Caucasian Business Week #1 by Caucasian Business Week

DISTRIBUTED FREE OF CHARGE

BUSINESS WEEK April 22, 2013 #01

caucasian business week

April 22, 2013, Issue 01,

caucasian1

BE INFORMED, DO BUSINESS

TODAY, RUSSIA IS THE REALITY FROM WHICH WE CANNOT ESCAPE Harvard University Professor Oscar Silva:

ne of the main attractions of your country is a geographical location, Georgia has the unique position and is located between the two great countries - Turkey and Russia which are the main sources of capital. Proximity to Azerbaijan that is a major player in the energy market is also important. Overall, proximity of Georgia to these markets is attractive. The second attraction is tourism.

GEORGIA’S SAAKASHVILI HOLDS OUT OLIVE BRANCH TO PRIME MINISTER

BBC: WEALTHY IRANIANS WANT TO INVEST IN GEORGIA “Georgia reminds Dubai 10 years ago”

Pg. 3

Pg. 4

25% OF RESPONDENTS LIKE ONLY GEORGIAN DISHES

ACT SURVEY:

FOREIGN INVESTMENTS IN AZERBAIJAN FELL BY 9.9% FOR MARCH

n March foreign investments in the economy of Azerbaijan decreased by 9.9% versus February 2013. SCC informs that for Jan-Mar of the year foreign investments made up AZN 924.06 million. Pg. 10

TEN TOP BANKS WITH HIGHEST PAID JOBS IN ARMENIA

he following banks appeared on the first top ten list: HSBC Bank Armenia, Byblos Bank Armenia, Armswissbank, Ameriabank, Armenian Development Bank, Conversebank, Areximbank-Group of Gasprombank, ProCredit Bank, Inecobank and Bank VTB (Armenia). Pg. 11

BANK SECTOR ENDS 1Q13 IN 65.3 MILLION GEL PROFITS

$20.11 BN TRANSFERRED TO CIS STATES FROM RUSSIA IN 2012

1.139bn was transferred from Russia to Azerbaijan in 2012, according to sources in the Central Bank of Russia. The volume of personal transfers from Russia to the CIS states reached $20.11bn in 2012.

eorgian President Mikheil Saakashvili held out an olive branch to Prime Minister Bidzina Ivanishvili on Friday, proposing an end to months of friction that threatens stability in the former Soviet republic. Saakashvili struck a conciliatory tone in remarks to thousands of supporters at their first big rally since his party was swept from power by Ivanishvili’s opposition movement in a parliamentary election last October. The defeat set up a tense situation in the Caucasus state, a conduit for pipelines pumping Caspian Sea energy westward and a platform for geopolitical rivalry between the United States and Russia, which fought a brief war with Georgia in 2008. Saakashvili is barred by term limits from seeking re-election this autumn and the president’s powers have already been reduced, but his United National Movement wants to remain relevant. “I’d like to extend a hand of friendship to them,” Saakashvili said of Ivanishvili’s government, addressing more than 10,000 supporters in the centre of the capital Tbilisi. “If we, your opposition, are optimistic, you should be optimistic too - and not angry,” he said. But he got a cool reception from Ivanishvili’s camp. “Saakashvili could not become a president of the whole country. He is just a leader of one political

team - and this team, as well as he himself, are in the past,” said Eka Beselia, a lawmaker from Ivanishvili’s Georgian Dream coalition. The rally was framed as a new start for Saakashvili’s party and a show of support for the proWestern course set by the president, who was first elected after leading the peaceful “Rose Revolution” protests in 2003 that swept out the old guard. Saakashvili cultivated close relations with Washington, and his efforts to bring Georgia into NATO were one of the factors that led to the fiveday war with Russia in 2008. Ivanishvili, a billionaire who made his fortune in Russia, fought off suggestions from Saakashvili during the parliamentary election campaign that he was a Kremlin stooge. Demonstrators echoed that theme on Friday, holding posters that read, “Any country but Russia - no way, but the West”, “Bidzina, go home!” and “Georgia’s choice is Europe.” Ivanishvili has pledged to make relations with the West a priority, following in Saakashvili’s footsteps, but says he also wants to improve ties with Moscow. Russia recently agreed to open its market to Georgian wine and mineral water, which were banned in 2006 as tensions increased, and Ivanishvili wants an investigation into the war to see whether Saakashvili was partly to blame. Reuters

QUICK PAYMENT BUSINESS REPRESENTATIVES UNVEIL COLLUSION BETWEEN TBILISI CITY HALL AND BANK OF GEORGIA

Pg. 9

GOLD BOUNCES BACK – BUT FOR GOOD?

Pg. 3

Finance Minister meets with the World Bank Vice President

Pg. 4

“Patience has its limits” – the Affected Businessmen Respond to Chief Prosecutor’s Statement

hy has Tbilisi City Hall granted exclusive rights to Bank of Georgia for filling out Metroman balance at the bank’s payment terminals? Tbilisi City Hall abstains to make comments on the issue.

According to the Commersant radio station, representatives of quick payment business assert Tbilisi City Hall and Bank of Georgia have made collusion. The fact only Bank of Georgia has obtained exclusive rights for filling out Metroman balance creates uncompetitive environment for other businesses, they assert. At the same time, the Bank of Georgia director general says Bank of Georgia has won the tender. AT the same time, OSMP commercial director told the Commersant radio station there are several major market players in Georgia and none of them had got information on the tender. He also casts doubt that the tender has been genuinely held.

NBG President Disagrees with Criticism of “Georgian Dream”: “Insurance Supervision is more Effective than ever before”

Pg. 5

Mamuka Khazaradze:

Approval of Labor Code Bill May Result in Growth in Unemployment Index Pg. 5

Zurab Gvasalia:

Creditors may demand that banks be banned to issue Mortgage Loans

Pg. 8

Irina Imerlishvili:

Expenditures of Other Funds, including the President’s Fund, should be explored Pg. 3

Zurab Chiaberashvili:

Universal Healthcare Programs Funds only a Visit to Doctor and Ordinary Examinations Pg. 3

TOP NEWS

caucasian business week

April 22, 2013 #01

BIDZINA IVANISHVILI TO VISIT STRASBOURG ON 21 APRIL

he Prime Minister of Georgia Bidzina Ivanishvili will visit Strasbourg on 21 April, as the press service of the Prime Minister informed InterPressNews, Ivanishvili will give speech at the Council of Europe Parliamentary Assembly. The Prime Minister will address the MPs on 23 April at 12:00 local time. After the appeal, Ivanishvili will answer the questions of the members of the PACE. Bidzina Ivanishvili’s bilateral meetings are planned within the visit. The spring session of the PACE will be held on 22-26 April.

MIKHEIL SAAKASHVILI: GEORGIA HAS A HOPEFUL OPPOSITION AND ANGRY GOVERNMENT

oday Georgia has a hopeful opposition and an angry governmentPresident Mikheil Saakashvili said at the rally on Rustaveli Avenue. According to him, he had not come to politics for occupying certain posts, for arriving at summits, for shaking hands with Presidents or enjoying some privileges. “I came here because you brought me here. I love you, I will win with you or die with you. Now it’s a time when we have only problems. You had been questioned, fired, intimidated for the last 7 months, but you still came here. Many cannot understand that everything is not sold for money. We came here for our dignity and motherland,” said the President. According to Saakashvili, the last years’ fight was worth saying today: Georgia is not sold. He said that people, who gathered on Rustaveli Avenue today, are not angry.

‘When we were in the government, we had a very angry opposition. Now it is on the contrary, we are optimistic opposition but we have very angry government. We call on you to be optimistic. Georgia should have an optimistic government, opposition and society. The slogans that the National Movement would have been destroyed remained as slogans. They could just buy some betrayers’, Mikheil Saakashvili said. The President called on the government to do good things for Georgia and offered assistance. ‘We left good buildings and comfortable offices, roads and infrastructure, police structures, billions of laris for the programs that are being implemented now. Our opposition was thinking only about betrayal. They were trying to go to the Kremlin and attend parades there. You have an opposition that loves your country and which thinks always about your prosperity’, the President noted.

