Caucasian Business Week #18 by Caucasian Business Week

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BUSINESS WEEK August 26, 2013 #18

caucasian business week

August 26, 2013, Issue 18

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BE INFORMED, DO BUSINESS

GEORGIA ECONOMY MINISTRY CALLS ON NATIONAL BANK AND COMPETITION AGENCY TO INVESTIGATE COMPANIES’ CLAIMS AGAINST “BANK OF GEORGIA”

conomy Ministry makes a statement concerning claims of quick payment companies against banks. Pg. 3

Ivanishvili Comments on Channel 9 TV Pg. 2

AIR CAUCASUS TO COMPETE WITH TURKSIH AIRLINES

ir Caucasus will make first flight to Antalya on August 18. Round-rip travel costs $420. 4 regular charters are scheduled this season . Pg. 3

MATERIAL DEPRIVATION AND QUALITY OF LIFE IN THE SOUTH CAUCASUS

uality of life and life satisfaction has been a central topic in social science research, as well as an increasingly popular area of interest for many policy makers. Pg. 6

COMMERCIAL BANKS ASSETS EXCEED 15 BILLION GEL

y August 1 overall actives of commercial banks equaled to 15,1 billion GEL. National Bank informs that overall actives (in the current prices) in the last reported month have increased by 127,2 million GEL (0,9%). Pg. 8

ARMENIA SUZE LA ROUSSE WINE UNIVERSITY TO SUPPORT ARMENIAN WINE-MAKING

row of notable experts in the field of wine-making from Suze la Rousse Wine University in France will be engaged in the process of development of Armenian winePg. 10 making.

AZERBAIJAN AZERBAIJANI BANKING SYSTEM SEES POSITIVE TRENDS

zerbaijan’s economy and banking system maintained the attractiveness for foreign investors in the first half of 2013. Pg. 11

CIS IRAN CAN EXPORT NATURAL GAS TO UKRAINE

ranian ambassador to Ukraine and Moldova Akbar Qasemi Aliabadi said that the Islamic Republic holds huge gas reserves and is ready to supply the two European countries with natural gas. Pg. 12

WORLD NEWS MINUTES OF MINIMUM-WAGE WORK TO BUY A BIG MAC: 36 MINUTES IN THE US, 6 HOURS IN AFGHANISTAN

bout six hours of minimum-wage work in India or Afghanistan earns you the same purchasing power, or enough money, to buy a Big Mac burger from McDonald’s. Pg. 13

QUICK PAYMENT BUSINESS ACCUSES MAIN COMPETITOR OF DUMPING POLICY

n response to the statement of quick payment companies Bank of Georgia explains that the bank is reported to be among a small number of operators that have decided to maintain option to the customer with the aim to draw new customers and stimulate competition. Accusations as if Bank of Georgia had annihilated the competitive environment re absolutely ungrounded. Nearly all quick payment operators have set the same tariff to the customer, while Bank of Georgia was among the operators that have decided to give option to the customer with the aim to draw new customers and stimulate the competition. Therefore, the commission fee for replenishing the mobile balance was determined as 0%. Bank of Georgia has released many statements that we want quick poyment services to be efficient as a result of the customer content and not as a result of control over profitibility of distinct directions of the business”, Bank of Georgia representative Sopho Balavadze says. A reported, Nova Technology, one of the players on the quick payment market, demands for creating competitive environment and accuses Bank of Georgia of carrying out dumping policy. Bank of Georgia’s service of Express Pay has

got such privileges that are unaccessible to Nova Technology for real competition, Nova Technology representatives noted. On August 21 the company representatives held a news conference at the Prime Times office and spread a special statement for the Prime Minister, the Parliament and other state offices. “Bank of Georgia has applied illegal steps for restricting competition. It remains as a monopolist and it aims at leading their competitors to bankruptcy that will make negative impact on thousands of companies and the state economy”, Nova Technology says. Bank of Georgia provides deliberate campaign against Nova Technology with dumping prices and financially losing and unprofitable operations lead to monopolistic conditions. The bank has fully monopolized public transportation fee system as the bank has been granted full exclusive rights in this segment. We ask you, all responsible bodies, prior to making real amendments to the law on free trade and competition, to act in line with the legislation. In other case, nothing will be left to do in this business, because Bank of Georgia will become a sole player on the market”, the Nova Technology statement reads. Pg. 3

Gia Khukhashvili: It is an unpleasant and painful process, but TV channels will be probably closed Pg. 4 Papuna Petriashvili: Central Budget Transfers to Local Selfgovernments May Shrink

“Alliance Capital Group”: Business will Need 3-6 Months to Recover after the Presidential Elections

SUBWAY TO OPEN IN LATVIA, Convenient LITHUANIA, GEORGIA AND UKRAINE Packing BY THE END OF 2013

ubway, the closely held restaurant chain with more outlets than McDonald’s (MCD) Corp., plans to pick up the pace of openings in Europe by adding as many as 1,000 new locations in 2014. The company aims to be in Latvia, Lithuania, Georgia and Ukraine by the end of this year. Ukraine has similar growth potential to Romania, which has 16 stores after the first opened in April 2012, said Peter Mompalao de Piro, a Subway spokesman. Pg. 6

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Affordable Prices!

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Pg. 4

MAIN EVENTS caucasian business week

August 26, 2013 #18

ARCHIMEDES GLOBAL GEORGIA STOCKHOLDERS ARRIVE TO GEORGIA

IVANISHVILI COMMENTS ON CHANNEL 9 TV

M Ivanishvili said he doubts there will be any “serious” potential buyers willing to purchase Channel 9 TV, owned by his family, which went off the air after Ivanishvili announced about intention to shut it down on September 1. Ivanishvili, who said that he was spending up to USD 1 million per month to keep the TV station running, criticized a decision of management of Channel 9 to suspend broadcasting prematurely before scheduled date of closure. “It was very regrettable how journalists and top management acted after I made the statement [about plans to shut down the channel],” Ivanishvili told journalists on August 22, adding that such decision was “very strange”, “unprofessional” and “shocking.” “Majority of those working in the Channel 9 was not professional journalists and while working [in Channel 9] they were able to gain professional skills and they were receiving salary and now they reproach me saying that I used them… It is very regrettable. It shows that I made a right decision,” “I spent 10 million dollars over the past ten months just for the sake of journalists [working in the Channel 9]; I had no other purpose at all; I’ve never given any instructions to the television station neither before the elections nor after we came into government,” “It is very uncomfortable for me to be an owner of a media outlet, because I am head of the government,” Ivanishvili said. Luba Eliashvili, director-general of Channel 9

TV, said it was her “unilateral” decision to suspend broadcasting; she said the personnel was shocked by PM’s announcement that he was planning to shut down the channel on September 1; she said that the announcement demoralized staff and she deemed it appropriate to suspend broadcasting immediately rather than to wait for September 1 as she saw no motivation in the staff to continue working. Asked about businessman Zaza Okuashvili reportedly having an interest in buying the Channel 9 TV, as well as about proposal to sell the channel to a group of individuals intending to set up a joint stock company for buying the Channel 9 TV, PM Ivanishvili responded that he’s not aware of these proposals and also added no serious proposal has yet been tabled so he’s not considering those proposals to be serious. “We will consider serious proposals if there are any,” Ivanishvili said, adding that he doubts there will be any serious bidder. He, however, also reiterated that his offer to sell the channel for third of its market value on the condition that new owner keeps the staff and secures station’s further operations remains in force. Channel 9 TV’s director-general, Luba Eliashvili, said that businessman Zaza Okuashvili was interested in buying the channel; Okuashvili owned Iberia TV before it was closed down in 2004 three months after Omega Group businesses, including Iberia TV, owned by Okuashvili, were raided by special task forces in what the authorities at the time said was part of tax evasion probe. Eliashvili at the time led Iberia TV’s newsroom.

ONISHCHENKO CONSIDERS LUGAR LABORATORY INAPPROPRIATE TO GEORGIANRUSSIAN RELATIONS

ain sanitary official of Russia Gennady Onishenko considers that the laboratory named after Senator Lugar may become a deterrent factor for GeorgianRussian economic relations in the future. Onishenko stated it to Interfax. “Works are going and it’s not bad, although Georgian side’s miserable efforts to justify operating of US military-naval biological laboratory on its territory, demonstrates absence of wish for open talks. In the perspective it may become a serious

deterrent for economic relations enlargement, as a distrust factor on supplied products”, - Onishenko states. As he said, currently 12 Georgian producers supplies products to the Russian territory. Already 690 batches alcohol drinks are exported to Russia, with total amount of 2,4 million liter. 462 kinds of wine, 42 kinds of ocgnac and 4 kids of minera water are registered in Russia. Currently Rospotrebnadzor has rejected 19 kinds of wine, 20 samples are under expertise.

TOYOTA CENTER MAY 4.07 MILLION GEL CONTRACTS

oyota Center Tbilisi participates in the tender, announced by Ministry of Internal Affairs to purchase 100 new automobiles. The company is the only one that submitted proposals for 2 tenders with total cost of 4 070 000 GEL. Ministry of Internal Affairs plans to buy 50 vehicles of 2013 model, zero mileage, 2,5 turbine diesel engine. Also purchase of 50 automobiles with 30 atmospheric diesel engines is planned. Proposal submission for electronic tenders is over and now review of tender proposals is going. The winner has not been revealed yet.

ue to appointment of temporary administration in the company, representatives of Archimedes Global Georgia stockholders are arriving to Georgia on August 26. They’ll acquire situation on the place and make decision on the future investments. Natia Kakhetelidze, deputy director general of insurance company Archimedes Global Goergia stated about it to GBC. She said that parallel with appointment of temporary adiminsitration, Insurance Supervision State Service is inspecting the company. After the inspection decision will be made for how long temporary adminsitrator will remain in the company. Currently, presence of temporary administration in the comppany was determined for 2 months,

till October 19. “We did not expect inspection. Company’s director general Nikoloz Ramishvili is in the USA with business visit. He suspended the visit and will return to Georgia as soon as possible. On Monday representatives of company stockholders (IFC, DEG, Archimedes Group) will arrive and make decision whether to appeal order of the head of Insurance Supervision State Servide; also mae decision on the future plans and investments of the company”, - Natia Kakhetelidze stated. Archimedes Global Georgia continues working as usual and serves to all insured or participants of the state programs. Temporary administrator appointed by Insurance Supervision State Service should provide improvement of financial conditions of Medical Insurance Group Archimedes Global Georgia.

POPULI CHANGES FORMAT

0 new Populi and Ioli supermarkets will be opened throughout Georgia in a year. Supermarkets manager company changes strategy and will focus on the small-size supermarkets, represented in all districts of Tbilisi and all regions of Georgia. “We’re transferring to the new express formats and till next summer will enlarge network with 20 new supermarkets. Working in this direction is already started and we’ll open fist express supermarket in Kutaisi, where one XL format supermarket operates successfully”, - Populi and Ioli marketing manager Lado Tsimakuridze stated to GBC. Currently Populi and Ioli network unites 56 shops throughout Georgia. The company will present large-scale promos

and plans in autumn. Focus will be made on sales and consumer benefits, also improvement of service quality. Lado Tsimakuridze says that unification of Populi and Ioli under one brand is not planned, because each of them has a lot of loyal consumers. It’s noteworthy that in the framework of strategy change, Populi may leave trade center GTC, where one of the largest Populi supermarket is located. Opening of the new Carrefour hypermarket in planned in GTC. ‘ “Negotiations are really going, in which all three sides are involved, although final decision has not been made yet”, - Lado Tsimakuridze says. He also mentions that their new strategy is to have not “several and large supermarkets, but many and everywhere”.

GEORGIA’S NEAT CATTLE EXPORTS TO AZERBAIJAN GROWS BY 60% IN JANUARY TO JUNE

n the first half of 2013 8,28 tons of cattle were exported from Georgia to Azerbaijan. Total value of the live weight is $21,33 million. Geostat published information about it. According to the report, share of this category in the total export made from Georgia to Azerbaijan is 6,41%. In comparison with analogical period last year, cattle export from Georgia increased by 59,72 or 3,1 thousand tons.

