Mtsvane. Gamtkitsulashvili says that the company will buy about 100 tons of grapes from population, while the company will pick the remaining part in its own vineyards, Gela Gamtkitsulashvili, one of the founders of the company noted. The company has not determined purchasing prices yet, but tariffs will be regulated by the market, Gamtkitsulashvili noted. The Caucasus Business Week contacted other winemaking companies too, but a part of them refused to comment oნ the issue, another part
In 2016 the company may not buy grapes, Badagoni winemaking company director Gia Shengelia said. Currently, the company is analyzing the situation whether to buy grapes or not in this year. Badagoni has wine reserves of the previous year and has its own vineyards too. Therefore, the company may not have necessity of buying grapes from population. «In several days we will decide whether to buy grapes from population or not», Shengelia said. Shumi In this year the company plans to process about 800-900 tons of grapes, of which 400-500 tons will be purchased from
Twins Wine House in Napareuli
found this issue untimely. For example, TbilVino founder Giorgi Margvelashvili noted that the company will buy grapes from population, but the volume and prices have not been determined yet. Schuchmann Wines director general Nutsa Abramishvili made analogical comments. The company has not started accepting grapes yet and the company is only planning the process. All details will be specified in about 1 week, she noted. As reported, in 2015 the Government spent at least 30 million GEL on the vintage subsidization. Winemaking companies processed 143 000 tons of grapes and revenues of winegrowers exceeded 102 million GEL. In the Kakheti Region, 141.6 thousand tons of grapes were processed and revenues of winegrowers marked 100 million GEL. In RachaLechkhumi Region 1 500 tons of grapes were processed and revenues of winegrowers made up 6.6 million GEL. More than 130 winemaking companies were involved in the grapes processing process, including 20 ones were hired by the Government.
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ELECTIONS 2016
September 5, 2016 #159
POPULISM IN ELECTION
PLEDGES
ANDRIA GVIDIANI AYFB Analyst
Political temperature rises along with coming parliamentary elections. Consequently, political parties compete with each other in terms of economic and other promises. Generous promises frequently remain on the election program papers and therefore, our population remains disappointed because of unfulfilled promises. Economic promises made by various political parties frequently become the subject of active discussions by politicians, economists and ordinary citizens. Consequently, the Golden Mean between unreal and pragmatic economic pledges is permanently discussed in the society. In this article, we introduce the list, to our thought, populist pledges made by various political parties. All analysis is presented in substantiated form, as far as possible. The article does not cover the Georgian Dream’s election program, because official documents have not been published yet.
United National Movement The economic part of the United National Movement (UNM) election program has become a subject of severe criticism frequently. Naturally, in most cases, this criticism is grounded and substantiated. According to the UNM program, thanks to their tax initiatives, 45 000 new job places will be created in 2017 to improve living conditions of the same quantity of families, that is about 150 000 persons. In the next years, as a result of accumulation of extra financial resources in the business sector and population, about 30 000 additional job places will be created every year. Promises are acceptable for all citizens, but another aspect is how real they are and whether the UNM is capable for fulfilling these pledges. As reported, 241 000 unemployed citizens were recorded in Georgia in 2015. According to the UNM program, 45 000 new job places will be created in 2017 and additional 90 000 job places will appear in the next 3 years. According to rough calculations, all these plans will reduce quantity of unemployed citizens from 241 000 to 106 000. This signifies the unemployment index will decline by 56% in the next 4 years. If the unemployment index in 2015 was 12%, according to the UNM calculations, the indicator will decrease to 5% by 2020 and this is a real dream for even many developed countries. Moreover, the model for growth in number of employees that calls for creating 45 000 new job places in the first year and additional 30 000 new job places in the next years, is absolutely unclear and unacceptable, because the employment growth paces should increase, not decline amid economic growth and increased number of new job places. As to reduction of taxes, it is worth noting that lowering revenue tax from 20% to 15% will cut budget revenues by 500 million GEL. Moreover, excise tax rate reduction by 25% on oil products, alcoholic beverages, as well as removing taxes on interest returns and real estate sales, will narrow the state budget revenues by additional 1 billion GEL. It should be also noted that VAT’s
top margin uplifting to 200 000 GEL from 100 000 GEL cannot leave more financial resources in the economy. On the contrary, more funds will be directed from the economy to the state budget (all auditors know this). Naturally, everybody welcomes lower taxes. Pledges for cutting state administration expenses are also very attractive, however, making large-scale social assistance promises in parallel regime is unreal. This signifies both promises, reduction in taxes, budget revenues and growth in social expenditures are unreal. Even if only pensions grow by 50 GEL, state budget expenditures will increase by about 450 million GEL. At the same time, higher social allowances for the poor will boost expenditures. Therefore, it is upon the elector to decide whether the UNM is giving real pledges. The UNM program also promulgates that economic crime should be decriminalized and tax amnesty should be introduced. Naturally, similar pledges looks very attractive and acceptable, but another aspect is whether the UNM has moral rights to make similar promises. The UNM program also calls for abolishing the Finance Police, but this is a very shameless promise, to put simply, from the party that is associated with the business sector terror by a certain circles of the society. We also remember very well specific facts how personal and political wishes of state officials were fulfilled by use of the very Finance Police. It should be also noted that full abolition of the Finance Ministry investigation service may provoke economic crime outbreak, because the syndrome of impunity will increase risks of committing crimes in entrepreneurial circles. The program also calls for uplifting untaxed minimum on postal parcels from 300 GEL to 1500 GEL. First of all, it should be noted that the previous minimum verge was 1500 GEL and the UNM lowered it to 300 GEL. Moreover, inclusion of this unimportant issue in the list of key messages comprises populism signs.