GEORGIAN PARLIAMENT ADOPTS AMENDMENTS TO LABOUR CODE

he Parliament of Georgia adopted amendments to the Labour Code by 75 votes at the first reading. According to the Deputy Speaker Manana Kobakhidze, the amendments are intended to ensure that an employer will never be able to dismiss the employee for no reason. “Since 2006, when the current Labour Code was adopted, there have been hundreds and housands

of cases of dismissing without any justification. After the adoption of the amendments, labor agreements will be revised, and people will not be afraid anymore that they their monthly contract will not be extended. Though an employer also should not be afraid that he will not be able to change his personnel, “ Kobakhidze said. The Parliament adopted amendments to the Labour Code on the level of maxims. The articles of the bill will be discussed in detail in the nearest future.

GEORGIA TO START EXPORTS OF VEGETABLES, FRUITS AND HONEY TO RUSSIA IN LATE MAY

eorgia will start exports of vegetables, fruits and honey to the Russian Federation in late May, Zurab Lipartia, a head for the phitosanitary department of the national food agency of the Agriculture Ministry told reporters. “We have to agree necessary technical procedures to launch exports of Georgian products to Russia. We should submit required certificates to the Russian side”, Lipartia noted. Georgian and Russian delegations achieved the agreement in Moscow on April 2.

GEORGIA TO HOST CONFERENCE OF HEADS OF EUROPEAN CUSTOMS WISSOL BECOMES CHEVRON SERVICES IN 2014 MOTOR OIL EXCLUSIVE IMPORTER eorgia will host a conference of The participants discussed the reports on the work

the heads of European customs services in 2014. A conference of customs administration heads from European countries was held in Oslo. The World Customs Organization and the Norwegian Directorate of Customs and Excise were the organizers. A Georgian delegation attended the conference.

of the governing bodies of the World Customs Organization, information about the plans and budget, the issue of choosing a chairman of the World Customs Organization and other issues. A decision was unanimously made at the conference to hold the next annual meeting of the heads of customs administrations of European countries in Georgia in 2014, the Georgian Finance Ministry reported on Friday.

NEW WINE PRODUCT GLEKHURI APPEARS ON GEORGIAN MARKET

n April 16 Wissol Group and Chevron, the world’s one of the leading oil companies, concluded a contract agreement on cooperation at the Radisson BLU Iveria hotel in Tbilisi. Under the agreement, Wissol Group has become an exclusive importer of Chevron lubricants and motor oil.

ive new wine products under the trademark of Glekhuri (Of Peasant) have appeared on the Georgian market: Rkatsiteli Qvevri, Qisi-Green, Khashmi Saperavi, Alaverdi Saperavi and Ikalto Green.

Customers are able to taste new wine products at the networks of Goodwill, Smart and Carrefour, where girls in Georgian traditional clothes will help them in choosing the most acceptable and interesting wine products from the mentioned five varieties.

The editorial board follows freedom press principles caucasian Publisher: LLC Caucasian Business Week - CBW Director: Levan Beglarishvili; Mobile phone: 555 472234 DISTRIBUTED FREE OF CHARGE Editor editor-in-chief: Evgeni Mikeladze; Email: caucasianbusiness@gmail.com Mobile phone: 568 208282

BUSINESS WEEK

Chevron products are sold under the trademarks of Chevron, Texaco and Caltex in the USA and Europe and are famous for their high quality. Georgian citizens are able to buy Chevron lubricants and motor oil at the network of Vianor, a Wissol Group subsidiary. Vianor offers Texaco lubricants and motor oil for both motorcars and trucks all over Georgia.

TBILISI TO HOST GEORGIA-CHINA BUSINESS FORUM

eorgia-China business forum will be held in Tbilisi. About 40 Chinese companies will take part in the Forum. “They will receive information on Georgia’s investment environment and business doing opportunities. The chamber of commerce and industry of Georgia and the China Council for Promotion of International Trade will also take part in the Forum”, the national investment

agency of Georgia says. The Forum is organized by the Chinese Embassy in Georgia, the national investment agency of Georgia and the Partnership Fund. Chinese businessmen will represent such sectors as energy, real estate, agriculture sectors and so on. Various bilateral meetings will be also held as part of the Forum to enhance economic ties and share experience.

April 22, 2013 #01

FINANCE MINISTER MEETS WITH THE WORLD BANK VICE PRESIDENT

inance Minister Nodar Khaduri has met with the World Bank Vice President . The World Bank-backed projects and the effectiveness of financial resources were discussed at the meeting. “A very important meeting was held with the World Bank’s Vice President. We discussed the efficiency of financial resources and future cooperation. I hope the World Bank will continue its support as it has been doing for the last twenty years,” said Nodar Khaduri. IPN

POLITICS

“PATIENCE HAS ITS LIMITS” – THE AFFECTED BUSINESSMEN RESPOND TO CHIEF PROSECUTOR’S STATEMENT Chief Prosecutor: Time delay is natural and expected Patience has its limit - so the affected businessmen respond to the statement of the country’s Chief Prosecutor. Note: The Chief Prosecutor Archil Kbilashvili said in an interview with commersant.ge that a large volume of complaints regarding these cases was inadequate to the possibility of their study and the time delay was natural and expected, but Kbilashvili explains that the government will certainly finish these cases sooner or later. The affected persons must receive back their property or compensation. These are very large sums, even according to rough estimates, it can be a billion lari, “- Kbilashvili says. According to “Albatross Group” former owner David Begiashvili, there is a complete inactivity in this area today despite the fact that his property now belongs to the Ministry of Economy and in a case of goodwill, it would have been much simpler to solve the

problem. “It’s already 7 months as the processes have been lasted but in our case there is a complete inactivity,” - says Begiashvili. In his words, there was the only response after his appeal to Prime Minister. Begiashvili informs that he expects a response from the Prime Minister’s office within a few days. The investigation has not been completed in “Magnat” case either. The company’s former owner Jemal Leonidze says that the process must not continue endlessly and “patience has its limits.” However, Leonidze adds that they have already begun an investigation on this case, and several witnesses have been interrogated in this regard. Note: The businessman got out of jail on January 13 and made a statement about his return to the oil market. commersant.ge

IRINA IMERLISHVILI: EXPENDITURES OF OTHER FUNDS, INCLUDING THE PRESIDENT’S FUND, SHOULD BE EXPLORED An interview with the Chairwoman of the Committee for Procedural Issues and Rules IRINA IMERLISHVILI

- As it turned out, President and his team spent considerable amounts of money from the budget of the State Security Service. You and “Georgian Dream” leader David Saganelidze announced about this yesterday at a special briefing. It became known how President, his family members and the former government’s senior officials spent budgetary resources for personal interests. How did this information fall into “Georgian Dream’s” hands, or whether the information is reliable and trustworthy? - I requested this information from the Chief Prosecutor’s Office on March 12. I became interested in the topic, as I’m an author of the bill which envisages a change to the law on the State Security Service. You remember hysterics in light of which the law was being discussed. In response to this letter, I got the documents, which were made public yesterday. Until this service was transferred under the authority of the government, these documents were classified “secret”. Over the years, there were two types of costs. Wages the guards received which were open to everyone and another types of expenses about which I spoke at the press -conference. When this agency subordinated to the government, these documents declassified and I was already authorized to make them public. They were officially obtained from the Prosecutor’s Office

caucasian business week

and therefore I have no doubt of its reliability. - The former head of the State Security Service has denied that during his leadership an inappropriate spending took place. How did this information fall in the hands of the Prosecutor’s Office ? - Declassification was withdrawn by the Prosecutor’s Office and then it became possible to make these documents public. As for the statement made by the former head of the service, how can the costs we talked about yesterday be reasonable? I doubt that he did not know about these costs. I think that on the contrary, he should know better than anyone about the costs we are talking about. Just because these costs have been “kept secret”, they thought that it would never become public. About what reasonable expenses we are talking when the budget funds from the State Security Service were spent on the President’s family members, his close friends, former and current government officials, vacations, trips, gifts of the former and current MPs. - Can it be regulated by legislation or other means so that such things will not happen in the future? - On the one hand, the documents that are related to the state budget should be open and public. On the other hand, Chamber of Control and now Audit Office is obliged to check the departments that spend amounts from the state budget. - What do you think how much information about the misuse of the budget funds can be made public? In the near future, should we expect disclosure of the same kind of materials? - When the budget money are spent so unreasonably, notorious funds theme is really very interesting as well as President fund’s issue which was permanently closed. There is always a dispute as to where the money from President’s fund as well as from other funds is spent. I have no doubt that these documents are “secret” as well and will not be disclosed during Mikheil Saakashvili’s presidency. It is essential that people know on what the taxes they paid are spent, and it should be completely transparent.