During January-June 2012, 5,2 thousand tons were exported from Georgia to Azerbaijan, with total value of the live weigh $19,2 million. During January-June of the current year products of $332,81 million cost were exported from Georgia to Azerbaijan, which is 26,9% of the country’s total export. In comparison with analogical period 2012, export to Azerbaijan has increased by 17,5%. For comparison, in 2012 Georgian products of $283,23 million were exported to Azerbaijan.

5TH COMPONENT WAS ADDED TO PREFERENTIAL AGRO CREDIT

th component - 1-months winery credit was added to Preferential Agro Credit. Annual rate is 12-15%, 9% of which is covered by the state. Currently, in the framework of the project, 4 859 beneficiaries have received loan, with total lending amount of 61,3 million GEL. Ministry of Agriculture informs that in the framework of the third component, for new enterprises, 161 loans of $20 188 441 is issued. Loans up to 7 years are issued for annual rate up to 3%. Through the second component, which provide 5 000 - 100 000 GEL for 5 years with 8% interest

rate, 2 068 farmers are funded, with total amount of 39 020 GEL. Through the first component (5000 GEL 0% product credit-installment for 6 months) 1 041 288 GEL is issued for peasants and small farmers. 2 630 beneficiaries used credit. Through the 4th component (leasing) was launched in July. Contractors (Georgian Leasing Company, TBC Leasing) have not got applications yet. Preferential Agro Credit project, initiated by Prime Minister started in Ministry of Agriculture in March.

BUSINESS August 26, 2013 #18

caucasian business week

MARNEULI FOOD FACTORY WILL ISSUE PEACH COMPOTE

oon Marneuli Food Factory will offer new product to consumers - peach compote. Company management reports that the factory already produced peach compote in the testing regime and it’s possible that the product appear in the supermarkets soon. “The enterprise permanently tries to spoil consumers and offers innovations each year. Re-

minding that in 2012 we started producing of the new product Lecho. This year we plan to increase its production. In 2013 the factory made additional investments in the direction of readymade salads, to increase product assortment and productivity”, - the company states. Marneuli Food Factory is part of Healthy Holding, founded in 2007 and is one of the largest enterprises in Georgia.

ALLIANCE GROUP MAINTAINED ISO 9001 CERTIFICATE

icro-finance organization Alliance Group and Alliance Group Leasing successfully passed second control audit of the quality mangement system standard ISO 9001. The group informs that TUV SUD auditor studied main processes of microfinance and

leasing activities, also service quality and security of the infromaiton about clients in details. According to audit conclusion, management system is effective in both companies. ISO 9001 is a quality management certificate, which enables to reduce business risks and correctly manage resources.

ECONOMY MINISTRY CALLS ON NATIONAL BANK AND COMPETITION AGENCY TO INVESTIGATE COMPANIES’ CLAIMS AGAINST “BANK OF GEORGIA”

E From Pg. 1

conomy Ministry makes a statement concerning claims of quick payment companies against banks. Commersant.ge was told by Deputy Economy Minister Natia Mikeladze that the pay boxes companies had applied to the Ministry, however, the Ministry sent the claims to the relevant authorities, including the National Bank and Competition Agency. As it is known, on April 1, 2013, as a result of the unjust decisions of mobile companies and “Bank of Georgia”, mobile companies have refused to pay a fee payment and the burden of payment for services laid on the customer. According to “Nova technology” company, this led to a significant reduction in the company’s revenues, lost jobs. JSC “Bank of Georgia” is intentionally fighting with us in dumping prices and expansion and monopolization of the market is carried out through financially unprofitable operations,

“- the companies state. Mikeladze notes that the Ministry of Economy has no other leverages but to call the appropriate authorities for response. “This is under the competence of the Competition Agency and the National Bank,” - says Mikeladze. She adds that she personally met with the representatives of the quick payment companies and acquainted with their problems, but at this stage the Ministry does not have other leverages. Recall that quick payment companies have already made several statements about their problems, including to the national bank. Recently quick payment companies have addressed Georgia’s Prime Minister, the Speaker of Parliament, the Minister of Economy, tax ombudsman, embassies and diplomatic missions. The statement’s authors say that the bank, which is the country’s leading commercial banking structure, is trying to bankrupt competitors.

POLISH ALUMINUM AND PLASTIC COMPANIES INTERESTED IN THE GEORGIAN MARKET

eorgian - Polish Business Forum to be held in Tbilisi in September. In September, the Georgian - Polish Business Forum will be held in Tbilisi. “Mimino Travel” company which is an organizer of the event states “Commersant” radio that approximately 12 Polish companies, which operate in aluminum and plastic doors - windows market, have expressed

their interest in the Georgian market. They say up to 25 Georgian businessmen and Economy Ministry officials will attend the Forum. According to “Mimino Travel’’, Forum is funded by the European Union [EU]. The purpose of the meeting is to bring together the Georgian and Polish businessmen and to acquaint them with the Georgian market. The Forum will be held on September 4 and 5.

BENISH GROUP TO LAUNCH OPERATION IN GEORGIA

eputy Minister of Finance David Lejava met with representatives of Benish Group. The holding successfully operates on the high tech market and has offices in several countries. The company wishes to enter on Georgian mar-

ket and search partners both in the state and private structures. Ministry of Finance informs that David Lejava introduced guests to investment opportunities of Georgia, existing tax legislation and expressed hope that the meeting will help holding representatives to get more information about Georgia.

AIR CAUCASUS TO COMPETE WITH TURKSIH AIRLINES

ir Caucasus will make first flight to Antalya on August 18. Round-rip travel costs $420. 4 regular charters are scheduled this season (18/08, 28/08, 5/09,

14/09). The flights will also be made to Astana (from 25.08), Cairo (from 26/08), Aqtau (from 2/09) and Istanbul (from 2/09). Newly brought Boeing (MD83) with 147 seats (12 business class) will serve to flights. The air company will bring second plane in 2 weeks.

One of the founders of Georgian-Singapore company George Kodua (former co-owner of National Airlines and Sky Georgia) suggests competing Turkish Airlines. He says that only Air Caucasus could dare choosing of these directions, unlike other market players. Air Caucasus is third Georgian air company on the market (Georgian Airways and Fly Georgia operate on the market). Eurasia Airlines, owned by Asonic Group, is its strategic partner 35% shareholder (although its share may be increased to 50%)

BARAMBO ACCUSES REGULATORY BODY OF IMAGE ABUSE

arambo accuses National Food Agency in irresponsibility. Candy producer company considers that false alarm made by agency due to withdrawal of the overdue aromatizers serves only to populism. Head of PR service Tako Saneblidze states that aromatizer, which had expiration date till the end 2012 (Agency stated that it expired in 2011) was stored for devastation; Revenue Service was informed about it in advance. She also said that certain number of barrels is collected for devastation, because this procedure needs workforce and appropriate technique. Single barrels are not devastated in any company. Nibladze says that in the informaiton released by Agency, the case deals to the aromatizer ofDan-

ish origin, also the comany uses German aromatizers. She also explains that Barambo is interested to maintain position on the market and management will not allow such violations. The company holds Georgian Quality Mark and also internaitonal ISO certificate, which requires meeting to premium brand requirements. Besides their partners are largest producers, among them Ar Callabout, which supplies Barambo with Beligian produced chocolate. Nibladze mentioned that each stage of industrial cycle is inspected, even withough inspection schedule of the Food Agency. On Thursday The agency released information about the withdrawal of 48 barrels of 25 liter Danish aromatizers during planned inspection.

CARREFOUR MAY UNVEIL THIRD ASSET IN TBILISI CENTER

arrefour new hypermarket may be placed in the trade center GTC, on the place of Populi. Trilateral negotiations among the trade network management and GTC owners are in the active phase. Supermarket networks Populi and Ioli marketing manager Lado Tsimakuridze also confirmed the information to GBC. “Negotiations are really going, n which all three sides are involved, although final decision has not been made yet”, - Lado Tsimakuridze states. Strategy change of Populi and Ioli manager company defined a decision to leave area in the trade center GTC. New plan of the management is to

enlarge network and focus on the small-size supermarkets “We make a decision due to new strategy. We want to transform to express format, to represent Populi and Ioli in all districts and in all regions”, - Tsimakuridze states. It’s noteworthy that one of the largest supermarket networks Carrefour has opened only one hypermarket in Georgia, located in the trade center Tbilisi Mall. French company already sated that in autumn they’re opening another hypermarket in the trade center Karvasla, which will replace Goodwill trade object.

INTERVIEW caucasian business week

August 26, 2013 #18

GIA KHUKHASHVILI: IT IS AN UNPLEASANT AND PAINFUL PROCESS, BUT TV CHANNELS WILL BE PROBABLY CLOSED An interview with Prime Minister’s advisor Gia Khukhashvili

- How would you assess the latest developments on the media market? Prime Minister’s statement is unrealistic - if “Channel 9” is not sold within 10 days, TV company will be closed. What does talk about the sale of the channel two months before the election mean? - Of course, TV channel will not be sold in 10 days, but maybe someone will be interested. Nobody speaks about direct sale and various procedures. Premier is not a man who puts the question this way.

As for shutting down the TV channel, it is a painful question for me, because there are many people who have contributed greatly to the process that occurred in the country. Taking care of the state, sometimes we have to make hard decisions. I think that this decision is painful, but correct - the National Movement, in any way, will try to discredit the election, which is of great importance for the future development of the country. The fact that television is in his ownership has worried Prime Minister for a long time, but I can tell you, he did not interfere in the editorial policy and gave maximum freedom to creative team. However, when we talk about the television, it is difficult to trust the word of a man. Due to its importance, this election is so special that if Prime Minister owns TV channel, the National Movement will launch PR campaigns and will try to discredit the electoral process by swearing “Channel 9”. Therefore, these risk factors should be removed, but the main fundamental reason is that his own media outlet burdens Prime Minister, as leader. I agree with Prime Minister that if a person is in politics, he should have no interest in the media becausethe political interest is an ugly system in itself. Premier made hard but objectively necessary decisionregarding “Channel 9”. In addition, Ivanishvili confirmed - he really wants a normal, open and democraticspace to open in this country and cat-

egorically rejects the use of administrative resources in any way. - It’s logical, but won’t getting rid of his own media outlet ahead of the elections have a negative impact on George Margvelashvili ‘s PR campaign? - When measured by standard stereotypes that the media and propaganda determines the fate of elections, then I might share this opinion. Unfortunately, this understanding of policy has been implanted in society for many years. In fact, I do not see the necessity of creating virtual reality and media manipulation. I think people should objectively make a choice depending on what the country needs today. If we speak of the number of media tools, the President has a big advantage today. In short, the most part of media space is still controlled by Saakashvili. It doesn’t matter “Channel 9” will be or not, the “National Movement” still has advantages, but it will not be decisive during elections. We must adapt to life when a political tool will not be found in the media. We generally must exclude political influence on televisions, and I hope the time will come soon when “Rustavi-2” comes out of Mikheil Saakashvili’s ownership. - Should we accept this fact that the vast majority of TV channels will be closed? - Unfortunately, it’s an unpleasant and painful process, but I think TV channels will be closed! - You might know, as Prime - Minister’s advisor, if

any investor is interested in “Channel 9”? - As far as I know, there was some interest and talks were held, but the ownership of television is a high risk factor. The purchaser should be a businessman and not a politician, Bidzina Ivanishvili does not negotiate with the buyer behind which he sees political interest. It’s a high-risk investment for a businessman, and the negotiations proceeded, it was even an attempt of selling the TV company, but none of the buyers made a decision. The turning of “Channel 9” into a commercial project is a long-term process. At least it will take one- two years. - At the time, Badri Patarkatsishvili transferred “Imedi” to the world’s best-known media holding “News - Corp”. Can’t Bidzina Ivanishvili bring a world renowned media group in Georgia? - It can be transferred under the management , but the project should be commercially interesting? At that time, “Imedi” was an attractive project, but today the situation on the market is different. All televisions are subsidized, none of them is commercially interesting, “Rustavi 2” that has taken the lion’s share of the advertising market, is confident that it will work continuously in such a manner. However, the process of distancing television from politics should start. As for the question, of course, such a manager can be found, but on one condition, the TV channels should be self-financing.