Girchi One of the most liberal economic programs was introduced by Girchi political party. How this program will change after merger with other political parties
remains unclear. The Girchi program promulgates that the Government will not take loans. Naturally, similar pledges sound as populism, because representatives of the Girchi party, even leaders, have frequently noted that there is no problem for the Government to take external debts. Moreover, it is unclear why the government should restrict loan taking mechanisms if the government will need financial resources for specific and target expenditure policy. The Girchi program also contains quite populist Reliable Money pledge that calls for introducing the so-called fixed exchange rate. According to the current conditions, today the controlled floating exchange rate runs in Georgia and the exchange rate is determined due to the market forces through interaction of the demand and supply. It should be noted that the fixed exchange rate hampers opportunity of carrying out efficient and independent monetary policy. It is also important that Georgia has imports and exports relations with many countries, which have different currencies and exchange rate regimes. Consequently, affixing of the GEL exchange rate to the USD will fix it to one and only currency, while the Georgian national currency will remain changeable to other currencies and it will be impossible to fixate the GEL exchange rate, in practice. Moreover, experience of other countries which have small open economies have showed that the floating exchange rate regime brings more advantages as compared to the fixed regime. For example, we can refer to the experience of Azerbaijan with the fixed exchange rate regime, when the new economic reality made it inevitable to move to the floating exchange rate and this process created huge problems in the state economy of Azerbaijan.
Labor Party The Labor Party has not published its program, but key messages of their election pledges are known. The Labor Party messages are mainly dictated by emotional aspects and they tedo not rely on specific economic calculations. The party has not introduced a substantiated analysis of their own election promises. For example, the Labor Party calls for lowering pension age to 55 and 60 years
old for women and men respectively. Naturally, similar pledges are evidently ungrounded and unsubstantiated as compared to the Georgian state budget potential. Lowering pension age will bring very heavy fiscal burden. Moreover, TV commercials have notified that pensioners will receive the 13th pension on birthdays. Populism signs of the mentioned promise consists in the mentioned fiscal burden. On the other hand, the 13th pension for birthdays sounds comical. Moreover, the Labor Party promises to issue 100 GEL bonuses to all pensioners over 80 years old, while pensioners over 100 years old will receive 2000 GEL pensions. Reality and feasibility of these pledges should be appraised by electors.
Alliance of Patriots Like all other parties, pledges by the Alliance of Patriots are not based on specific economic analysis. The action plan of the Party makes focus on the issues that are very relevant in the society. For example, the Alliance promises to create 10-year schedule for return of the Soviet deposits. The mentioned promise is very popular in the pre-election period, but a major part of the Soviet depositors do not believe in similar pledges, because, on the one hand, enormous fiscal resources are required to serve similar obligations, on the other hand, specific legal aspects of return of Soviet deposits are questionable. The Alliance of Patriots also believes that the Government should set up special fund that will help about 8000 families launch startup business activities every year. “If a citizen has an interesting business idea, he/she should apply to the Fund. The latter should assign an accountant, lawyers, economic, co-manager, required space and, the most important component, the Fund should allocate 20-80 thousand GEL loans without mortgages and guarantees or with very low annual interest rate of 2-3%”, the election promises of the Alliance of Patriots read. It should be noted that similar calculations enable to appraise the issue skeptically, because there is no substantiation
to prove the mentioned opinions. Moreover, the mentioned 2-3% is illogic interest rate and therefore, populism signs of these promises become more evident and manifest. As to taxes, the Alliance assures that enterprises should pay only one tax due to geographical location of business. It should not be mandatory to hold cash registers and petite entrepreneurs should not have to submit any documentation and so on. It should be noted that similar tax oasis puts the existing taxation model upside down and entirely contradicts the contemporary standards of taxation systems. The Alliance offers to resolve problems of mortgagees through issuing long-term interest-free loans from the state budget. Naturally, this theme and in general interest-free loans are main subjects of populism. As part of the healthcare reform, the Alliance of Patriots pledges to ensure free of charge hospitals, besides private paid hospitals. Naturally, any free of charge business supported by the Authorities directly hits the private business and in this situation its is unimaginable to develop the private sector. To put simply, pledges by the Alliance of Patriots are unrealistic and unsubstantiated.