Zurab Chiaberashvili: Universal Healthcare Programs Funds only a Visit to Doctor and Ordinary Examinations An interview with a former Health Minister ZURAB CHIABERASHVILI - Only 3 percent of the population felt an improving access to the health care in the backdrop of transition to universal health care program. These are the results of the survey conducted by the American Republican Institute with participation of more than 3 000 respondents. 49 percent of respondents believe that nothing has changed, while 40 percent believe that the situation has worsened. What do you think was a reason for the 3 - percent rate and was this result expected or unexpected for you? - When a universal health care program began, I said in an interview with “Commersant” that expectations of our society were different and the Health Ministry started a program of virtually other type. Basically 2 things worry our people with regard to health care. These are medications, but this expectation has not justified. Thus, the universal health care program funds only a visit to a doctor and very simple tests. Naturally, this was reflected in the attitude of the majority of the people. Ministry of Healthcare responds to the fact that this program is a significant aid in emergency cases. In fact, a person should really die so that the Ministry of Health reimbursed treatment costs within the universal health care program. So the result we have today is not unexpected. One more thing: I mentioned medications. Co-participation in drug costs is not provided in the universal health care program. We are well aware that drug costs occupy a very large share in medicine expenses in Georgia, and therefore, this is one of the issues that bothers our citizens. Therefore, the Ministry of Healthcare should pay a serious attention to this issue while planning a program. - Can it be explained by the fact that this is the first stage of the universal health insurance and at the second stage which should come into effect from July everything will be reimbursed? Where the Health Ministry made a mistake – when the first stage was so minuscule or, as a whole, people have failed to understand at what stage is the universal healthcare program? - In fact, we must admit that the first phase of this program has failed, and must retain some hope that from July 1 it will become more improved.

First of all it should finance the expensive laboratory tests and planned operations. If the program is fully operational from July 1, then this service should cost 15 GEL for the state. We are talking about the insurance of 2 million people. Healthcare budget has increased, which is welcome, but so far the Health Ministry did not say how much one person will cost from July 1 and whether the state has the ability to reimburse treatment costs of additional 2 million people. - What kind of insurance should not be enacted from July 1? - Any reform needs a good start in order to be successful. Today we see that a negative opinion formed in the public regarding the universal health care program which may negatively affect the next stages of this program. I believe that one of the reasons of this failure, besides the fact that the costs were not actually counted, is that it was not considered that the medical staff should be motivated and actively involved in the program. In addition, the program’s failure was caused by the lack of awareness of our citizens. Naturally, they are waiting for more, get less and this is reflected in the results about which you are talking. So, the Health Ministry will have to conduct a very serious information campaign over the next months (until July 1) and explain to the public what it can offer. The second issue is an inexpedient spending of public funds. 2 million people which were formally involved in a universal health care program, have not received the actual results yet. For example, it would be good if more targeted programs were created for chronic diseases that require drug costs of 100-200-300 GEL a month. There are many ways and in order to select better from them, we need to discuss. However, except for a few briefings, the public has not received detailed information.

INTERVIEW

caucasian business week

April 22, 2013 #01

HARVARD UNIVERSITY PROFESSOR OSCAR SILVA:

TODAY, RUSSIA IS THE REALITY FROM WHICH WE CANNOT ESCAPE An interview with a representative of the International Investment Bank and Harvard University professor OSCAR SILVA, who was in Georgia at the invitation of ISB International School of Business - In your opinion, how attractive is Georgia in terms of investment? - One of the main attractions of your country is a geographical location, Georgia has the unique position and is located between the two great countries - Turkey and Russia which are the main sources of capital. Proximity to Azerbaijan that is a major player in the energy market is also important. Overall, proximity of Georgia to these markets is attractive. The second attraction is tourism. I have been in your country for the first time and I am impressed by the potential of the country. You have old, beautiful historic buildings; there is a boundary between different cultures. Georgia is an important country for tourism, which is your advantage. The third attraction is the desire of the government to have an open economy and the full protection of the law. - The government expects 2 billion USD in foreign direct investment in the current year, in your opinion, how realistic is this amount? - It’s hard to talk about numbers, it is important to mention what attracts investment. This is the transparency of laws, protection of capital and the country’s competitiveness. The investment environment is very challenging, fighting for capital is going on, and that’s why it is important to search for new resources in such countries as India, Russia, Brazil and China. Today the traditional sources of capital are experiencing difficulties that will affect the overall volume of investments. At the same time, investment is not the solution for the economy. A

country that wants to have a sustainable economy should search not only foreign, but also domestic investment and it is important to encourage people to save money as well as transfers of Georgian people emigrated abroad are also significant As per the data I have received from the World Bank, the people who left Georgia annually transfer up to one billion dollars to the country, it is a good source of financing. The government should look for ways on how to put these flows within the productive limits. - The government of Georgia plans to set up an investment fund, which will fund various investment projects, if there is a similar experience in the world? - As for the funds, as I understand it, the government is trying to establish a fund jointly with the private sector and this is an interesting way of mobilizing capital, but the process must be properly designed. It is important to establish equal ground for local and foreign businessmen, foreigners should not have the benefits. It is important the process to be effective for society. It is also important to distribute roles correctly. The government should not have the managerial role and should promote the sector because ultimately we are trying to increase private sector participation. Many countries have such funds, and it will be the most successful if government invests in the areas where the private sector will not go and encourage this directions. In my opinion, such sectors are the microfinance market, health and education, which are potentially commercial markets, from the social point

of view, these are the sectors which should be encouraged. - What do you recommend the Georgian business, where should they find the long-term resources – in banks or international funds? - Generally, countries do not differ from corporations and they wish various sources of funding. Each source has advantages and disadvantages. We have already talked about foreign direct investments, as well as about the importance of developing local capital. Private capital is more efficient risky capital, which is invested in the new business opportunities which has the commercial results. Government may participate in co-financing to give the private sector an opportunity to find the money. Historically, it is better to rely on the own capital sources and develop them. The banking sector is also a significant player. In general, it is possible to attract capital from the West, but there are difficulties there , your country knows this and cooperates with the EBRD, the World Bank for financing investment opportunities. - The new government jointly with business is very actively engaged in the return of Georgian products to the Russian market. In your opinion, what kind of consequences may it bring for Georgian business? - Today, Russia is a reality, which we cannot escape, so we should look at this situation objectively and try to get the results. There are centuries-old connections between the two countries, including a likeness - language, education, culture, public ... Russia has a huge market for

such a historical product, as wine and in a case of good ties, the potential will also appear. Energy imports is also noteworthy, energy security is important for long-term economic sustainability and economic policy vision to be long-term. Therefore, an attempt to have more stable relations is welcomed. - Another government’s initiative is the idea of creating a competitive environment, an experience of what country should be adopted? - I think Georgia should look at such countries, which are similar in terms of the market size, geographical location. One of the first that I can recall, is Singapore, it is a country with small economy. - In general, in what countries do investors invest, in the countries with stringent regulations or where regulations are weak? - There is no simple answer here. Both forms of regulation may become problematic, severe regulations, bureaucracy create a black economy, which will create problems to the government in taxes. This process kills the production deal. The bust is not good, weak regulations can create anarchy. Georgia needs clear rules, development of production is important today, rules must be fair, as well as the country’s political stability is important. - How would you evaluate the potential of the Georgian managers? - You has a food progress in terms of increasing the level of knowledge, it is important to develop managerial skills and I hope you will continue, education never hurts and it is never harmful to anyone. Commersant.ge