PAPUNA PETRIASHVILI: CENTRAL BUDGET TRANSFERS TO LOCAL SELFGOVERNMENTS MAY SHRINK An interview with the Deputy Mayor Papuna Petriashvili

-Tbilisi Mayor’s Office appealed to the City Councilwith a request to increase the budget. In what direction do you plan to increase spending if your offer is accepted? - Changes in the budget will not affect only one of areas, items or programs. Comprehensive changes are planned, which include social programs, improvement of kindergartens infrastructure, teachers’ salariesincrease, etc. There are also highly capital projects, including road construction and rehabilitation of water supply sys-

tems. We are talking about a comprehensive budget, which, as we plan, twill grow by 16-17 million GEL and will reach 740 million GEL. - What was the main reason for the increase in budget? - We have a surplus of 17 million GEL, mainly due to the tenders held in the recent past - in particular,400 tenders were held, in which we saved that amount. We also reallocated budget expenditures and saved 50 million GEL, so in general it turns out that we need to plan the expenditure of about 70 million GEL in addition. In particular, 17 million will be spent on the kindergartens program and 38 million GEL were allocated for this purpose. In general budget will spend 55 million GEL on preschools. This is a record amount, in previous years it was 2 times smaller. - What will 17 million be spent on? - First of all, kindergartens should be completely on state funding, without the complicity of the parents. In addition, the installation of heating systems in 150 kindergartens is planned as well as windows and doors updating. Rehabilitation of alarm kindergartens is also very important.

-What else do you plan to do in the city, except for the kindergarten program? - State funding of ambulance services will be increased- as the number of calls has increased by 1015%, we are going to add 10 more ambulances, 80 ambulances are operating in Tbilisi today. Another very important area is a municipal transport, purchase of new buses. We will begin to change municipal buses, now we’re going to announce a tender for the purchase of 100 modern buses, which will be adapted to the needs of people with disabilities. 13 million GEL will be spent for this purpose. We also plan to provide gas to the areas that have been recently joined to the town, as well as in places of compact residence of refugees. - Whether the budget envisages costs for major infrastructure projects? - We have only one major project that will have an impact on the image of the city - we plan to build a cableway in the center of Tbilisi. The tender will be announced in September, the project will be implemented in the spring of 2014. -Have you had any consultation with the City Council on these issues?

- We have already met with the Chairman of the City Council, as well as with the majority and the opposition. Finally, the issue will be resolved in the next few days, when a meeting of the Finance and Budget Committee of the City Council will be held. During consultations, I have not heard any significant and specific claims against us. It is possible that some adjustments will be made to the developed programs, but this is still the subject of consultation. - Whether you are working on the budget for 2014? - On November 14 the budget will be submitted to the City Council for consideration. Of course, a work on the budget will start earlier, at the beginning of September. We plan to study the project in collaboration with non-governmental organizations. In this case, much will depend on the country’s budget for 2014 - in particular, on how much will be allocated from the state budget. Although, in general ,we can assume that the trend of increasing transfers from the central to the city budget, as it was in the last 2 years, is likely will not continue.

“ALLIANCE CAPITAL GROUP”:BUSINESS WILL NEED 3-6 MONTHS TO RECOVER AFTER THE PRESIDENTIAL ELECTIONS An interview with Executive Director of the “Alliance Group Capital” Ayeti Kukava

-A few months ago, the Minister of Finance saidthat the influx of investment was expected in the summer. How do you think the situation has

changed after parliamentary elections and whether the influx of investment is being observed this summer? - I think that the opinion of investors has not changed - there are both positive and negative factors. More favorable conditions for a market economy can be considered as positive factors. While the adoption of several legislative changes without proper consultation with experts can be considered as negative. They have caused fluctuations in the business process. It is important that when making decisions regarding the business, the opinion of entrepreneurs was also taken into account as well as a constructive dialogue between the business and the state - in many cases it doesn’t happen. I also do not see signs of recovery, and I believe that after the presidential elections the business will need another 3-6 months in order to finally get back to the old rate of development. - Economic downturn was registered in June.

What do you think was the cause of this, and whether there is a threat to the continuation of this trend? - To attract direct investment is very important for the country’s economic growth. But foreign investors, of course, are closely following the internal situation in the country and the actions of local companies. Accordingly, we should not wait any major changes, except in the specified time. The process of business acclimatization is also very important. Under the new government, several taxes have changed that forced business to go to unplanned changes. For example, investors often made offshore investments, as they are well suited to the investment management. By the decision of the present government, offshore investments are subject to 15% tax, whereas before it made 5%. This is a significant increase. It is understood that this was done in order to halt the flight of capital to offshore, but it hurt foreign investors, including large international funds, one of

which invested $ 70 million in Georgia. The risk of recession will be exacerbated if the investment funds announced by the Prime Minister don’t work , and the implementation of infrastructure projects will not be resumed. -How do you think, will the opening of the Russian market bring any meaningful changes in the economy of Georgia? -The Russian market is large, but unpredictable, and we need a lot of time to understand how to use it.The fact that today Georgian goods are sold there does not mean that this process will continuetomorrow. Especially, in the backdrop when there is no unified control system, taxation regime, etc on this market. For example, if the company expects to export 1 million bottles of wine in Russia, takes appropriateupgrading, but for some reasons - economic, political, corruption - the market closes, it will put thebusiness in a difficult position. Therefore, at this stage it’s too early to make any conclusions.

STATISTICS August 26, 2013 #18

caucasian business week

PRODUCER PRICE INDEX FOR INDUSTRIAL PRODUCTS IN GEORGIA (JULY 2013)

n July 2013 the Producer Price Index (PPI) for Industrial Products decreased 0.6 percent over June 2013. The PPI decreased 3.0 percent over July 2012 and increased 58.5 percent over the 2005 average. The most significant contributions to the monthly PPI were made by changes in the price level for the following sections: Manufacturing: the prices decreased 0.7 percent contributing -0.61 percentage points to the changes in the overall index. The significant price decreases in this section were recorded for the subsections of manufacture of food products, beverage and tobacco products (1.7 percent), manufacture of transport equipment (11.4 percent), manufacture of other non-metallic mineral products (2.7 percent). Meanwhile, the prices increased in the manufacture of paper and publishing (16.2 percent). The most significant contributions to the annual

PPI rate were made by changes in the price level for the following sections: Manufacturing: the prices decreased 4.8 percent contributing -3.97 percentage points to the changes in the overall index. The significant price decreases in this section were recorded for the subsections of manufacture of basic metals and fabricated metal products (11.3 percent), manufacture of food products, beverage and tobacco products (3.1 percent), manufacture of other nonmetallic mineral products (9.5 percent). Meanwhile, the prices increased for the subsection of manufacture of paper and publishing (18.0 percent). The following table presents the Producer Price Index over the previous month and the corresponding month of the previous year, with the relevant contributions of the sections and subsections to the changes in the overall index. www.geostat.ge

ENERGY SECTOR RECORDS 179.4 MILLION USD FDI INFLOWS IN 2012

n 2012 the most direct foreign investments were made in Energy sector. According to Geostat adjusted data, last year $179,4 million direct foreign investment was made in energy sector, which is 20% of the total investments. Besides, in comparison with 2011, this data is 24,6 million less. In 2012, in comparison with previous year, direct foreign investment growing trend was mentioned in processing industry, agriculture and healthcare sectors. $167,0 million was invested in processing industry, which is 47,6 million higher in comparison with 2011. $162,6 million or 18% of the total investments were directed in financial sector.

$72,8 million was invested in transport and communication; $41,8 million - on construction; as for real estate, $40,1 million was invested in this sector which is 2,2 times less than in 2011. $17,7 million was invested in the hotels and restaurants sector, $17,6 million on healthcare and social assistance; 16,1 million in agriculture, fishery, 4,9 million in mining industry, which is 8,2 times less than 2011 data. Totally $190,8 million was invested in other sectors. Reminding that according to adjusted Geostat data; in 2012 $912 million direct foreign investment was made in Georgia.

FOREIGN TRADE TURNOVER REDUCED BY 2%

n 7 months foreign trade turnover equaled to 5,662 billion. According to preliminary Geostat data, January-July 2013 indicators are 2% less than 7 months data of previous year. In comparison with analogic period 2012, export amount increase by 9%, to 1,476 billion.

Import amount is $4,186 billion, 5% less in comparison with January-July 2012. Besides, negative trade balance in January-July 2012 equaled to $2,71 billion and 48% of the foreign trade turnover. This is a preliminary statistics. Adjusted data of Georgiaâ&#x20AC;&#x2122;s foreign trade turnover will be published on August 26.

BUSINESS & ECONOMY August 26, 2013 #18

caucasian business week

SUBWAY TO OPEN IN LATVIA, LITHUANIA, GEORGIA AND UKRAINE BY THE END OF 2013 in the U.K. in 2013 to take the number to 1,544, up from 59 openings in 2012. Growth may also quicken in the Netherlands, Finland and Sweden, where at least 20 stores have been opened in each country in 12 months. The company aims to be in Latvia, Lithuania, Georgia and Ukraine by the end of this year. Ukraine has similar growth potential to Romania, which has 16 stores after the first opened in April 2012, said Peter Mompalao de Piro, a Subway spokesman.

Brand Awareness

ubway, the closely held restaurant chain with more outlets than McDonald’s (MCD) Corp., plans to pick up the pace of openings in Europe by adding as many as 1,000 new locations in 2014. The sandwich shop operator has 4,018 stores in Europe, where it has continued to grow during the continent’s recession and wobbly recovery, Assistant Regional Director Mike Charest said in an interview. The Milford, Connecticut-based company has opened about 500 stores a year in

Europe for the past two years, and may add 800 to 1,000 next year. “Europe is the strongest, fastest-growing international market for Subway outside of North America, and will continue to be,” Charest said by phone from his Amsterdam office on Aug. 13. Subway’s strategy “works for us regardless of economic situation” by balancing affordability with high-quality food. The U.K. is at the “top of the list” for growth in Europe, with a goal to have 2,000 outlets by 2015, the executive said. Subway has added 63 locations

Strong brand awareness in the U.K., Russia and France helps development in those countries, Charest said. Subway plans to add 190 to 200 stores in Russia and 100 in France in 2014, maintaining the current pace. Growth in Italy, Denmark and Belgium, which have 17, 15 and seven stores, has been “more challenging” due to difficulties establishing the initial profitable franchises that fuel development, Charest said. Italy has “plenty of home-grown independents and chains to feed the market,” said Anya Marco, a director at London-based Allegra Strategies, a research consultant to restaurant companies including Subway. Belgium is hard for international restaurant com-

panies to enter because it’s a small market dominated by independents, while Subway’s difficulty in Denmark relates in part to a preference for established Danish chains, Marco said.