Free Democrats Economic part of election pledges by Alasania’s Party seem unreal at one glance. For example, no specific plan for growing the state budget by 4 billion GEL has been introduced. Their promises for minimum salaries are also unacceptable. Today salaries at the labor market are determined by the demand and supply. Consequently, strictly determined forms of minimal salaries will move a major part of salaries to the shadowy segment and similar changes will provoke other law violations. As to Alasania’s pledges regarding minimal salaries, this component is very unclear from the standpoint of the mentioned heavy fiscal burden. As to the ruling party, it should be noted that at this stage, they have not published an economic program and therefore, it is impossible to provide any appraisals.
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September 5, 2016 #159
September 5, 2016 #159
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BUSINESS
September 5, 2016 #159
Five Star Hotel to Open in “Cube Tower” in Early 2018 The “Cube Tower,” which shall house the five-star Swiss Belhotel International, is to begin operating in February 2018 – one month later than originally planned. The government of Ajara has agreed to extend the deadline for the investor company “ADOG-GEORGIA” to fulfil its liabilities. ADOG-GEORGIA’s fines have been written off under the condition that the company will thoroughly fulfil all terms of the new contract. ADOG-GEORGIA acquired the real estate located on Gogebashvili Street in Batumi in 2010 for a symbolic price of 1 Lari. By no later than 1 January 2018, the investor was due to build and begin operating a building incorporating at least 22 floors, at least 180 hotel rooms, and a casino.
INVESTING PRODACTION
Spanish Jamón Ham to Be Produced in Georgia of the mentioned project will develop the Georgia cattlebreeding field and take meat products manufacturing onto European level. All these efforts will lead us to economic recovery”, the Partnership Fund executive director David Saganelidze said. Spanish businessmen has recently founded Native Georgian company in Georgia. They own Deraza Iberico company in Spain. Deraza Iberico is recognized as the world’s major meat products manufacturer. “Spanish businessmen led by Deraza Iberico founder Rejino Diaz Del Riosa, visited Georgia jointly with specific investments proposals in May 2016. They are interested in finding Georgian pig breeds and making investments in pork production. By involv-
The Partnership Fund and Native Georgian company have concluded a memorandum on mutual understanding. Under the memorandum, production of Jamon, the world’s famous brand, will start in Georgia. Jamon is a pork made of special breed of Spanish black pig. This product is made only in Spain and Portugal and is recognized worldwide. Under the memorandum, Native Georgian will create a pig farm jointly with local farmers in Kakheti and Racha. Output of the farms will be 9 000 pigs a year. The company plans to grow 1 200 best-breeded pigs for 6 years. The company plans to commercialize Georgia-produced pork on international markets. “This is the world’s major meat products manufac-
turer. In 1920s the company launched production yummy pork from Spanish black pig that was at the verge of extinction. In this way the company created one of the most in-demand and popular product. Spanish businessmen have arrived in Georgia several times. They have visited all regions of the country and examined local breeds of pigs at laboratory level. It is worth noting that Georgian domestic breeds of pigs identical to Spanish genotype were found in the country. The project implementation makes us happier, because it works in regions and develops them. The project will create additional job places, revive economic life and increase revenues of our population. Successful implementation
NEWS
INVESTING
Promotion of Borjomi Begins in South Korea
Investor to Implement 10.7 million USD Project in Batumi’s Hero Alley
Borjomi is being exported to South Korea. According to the Ministry of Foreign Affairs, the first shipment of the mineral water brand reached the Korean peninsula in June. The import of Borjomi is conducted by the Korean commercial firm ANK Service Co, which has exclusive rights to distribute and sell IDS Borjomi products in South Korea.
Tbilisi Sea Plaza Opens in December Major shopping mall of the South Caucasus will open in Tbilisi. Hualing Group plans to unveil Tbilisi Sea Plaza shopping mall at the end of 2016. Hualing Group representatives told the Commersant that Tbilisi Sea Plaza is a shopping complex that unites both single-floor buildings and central five-floor modern building with 0.5 kilometer in length. The complex will open in December. The shopping mall will have a storehouse, customs facilities and customs terminal. Total space of the central building is 120 000 square meters.
A project of 10.7 million USD will be implemented in the Hero Alley in Batumi, Ramaz Bolkvadze, Minister of Finances and Economy of Ajara, noted at the presentation of investment indicators for January-June 2016. This is the fifth project for the Hero Alley and its implementation will start in the near future. “Recently a decision was taken on implementing a new investment project in the Hero Alley. The investor has bought the territory by electronic auction and a new top-level hotel complex construction works will start there. According to the project, at least 10.7 million USD investments will be made”, Ramaz Bolkvadze said. The project calls for constructing at least 60-suite hotel, public facility, entertainment center and underground parking place on 1500 square meters, he said. The project implementation will end by 2020. “5 top-class hotel complexes are being constructed in the Hero Alley and total investment value makes up 51 million USD”, the Ajara Finance Minister noted. We remind you that the Ministry of Finance and Economy of Ajara has worked on developing the Hero Alley development concept. The territory space is 3 hectares. Under the plan, the alley is divided in 14 investment land plots and their development will be carried out in 3 phases. Under the concept, maximum height of the building will be 140 meters and the minimum height will be 30 meters. Hotels, apartments, restaurants, various entertainment facilities and sports centers will be arranged on the territory. The objective of the Hero Alley development is to improve the investment environment, bolster business and tourism sector, create new job places and develop the city infrastructure. Implementation of 4 new investment projects is underway in the Hero Alley.