BBC: WEALTHY IRANIANS WANT TO INVEST IN GEORGIA “Georgia reminds Dubai 10 years ago”

he Iranians who come to Georgia – this is the title of the article published in the British BBC. As the author of the article Damien McGuinness notes that increasing numbers of Iranians are settling in the former Soviet state of Georgia. Some say they are being forced to move because of Iran’s poor economy, hit hard by Western sanctions. Others blame persecution by the authorities in Tehran. As McGuinness says, the weekly magazine “Aryana” may be printed in Georgia but it is written in Farsi. That is because it is catering to the growing number of Iranians moving here - since its launch seven months ago, its circulation has quadrupled. The magazine helps Iranians settle in Georgia by explaining the local culture and traditions. Georgia is an attractive option for many: It is close to Iran, the economy is growing and Iranians do not need a visa. Record unemployment has forced a growing number of Iranians to seek work in Georgia he number of Iranians who travelled to Georgia increased by 60% last year, to around 100,000 per year. And more than 6,000 Iranians are now officially registered as residents in Georgia - a large

number for a country unused to immigration. The advantage of Georgia is that it is seen as the most pro-Western and business-friendly country in the region. But there are also strong cultural and historical links between Georgia and Iran. Georgia was once part of a large Iranian, or Persian, empire. Those influences can still be seen today in the architecture of Tbilisi’s Old Town. Georgia, meanwhile, hopes the influx of Iranians will lead to an economic boost. But the challenge is how to have a good relationship with nearby Iran while avoiding antagonizing the US - Georgia’s most important ally - and the EU, which Georgia wants to join. He argues that Georgia has to manage a delicate balancing act between nearby powers, who may have different political ideologies, and key allies, who are far away. The author writes that Iranians say that living in Georgia means they feel free from harassment by the authorities for certain political opinions or lifestyle choices, such as drinking alcohol. And some Iranian women say they enjoy not having to wear a headscarf. Meanwhile back at the printing presses, Ms Ghazi was organizing the distribution of this week’s edition of her magazine. The business opportunities in Georgia now remind her of Dubai 10 years ago. However, McGuinness mentions that unemployment in Georgia is high. Therefore, for Iranians who do not have the capital to start a business, it is difficult to find a job. But at least, many of them say, they have found a country where they can feel free.

IRAN PRESENTS POTENTIAL OF OWN FREE ZONES

xhibition of 7 trade-industrial Iranian zones’ potential was launched today in Tbilisi Sports Hall. Within frames of exhibition, which will last until April 20, business meetings and presentations of investment projects are planned. Among exhibited production, there are hybrid (solar-wind) electric stations, farming machinery, drug plants, etc. According to Sakstat, Iranian investments in

Georgia amounted last year to $494,700, declining 2.6 times year-on-year and accounting to 0.05% of total FDI in the country. For the same period, Iranian import to Georgia amounted to $99.4 million (1.3% of Georgia’s total import), while Georgian export to Iran – to $19.05 million (0.08% of total export). In 2012, Georgia hosted 89,170 visitors from Iran (2% of total number, growth – 48%). Sarke

CREDITORS OF GEORGIAN STEEL TO GATHER MEETING NEXT WEEK

bilisi city court considers case on insolvency of JSC Georgian Steel. As the court declared, after consideration of case-related materials, issue of gathering creditors’ meeting was decided. The meeting is appointed on April 24. The meeting will check claims, which were submitted after the deadline. Sarke

April 22, 2013 #01

INTERVIEW

caucasian business week

MAMUKA KHAZARADZE: APPROVAL OF LABOR CODE BILL MAY RESULT IN GROWTH IN UNEMPLOYMENT INDEX An interview with “TBC Group” founder Mamuka Khazaradze - Large business of Georgia held a closed meeting with the Minister of Finance, Minister of Economic Affairs and NBG President last week. What did business ask ministers about? - It was an interesting meeting. We met with the Ministers of Economy and Finance and the central bank President. They made a presentation of the planned changes to the Tax Code. I must say that the changes are quite pro-business and will be implemented in the near future. Apart from that, we discussed the problems that this or that company faces. In a recent period, so many meetings were held between business and ministers that they are aware of these problems and resolve them very quickly in favor of the business. - Unlike previous periods, you are going to these meetings boldly, openly, meet with media without any problem, what is a reason for this? - These meetings are initiated by representatives of the government, which is very welcome. In this case, the coordination was carried out through the business association, which played a very good role in this relationship. I do not think that there is any problem about which the government did not know. Maybe not all the issues are resolved, but the ways of the problems solving are being discussed. - It seems that, on the whole, business is satisfied with the relationship with the government, but there are topics which, for example, Prime Minister raised during the meeting with the media. Namely, that there are no interesting projects in which the investment can be made, except for agriculture and energy. What do you think, does business face any problems in this regard? Do you think that the private sector is inactive or an activity of the government is necessary in this direction? - Traditionally, the theme of doing business in Georgia is rather difficult. One of the reasons is the background of the political crisis the country has had all these years. One of the main problems the country faces today is the lack of investment

capital. I do not speak about large capital, I mean a small capital when a small business needs not a loan but financing. I think there are ideas in agriculture as well as in other fields. I think the main problem today is teh absence of investment amount. I’m looking with a great hope at the idea of funds creation, which will be completed very soon. Our group has a few large and medium-sized projects which will be presented because ,as I told you, today the country needs long-term capital. I would like also to point out that the interesting issues about the strengthening of the stock market and a pension reform which will generate the long-term money in the country were discussed at the meeting. - You got an answer about a pension reform, will the reform be delayed in time? The same applies to the Partnership Fund. - As far as I know and as the Prime Minister also noted at the meeting, the funds issue should be completed within 2 months. As for the pension fund, a work is underway. The sides have already agreed on Friday that working meetings will be held with the Ministries of Economy and Finance in order to start work in details at the legislative level. -Considering these processes, has the business intensified or is still in a waiting mode? Even with respect to the same loans, you said that big business was on hold some months ago and was not so active with respect to loans. Now, what is the situation in this regard? “TBC Bank” has released several new products, is there any interest? - I agree that the first quarter was a little slow. Now the recovery is being observed. This was due to the constitutional changes. Businesses were still waiting for an agreement between the majority and the minority. This is a thing of the past. The country does not face any political threat; therefore, I think that big business will become more active. As for banks activity, you can see that there is a very serious competition