Room for Hamburgers

Subway’s European expansion doesn’t pose a problem for hamburger chains like McDonald’s and Burger King (BKW), given the company’s focus on deli sandwiches, Jack Russo, an analyst at Edward Jones & Co. in St. Louis, said in an interview. Similarly, Subway isn’t much of a threat to Yum! Brands Inc. (YUM), owner of the KFC and Pizza Hut chains, he said. “The pie is big enough for everybody,” said Russo, who has a buy recommendation on McDonald’s shares and advises holding Yum! Brands stock. Burger King’s revenue in Europe, the Middle East and Africa fell 10 percent in 2012 to $472.9 million even as 239 new locations brought the region’s total for the Miami-based company to 3,121. Same-store sales at Oak Brook, Illinoisbased McDonald’s fell 1.9 percent in July from the previous year in Europe, where it gets 40 percent of its revenue. Subway’s revenue in Europe increased 18 percent to $1.57 billion in 2012. Global store sales rose 9 percent to $18.1 billion. The company’s European expansion is part of president and co-founder Fred DeLuca’s aim to have 50,000 Subway stores worldwide by 2017. Subway opened shops in Ireland in 1994 and England in 1996, according to its website. It currently has almost 40,000 locations, compared with almost 35,000 for McDonald’s. Subway is owned by Doctor’s Associates Inc., which is co-owned by DeLuca and Peter Buck, a family friend who loaned a 17-year-old DeLuca $1,000 in 1965 to open a sandwich shop. The restaurant chain is valued at $5 billion, according to the Bloomberg Billionaires Index. Bloomberg

MATERIAL DEPRIVATION AND QUALITY OF LIFE IN THE SOUTH CAUCASUS Quality of life and life satisfaction has been a central topic in social science research, as well as an increasingly popular area of interest for many policy makers. Balanced development is especially important in developing societies where political and economic changes can impact social inequality, as well as material wealth and health. This post uses data from the Caucasus Barometer (CB) 2012, as well as the Life in Transition (LIT) 2010 survey (carried out jointly by the European Bank for Reconstruction and Development and the World Bank) to explore issues detrimental to the general quality of life in the South Caucasus region. These issues include the material situation of households (as reflected in the consumption of goods and services), and its impact on healthrelated indicators and general life satisfaction across the region. According to the 2010 LIT survey, the average amount of monthly savings was 1628 dram ($4) in Armenia, 7 manat ($9) in Azerbaijan and 10 lari ($6) in Georgia. However, the standard deviation from the mean was high for all 3 countries, which means there were substantial differences between the amounts of money saved by different individuals. This is also reflected in relatively high values of the GINI coefficient for income in these countries. The coefficient measures inequality in income distribution within a population. Across the region the values of the GINI index were 31.3 for Armenia (2010), 33.7 for Azerbaijan (2008) and 42.1 for Georgia (2012), as reported by the World Bank. Unequal income distribution and material deprivation are also apparent in differences in food consumption across all households included in the CB 2012. The survey asked about which of the following products households limits due to financial reasons: bread and pasta, butter and milk, poultry, beef, pork, fish, fruit and vegetables, potatoes, sweets and chocolates. From this list, 80% of households in Armenia, 66% in

Azerbaijan and 74% in Georgia cut down on the consumption of at least one type of food products due to financial constraints.

In terms of the purchases of goods and services such as electricity and gas, slightly more than half of Armenians (55% and 58%, respectively) and Georgians (52% and 55%, respectively) limit their consumption of these items due to financial reasons. Azerbaijanis seem slightly less likely to do so with 49% cutting down on electricity or gas use, yet the difference between the values reported for Azerbaijan and Georgia is within the margin of 3% error. Material deprivation, both in the case of limited food consumption or utilities (electricity, gas) is significantly higher in the rural areas. These differences are highest in Armenia and lowest in Azerbaijan, where the difference between material deprivation in the capital and other urban areas is non-significant. Living conditions, including material difficulties, can have a substantial impact on overall life satisfaction. An examination of the effect of food limitations on life satisfaction, while controlling for type of settlement (urban, rural and capital), gender, and age shows that across all three countries the necessity to cut down on food consumption has a significant negative impact on the general quality of life. Multivariate regression analysis shows that a cut in each additional food item results in a significant drop in the average life sat-

isfaction level. No cutback on food is used as a reference category in the model, while the other options included 1 to 9 indicating the food items. Gender is not found to affect the level of life satisfaction in any of the countries. Settlement type has an impact in Armenia and Azerbaijan where people living in the capitals declare, on average, significantly higher levels of life satisfaction than in the countryside.

Life satisfaction is not the only variable strongly related to material conditions. Depending on the economic situation of the household (e.g. those that need to limit food consumption, or other expenditures), the subjective assessment of individual health varies. People from poor households are significantly more likely to consider themselves to be in very poor or poor health. Causality is not established here though as poor health might be both the result as well as the reason for material deprivation.

The relationship between health and material deprivation is not a surprise and it has been wellresearched in the social science. However, it deserves strong emphasis, taking into account the high number of households that needs to restrict their food and utilities consumption in the South Caucasus. Monitoring changes in the material situation of households is thus of major importance. Analysis of a LIT 2010 question “My household lives better nowadays than around 4 years ago” shows substantial regional differences in this respect. According to the subjective individual assessment, the quality of life in Armenia and Georgia seems to have deteriorated rather than improved compared to around 4 year ago, whereas in Azerbaijan the assessment of the change in the household situation was more positive.

As the most recent LIT data come from 2010, the situation and standards of living in Armenian, Azerbaijani and Georgian households might currently be different. Yet, as the CB 2012 shows, most households still face material problems that force them to limit consumption of basic products such as food. Since there is a significant positive relationship between the financial situation of a household and individual health and wellbeing, all of these factors require special attention and long-term monitoring in the region. crrc-caucasus.blogspot.com

BUSINESS August 26, 2013 #18

caucasian business week

CONVENIENT PACKING AFFORDABLE PRICES!

atakhtari brewery’s beer and the saperavi and tarragon soft drinks are now available in 0,33L cans. This is expected to improve the company’s export potential. According to Marketing Director, Tornike Nikolaishvili, this packaging is an approved method around the world. The company’s goal is to introduce new packaging, industrial efficiency, and consumption culture on the market. More importantly, this will expand export potential for the Natakhtari Company and cover all market aspects previously inaccessible to them, such as airline companies and hotel mini-bars. “Because we are the leading brewery in Georgia, it’s our mission and responsibility to establish innovation on the market. We are the first among local entrepreneurs who bottle beer in 0,33L cans,” says Nikolaishvili. “As the can vindicates the coolness, it creates a breezy effect at first touch and a person drinks it before it gets warm,” he added. The price of the beer cans will be 1 Lari as the company wants to encourage the customers to shift to consuming smaller cans. An increase in the assortment of beer in 0,33L cans depends on how the Georgian population adjusts to this new packaging. “It’s the first step,” he added. In November 2012, Natakhtari brewery produced pear-flavored lemonade in 0,33L cans and has recently added two new flavors– saperavi [grape] and tarragon. The additions were determined by its popularity through sales. “The prices for lemonades are 0.50 Lari, however this is a promotional sale in order to move customer’s consumption towards this packag-

ing,” he said, adding that the concrete deadline for the sales price has yet to be determined and depends on customer buying habits. Nikolaishvili also noted that Georgian lemonades are very popular in several countries– particularly Natakhtari lemonades, which are exported to 20 courtiers outside the Caucasus, including Central Asia, Europe and the United States. “Some channels of distribution were unavailable to us, because we did not have 0,33L packaging before,” he explained. The company will enter the foreign market with their lemonade products first, and later on when the awareness of the brand and company is high, it will introduce its beer; as they believe in its potential on the export markets.

TBILISI INTERNATIONAL FESTIVAL OF THEATRE International Program

25,26 SEPTEMBER, 2013 “This one-night-stand by a trio of clowns as zany as any we have seen here for decades gave immeasurable delight to the capacity audience at Bats… ”

MEMBERS OF OUR LIMBS

Clown Show Devised by Jenni Kallo, Sampo Kurppa and Thom Monckton About performance: Members of Our Limbs is a frenzy of absurd and eccentric clowning. It follows the antics of three sporadically violent and markedly edgy characters as they are dragged unwittingly through their own show. Patterns of the ordinary world and principles and influ¬ences of clowning are put on an operating table and dissected. A suitable set of body parts are selected and a clown show is produced like you’ve never seen before. It’s wordless, highenergy, visual, and above all; it’s funny. Duration: 65 minutes Without Intermission Web-site: www.kallocollective.com www.tbilisiinternational.com www.facebook.com/TbilisiInternational

BANKING NEWS

PROBLEM LOANS EBRD PRESIDENT HAILS PORTFOLIO GEORGIAN COMMERCIAL BANKS struction and Development (EBRD) president REDUCED Suma Chakrabarti, who visited Georgia last

n the banks’ total portfolio share of problem loans was defined at 9% by August 2013 (first quarter 2013 - 9,5%). According to national Bank of Georgia’s statistics, in April-July amount of problem loans (non-standard, dubious, hopeless) is reduced by 11,8 million GEL, to 824 million GEL. Total portfolio of 20 banks equals to 9,168 billion GEL (first quarter 2013 - 8,8 billion GEL). Annual growth of the total credit investment is 8,3%, it was 20,9% in the analogical period last year.

BTA ENDS JANUARY TO JULY PERIOD IN LOSSES

SC BTA Bank completed January-July with 1,9 million GEL loss (01/07/13-1,8 million GEL). By August 1 bank’s deposits (without banks’ deposits) equal to 41,4 million GEL (01/07/13 - 42 million GEL), credit portfolio - 69,4 million GEL (01/07/13 -73 million GEL), overall obligations - 102,1 million GEL (01/07/13 - 102,4 million GEL). Bank’s actives are 127 million GEL, market share - 0,8%. BTA Bank operates since 2001. 49% of the stocks belong to JSC BTA BANK, 51% - t0 Silk Road Financial Group. Large beneficiaries are: fund Samruk Kazina (39,9%) and George Ramishvili (31,6%). Bank’s stock capital equals to 24,8 million GEL.

BANK OF GEORGIA PROFITS MARKED 75 MILLION GEL AS OF AUGUST 1

SC Bank of Georgia completed January-June with 75,2 million GEL profit (01/07/13 -59,3 million, 2013 first quarter - 24,014 million GEL). In 2012 bank’s profit was 134,349 million GEL. By August 1, bank’s actives equal to 5,209 billion GEL, market shar e- 34,6%. In April July actives have increased by 13 million (2013/ first quarter-5,186 billion GEL, 35,4%). Bank of Georgia Holding is a shareholder of Bank of Georgia since October 2011. Since February 28, 2012 Bank of Georgia Holding’s securities has been on the premium list of London Stock Market. Beneficiaries include: Firebird European Funds (7,2%), EBRD (5%) IFC (5%), Franklin Templeton Investments (8%). Invest bank completed 7 months with loss JSC Invest Bank completed January-July 2013 with 1,2 million GEL loss (2012 profit - 3,3 million GEL). By August 1, nonbanking deposit portfolio equals to 10 million GEL (15,9 million GEL in 2012), loans - 8,5 million GEL (6,9 million GEL in 2012), overall obligations - 16,5 million GEL (17 million GEL in 2012). Bank actives equal to 30,3 million GEL (32,2 million GEL in 2012), market share - 0,2% (0,2% in 2012). Invest Bank operates since 2003, 70% of the actives belongs to KSN Foundation, 30% - to TRENDFOR HOLDING LTD. Beneficiaries are Mikhael Hagen (70%), Brenda Patricia Cocksage (15%), Steven John Kelly (15%). Bank’s stock capital is 13,7 million GEL (15,3 million GEL in 2012).

August 26, 2013 #18

caucasian business week

n many countries fight to obtain and maintain stability of banking sector. Georgian reality is one of the best in this regard, among which I have seen during my visits”, - considers European Bank of Recon-

month and gave interview to Georgian Forbes. In the interview with Forbes, to prove stability of Georgian banking system, Chakrabarti recalled overdue loans statistics, which is 9,5% of the total loans in the case of Georgia, 20% - o Southern and Eastern Europe and this ratio creates serious problems to the banks of this region. “Georgia is in the better position indeed, therefore we got a great compliment. Although EBRD has also participated in the stability of the local banking sector - we were actively involved in this process. I’d add that National Bank of Georgia is focused to maintain price stability on the macroeconomic framework and they do a great job”, - Chakrabarti stated. Reminding that Georgian banking sector consists of 21 commercial banks.

COMMERCIAL BANKS ASSETS EXCEED 15 BILLION GEL

y August 1 overall actives of commercial banks equaled to 15,1 billion GEL (01/07/12 - 14,9 billion GEL). National Bank informs that overall actives (in the current prices) in the last reported month have increased by 127,2 million GEL (0,9%). Share of 5 largest banks in the total actives of the banking system equaled to 79,1% (01/07/13 - 79%). Own funds of the banking sector (stock capital)

equals to 2,6 billion GEL, which is 17,5% of the total actives of commercial banks. Contribution of the foreign capital in the total cashed authorized capital equaled to 74,2%. In July net profit equaled to 39,3 million GEL. By August 1 2013, Georgian bankig sector is represented by 20 commercial banks, among them 16 - with foreign capital contribution in the authorized capital, 2 - branches of the foreign banks. Former micro-finance organization FINCA entereed on the bank market in August.