ing David Saganelidze, the company representatives visited regions of Georgia, met local farmers and conducted scientific research works on Georgian pig breeds. Visit of Deraza Iberico delegation to Georgia was planned at the business meeting in Spain during the visit of the Partnership Fund members to Spain. The Partnership Fund executive director David Saganelidze and the Investment Department director Giorgi Cherkezishvili met with the Deraza Iberico founder and received information on the production process. At the meeting Deraza Iberico representatives expressed intention to visit Georgia and make investment in our country”, the Partnership Fund representatives noted.
Construction of $700 million Eco Green City Has Started Gino Green City corporation together with Partnership Fund starts construction of Eco Gren City. Project The project implies construction of recreational facilities, hotels , shopping and residential buildings at Tbilisi Sea area. Gino Green City is one of the large-scale projects on the Tbilisi Sea coast, with the surrounding area of coniferous forest, where the percentage of oxygen in the air is very high. In 2017 the construction of the first renovated infrastructural residential complex– a business class multifunctional apart-hotel “Resort”, will be finished. Environmentally friendly construction materials used in the building, will allow residents to use green energy. Gino Green Corporation was founded by Slovakian Gino Invest, the total investment amount is $700 million. Export finance bank of Slovakia also plans to allocate money in it.
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OPINION
September 5, 2016 #159
Inevitability Of Punishment Dr. Andrei Maximov Maximov&Partners LLC am@maximov.com www.maximov.ge
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oing business by unwritten rules, experiencing it as a service to family or friends with lacking business planning is a very common phenomenon in Georgia which too often results in conflict, including the case of a foreign investor and entrepreneur and his local partner. Inevitability of punishment is, in my opinion, the most important issue, the key link which would help getting Georgian economy out of the existing condition and up to a better future. The heart of the problem when dealing with a business conflict is ultimately as follows: who wins in the end? The scrupulous and honest party or its opposite, brazen and unscrupulous? Make no mistake: the judicial and legal system in today’s Georgia works, even though unintentionally, in the interests of business people with no ethics. For example, I am an investor or a businessman who got cheated. Let’s say, the other party simply defaulted on contractual payments for delivered goods or provided services. It is lucky if all conditions were registered within the legal environment— otherwise, there would be no use even mentioning the issue. However, even if all documents are in place, this is not sufficient. When going to court, the injured party sets itself up for many years of waiting for a court decision on quite an obvious issue. It is difficult to blame the judges for that: each of them has on average 500-600 cases on his desk, so it is not physically possible to review them within a period of time that would have been reasonable for businesses. Also, what is an ineffective judicial system when compared to its resulting lack of punishment and/or a punishment that is indefinitely postponed? In such a case those will win in business who cheat, default on their obligations and do not pay for provided services or delivered goods. Under such conditions the unscrupulous businessman will always have competitive advantage over the honest one! This state of things will raise the number of those who would like to cheat and to drive into a corner all those who honestly pay on time and fulfill all their contractual obligations. It becomes more profitable, as per business process, to take advantage of one’s partner rather than doing business honestly (let us leave business ethics alone). It is great when you can use someone else’s money with 0% interest for three years in a row, and only then you would have to return them to their source as per the court decision—that is, if you will find the donor at all… Why, indeed, bother getting secured loan from a bank, with its 20% interest? A year ago, there appeared, finally, some light at the end of the tunnel: changes in Georgian legislation allowed the resolution of business conflicts via private arbitration and in a rather prompt manner--after all, two or, as a maximum, three months, though still quite a long delay, but so much faster than three years of wait… However, since the arbitration decision must be approved by courts, in reality everything got back to square one. I will provide an example from own business practice. We have been working for two and a half years with a respectable Railway Car Building Company (a subsidiary of Georgia’s Railway Car Building Holding): we were providing truck haulage services for delivering mounted wheels and spare parts from Russia, always on a deferredpayment basis. We got always paid while we were still in the processing of delivering the cargo. However, every time when the last truck would get to the depot, payments would stop. Our companies work in the legal environment only, our business used the services of the best legal experts in Georgia, and our contracts had clauses for