NBG PRESIDENT DISAGREES WITH CRITICISM OF “GEORGIAN DREAM”: “INSURANCE SUPERVISION IS MORE EFFECTIVE THAN EVER BEFORE”

resident of the National Bank of Georgia [NBG] has made the first comments on the separation of the insurance supervision from the National Bank in a conversation with radio “Commersant”. This initiative belongs to the Chairman of the Finance and Budget Committee and has been approved by Parliament. David Onoprishvili claims that the insurance supervision has not actually been carried out, which led to many expenses from the state. According to the President of the National Bank,

today insurance supervision is more effective in the country than ever before. Giorgi Kadagidze says that this sector has taken important steps in terms of the insurance sector development and supervision since it moved under the monitoring of the central bank. NBG President hopes that the independent supervision will make the insurance sector more effective and it will continue the central bank’s course. In his words, it will be clear very soon what kind of impact this initiative will have on the insurance sector. Radio “Commersant,” FM 95,5

concerning products as well as the reduction in interest rates. If we compare this year to last year, the percentage in the banking sector decreased dramatically and we expect a further decrease. It is also important to strengthen exports. Perhaps the Russian issue will play a certain role in it and there is a very optimistic mood. I hope that this will be so. - Did you ask about the decision that has been taken with regard to the increase in a fee on water and which was objected by the water companies, including “Borjomi”? - I think that the result will be the fact that the product’s price is likely to rise. There is not only a question of water fee. The initial increase by 0.01 GEL will make the products expensive. This is a difficult formula. If this decision is made, we will not be able to avoid it. We learn from other countries’ experience (the experience of the famous mineral water companies), and no other country has such high water fees as Georgia. This will not destroy the business, but in the end will not bring a big effect from the fiscal point of view. I would like to mention one painful issue that was discussed and concerns everyone. This is the employment law. The project, which was submitted, is absolutely a step backwards. There are enslaving conditions against employers and if this law is adopted, I guarantee that unemployment will rise. We hope this issue will be discussed by the government and Parliament, and in the end it will not be adopted in a form it is now presented. - What is the main thing that you do not like? - Several issues. We cannot have permanent employment. If the person cannot be released due to his unsatisfactory qualification, then the business will be very cautious while hiring new staff. The employees will not be motivated to improve their skills and their knowledge. We will not sign collective agreements if the trade unions are not established. It is wrong because it will limit the employer. In addition, there are many issues, which are unacceptable for us. We

sent our remarks to the government and I hope they will take into consideration our concerns. – Tax and labor laws are not acceptable for business. Then, in what is the government’s cooperation with business expressed? - The government does not adopt laws. Laws are made by politicians, MPs and so on. Government officials and ministers share a view the business expressed. Ultimately, these meetings and discussions serve to reach the results that we want to get. commersant.ge

ACT SURVEY: 25% OF RESPONDENTS LIKE ONLY GEORGIAN DISHES

5% of the respondents like only Georgian cuisine. ACT, a public opinion and strategic consulting company has conducted the survey – which of the national cuisines do you like? 30% of the respondents named Italian cuisine as the most attractive, 20% named Russian cuisine and 17% named Chinese dishes.Ukrainian and Turkish dishes turned out to be very popular too in Georgia. 2% of the respondents have never tasted dishes of other countries. The survey has also explored the regime and conduct of Georgian citizens in terms of nutrition. According to the research, a major part of Tbilisi residents have homemade

dishes (97%). 38% buy semi-finished products. Tbilisi residents buy semi-finished products and make them at home. 12% of the respondents buy finished products too at supermarkets. “In general, homemade dishes are associated with healthy and balanced nutrition, but it is difficult to say how healthy food our population has. Today incorrect nutrition and related problems are relevant all over the world. It is interesting what is the tendency and problems in our country in this respect. Anyway, this is other issue and ACT will continue research works in the future and publish the results in electronic edition”, an ACT statement reads. BPI

SALES MANAGEMENT COMPANY TO PROVIDE CONSULTING SERVICES ON AGRO CREDIT ISSUES

he Sales Management Company will provide consulting services to the farmers and agribusiness companies that are interested in taking preferential agro credits. ‘We believe the new initiative fits comparatively inexperienced farmers and companies that are interested in taking agro credits, but face certain difficulties with commercial banks. Our team of advisors will help agribusiness companies plan business processes. Moreover, our services include the planning of the company strategy, adverting and marketing, creating brands and market positioning services, sales management and crisis management, market research. We offer our services to agribusiness companies on favorable conditions, as our company plans to provide active cooperation with one of the interesting programs of EBRD. The program finances 50% to 70% of the costs for consulting services. Therefore, this would be considerable preference for agribusiness companies”, the Sales Management Company says. The program of preferential agro credits is very

important for Georgia, because the agrarian sector lacks for capital and this financial source will enable many companies to carry out re-equipment projects and introduce new technologies. We believe sales of products should be one of the most important chains of this project, as well as the sales management on domestic and foreign markets. In this direction the company will actively cooperate with small and medium sized companies. The Sales Management Company was founded in 2011 to support and popularize domestic products. The company has created a trademark of Choose Georgian. At this stage, Georgian honey “Machakhela Datunia”, Elite Tea and LIVO natural juices of citrus are sold under this trademark. Exhibition and sales of Georgian products are held twice a year by the initiative of the sales management company and Goodwill company. The second exhibition will be held at the Didi Dighomi hypermarket of Goodwill on April 26 to April 28. Agribusiness companies that are interested in cooperation with the sales management company may contact the company on www.cartuli.ge. BPI

GEORGIA RANKS SECOND IN CAUCASUS IN TERMS OF IT SECTOR DEVELOPMENT

eorgia ranks 65th among 144 countries in the Global Information Technology Report 2013. The report was published by the World Economic Forum (WEF). In the rating Azerbaijan ranks 56th and Armenia is 82nd , Kazakhstan is 43rdand Russia is 54th . The first position has gone to Finland, Singapore is second and Sweden is 3rd. The Netherlands, Norway, Switzerland, Great Britain, Denmark,

the USA and China share ten top positions. The rating includes information on internet networks, information business infrastructure and development of information technologies. The rating is based on three main factors: 1) climate - prices, technological market, legislation, infrastructure; 2) readiness – accessibility of the government, business and individual sectors; 3) consumer – products, services that are used by interested sides. BPI

BUSINESS

caucasian business week

NON-ALCOHOLIC BEVERAGE LABELING ISSUE DELAYED UNTIL JANUARY 2014

adio “Commersant” learnt that the government had postponed soft drink labeling issue until January 1, 2014. Non-alcoholic beverage labeling was the previous government’s decision and had to come into force from January 2013. Against a protest of entrepreneurs, the Finance Ministry postponed the decision’s enactment until March 1 and then till May 1.

According to “GePRA” company consultant, business has received a verbal promise at the meeting with Finance Minister. However, there is no official confirmation of the labeling delay until next year. At the same time, Kakha Maghradze notes that the enactment of labeling from May 1 is technically impossible since companies are not provided with technologies required for labeling. Radio “Commersant,” FM 95,5

April 22, 2013 #01

GEORGIA REDUCES IMPORT OF PETROLEUM PRODUCTS IN MARCH 2013

n March 2013, Georgia imported 65.1 million tons of oil products, according to Georgia’s Union of Petroleum Products Importers. This month’s gasoline imports totaled 28,900 thousand tons, and import of diesel fuel - 36,200 tons. Compared to the same period last year, imports of petroleum products to Georgia increased by 12,200 tons. The largest share of gasoline imports belonged to

Romania - 41,900 tons, Bulgaria - 23,700 thousand tons, Azerbaijan - 5,000 tons, Italy - 4,300 tons. In the first quarter of 2013, the largest share of imports of diesel fuel fell to Azerbaijan - 35,700 tons, Romania - 16.600 tons, Russia - 14,600 tons, Bulgaria - 7,500 tons, Greece - 3,800 tons. “The consumption of petroleum products increases with the coming of spring due to intensification of active farm work, infrastructure projects, construction, and transit,” Georgia’s Union of Petroleum Products Importers reported.

DESPITE DROP IN PRICES, DEMAND FOR GOLD REDUCED IN GEORGIA Experts not advise to buy gold at this stage

imilarly to the world market, gold prices are decreasing in Georgia as well and specialists say that this trend will continue, so they do not advise people to buy gold. Note: Recently, the price of gold has decreased by 13% in the world market and gold futures cheapened by 9.4% per ounce to 1360.5 USD that is a record one-time decline in the last 30 years. Since the beginning of the year gold value reduced by 20%, while in 2012 its growth made 12%. The experts account drop in gold prices for easing of global inflation.