DEPOSIT PORTFOLIO INCREASED BY 1,8% IN JULY

y August 1, 2013 Nonbanking deposit portfolio placed in the banking sector equaled to 8,7 billion GEL (01/07/13 - 8,5 billion GEL). Annual growth of deposit portfolio is 11,1% (01/08/12 - 35,5%). NBG informs that in July, in comparison with previos month, deposits on demand increased by 11.8 million GEL (3%) and fixed term - 38,1 million GEL (0,8%).

Deposits dollarization coefficient equaled to 61,9% (01/07/13 -61,7%). Average annual weighted interest rate on the fixed-term deposits equaled to 6,6% (01/07/13 -6,9%), among them on the deposits in national currency - 9% (01/07/13-8,4), in the foreign currency - 5.5% (01/07/13-6,5%). USD share in the foreign currency deposits equaled to 80,6%, EURO - 16,9% (01/07/13 80%; 17,4%).

CURRENT CONDITION OF COMMERCIAL BANKS’ LOAN PORTFOLIO

he volume of lending by commercial banks (including loans to nonresidents) in July 2013 decreased by 36.0 million GEL (0.4 percent) compared to the previous month, constituting 9.1 billion GEL by August 1, 2013. The volume of loans provided in the national currency increased by 64.5 million GEL (2.1 percent) and the volume of loans in foreign currencies decreased by 100.5 million GEL (1.6 percent). By the end of July 2013, commercial banks issued 836.1 million GEL worth of national currency-denominated loans (0.9 percent, or 7.2 million GEL, more than in the previous month) to resident legal entities and 3.9 billion GEL worth of loans in foreign currencies (2.6 percent, or 105.6 million GEL, less than the previous month). Of the total volume of lending to legal entities,

the biggest share falls on trade - 46.9 percent. Compared with the previous month, in July 2013 the volume of loans provided for trade decreased by 1.6 percent, or 36.6 million GEL, and constituted 2.2 billion GEL. The share of loans provided to the industrial sector constituted 19.6 percent of all loans to legal entities, amounting to 925.4 million GEL by August 1, 2013 (3.0 percent, or 29.0 million GEL, less than in July 1, 2013); 9.2 percent falls on construction, amounting to 436.5 million GEL (a decrease of 3.7 percent, or 16.8 million GEL). Therefore, 75.7 percent of the total volume of lending to legal entities falls on only three sectors - industry, construction and trade. The volume of lending to resident individuals increased by 2.1 percent, or 84.4 million GEL, during July 2013 and reached 4.1 billion GEL by August 1, 2013.

NBG ISSUED 270 MILLION GEL REFINANCING LOANS

n August 22, on the 7-day refinancing loans auction #34 of the National Bank of Georgia, loan of 270 million GEL nominal value was issued. Applications of 4 commercial banks were approved. Minimal and average weighted interest rate was defined at 3,75%, maximal - 3,79%. It’s noteworthy that NBG reduced refinancing rate to the record low level - 3,75% on August 14. Monetary policy mitigation trend is mentioned during last several months. The rate permanently decreases, based on inflation expectation. In May deflation was 0,1%, in April - 1,7%, in June - 0,2%, in July -0,2%. NBG informs that credit activity remains low in the country, which causes slowdown of joint demand. Low lending activity also interest rate channel for weakens monetary policy transmission.

BANKING SECTOR RECORDS 192.3 MILLION GEL PROFITS IN JANUARY TO JULY PERIOD

eorgian banking sector completed January-July 2013 with 192,3 million GEL profit (01/07/13 -153 million GEL). In July profit increased by 39 million GEL (by 20,4 million GEL in June). 13 banks are profitable, other 7 had loss. For the reporting period, banking sector’s own capital (stock capital) is 2,636 billion GEL (01/07/13-2,613 billion GEL). Supervisory capital equals to 2,716 billion GEL (01/07/13-2,7 billion GEL), capital adequace coefficient is - 17,7%- (01/07/13-17,7%). For the reporting period Return on Equity (ROE) is 12%, Return On Actives (ROA) - 2,1% (01/07/13- respectivelty 12,9%, 2,3%). Consolidated data includes results of 20 commercial banks. Former Micro-finance organization FINCA got banking license in August.

BANK CONSTANTA INVOLVED IN THE 5TH COMPONENT OF PREFERENTIAL AGRO CREDIT

ank Constanta involved in the 5th component of Preferential Agro Credit. Through this component 15-months loan issued for the company which will buy grapes for 1 GEL and above for the vintage. Subside budget is 25 million GEL. Portfolio is 50 million GEL, although in the case on need Ministry of Agriculture Project management Agency may increase it. 8 banks are involved in this component (Bank of Georgia, TBC bank, Bank Constanta, Cartu, Basis Bank, Pro Credit and Halyk Bank). Wine makers will get loan up to 100 000 GEL for 15%, from 100 000 GEL for 14%. Annual interest rate of the credit up to 10 million GEL is defined at 13%. 9% is subsidized. This component was launched on August 12 and will complete on November 1. Ministry of Agriculture started Preferential Agro Credit project, initiated by Prime Minister in March and over 65 million GEL is issued in the framework of I, II and III components. Contractors (Georgian Leasing Company, TBC Leasing) have not received applications on the IV component (leasing), added in July. Constanta’s Agro Credit portfolio equals to 690 000 GEL by July 1.

PUBLICITY August 26, 2013 #18

caucasian business week

10 PEACH EXPORT FROM ARMENIA EXCEEDED 600 TONS

he volumes of the peach export from the Republic of Armenia have exceeded 600 tons. The volumes of the tomatoes export are getting closer to that figure. This was reported to Armenpress by the Deputy Minister of Agriculture of the Republic of Armenia Robert Makaryan. “By this moment 637 tons of peaches have been exported and the storage volumes have made 361 tons”, - said Robert Makaryan. The Deputy Minister of Agriculture of the Republic of Armenia informed as well that by August 22 586 tons of tomatoes have been exported from the Republic of Armenia and 3900 tons have been stored. On August 9 the storage process of the tomatoes and peaches has been launched in the Republic. Before the storage, visits were made to the large processing companies. After the hail fall the expected volumes of the peaches and apricots were once more estimated. ARMENPRESS

BOOKS EXPORTED FROM ARMENIA TO MOZAMBIQUE

n the first half of 2013 the export volumes of printed books, brochures, leaflets and similar materials from the Republic of Armenia have increased by about 20% in comparison with the same period of the year of 2012. According to the data provided by the State Revenue Committee at the Government of the Republic of Armenia, during the first six months of 2013 6,7 tons of books were exported from Armenia in comparison with the 5,6 tons of the same period of the previous year (2,3 tons to USA, about 2 tons to the Russian Federation, 1,2 tons to Georgia and 425 kilograms to Mozambique). As reported by Armenpress, the export volumes of printed books, brochures, leaflets and similar materials from the Republic of Armenia in the first half of 2013 have increased nearly twice in comparison with the same period of the previous year, making 4,2 tons from 2,2. In the first half of 2013 the total export volume from the Republic of Armenia made $710,395,000. ARMENPRESS

ARMENIAN JERMUK AND CZECH KARLOVY VARY TO COOPERATE

ice Prime Minister of the Republic of Armenia, Minister of Territorial administration Armen Gevorgyan on August 22 hosted the delegation of Czech Karlovy Vary region headed by Governor Josef Novotný. “Armenpress” was informed public relations department of the ministry that at the meeting were present head of Vayotz Dzor region Edgar Ghazaryan and mayor of Jermuk Vardan Hovhannisyan. The delegation visited Vayotz Dzor region, Jermuk, discuss possibilities of cooperation between Karlovy Vary and Jermuk city. Vice Prime Minister expressed satisfaction that friendship relations between Armenia and Czech Republic will be transferred to interregional level. He noticed that Jermuk and Karlovy Vary have many commonalities and they may have interesting and effective cooperation. He informed about tourism programs implemented in Armenia noticing that the experience of Karlovy Vary which has tourism traditions can be useful for Armenian colleagues. The guests mentioned that they are interested in cooperation and are impressed with nature and recreational opportunities of Jermuk. Governor Josef Novotný introduced information about the region mentioning that it annually receives almost 500 000 tourists. He also offered to discuss the opportunity of establishing direct air link with Karlovy Vary which will be favorable for development of tourism between the two sides. At the meeting the sides expressed readiness to support the implementation of mutually interesting projects. ARMENPRESS

ARMENIA August 26, 2013 #18

caucasian business week

SUZE LA ROUSSE WINE UNIVERSITY TO SUPPORT ARMENIAN WINE-MAKING

row of notable experts in the field of wine-making from Suze la Rousse Wine University in France will be engaged in the process of development of Armenian winemaking. The Director of the Industrial Development Foundation Hayk Mirzoyan stated this in a conversation with “Armenpress”. Among other things the Director of the Industrial Development Foundation Hayk Mirzoyan noted that the delegation from Rhône-

Alpes will participate in the upcoming V Wine Festival in Vayotz Dzor, which is scheduled to be held on August 4-6 of the current year. Within the framework of the aforesaid festival a wide scope of issues regarding the Armenian-French winemaking projects will be under discussion. The Wine University, in Suze la Rousse, organizes technical, oenological and commercial training useful to all professions in the world of wine. Amateurs are also widely welcomed on Weekends to learn wine-tasting and the pleasures

of taste. The Wine University in Suze la Rousse opens up an original training program to all who are looking for a reputation as a Connoisseur of the wines of the Rhône Valley. A not-for-profit structure, it has as partners, amongst others, the General Syndicate of Winemakers of the Côtes du Rhône, the Conseil Général, Professional Syndicates... It has accomplished the almost unique (in the world, we would like to specify) experience of bringing together in one spot an oenologyagronomy laboratory, a learning and advanced training center in all the wine and wine-making disciplines, a resource center and a conference center. More than two hundred students and two thousand people, in permanent training, come there every year and they have an extraordinary working tool. The University of Wine delivers diplomas, in partnership with other universities, and also ensures a permanent formation for professionals with training courses of short duration. But also training courses during the weekend, for the very many amateur oenophiles, who come there for pleasure while learning, in Suze la Rousse, the art of tasting. ARMENPRESS

RUSSIAN AMBASSADOR TO ARMENIA VISITS GEOPROMINING PLANT

eoProMining, a diversified international mining group (GPM or the Company), said today that Ambassador of the Russian Federation to the Republic of Armenia, Ivan Volynkin, has visited one of GPM’s Armenian assets – the Ararat gold extraction plant. During the tour around the facility Mr. Volynkin visited the production site and met the management of GPM Gold to discuss the current state of affairs and prospects of the company’s development in Armenia. Mr. Volynkin was appointed Ambassador of the Russian Federation in the Republic of Armenia in May 2013 and this is his first visit to the production sites of GeoProMining, which is a major Russian investor to Armenia. The Ararat gold extraction plant is currently undergoing a

large-scale modernization, which includes the construction of a new ore processing line using innovative Albion technology. This project when completed will increase the plant’s production volumes and efficiency several times. “It has been very interesting to get to know GPM’s activities in Armenia. I am pleased with both business and social aspects of its performance in the country. Its transparency, reliability, competitiveness and, definitely, its great personnel are the key indicators of the company’s great prospects in Armenia. I am confident that as an advanced business that is making its considerable contribution to a wide range of the Russian-Armenian relations GPM will be developing further in the interests of friendship and for the benefit of our nations. It will be my pleasure to keep in contact with the management and the employees

of the company,” said the Ambassador. “We are always pleased to welcome honourable guests at our plant. For many years GPM has been maintaining close working ties with the Russian diplomatic mission in Armenia. We have been conducting joint social projects and participating in promoting the Russian language in Armenia. GPM is grateful for the granted support and as a good-faith investor we are happy to contribute to strengthening the relationships between Russia and Armenia,” said Vladimir Kozlov, CEO of GPM Gold, one of GPM’s assets in Armenia. GeoProMining, founded in 2001, is an international, privately held company with a diversified base of gold and other metals assets. GeoProMining has mining businesses in Armenia and the Russian Federation. ARKA