very impressive penalties for violating terms of payment (up to 0.5% per day off the outstanding amounts). As company debt grew outrageously high, our lawyers got to work. When considering our claim, however, the judge declined the application of an interlocutory injunction on the grounds that that could lead to the bankruptcy of the defendant (he was obviously not too concerned, in this case, with a possible bankruptcy of the claimant). The threat of a potential settlement to avoid huge penalties may have been a factor in making our debtors “afraid”, so that they eventually paid up their dues following three pre-trial settlements and even hefty penalty fees for breach of contract. Only one smaller payment was still outstanding, a few thousands of dollars, so we decided, as an experiment, to deal with it via arbitration. What a wrong move! The arbitrator arrived at a fairly quick decision indeed, only after two months of consideration—and it was in our favor, too. For some reason, however, he drastically reduced late payment penalties: he may have regarded our company as a malicious money-lender. Despite the fact that our intention was never to lend money to anyone and that, as a result, we paid own money for somebody else’s haulage. Most importantly, however, is this: this arbitration decision is still, after four months’ waiting time, not approved by the judge due to certain reasons that are not entirely comprehendible (judge on vacation, change of judges, etc). It is still “hanging” even though no full-fledged case hearing is necessary: we are talking only about the approval of the verdict that had already been passed. This is not about our relationship with the Railway Car Building Company. This is about theory. Just imagine which inferences from this situation will deduce a company that has constantly (and Railway Car Building Company is typical in this respect) practiced payment default or delays in its relations with its suppliers. I have no personal grievances to company top managers (though no sympathy, either). They do everything quite correctly when looking at the situation from the narrow, utilitarian standpoint: they carry out their operations executing their production plan at someone else’s expense. Why not, if the existing legal system allows that and, more so, even supports such behavior? They did it once, then ten times, then one hundred times more. When banks do not agree to finance an unreliable client, even using high interest rates, then why not get resources from the supplier of goods or services—all the more so, as no interest has to be paid for as long as three years?! On top of that, such business practices, even though everyone is aware of them, are not an obstacle for starting successful PR campaigns, getting national business awards and getting to the top of the national rating for successful business enterprises. I would like to stress the point that without the inevitability of punishment in Georgian business environment there will be no great influx of foreign investors into the country, especially small- and medium-scale investors, despite the most successful institutional reforms. It is not true that foreign investors are only interested in top profits. Their first priority is not to lose their money, and only next comes their keen desire to recover funds with a profit. Investors will, without thinking twice, accept smaller profit and longer pay-off profit if they get guarantees against losses and more predictability in their business process. More importantly, investors would be enthusiastic for getting in and enriching Georgian economy with their ideas, knowledge and money.
PASHA Bank sponsors oikos Summer School
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ASHA Bank co-funds oikos Summer School which will take place at Tbilisi State University through 1-5 September. oikos is an international student-driven organization for sustainability in economics and management founded in Switzerland in 1987. The major topic of discussion will be “The Education for a Better World”. Among the attendees there will be 30 local and international participants as well as specially invited professors and facilitators. The five-day project aims at bringing the students and professors together to learn the new methods and approaches of management. Over the course of the Summer School participants will have the opportunity to explore their own leadership skills, look at how to develop them and contribute to the common good of society. The teachings will focus on the following: planet care, collaboration between the nations, creating customer oriented organizations, employees’ welfare, etc. This year Tbilisi State University hosts oikos Summer School for the third year in a row. “PASHA Bank regularly supports the projects that are aimed at educational and professional development in the country. oikos Summer school is focused on trendy topics and we believe these meetings will affect the participants’ knowledge and experience in the most positive way,” – said Anano Korkia, Head of PR and Marketing at PASHA Bank. „Education is one of our core topics. oikos organizes more than 500 projects in more than 30 countries annually. Topic of the Summer School is currently very popular worldwide and particularly important for our region. Today’s students are future leaders, so it is essential to prepare them for the challenges of tomorrow. We couldn’t do what we do without our donors and partners. We would like to say special thanks to PASHA Bank for its tremendous support in terms of funding, ideas and outreach.” – Ani Lomouri, Director of Summer School 2016.