A similar trend is observed in the Georgian market. Commersant.ge was told at “Golden World” that the decreasing trend has been observed for 2 months and this time one gram of gold costs 45 GEL while two months ago it cost 55 GEL. As “Golden world” explains, the decreasing trend will continue due to the situation in the world market. According to them, despite the fact that gold has become cheaper, the number of users has not increased which is explained by March typical statistics and the period of fasting. commersant.ge

MOMXMAREBELI.GE PLANS TO EXAMIN ICE-CREAM PRODUCTS

omxmarebeli.ge plans to examine ice-cream products, including Tolia ice-cream products. Lia Todua, a director for the momxmarebeli,ge website told the commersant.ge radio station, last season Tolia and Gurjaani Ice-cream companies were facing certain problems and this was confirmed by laboratory tests that will be published after the ice-cream seasons reaches its peak. As reported, momxmarebeli.ge was asked by consumers to examine Tolia ice-cream products. According to the website, Tolia and Gurjaani Ice-cream products had got certain problems and laboratory tests have found Saamo and Tolia vanilla and chocolate ice-cream products microbiologically polluted.

“I used to buy Tolia ice-cream products before I learnt this information. I have never bought Tolia products since then, despite the same website has refused the information. There is unclear situation and we are interested whether it is safe to buy Tolia ice-cream products”, the letter to the Commersant radio station reads. The same consumer has unveiled another problem: the volume of beef in Tolia manufactured Khinkali is less than indicated on the product’s label. The administration of the momxmarebeli. ge website has got information too. They have bought the products in several trade outlets and 19 units of Khinkali were found instead of indicated 20 ones and these facts affirm the company has been swindling the consumers. bpi

GEORGIA’S WINE EXPORTS GROW BY 8.5%, BRANDY EXPORTS GO UP BY 71%

his year, the export of wine from Georgia was increased by - 8.5% and brandy by – 71%. As Ia Janashia, Deputy Minister of Agriculture stated on today’s briefing “this is a remarkable fact and we welcome it”. “Georgian companies began product diversification. In many cases it is associated with company’s strength and its production increases. Such a big increase of Brandy exports is significant and valuable. As for wine, our export markets - China, Latvia, Estonia, Canada, United States, Germany, Turkey, Japan, England, Czech Republic and its exports are increasing day by day “- said Janashia. Later in the day Georgian winner companies of the competition - “CHISINAU WINES AND SPIRITS CONTEST” of the annual international exhibition of wines and spirits in Moldova were awarded. Among the winners are “Georgian wine”, “Sarajishvili”, “Bagrationi”, the ltd “Vainmen” and other companies.

AN ADDITIONAL $84 MLN INVESTMENT TO BE INVESTED IN GEORGIAN GAS AND OIL EXPLORATION AND PRODUCTION MINISTER OF ENERGY

his year it is planned to invest an additional $ 84 million for the exploration and production of oil and gas in Georgia, said Minister of Energy and Natural Resources of Georgia Kakha Kaladze on Wednesday while visiting the areas of oil and gas companies “Jindal petroleum LTD” in Okami and Sartichala. “Very big companies are interested in holding exploring works in Georgia. One of them is Indian company” Jindal petroleum LTD”. It started drilling operations in January and has already began producing oil in March. It is about producing 25

tons per day, and there is a strong possibility to increase production up to 50,000 tons. As experts suggest, our country has oil, and God forbid, that it would be so much oil, that it would be enough for all of Georgia, “ said Kaladze. The minister noted that a few companies that have already received the license for exploration entered the country. “Since 2013 it is planned to invest in this sector an additional 84 million investment. That the oil production has started generates a new interest from investors,” noted Kaladze. Trend.az

JINDAL PETROLEUM LIMITED LAUNCHES OIL EXTRACTION FROM NEW WELL

ndian oil company Jindal Petroleum Georgia has launched oil extraction from a recently drilled well at the XIB license block in the Sartichala section of the Samgori field. The drilling works started on January 26 and ended on March 8.

The well depth makes up 2450 meters. The well reserves are said to be 2.4 million tons to 8.7 million tons. The company is carrying out the same works in the Krtsanisi well on the XIB license block. The well’s depth makes up 2003 meters. Moreover, the company is also carrying out primary search and drilling works in the Okami section of the IX license block. The projected depth of the well is 3500 meters. Jindal Petroleum Georgia Limited, a subsidiary of Indian company Jindal Petroleum Limited has been carrying out oil and gas search and extraction works in Georgia since 2009 in the VII, IX, X, XIB and XIIIA license blocks.

INTER RAO UES HAS NO PLANS TO SELL ASSETS IN GEORGIA AND ARMENIA

nter RAO UES does not plan to sell assets in Georgia and Armenia, the company board’s member Ilnar Mirsiapov noted. “We have no similar plans for Georgia and Armenia. Indeed, our assets in Armenia do not have good times at this stage”, he noted and

added Armenia based electricity distribution networks owe about 200 million USD. “As to Georgia, we have concluded a long-term memorandum with Georgian colleagues and this step guarantees we have no plans to withdraw from there”, Mirsiapov said.

ECONOMY

April 22, 2013 #01

GEORGIA ASKS FOR WORLD BANK SUPPORT IN DEVELOPING ANTITRUST LAW

caucasian business week

eorgian Finance Minister Nodar Khaduri and Economy Minister Georgi Kvirikashvili are on a working visit to Washington to attend the annual meeting of the

World Bank (WB) and International Monetary Fund. Within the visit, the ministers met with members of the World Bank’s financial sector development management group. As Kvirikashvili told journalists on Friday, the Georgian side appealed to the leadership of the World Bank with a request to provide consultations in the development of antimonopoly law. At the meeting Georgia’s efforts to restore economic relations with Russia was also supported.

KARLO KVITAISHVILI APPOINTED AS CHAIRMAN OF NATIONAL COMMUNICATION COMMISSION

ational Communication Commission reported that Georgia’s President appointed Karlo Kvitaishvili as chairman of the Commission. To remind, former head, Irakli Chikovani, had requested resignation recently. Kvitaishvili, 56, graduated from chemistry department of Tbilisi State University in 1980. In 1981-2007, he worked in Physical and Organic Chemistry Institute, then – in Poti seaport. Since 2007, he is member of National Communication Commission. Sarke

MARCH RECORDS 112.7 MILLION USD TRANSFERS FROM ABROAD TO THE REZONANSI: “HOW THE FORMER OFFICIALS WERE SEIZING GEORGIA n March 2013, the volume of money THE LAND AREAS” transfers from abroad constituted 112.7

million USD (187.0 million GEL), which is 4.6 million USD (8.2 million GEL), or 4.3 percent more than the same amount for March 2012. 93.9 percent of total money transfers from abroad fall on those 12 big donor countries, from which the volume of such transfers exceeded 1 million USD in March. In March 2012 the share of these 12 countries constituted 94.4 percent of the total volume of money transfers.

MARCH RECORDS 33.273 MILLION GEL INTERNET TRANSACTIONS

esidents of Koreti village (Akhmeta district of Kakheti region) demand the law enforcement agencies to investigate alienation of land area. The population insists that the land areas are owned by LLC Doran, behind of which are “Kakha Bendukidze (ex-minister of economy), Petre Tsiskarishvili (ex-governor of the region) and someone Liparteliani”. In his turn, Bendukidze denies relations with the company and land ownership in Akhmeta. The newspaper did not manage to contact with Tsiskarishvili. LLC Doran holds hazelnut plantations and processing factory in Akhmeta. Head of the company Mikheil Zirakishvili declares that the land

was purchased from private owners in 2007, now nut plantations occupy 50 ha and area is planned to increase by 20 ha. However, the population declares that the company has enclosed 100 ha. The population needs land areas for pastures, as most of them are engaged in cattle breeding. Sarke

he month of March 2013 registered 33.372 million GEL internet transactions made by plastic cards of Georgia based commercial banks, the National Bank of Georgia

(NBG) says. Transactions worth 31.72 million GEL were made in February 2013, while the figure marked 32.18 million GEL in January 2013, NBG says. The historical maximum was registered in December 2012 and the figure equaled 36.155 million GEL. It should be also noted the volume of online transactions are expected to further increase as PayPal international payment system has launched operation in Georgia too.