UNION OF CANNERS AND JUICE MANUFACTURERS FOUNDED IN ARMENIA

n August 21 in Ministry of Agricultur of Armenia took place the founding meeting of “Union of canners and juice manufacturers of Armenia”. “Armenpress” was informed from public rela-

tions department of the ministry that before the signing of the founding treaty minister Sergo Karapetyan welcomed the idea of uniting of processing sector companies. “The improvement of agricultural production system demands more reliable processing, more flexible orientation towards markets, greater attention on quality of the products which will be possible to organize only in case of great unions and highlighted cooperative interests,” said Sergo Karapetyan noting the experience of developed European states. The minister also stressed that the necessity of circumstance of being one legal entity with processors for more protected and civil relations with newly formed village cooperatives. After that 26 processing companies and State Ag-

ricultural University of Armenia signed the treaty, established the statute elected the president of the union who will be substituted on a two-year rotation basis. The newly formed union declared its aims which refer to progress of quality of juices, fruit and vegetables canings, the progress of Armenian production rate with joint efforts in target markets, improvement of legislation of the sphere, participation in international exhibitions, conferences and forums. The minister congratulated the members of the union on occasion of the formation of the body and its first president Ervand Tahverdyan wishing effective work. ARMENPRESS

EXPERT: OPENING OF ARMENIA-TURKEY BORDER WOULD SPUR ARMENIAN ECONOMY’S DEVELOPMENT

he opening of Armenia-Turkey border would spur Armenian economy’s development, Caucasus Institute Director Alexander Iskandaryan said Thursday at a news conference. Turkey and Armenia have had no diplomatic ties since Armenia became independent from the Soviet Union in 1991. Turkey closed its border with Armenia in 1993 in a show of support for its ally, Azerbaijan, which had a dispute with Armenia over Nagorno-Karabakh, the ethnic Armenian enclave of Azerbaijan.

There are several sensitive issues complicating the establishment of normal relations between the two countries, particularly Ankara’s blatant support of Azerbaijan in the Nagorno-Karabakh conflict resolution process and Turkey’s refusal to acknowledge the mass killings of Armenians the Ottoman Empire as genocide. “The opening of borders between Armenia and Turkey would have favorable impacts on Armenia’s economy, since it would open other markets for Armenian goods,” Iskandaryan said though finding prospects for settlement of this matter in

the near future very low. “Of course, theoretically this border will be opened sooner or later – there are no borders closed forever,” he said. “I don’t know when it will happen, but I see no signs of this process now.” In his opinion, Turkey is now concerned about its domestic problems rather than about its border with Armenia. “Although the United States, the main sponsor of this process, continues its efforts to open the border, but it has few levers to propel the process, or has no levers at all,” the political analyst said. ARKA

AZERBAIJAN August 26, 2013 #18

caucasian business week

AGRICULTURAL SECTOR NEEDS PRIVATE INVESTMENTS TO REALIZE ITS POTENTIAL

zerbaijan’s government currently pursues a policy aimed at economic diversification, capitalizing upon the country’s non-oil wealth. Experts agree that favorable soil and climatic conditions, relatively cheap labor and access to rail transport turn the agricultural sector into a major priority of the domestic non-oil economy. More than half of the Azerbaijani population lives in the regions and agriculture has the largest share of employment, as 38 percent of the population is employed in this sector, which enjoys extensive assistance of the government. The establishment of agro-parks, the specialization of areas on production of agricultural goods, and introduction of information technologies in the process of production of agricultural produce have been defined as the highlights of the state policy on the development of the agricultural sector in the fast-growing South Caucasus republic. However, the agriculture sector is not strong enough to attract necessary financial resources for development despite the state support. Currently, mainly universal banks provide banking services to the agriculture sector in Azerbaijan. Different models are applied in the world to increase support of the financial sector to agriculture, with different combinations of public and private presence. Expert at the Support for Economic Initiatives Public Union Samir Aliyev said that in the non-oil economy the agricultural sector has the greatest potential for development and economic diversification. But the sector needs to attract financial resources to ensure the required level of development. According to Aliyev, the main obstacle here is that commercial banks are not interested in lending to the agricultural sector, which is evidenced by the low proportion of the agricultural sector in the total loan portfolio of banks. Currently, only 5 percent (671 million manats a year) of the loan portfolio of the banks operating in Azerbaijan accounted for the agricultural sector, while the share of consumer loans is 37 percent.

The banks apparently lack interest in agriculture due to high risks and beware of losing their money. The banks often are not interested in lending to farmers, because they have nothing except land and investments, which do not pay off immediately in this sector. For example, Aliyev said, one should wait several years for the wine-growing crop to yield. In case a loan is received, it must be paid the next month. Therefore, entrepreneurs working in the agricultural sector often face challenges related to the repayment of loans. The expert offers several measures to ensure the interest of the banks in agriculture funding, including establishment of a guarantee fund. Such a fund may provide guarantees to banks by paying compensation in case of potential problems with the repayment of loans. Also, mechanisms of insurance in the agricultural sector can be considered here. For example, crop farmers are insured against floods and fires in Azerbaijan. But due to certain problems crop at all cannot be produced, otherwise, prices could fall sharply. Farmers need insurance against such situations. The potential of the Azerbaijani agricultural insurance market is estimated at 100 million manats (about $127 million). The market could grow by at least 20-30 percent, as a new field of activity will emerge after the new law on “Insurance of agriculture” is passed. In this regard, the Azerbaijani Finance Ministry has reached a preliminary agreement with the International Finance Corporation (IFC) and the Swiss State Secretariat for Economic Affairs (SECO) to implement a project on applying an international model of agricultural insurance by adjusting it to the requirements of the Azerbaijani market. Finally, the creation of a specialized agricultural bank in Azerbaijan would be a way out in this regard. The bank should specifically engage in lending and the development of the agricultural sector. Earlier discussions were held on setting up such a bank on the basis of Agrarcredit organization or a separate bank in Azerbaijan. The Azerbaijani government conducted consultationswith the World Bank, the IFC, EBRD and other international financial institutions, but no result has been achieved so far.

Agrarcredit’s main shareholder is the Finance Ministry, which owns 99.9 percent of shares in the credit organization, while the rest is divided equally between Azersigorta state insurance company and Irrigation and Water Management. Expert Ogtay Haqverdiyev, in turn, believes that to ensure the interests of the banks it is necessary to set up large agricultural farms. Large farms will have equipment, large livestock farms, etc., that is, they will turn into major agricultural enterprises that the banks will be interested to work with. The government has already created several large agricultural enterprises. New companies have all the necessary equipment and there is a high yield. The creation of specialized farms on viticulture, grain, cotton growing and other fields would be the next step in this regard. Haqverdiyev believes it is necessary to create specialized enterprises as farms engaged in all types of agricultural activity are not effective. “The state, based on the example of established businesses shows how you can create civilized farms with high yields. This practice will give an impetus to the development of the agricultural sector in our country. Tourism can be an example to see that governmental intervention leads to positive change. Tourism development has been the private sector worldwide. Due to the fact that in the private sector tourism in Azerbaijan is not developed, the state began to build major tourist destinations, especially in the north and the south (of the country). Once the infrastructure for tourism was created, the private sector began to build hotels and small tourism centres,” Haqverdiyev said, noting the need to develop the agriculture sector in a similar scenario. Experts assure that if the above-mentioned issues are resolved, the agricultural sector will receive the necessary funding. Currently, 871,220 rural farms and households, 2,343 agricultural enterprises, 2,593 farms of individual entrepreneurs, and 531 ventures processing agricultural products operate in Azerbaijan. The State Statistics Committee reported that in JanuaryJuly 2013, the volume of agricultural production in the real prices amounted to 2.123 billion manats, increasing by 4.9 percent in comparison with the same period of 2012. The growth of crop production amounted to 4.5 percent and that of the livestock production made up 5.1 percent. About 587.2 million manats were allocated in subsidies in Azerbaijan under the state support to agricultural producers in 2003-2013. The amount of funds allocated from the state budget to the agriculture sector reached a record high of 468.2 million manats ($596.4 million) in 2012, compared to 444.7 million manats (nearly $566.5 million) in 2011. The development of the agriculture sector, which is measured in terms of food security, is one of the main directions of the “Azerbaijan 2020: Vision of the Future” Development Concept.

AZERBAIJANI BANKING SYSTEM SEES POSITIVE TRENDS

zerbaijan’s economy and banking system maintained the attractiveness for foreign investors in the first half of 2013. In a report on financial stability in January-June, the Central Bank of Azerbaijan (CBA) said that the funds attracted from nonresident banks and international financial institutions rose by 16.2 percent to over 2.686 billion manats by the late second quarter of 2013. “The specific share of the funds attracted from abroad in total liabilities is below the historical high, as the figure was 17.5 percent at the end of the first half of 2013. The historical maximum was recorded in January to September 2012 at the level of 17.9 percent,” the CBA report reads. Overall, the growth of the resource base of the Azerbaijani banking system in the first half of 2013 was ensured mainly by leveraging internal funds. In this period, liabilities of the banks grew by 1.6 percent (241.1 million manats) and amounted to 15.329 billion manats as of July 1. The total volume of funds attracted by the banks in the domestic market grew by 6.6 percent, reaching 11.400 billion manats, which makes up 74.4 percent of the banks’ liabilities. The population’s deposits in the country’s banking system grew 15.8 percent to 5.922 billion manats, and their share in the total volume of the banks’ liabilities was 38.6 percent. The CBA also notes positive changes in the structure of deposits on terms. Time deposits increased by 1.249 billion manats, while call deposits by 302 million manats. The share of time deposits in the total volume of deposits remained at 80 percent. The increasing public confidence in the domestic banking system paved the way for the growth of the portfolio of deposits invested for the long term and those held in the national currency.

In the first half of 2013, long-term deposits increased by 26.7 percent up to 42.4 percent of the total deposits. Deposits in the national currency over the past year increased by 21 percent, reaching over 3.583 billion manats, which accounted for 60.5 percent of the total deposits. The figure was 58 percent in early 2013. The CBA also said that the depth of the banking sector continued to grow in the first half of 2013. The ratio of bank assets to the country’s GDP over the past five years has increased by 40 percentage points to 67 percent. Earlier, CBA Chairman Elman Rustamov said that the central bank expects this figure to hit 100 percent in the next 10 years. By the end of the first half of 2013, the assets of the banking sector reached 18.19 billion manats, increasing by 1.66 billion manats or 10 percent. The volume of loans which account for 74 percent of the bank assets increased since the beginning of the year by 12.5 percent to 13.42 billion manats. Despite a 1.9 percent decrease in the amount of funds attracted from the financial and other sectors, the contributions of private individuals increased by 15.8 percent to 5.92 billion manats. The CBA also reported that the banking system sees a reduction in the level of concentration. According to the report, the share of large banks (included in the top five banks in terms of capital) in the banking system’s total assets decreased from 57.8 percent at the beginning of the year to 52.1 percent as of July 1, 2013, while the share of investments in credit to the economy -- from 54.2 to 51.6 percent. The report cites keeping the trend of the declining Herfindahl-Hirschman Index, which began in 2008-2009. The index, which assesses the degree of concentration of the banking market, is average.

The capital base of the banking system continued to strengthen and the indicators of capital adequacy of the banking system were at an acceptable level. The total capital of the banks increased by 11.7 percent (or 301.2 million manats) and amounted to over 2.883 billion manats. The main source of growth in total capital was capital stock, the share of which amounted to 79.5 percent (the figure was 81.6 percent in the beginning of the year). The authorized capital of the banking system increased by 8.1 percent (or 171.4 million manats). Investment in shares (equity) and intangible assets of subsidiaries and other credit institutions amounted to 330.2 million manats (the figure was 302.6 million manats in the beginning of the year). The expansion of the regional network of the financial and banking system of Azerbaijan continued, according to the CBA report. In the mentioned period, the number of bank branches in the country increased by 26 to 676, while that of bank divisions - by two to 134. As of July 1, 43 banks operated in Azerbaijan. In July, Moody’s Investors Service kept the outlook on Azerbaijan’s banking system as stable. The key drivers of the outlook included a favorable operating environment, improving asset quality and sufficient capital buffers to absorb losses.