Liberty Bank Joins Breast Cancer Treatment and Prevention Campaign
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r. Sergey Osadich, director of Avon Cosmetics Georgia, and Liberty Bank director general Mr. Aleksi Khoroshvili have concluded memorandum on cooperation. Under the memorandum, Liberty Bank will join Avon’s campaign that calls for updating the population on breast cancer treatment and prevention measures. In addition, Avon company will provide free of charge consultations, echoscopy and mammography examination and diagnosis services thanks to a movable clinic. Liberty Bank manages the broadest network of service centers in Georgia and serves more than 1.5 million clients. Having joined the campaign, the bank will apply its own platform and deliver information to population in not only cities, but also villages, where medical infrastructure has not been developed in due manner and women do not have access to free of charge screening programs. Liberty Bank will ensure distribution of educational materials and deliver information to the population about visits of Avon’s movable clinic to their own regions. Since 1992 Avon company has been actively implementing breast cancer treatment campaign worldwide. In 2013 Avon Georgia also joined the existing program. For the purpose of implementing charity objectives, Avon will direct revenues from sales of charity products to the breast cancer defeat campaign. In 2014 the company bought ultramodern digital mammography device and placed it in New Vision university hospital, where any woman in Georgia is able to pass free of charge consultations in mammology. Moreover, the company carries out rose-color meetings every year to increase perception about breast cancer. Starting August 15, 2016 the company inaugurated visits of movable clinics to regions, where women are able to receive free of charge consultations and diagnosis thanks to modern medical equipment. The campaign started in Racha and will be continued in Svaneti, Guria and Samegrelo. Breast cancer is the most frequent disease among women. At the same time, at early phase, 8 cases of 10 ones are subjected to treatment. Permanent self-examination and screening considerably diminishes cancer development risks. Therefore, it is very important that as many women as possible to receive information on self-examination methods and screening, As part of the program, women living in regions will receive free of charge consultations in mammology and will have the opportunity to pass free mammology and echoscopy examinations. “Liberty Bank’s support in this campaign is very important and valuable, because more women will receive information about movable clinic opportunities and receive educational materials on breast cancer prevention measures”, Avon company director Sergey Osadich noted. “We are happy to make certain contribution to this important campaign . Jointly with Avon company we will implement other campaigns too to increase perception of breast cancer treatment and its prevention in Georgia”, Liberty Bank director general Aleksi Khoroshvili said.
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COMPANY
September 5, 2016 #159
Rompetrol Georgia Management Congratulates Rio Olympic Games Champions on Victory
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ompetrol Georgia, part of KMG International, sponsor of the Weightlifting Federation has congratulated golden and bronze medal winners at the Rio de Janeiro Olympic Games on victory. A special press- conference was held at Tbilisi Marriott Hotel at 01:00 pm on August 30. Olympic wightlifters Lasha Talakhadze and Irakli Turmanidze, Minister of Sports and Youth Affairs, representatives of the Weightlifting Federation and Rompetrol Georgia general manager have attended the meeting. For the second year, Rompetrol Georgia has provided sponsorship for the Weightlifting Federation of Georgia and met successful participation of Georgian wighlifters at Rio Olympic Games with special excitement. “Rompetrol believes in success gained thanks to hard work and it supports the dreams of the ones that want to stand out, as the Georgian champions did. We are proud that the Georgian athlete is the world’s strongest man. This huge success was achieved thanks to enormous efforts and huge job by the Weightlifting Federa-
tion. Therefore, we want to express our respect to you. Sports permanently inspires for endless advancements and progress, growth in competitive capacity and achieving success. These characteristics express our values”, Rompetrol Georgia general director Kairat Kabilov said and transmitted Fill&Go fuel deposit cards to the Olympic Game winners. “We welcome that by Rompetrol’s support huge job has been performed for developing the weightlifting sport in Georgia. We were very proud seeing two Georgian athletes on the Olympic Pedestal. This success was achieved thanks to hardworking and we are happy that your company was also involved in this process. I am happy that private companies have established a good tradition to support various directions of sports. Support by the business sector will bolster further development of sport. When our athletes achieve success, our cooperation becomes more interesting. Support by business companies provide wider opportunities for young men to be a success. I thank all companies and Rompetrol that have engaged in the Georgian sport devel-
opment”, Minister of Sports and Youth Affairs of Georgia Tariel Khechikashvili said. “I would like to express gratitude to the management of Rompetrol and our friends from Kazakhstan. Our cooperation with Rompetrol has laid a foundation of serious development and this process goes on. By support of Rompetrol, we have appointed salaries to young athletes and young trainers, we have managed to send Georgian referees to international tournaments. We have managed to defend our positions at the court. We have reconstructed new halls and revived them. Improved recovery procedures were held for our main combined team. This cooperation has helped at our Federation in improving the management and inviting international experts. We have conducted necessary training workshops. Championships in Georgia were held at the top level. We are looking forward to carrying on this cooperation and moving to a new phase of friendship with Rompetrol through making new achievements at international arena. I would like to express special gratitude to Mr. Kairat Kabilov, Konstantine Papushoi and Janat Tusupbekov. Thank everybody, who have backed us during this period. We deeply appreciate this”, Kakhi Kakhiashvili, president of the
Georgian Weightlifting Federation and Threefold Olympic Champion, noted. At the 2016 Olympic Games Lasha Talakhadze, 22, won Georgia’s first golden medal and made the world’s Olympic record. He lifted 215 kg Snatch +258 kg Clean and Jerk. On the same day Irakli Turmanidze won the bronze medal. It should be noted that KMG International supports weightlifting in several countries. KMG International supplies top quality products to the Georgian market, through it subsidiary, and in this way ensures top level performance. This year Rompetrol Georgia plans to invest 3 million USD in network development and logistic facilities. The international group supplies European-quality EURO 5 fuel to the Georgian market. Rompetrol Georgia is part if international rebranding program of retail network, a program that brings a new concept for Georgian customers with a premium design, combining their needs and expectations with the best technical solutions. A result of intense research, the station sets a new quality standard for the Rompetrol network and provides a modern framework for the products.