GEORGIA’S FOREIGN TRADE TURNOVER MARKED 2144 MILLION USD IN JANUARY TO MARCH 2013

n January to March 2013 Georgia’s foreign trade turnover made up 2144 million USD, down 5% compared to the same period of 2012. Including the exports marked 565 million USD, up 5% and the imports constituted 1579 million USD, down 8% year on year. The negative trade balance constituted 1013 million USD in January to March 2013 and equaled 47% in total foreign trade turnover. A final report on Georgia’s foreign trade turnover will be published on April 24.

61 % OF RESPONDENTS THINK JOBS IS THE MOST IMPORTANT ISSUE – NDI

ccording to the National Democratic Institute survey, 61 % of respondents think jobs is the most important issue. To the question - which national issue is the most important for you and your family, 61% answered – job, 34 % - territorial integrity, 32% - available healthcare service, 25 % - poverty and 18% - relations with Russia.

The director of the Georgia office of the National Democratic Institute said at the presentation of the results that the survey was carried out on 1327 March. 3rd 103 people were interviewed. The survey was funded by Sweden’s International Development and Cooperation Agency. It was ordered by the National Democratic Institute and was carried out by the Caucasus Research Resources Center.

THE REZONANSI: “PRIVATE TAXI BUSINESS DID NOT AVOID THE STRIKE EITHER”

rivers of company Nostalgia held a strike yesterday, which had lasted a few hours. Owner of the company Nika Khoperia links the strike to the strengthening of control over the fixed tariff. He excludes that reason of a strike was reduction of traveling tariff from 3 lari to 2 lari, as

drivers declare. In his turn, Lavrenti Alania, head of transport trade union, says that the problem cannot be solved in the field of transport, until it is not regulated by legislation. Alania points that tariffs are individually determined by the companies and this causes a chaos. Sarke

THE VERSIA: “LIST OF THE BUSINESSMEN, WHO HAD FUNDED NATIONAL MOVEMENT BY 13 MILLION, WHILE GEORGIAN DREAM – BY 4.5 MILLION”

he article is based on materials of Transparency International – Georgia (TI Georgia) concerning to funding of political parties, according to which, Georgian Dream has received revenue of 4.6 million lari in 2012 (excluding August-September), while National Movement – 13.4 million. The newspaper notes that 397 contributors of National Movement, while 33 of Georgian Dream have definite connections with business. Namely, National Movement has received 117,000 lari from construction company Modern House, per 60,000 lari – from Lado Gurgenidze (execu-

tive chairman of Liberty Bank), Temur Kokhadze (partner in subsidiary company of Tegeta Motors), Ekaterine Chkhaberidze (director general of Goodwill), Giorgi Ramishvili (Silk Road Group), Levan Pkhakadze (Wissol Group), Mikheil Svimonishvili (Marneuli Food Plant), Devi Ovashvili (Interplast), 55,000 lari from Kakha Bendukidze, 40,000 lari – from Zurab Gabinashvili (New Light), etc. Georgian Dream has received per 60,000 lari from Valeri Gelashvili (Khashuri MP) and Nikoloz Bakhtadze, 40,000 lari – from Besik Nizharadze (Beni 41), 17,000 lari – from Nodar Javakhishvili (head of bank Cartu), etc. Sarke

BANKING NEWS

April 22, 2013 #01

caucasian business week

President of Banking Association: CREDITORS MAY DEMAND THAT BANKS BE BANNED TO ISSUE MORTGAGE LOANS After developers, instant payment companies protest against the banks’ possession of non-core assets

fter developers and instant payment companies, it remains only creditors to protest against the issuance of mortgage loans by banks – President of the Association of Banks of Georgia responds to another accusation against banking sector. Note: Quick payment companies say that, as a result of unjust decision made by mobile operators and “Bank of Georgia” on April 1, 2013, mobile operators refused to pay a fee and a burden of service fee laid down on consumers, which put the companies in danger of bankrupt-

cy and job loss. At the same time, the companies note that the laws of any developed country prohibit banks to run non-core business. Earlier, developers demand to ban development activities of banks. Zurab Gvasalia, President of the Association of Banks of Georgia, explains сommersant.ge that the demand of fast payment companies to restrict the activities of banks is “impossible” because the bank is a financial institution and it has provided cash payments much earlier than fast payment companies. “It remains only private creditors to hold a protest rally on why banks are issuing mortgage loans, because this is their business,”- Gvasalia says. He notes that today the banks offer consumers better service compared to these companies. commersant.ge

BANK SECTOR ENDS 1Q13 IN 65.3 MILLION GEL PROFITS

eorgian Banking sector completed first quarter of 2013 with 65,3 million GEL profit. In comparison with analogic period of last year, profit is increased by 4 times (16 million GEL in 2012 first quarter). 12 banks out of 20 are profitable. According to National Ban of Georgia’s (NBG) statistics, quarterly incomes equaled to 529,2 million GEL (550 million GEL in 2012 first quarter), expenditures - to 457,4 million GEL (527,3 million GEL in 2013 first quarter).

For the reporting period won funds of the banking sector (stock capital) equals to 2,5 billion GEL (2,2 billion GEL in 2012 first quarter). Supervising capital equals to 2,6 billion GEL (2,5 billion GEL in 2012 first quarter); capital adequacy coefficient is 17,7% (18,1% in 2012 first quarter). For the reporting period return on equity equals to 10,5%, (ROE), on actives - (ROA) - 1,8% (accordingly 2,9%, 0,5%). Consolidated data includes results of 20 commercial banks. BPI

REPRESENTATIVES OF BANK AND HOUSING SECTORS TO HOLD MEETING

nother meeting of the banking sector and developers will be held in the first non-session week within parliamentary commission to study developers’ problems. According to the Banking Association, the meeting will take place in Tbilisi and the banking sector is ready to engage in the working process. The commission is headed by the Deputy Chair-

man of the Parliamentary Committee on Legal Affairs and is consisted of the representatives of Ministry of Justice, Ministries of Economy and Finance, Developers Association as well as the affected population. The Chairman states that one of the obstacles hindering the development of the construction industry are development companies owned by banks. commersant.ge

COMMERCIAL BANKS GROW STOCK CAPITAL BY 34.87 MILLION GEL

eorgia based commercial banks have increased stock capital by 34.87 million GEL in February 2013, the National Bank of Georgia (NBG) says. Total stock capital of all 20 commercial banks stood at 2.498 billion GEL in late February, while the figure indicated 2.463 billion GEL at the end of January 2013. The number of branches of commercial banks has not changed in February. The figure stood at

135 in late February, while the quantity of service centers rose by 6 ones to 709. The number of nonbank deposit institutions has not changed and the reporting month recorded only 18 ones at the end of February 2013. Two new licensed microfinance organizations were created in February 2013 and the quantity of microfinance organizations increased to 63 ones. The quantity of currency exchange booths decreased by 12 ones to 1008 ones. The number of insurance organizations decreased to 14 ones from 15, while the number of pension funds has no changed and the figure marked 6 ones at the end of February 2013. BPI

TBC BANK RECEIVED GOLDEN BRAND 2012

inner of the business award of Financial and Global Idea in the nomination of The Best Corporative Brand of the Year. Besides, the bank received awards in the following nominations: the best brand among quick payment companies - TBC Pay; subsidiary company of TCB bank - Bank Constanta got award of the Best Social Responsible Brand.