AZERBAIJAN’S CAR IMPORTS FROM GEORGIA INCREASE

round 1,900 cars worth a total of $189.55 million were exported from Georgia to Azerbaijan in the first six months of 2013, the Georgian statistics body, GeoStat, reported. According to GeoStat, the share of goods of this category amounted to 56.95 percent of the total volume of Georgia’s exports to the neighboring country. The volume of car exports from Georgia increased by 25.85 percent compared to the same period of 2012. For comparison’s sake, 15,400 cars were exported from Georgia to Azerbaijan in January-June 2012, which amounted to $150.62 million. 1,780 trucks were exported to Azerbaijan for a total amount of $11.92 million in the first half of 2013, which is 28.64 percent below the figure reported in the same period of 2012. Around 1,540 trucks totaling $16.7 million were exported from Georgia to Azerbaijan in the first six months of 2012. In January-June 2013, Georgia exported goods worth about $332.81 million to Azerbaijan. The figure was 26.9 percent of the total volume of the country’s exports during the reporting period. According to GeoStat, the exports to Azerbaijan increased by 17.5 percent compared to the same period of 2012. Georgian goods worth about $283.23 million were exported to Azerbaijan in January-June 2012. Georgia’s total exports amounted to $1.24 billion in January-June 2013, increasing by 9 percent compared to the same period of 2012.

SOCAR GEORGIA GAS CONCLUDES GAS NETWORK CONSTRUCTION IN ADZHARIA

OCAR Georgia Gas has held an opening ceremony to mark the finalization of construction of a gas pipeline in the Adzhariya Autonomous Republic, Georgia.,AzerTag state news agency reported.The event was attended by Georgian Energy Minister Kakha Kaladze and employees of the company. The 17km-long gas network will enable 900 potential users to get connected to the gas pipeline. According to the plan of the Georgian Ministry of Energy and gas companies, more than 86,000 families (252 in the villages) in Georgia will be provided with the natural gas by the end of 2014. Company “SOCAR Georgia Gas”, as a daughter company of the “SOCAR Energy Georgia”, was established in August 2007 with the aim of making its relative contribution to the market of natural gas in Georgia. The company is carrying out import and selling to the social and commercial users. Within the framework of the agreement concluded between the Ministry of Economic Development of Georgia and “SOCAR Georgia Gas”, the company is implementing construction of new gas pipelines and rehabilitating the existing ones in populated areas of various regions of Georgia.

NEW STEEL PLANT TO BE BUILT IN BAKU

aku Steel Company, the biggest producer of construction re-bars in the domestic market, has signed a contract with the Austria-based Siemens VAI company for the construction of a new steel plant in the port of Hovsan, a settlement in the Azerbaijani capital Baku, the company’s head, Rasim Mammadov, said in an interview to the official press published on August 21. According to the interview, the 100 million euro contract envisions an increase of the plant’s production capacity up to 750,000 tons per year, as a result of consistent implementation of the casting technology. The steel foundry is planned to produce steel square stock of 130 to 260 millimeters, as well as raw materials for pipes of the 110-350 millimeters diameter, which will be used by the Azerboru company. Mammadov said that commissioning of the plant will allow to open more than 1,000 jobs. During the last two years $45 million have been invested in the construction of new and revamping of existing sites, which has resulted in an increase of the company’s annual capacity to 770,000 tons. The company intends to start production of angles, channels, double tees, rolled wire, wires and other steel products, along with various re-bar profiles. Baku Steel Company plans to invest an additional $30 million to increase its capacity up to 1,100,000 tons of steel this September. According to Mammadov, the plant is carrying out extensive upgrade work. “A large laboratory complying with the highest standards has already been deployed. The plant is being equipped with modern equipment delivered from Germany, Spain and Italy. After completion of the renovation work, on September 25, we will be able to reach the capacity of 1.1 million tons per year,” Mammadov said. Baku Steel Company, the first up-to-date steelworks in the Caucasus region, started operation in June 2001. The company has an experience of exporting its goods to Russia, Georgia, Turkmenistan and Iran. The company uses an electric arc furnace (EAF) with the application of alternative energy supply, which is widely used in Germany, USA, France, Italy and other developed countries, a ladle-furnace, and a cutting-edge continuous casting machine (CCM). Using a state-of-the-art steelmaking and continuous casting technology, the company produces different grades of steel billets with cross sections of 120x120, 140x140, 150x150 mm and the length of 12,000 mm, and hot-rolled re-bars with diameters ranging from 10.0 to 32.0 mm with the length of 6,000 to 12,000 mm.

CIS caucasian business week

August 26, 2013 #18

RUSSIA’S FIRST YEAR IN WTO: SHORT-TERM PAIN TO GET LONG-TERM GAIN?

year after Russia was officially admitted to the WTO, the aftermath doesn’t look rosy. Agriculture and food industries are suffering and the EU is attacking the country for alleged violations of the membership rules. However, analysts promise WTO fruit will come to Russia in about 3 years. The world’s sixth largest economy – Russia - officially became the 156th member of the WTO last August 22 , after an unprecedented 19 years of negotiation. One year on, and the effects of the membership are largely disappointing. Trade turnover shrank 0.7 percent in the first half of 2013. Exports fell by 3.8 percent, while imports increased by 4.4

percent. In line with pre-admission expectations, Russia’s food and agriculture are now clearly suffering the most, as the country’s producers haven’t yet become competitive enough to resist growing imports. In the last six months, the import of milk and cream to Russia increased by 15.5%, milk powder - by 47.7%, butter - by 12.5%, cheese and cottage cheese - 10%, according to the Federal Customs Service. The pain of getting used to a new economic reality was largely expected, with the headline statements saying prior to Russia’s admission that the country’s federal budget would lose about $14 billion in lost tariff revenue during the first two years. In the wake of the recent pressure against

KAZAKHSTAN EXPECTS 6-PERCENT GDP GROWTH IN 2013

he economic growth in Kazakhstan will hit 6 percent in 2013. “According to our forecasts, the economic growth will be stable in 2013. We expect the negative impact of global economic instability to be less significant than in 2012,” Dosayev said. “A 6-percent GDP increase can be achieved if positive dynamics growth is observed in industrial sectors and the relevant bodies implement active policy.” Dosayev said the economic growth in Kazakhstan was 5 percent in 2012. The growth of retail trade turnover was 12.8 percent. The foreign trade turnover in 11 months of 2012 increased by 10.9 percent and amounted $125, 2 billion. Export of goods hit $84.9 billion, which exceeds the 2011 figure by 6.3 percent and import hit $40, 3 billion, which exceeds the 2011 figure by 21.9 percent, Dosayev said adding that the inflation rate was only 6 percent compared to 7.4 percent in 2011. Kazakhstan’s trade turnover with the Customs Union member states - Russia and Belarus

-- reached $22.1 billion in 11 months of 2012, which 4.8 percent more than in 2011. Speaking about the future plans of the ministry, Dosayev said that the main goal before Kazakstan is to enter the rank of Top 30 developed countries. “The Kazakh Ministries of Economy and Budget Planning and Protection of Environment are working over the strategy on transition to green economy, which aimed at protection and rational utilization of the natural resources in various fields of economy,” Dosayev said. Dosayev stated that a road map also was developed to provide employment and growth of economy in crises. As a part of the road map, it is planned to attract the foreign investments in the various sectors of the Kazakh economy, and improve the investment climate. Also, a law on state-private partnership and concept on new budget policy are planned to be developed to ensure macroeconomic stability and economic growth, to maintain welfare of population and to increase the effectiveness of budget utilization, Dosayev said.

INDONESIA SEEKS ENERGY COOP WITH KAZAKHSTAN

azakh Economy and Budget Planning Minister Erbolat Dosaev and his Indonesian counterpart Muhammad Hatta Rajasa discussed economic cooperation between two countries in Jakarta, the Kazakh Ministry reported.

During the meeting, Rajasa said his country is interested in cooperation with Kazakhstan in transport, logistics, trade, investment, agriculture, oil and gas, and tourism. Dosaev in turn said that Indonesia occupies an important place in the Asian direction of Kazakhstan’s foreign policy. “The potential for mutually beneficial cooperation is great,” Dosaev said. According to Dosaev, the trade turnover between Kazakhstan and Indonesian almost tripled in the first half of 2013 compared to the same period of 2012 and hit $150.5 million. The volume of mutual trade between Kazakhstan and Indonesia was $23.828 million in 2010. In 2011 its level reached $35.1 million and in 2012 - $57.3 million. A meeting of Kazakh-Indonesian intergovernmental commission on economy cooperation took place in Jakarta during the visit of the Kazakh delegation.

the trade agreement, some of the country’s officials have said the loss would be bigger – about $15 billion. “…short-term, over the first two or three years, membership of the WTO can be expensive in terms of lost revenue and the cost of changes. But after that the membership benefits should start to appear and be a major positive catalyst for the economy long term,” Chris Weafer, a senior partner with Macro-Advisory.com, told Business RT. “It is a case of short term pain to get long term gains,” Weafer added. Earlier this week the rating agency, Moody’s, said that Russian companies will not feel the effects from the WTO membership until 2016. “The WTO is expected to give synergy to the Russian economy. But synergy doesn’t work in one year. Even a merger of companies starts working in three years. It will take longer for the state to get acquainted with all the rules and take advantage of all the legal procedure that the WTO provides for Russia”, a partner at Goltsblat, Vladimir Chikin concluded talking to RT.

Fruit to ripen

The World Bank estimates that membership could add an additional 3.3 percent to overall gross domestic product, or about $65 billion in the first three years. This is expected to rise to an 11 percent benefit, or $220 billion, within a decade after WTO membership. Moscow’s New Economic School projected a sustainable 0.5 percent addition to annual GDP growth as a membership benefit. The weak global economy is a big part of Rus-

sia’s missed targets, Weafer explains. “…the WTO calculation is based on so-called normal trading conditions whereas Russia’s economy has been slowing for the past year and the EU, Russia’s biggest non-energy based trading partners, has also been on the edge of crisis. So there have not been normal trading conditions and that also has acted against Russia accruing membership benefits so far,” the expert says.

Blocking points

“The World Bank’s calculation is based on full compliance with the membership rules both by Russia and its trading partners plus the timely implementation of the tariff changes. Instead we see that there are quite a few disputes which are blocking the benefits of WTO membership,” Weafer says. While the newly accepted members are supposed to be granted a sort of a 6 year transition period to adapt to the trading body rules, the global economies didn’t give Russia such a “grace period”. Only three months later the European Union, Japan and the United States started formally criticizing Russia for maintaining trade barriers that appeared to be inconsistent with its WTO commitments. After less than 11 months of membership, the largest WTO members including the EU, China, the US, Turkey, and Japan united the first WTO case against Russia over a recycling levy on imported vehicles. No other country has ever been accused of a violation so early in its membership. For comparison, in China’s case, it took over two years before the US initiated the first WTO dispute against China, BNE reports. rt.com

NEW SEA PORT IN TURKMENISTAN TO BRING ASIAN-EUROPEAN ECONOMIC COOP TO NEW LEVEL TRACECA

new international sea port which will be constructed in Turkmenistan’s Turkmenbashi city on the Caspian Sea will become an important link to form state-of-the-art transport infrastructure and bring economic and trade cooperation between Asia and Europe up to a new level, a message published on the official website of Europe-Caucasus-Asia Transport Corridor (TRACECA) said on August 21. According to the message, the port will also give a strong impetus to the long-term development of inter-regional relations and open up broad possibilities to increase transport flows in the Eurasian area. The project of the new international sea port envisages the construction of ferry, passenger and container terminals. The complex will include a general loading terminal, a terminal for bulk cargo, as well as shipbuilding and ship repairing plants. The total area of a multifunctional port is more than 1.2 million square meters. The project will be implemented by Turkish company Gap Inşaat, which won the international tender on construction of a modern sea port with the estimated value of $2 billion. According to Turkmen media outlets, this project will join Central Asia, Caspian Sea countries with South Caucasus and Black Sea region with further exit to Turkey and European countries. Speaking at the foundation ceremony of the

Turkmenbashi sea port, Turkmen President Gurbanguly Berdymukhamedov said that it will raise perspectives of expansion of transport infrastructure in southern and eastern directions with the exit to such large economic centers, as China, India, Pakistan and the Asian-Pacific region. “New international sea port in Turkmenbashi will also influence the geopolitics, will be one of the main constituents of international cooperation in the transport sphere and have positive impact on general situation in the region and beyond it,” the Turkmen president said. TRACECA is the international program of cooperation in transport between the EU and its partner-countries in Eastern Europe, South Caucasus and Central Asia. The organization has a permanent secretariat in Baku. TRACECA member-countries are Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Armenia, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine and Iran.