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PR
September 5, 2016 #159
PR Campaigns in Georgia Lack of Comprehensive Conceptual Purpose Interview with Kakha Maghradze, senior consultant and clients relations manager for GEPRA consulting company - What are you by profession? - I am am international relations specialist by profession, however, I have never worked in this field. For many years I have worked in the public relations field and therefore, I associate myself with this profession. - What about the first job? - I used to work as a secondary school teacher and used to teach history and law. At the same time, I was working as a distributor. Since June 2004 I started working as a consultant and projects manager for GEPRA and continued as a senior consultant and clients relations manager in 2007. My experience before GEPRA includes working for various nongovernmental organizations as a trainer-consultant, trade agent for distribution companies and a screenwriter at TV companies. -Your first success -I would not apply the word of SUCCESS, but the first major project was an inauguration of TBC Bank head office and promotion of its communication. There were also projects for developing communication strategies for the Ministry of Justice and the
Ministry of Refugees and Accommodation, as well as PR and communication campaigns for Natakhtari, Unicard, Borjomi and more than 30 other Georgian and international organizations. - Project and activity in which you take pride till today. - In May 2015 I set up a social responsibility club. - The field where you would never work. - I have not thought about this issue. - What are necessary factors to achieve success in your profession? - This field does not have special characteristics. Like all other fields, purposefulness and hardworking create preconditions for success. You should work on yourself with focus on development Sooner or later, success will come. - How easily do you manage to resolve crisis situations, take decisions? Do similar cases affect quality of other affairs? - Naturally, similar situation make corresponding influence. The more time passes and the more experience you gain,
you become calmer and meet problematic issues with more balanced positions. All these factors enable you to cope with all challenges better. - Interesting episode from your life that changed your life and made you in-demand figure in your field. - I cannot remember something special. All specific success is reflected on your effectiveness, number of clients and so on. - Without this profession, who would you be, where would you act? - Maybe I would work in media field. I have not thought about this. Maybe I would work in the education sector too. - What is your strong and weak sides and characteristics, as a man of affairs? - Laziness is the weak side. I fail to use my potential fully. - What benefits do you receive from the company, where you work? What makes it interesting for you? - PR Management and PR Consulting, in general, are popular fields. Today these directions are considered to be the most interesting and important fields. This signifies
these fields provide creative and good, interesting, profitable job places. This direction was not so popular when I started working in this field. I turned out in this sector by chance. They were seeking a specific person for a specific project. I was recommended to them and after interview I was selected for a specific project. I had no experience and no background in that period. - What factor creates major discomfort in your work? - Nothing. - Is PR perceived and taken in its classic essence in Georgia? - Public relations principles are the same, but in Georgia these principles work in comparatively different way. In Georgia PR campaigns and philosophy lack for comprehensive conceptual purpose. Accent is made on volume and frequency of media coverage, because evaluation mechanisms are limited. In our country relations with media is different. Facebook is managed by different principles and so on. - Where do you see yourself after 20 years? - in Academic field, the education sector.
Kakha Maghradze has worked as a consultant and project manager for GEPRA since 2004, while starting 2007 he has been working as a senior consultant and clients relations manager. Besides working with clients and managing their PR projects, Kakha Maghradze has acquired worthy experience in event management, management of social programs, branding and strategic planning of communication. Since 2005 Kakha Maghradze has conducted many trainings and workshops in public relations, contemporary approaches of communication and strategic planning of PR for public officials, business sector representatives and members of nongovernmental organizations. Moreover, as a lecturer, since 2007 Kakha Maghradze leads the event management course at Tbilisi PR School, as well as public relations course since 2009. Kakha Maghradze is author of a guidebook for public officials – “Strategic Planning for Relation with Successful Society”.
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PUBLICITY
September 5, 2016 #159
15
WORLD NEWS
September 5, 2016 #159
Quotes
“ The capacity of the IAP will be five billion cubic meters per year. The pipeline will be capable of carrying out reverse supply
The only way to deal with an unfree world is to become so absolutely free that your very existence is an act of rebellion
”
Albert Camus
TANAP project, worth $9.2 billion, envisages transportation of gas of Azerbaijan’s Shah Deniz field from Georgian-Turkish border to the western borders of Turkey
Big Banks Plan TAP, TANAP to Reduce TAP Committed to Europe’s Dependence on to Coin New Facilitating Links to Russia Region Gas Infrastructure Digital Cur-
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he Trans Adriatic Pipeline (TAP) AG welcomes the signing of a Memorandum of Understanding (MoU) on the Ionian Adriatic Pipeline (IAP) by Albania, Bosnia and Herzegovina, Croatia, Montenegro and Azerbaijani state oil company SOCAR, TAP reported. Ian Bradshaw, Managing Director of TAP, said that the MoU enhances energy cooperation across South East Europe and is an important step towards energy security and diversification in the region. “TAP remains committed to facilitating connections to key gas infrastructure in the region, including the Ionian Adriatic Pipeline and the Interconnector Greece-Bulgaria (IGB),” he said. IAP pipeline with a length of around 516 kilometers will be connected to the Trans Adriatic Pipeline (TAP), which is designed to transport Azerbaijani gas to Europe, in the city
of Fier in Albania. The IAP will pass through Albania, Montenegro, Bosnia and Herzegovina, and end in the city of Split in Croatia, where it will be connected to the existing gas distribution system of the country. From Croatia, the gas can go to Hungary and other countries of Central and Western Europe. The capacity of the IAP will be five billion cubic meters per year. The pipeline will be capable of carrying out reverse supply. In January 2014, TAP signed a Memorandum of Understanding and Cooperation (MoUC) with ICGB, the company developing IGB, establishing technical cooperation to interconnect the two systems. In May 2013, Albania, Bosnia and Herzegovina, Croatia and Montenegro signed a MoU for the support and cooperation in the realisation of both the TAP and IAP projects.