IRAN CAN EXPORT NATURAL GAS TO UKRAINE

ranian ambassador to Ukraine and Moldova Akbar Qasemi Aliabadi said that the Islamic Republic holds huge gas reserves and is ready to supply the two European countries with natural gas. “Both Ukraine and Moldova are in need of natural gas. Iran enjoys vast gas reserves, and is prepared to consider future supply of gas to the two countries,” Aliabadi said, Press TV reported.

Ukraine is currently securing a major portion of its needed gas through imports from Russia. Ukrainian authorities say that high prices have forced them to look for ways to reduce the country’s dependence on Russian gas. Iran, which sits on the world’s second largest natural gas reserves after Russia, has been trying to enhance its gas production by increasing foreign and domestic investment, especially in its South Pars Gas Field.

WORLD NEWS August 26, 2013 #18

caucasian business week

EUROZONE GDP UP 0.3% IN Q2, MARKS FIRST STEP OUT OF WORST RECESSION ON RECORD

econd quarter growth picked up across Europe, ending an 18-month economic decline. Germany and France, the 17-nation bloc’s largest economies, led in growth. As forecast by Frankfurt-based Bundesbank, Germany posted robust 0.7 percent growth. France, Europe’s second-largest economy, followed with 0.5 percent growth, after contracting the last two quarters, according to the French national statistics office, Insee. This marked the best quarterly expansion since Francois Hollande took over as President in May 2012. However, unemployment in France is still at a 15-year high of 11 percent – some 3.2 million people. The figures from Brussels have raised hopes world-wide that the economy is rising from the ashes of a record-long recession and finally entering a period of stability. “The eurozone has been hauled out of recession and Germany has done the lion’s share of that... But this rhythm can’t be maintained. Growth will become more modest and in the second half of the year we should see plus 0.3 percent to 0.4 percent,” Andreas Scheuerle of Dekabank, told the Guardian. Economic confidence continues to rise, and an increase in manufacturing stimulates the economy on all fronts- more work, higher energy demand and more exports. In July, Chinese exports to Eu-

rope increased by 2.8 percent, an initial hint of improving consumer sentiment. Eurostat data shows strong growth in the Czech Republic (0.7 percent), the UK (0.6 percent) Lithuania (0.6 percent), Latvia (0.5 percent) and Poland (0.4 percent). Cyprus, Italy, Spain, Bulgaria and Sweden contracted. Data was not available for Greece or Slovenia, both high-risk economies within the euro zone.

Hold the champagne While there is plenty cause to celebrate the recovery, many of the southern periphery states remain depressed. Greece’s economy, for example, contracted 4.6 percent year-on-year, and Cyprus, the most recent member state to negotiate a banking bailout, contracted 5.2 percent year-on-year. “... this slightly more positive data is welcome – but there is no room for any complacency whatsoever. I hope there will be no premature, selfcongratulatory statements suggesting the crisis is over,” Olli Rehn, the European commissioner for economic and monetary affairs, wrote on his blog. Eurozone debt, in total, has swelled to $11.4 trillion (8.75 trillion euro), a great portion which is accounted for by the five bailout countries Greece, Ireland, Cyprus, Spain, and Portugal. rt.com

CHINA FDI INFLOWS QUICKEN IN JULY DESPITE SLOWING GROWTH

nvestment inflows into China quickened in July, the government said on Friday, suggesting foreign firms’ confidence in the world’s No.2 economyis holding up despite slowing growth. China drew $71.4 billion in foreign direct investment (FDI)in the first seven months of 2013, up 7.1 percent from the same period of 2012, the Commerce Ministry said. In July alone, China attracted $9.4 billion in FDI, up 24.1 percent from a year ago, quickening from the 20.1 percent pace in June -- the fastest in more than two years, although the amount was lower than June’s $14.4 billion. “This shows that foreign investors are still very confident in China’s investment environment,” Shen Danyang, the ministry’s spokesman, told reporters. The ministry said FDI from the United States rose 11.4 pct in the first seven months from a year earlier, while FDI from the euro zone grew 16.7 pct, including a 58.3 pct jump in investment from Germany. FDI from 10 Asian nations was up 7.7 pct, including a 55.2 percent rise from South Korea, and 612.6 pct rise from Thailand. The ministry said FDI inflows into the manufacturing sector in the first seven months fell 2.4 pct from a year earlier, while investment in the service sector rose 15.8 pct.

China aims to lure more FDI in advanced manufacturing to help move its industry make more sophisticated, high-value products. It has recently stepped up efforts to attract more investment into high-end services including logistics, research and development and education. Premier Li Keqiang has been pressing for foreign investors to open service industries, including financial services, in a pilot free-trade zone in Shanghai. A private factory survey this week reinforced signs of stabilizing in China’s economy after the government took targeted measures to support the economy, including scrapping taxes for small firms, offering more help for exporters and accelerating investment in urban infrastructure and railways. China’s pace of economic growth slowed to 7.5 percent in the second quarter, down from 7.7 percent in the three months ending March 31 -- the ninth such deceleration in the last 10 quarters. The ministry said there were signs in early August that China’s trade performance was stabilizing. “China’s growth in imports and exports will hopefully stabilizes further in the next few months, with global demand improving steadily and the gradual implementation of a series of trade facilitation measures,” Shen said. China’s exports rose a stronger-than-expected 5.1 percent in July from a year ago, while imports jumped 10.9 percent from a year earlier, the latest data showed. Foreign firms’ confidence in China appears to have outweighed fears of increased regulatory scrutiny following investigations into alleged price-fixing and monopolistic behavior by foreign companies selling milk formula and pharmaceuticals. Chinese authorities have visited the offices of numerous foreign pharmaceutical firms in the past month, and police have accused British drugmaker GlaxoSmithKline (GSK.L) of bribery. GSK has said some of its Chinese executives appear to have broken the law. Reuters

MINUTES OF MINIMUM-WAGE WORK TO BUY A BIG MAC: 36 MINUTES IN THE US, 6 HOURS IN AFGHANISTAN

bout six hours of minimum-wage work in India or Afghanistan earns you the same purchasing power, or enough money, to buy a Big Mac burger from McDonald’s (NYSE:MCD) as just 18 minutes of work in Australia, according to a new report from the ConvergEx Group. The Economist developed the Big Mac Index in 1986 as a lighthearted way to measure “whether currencies are at their ‘correct’ level.” “It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services (in this case, a burger) in any two countries. For example, the average price of a Big Mac in America in July 2013 was $4.56; in

China it was only $2.61 at market exchange rates. So the “raw” Big Mac index says that the yuan was undervalued by 43% at that time.” The ConvergEx Group’s analysis put a new spin on the classic Big Mac Index. They added another datapoint to the mix -- minimum wage. The report calculated how many hours of work at minimum-wage rates a worker need to do to earn enough money to purchase one Big Mac burger. It takes about 34 minutes to earn enough for a Big Mac in the U.S., according to calculations by ConvergEx strategists, but it takes more than 10 times as many minutes of work -- 372 minutes -- in Afghanistan. In Sierra Leone, it takes more than 5 and half days of work, or 136 hours, to earn enough to purchase a Big Mac. ibtimes.com

SUGAR-FREE: SHARAPOVA DITCHES NAME-CHANGE IDEA

ussian tennis star Maria Sharapova has reconsidered legally changing her surname to Sugarpova – her confectionary brand - for the two weeks of the US Open. The world’s highest-earning female athlete said getting a new passport would take too long. The about-face comes a day after the news about Russia’s tennis star planning to change her last name made headlines Tuesday. The media said Sharapova wanted the identity update to promote the candy brand she launched a year ago. Sharapova approached the Florida Supreme Court about the legal short-term switch, The Times reported. However, she dropped the idea after she realized that passport procedures would be too time-consuming, which would break her plans to move on to Japan shortly after the US Open, Vedomosti daily report Wednesday. As a part of her promotion campaign the tennis player reportedly planned to wear the Sugarpova ‘lips’ logo on her tennis clothes. The news appeared on the eve of the first anniversary of her Sugarpova brand. Sharapova launched the candy and chewing gum brand in August 2012, with the sweets now being sold across 15 countries. She reportedly invested $500,000 of personal funds in the company. Sugarpova sold 1.5 million bags of sweets in its first

year at US$6 a pack. The company’s profits have helped Sharapova become the highest earning female athlete in the world, according to Forbes. The tennis player reportedly earned $29 million between June 2012 and July, with the lion’s share of her profits coming from endorsement deals. Sharapova won $6 million in prize-money, with the remaining $23 million coming from contracts with such megabrands as Nike, Porsche, Head, Tag Heuer, Samsung Elecronics and Evian. The tennis star’s candy business has been criticized for promoting unhealthy eating. In Britain, the National Obesity Forum accused Sharapova of being “irresponsible”, Reuters reports. She has plans to expand the Sugarpova brand into cosmetics, fashion and other accessories. rt.com

EXHABITION caucasian business week

August 26, 2013 #18

TBILISI GUIDE August 26, 2013 #18

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 4 Odessa St., Tbilisi Tel: 224-48-58 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: 75 21 11, Fax: 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 61 Agmashenebeli Ave. Tbilisi Tel: 91 01 94, 91 01 95, 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 CHINA TOWN Tbilisi , 44 Leselidze St. (ent. from Chardin St.) Tel: 43 93 08, 43 93 80, Fax: 43 93 08 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

PUBLICITY August 26, 2013 #18

caucasian business week

Location City Batumi, Sarpi Black sea coast, on Silk Road, near Turkey-Georgia border checkpoint. 30 meters from the sea. There are shopping points near complex, Apsaros Castle and other sightseeings.

Hotel description Sarpi Resort Hotel & Restaurant â&#x20AC;&#x201C; at the Sarpi Black sea coast is located 3000 sq. m. modern hotel complex, near Turkey-Georgia border, 30 meters from the sea. Hotel complex is isolated, equipped with surveillance cameras, security and parking system, which provides safe and comfortable environment for guests. There is indoor and outdoor type of restaurant, cafĂŠ in the hotel complex. Our restaurant has Georgian and Turkish cuisine. Bar occupies 370 square meters in the hotel complex, with wide range of drinks. The hotel has fitness and entertainment room for guests (for free). Throughout the territory of the Hotel complex operates a 24-hour high-speed wireless Internet access, which is also free of charge. Sarpi Resort Hotel & Restaurant also offers sailing with boat and scooter in the sea. As well arranges special A la Furshets and banquets.

Cottage Description

WWW.SARPIRESORT.GE; Tel: +995 422 21 25 00 / 01; Mobile Phone: +995 577 43 00 03; FACEBOOK: Sarpi Resort Hotel

Hotel Complex has modern, luxerous 14 units cottage. Cottage is 2 storied, rooms 84 m2, with living room, bathroom, toilet, 3 bedrooms and 6 beds. Cottages has a sea view and balconies. Each room has air conditioning, TV, Phones and Mini-bars. You can order right from cottages from the restaurants and bars as well. Rooms are equipped with high-speed wireless internet access for free. Housekeeping service is provided during the day. Wake up service is provided upon request.