Oil poised for biggest monthly gain since April ahead of OPEC talks
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lobal crude prices are headed for their biggest gain in five months as speculation mounts over a deal to cap output by the world’s biggest producers. Prices for Brent crude are looking to gain over 13 percent in August, while US benchmark West Texas Intermediate is headed for a 14 percent gain for the month. Earlier this week, Prime Minister Haidar Al-Abadi said Iraq is going to back the output freeze as the prolonged decline in prices was hurting the secondbiggest member of OPEC. The country produces 4.36
million barrels a day, according to July data published by Bloomberg. Saudi Arabia is OPEC’s biggest producer with a daily output of 10.43 million barrels per day. Limiting production will have a positive impact on the market, according to Saudi Arabia’s Energy Minister Khalid Al-Falih who still rules out cutting output. OPEC and other major producers headed by Russia tried to negotiate a freeze in April. However, the meeting in Doha ended without an agreement as Iran refused to join the talks and Saudi Arabia rejected a deal without Iran.
rency
Four of the world’s biggest banks have teamed up to develop a new form of digital cash that they believe will become an industry standard to clear and settle financial trades over blockchain, the technology underpinning bitcoin. UBS, the Swiss bank, pioneered the “utility settlement coin” and has now joined forces with Deutsche Bank, Santander and BNY Mellon — as well as the broker ICAP — to pitch the idea to central banks, aiming for its first commercial launch by early 2018. The move, to be announced on Wednesday, is one of the most concrete examples of banks co-operating on a specific blockchain technology to harness the power of decentralised computer networks and improve the efficiency of financial market plumbing.
Armenia’s Economic Activity Index Shows Record Decline Armenia’s economic activity index decreased by 4.7 percent in July 2016 compared to the same period of 2015. This is a record figure, Aysor.am reported citing Haykakan Zhamanak newspaper. A decline in the country’s economic activity has not been observed yet in 2016, according to the newspaper. Just two weeks ago, Armenia’s Prime Minister Hovik Abrahamyan summed up the figures for the 1H2016 at a cabinet meeting and was satisfied with 4-percent economic growth during that period, said the report. He ordered the ministers to present these figures to the public. However, the ministers are unlikely to do so, said the newspaper. The 2H2016 hasn’t shown too optimistic figures, with almost all the economic sectors recording a decline.
C
onstruction of the Trans Adriatic Pipeline (TAP) and the TransAnatolian Natural Gas Pipeline (TANAP), through which Azerbaijani gas will go to Europe, will enable Greece and the countries of Southeast Europe to reduce dependence on Russian gas, president of the Hellenic Association for Energy Economics, professor Kostas Andriosopoulos said. He made the remarks at the First International Association for Energy Economics (IAEE) Eurasian Conference being held in Baku, Azerbaijan, Aug. 30. He noted that currently the region’s dependence on supplies of Russian Gazprom company is very high, and it continues to grow as consumption grows. In order to reduce dependence of the countries of Southeast Europe, it is also necessary to build Interconnector Greece-Bulgaria (IGB), which will make it possible to deliver gas from the TAP
pipeline further to Europe, Andriosopoulos said. Development of the system for supply of the LNG (liquefied natural gas) from different countries will also help to reduce the region’s dependence on Russian gas, according to the expert. Andriosopoulos noted that the global LNG market will continue to grow, and is projected to reach 470 million tons per year by 2030 compared with the current 245 million tons per year. TANAP project, worth $9.2 billion, envisages transportation of gas of Azerbaijan’s Shah Deniz field from Georgian-Turkish border to the western borders of Turkey. The gas will be delivered to Turkey in 2018, and after completion of the Trans Adriatic Pipeline’s (TAP) construction, the gas will be delivered to Europe in early 2020. TAP’s initial capacity will be 10 billion cubic meters of gas per year with the possibility of expanding it to 20 billion cubic meters.
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PUBLICITY
September 5, 2016 #159