“Winning 3 nominations simultaneously is a considerable success and special stimuli for TBC Group. I’m happy that majority of the companies who deserved award in different nominations are TBC clients”, - Vakhrang Butskhrikidze, general director o the bank stated. Annual business award with participation of Georgia and US Chamber of Trade is held 8th times this year and results are revealed by the evaluation of about 200 experts. BPI

SARKE INFORMATION AGENCY

PAYMENT CARDS OF LOCAL ISSUERS ACCOUNT FOR 94% OF DOMESTIC OPERATIONS

ational Bank of Georgia reported that turnover of operations, implemented in the 1st quarter by payment cards of local issuers, totaled to 1.84 billion lari. This volume is increased by 4% year-on-year. Number of operations made up 14.85 million, increasing by 6%. Domestic operations accounted for 94% of total turnover (i.e. for 1.73 billion lari, yearon-year growth – 4%). At that, turnover of online operations totaled to 97.27 million lari (growth – 14%), while number of such operations – to 2.26 million (growth – 35%).

KSB LAUNCHES CAMPAIGN ON CONSUMER LOANS

OR Standard Bank (KSB) announced that consumer credits are available now for interest rate of 14%. The bank will hold the promo action through May 31. Consumer loans may have volumes from 500 lari to 10,000 lari (unsecured credits) or to 50,000 lari (secured credits). In case of unsecured loan, eligible borrower should have monthly income of 500 lari (borrower of secured loan is required to have monthly income of 300 lari at least). Duration of unsecured loans ranges within 3-36 months, while of secured ones may reach 60 months. According to National Bank of Georgia, average rate of interest on consumer loans, issued in national currency, made up 34.4% as of end of December 2012, while on ones, issued in foreign currency – 17.4%.

BANK OF GEORGIA INTRODUCES NEW INTERNET BANKING PROGRAM OF EXPRESS ONLINE

lients of Bank of Georgia may use new remote service of the bank – Internet-banking with Express Online. As representatives of the bank declared at the presentation today, Express Online has improved speed, simplified usability and protection of international standards (120-bit security certificate). All options are located on single page, which improves speed. Speed is also improved with option to pay several bills or making several transfers with just single click, the bank said. Option of payment bills of mobile and home phones, utilities, Internet and cable TV broadcasting with Express points is also available. The Express points are collected, while pay with Express Card in trade and service outlets.

PROCREDIT BANK JOINED TBC PAY INSTANT PAYMENT SYSTEM

P N

roCredit Bank announced that its clients may use various banking services through instant payment terminals of TBC Pay from now. The services include putting money on current account and saving deposit, as well payment of credit. To remind, the bank had joined another similar system, Nova Technology, in March.

NUMBER OF CREDIT CARDS INCREASED BY 38% IN Q1 ational Bank of Georgia reported that as of March 31, there were 1.11 million credit cards in circulation on Georgian market. The number is increased by 38%, if compared with the 4th quarter of 2012. Respectively, credit cards account for 21% of total number of banking cards in circulation (5.356 million). At that, 83.2% of all credit cards are of Visa system (instead of 72.7% a quarter ago), which number has increased by 58% and reach 924,584. EC/MC cards account for 5% (instead of 7%), making up 56,145 in number (decline – 2%), while others – for 11.6% (instead of 20.2%), making up 129,476 in number (decline – 20%).

CIS

April 22, 2013 #01

EU SANCTIONS SAVED BELARUS FROM CYPRUS LOSSES – LUKASHENKO

anctions imposed by the European Union on Belarus over its human rights record saved Belarusian businessmen from taking a Cyprus deposit “haircut,” President Alexander Lukashenko said on Friday. “The Europeans took a swipe at two-three dozen major businessmen, almost threatening they would not let them into Europe, would take away their money and freeze their accounts. So, they [Belarusian businesses} had to take their money from Cyprus and other [British] Virgin Islands [offshore zones],” Lukashenko said in his annual state of the nation address. In October 2012, the EU extended its sanctions against individuals and companies linked to the Belarus government, saying Minsk had failed to improve its human rights record. The sanctions are part of the EU policy of “critical engagement” with the government of President Lukashenko in an attempt to push it to implement political reform. “Now they [Belarusian businessmen] are saying thanks to the President [Lukashenko] that they were not let into Europe because of him,” Lukashenko said. Russia’s Prime Minister Dmitry Medvedev said on Wednesday domestic state-controlled and private companies have not sustained any losses due to the financial crisis in Cyprus. That refers to all

“state structures and even a significant number of private companies,” he said. “What happened in Cyprus has not in any way affected our programs,” he said. Many Russian banks and companies have done business in Cyprus since the 1990’s, taking advantage of the nation’s low taxes and lax business regulations. Russian banks held about $12 billion on deposit with Cypriot banks at the end of 2012, while Russian corporate deposits accounted for another $19 billion, according to estimates by the international rating agency Moody’s. Cyprus has had to agree to overhaul its banking sector and introduce “haircuts” for bondholders and savers with accounts of over €100,000 in the country’s two biggest banks, in return for the much-needed €10 billion ($13 billion) bailout from the European Union, the European Central Bank and the International Monetary Fund. Under the rescue deal, Laiki Bank, the country’s second largest lender, will be broken up and its deposits of less than €100,000 will be moved into the Bank of Cyprus, the country’s largest bank, which will be restructured. Laiki Bank’s deposits of over €100,000 will be frozen and used to resolve its debts, while depositors with more than €100,000 at the Bank of Cyprus could face losing up to 60 percent on their savings. RIA Novosti

KAZAKHSTAN MAY HAND KASHAGAN STAKE TO CHINA

he Kazakh government could block the sale of a stake in the giant offshore Kashagan oil and gas field to India, in order to hand it to China, an official admitted on April 16. Speaking with journalists, Kazakh Oil and Gas Minister Sauat Mynbayev refused to rule out recent speculation that the 8.4% stake being sold by Conoco Philips could end up in the hands of either China National Petroleum Company (CNPC) or Sinopec, rather than India’s Oil and Natural Gas Corporation (ONGC). Astana is due to make a decision on whether to allow the sale of the holding in the North Caspian Operating Company (NCOC), the international consortium developing the Kashagan field, to ONGC’s international arm OVL, by May 25. However, asked if Kazakhstan might instead buy the stake itself and sell it on to one fo the Chinese groups, Mynbayev said no decision had yet been made. “Kazakhstan has not yet taken such a decision, but there is such a possibility,” he said. “If the terms offered by one side are significantly better than those of the other potential buyer, then the logic for the authorities of Kazakhstan will be crystal-clear.” OVL agreed to buy Conoco Philips’ Kashagan

caucasian business week

stake in November. The existing partners in the consortium – which include several international companies alongside Kazakhs state oil and gas company KazMunaiGas (KMG) - declined to exercise their pre-emptive rights. However, Astana then said it can still stop the $5bn deal under legislation allowing it to block investments into strategic sectors such as energy if they are deemed to be against the national interest. Previously there had been speculation that Astana might block the transaction to allow KMG to up its stake in Kashagan. However, that would require both a high acquisition cost and burden the state company with the largest share of investment costs in the second phase of Kashagan’s development. China has been steadily increasing its investment in Kazakhstan over recent years. In particular, the Asian giant has piled into the oil and gas sector, as it seeks to secure steady supplies of hydrocarbons to meet growing domestic demand. Around 25% of Kazakhstan’s oil output is now produced by Chinese companies. That growing economic connection necessarily means closer political relations. President Nursultan Nazarbayev visited Beijing on April 6, meeting with Chinese President Xi Jinping and

CNPC officials. An oil export deal and an agreement on principles of cooperation on expanding the Kazakhstan-China oil pipeline were signed during the trip. Nazarbayev’s press service also reports that the president discussed a potential “oil for investment” arrangement with CNPC head Zhou Jiping. Under the programme, China would gain access to Kazakh resources in return for investment into oil service and processing projects, the statement says. A previous attempt by Chinese companies to buy into Kashagan was thwarted in 2003, when members of the NCOC consortium blocked sale of a stake by BG Group to CNOOC and Sinopec. Instead, half the stake was sold to KMG and the other half split between the existing consortium members. New Delhi has also been actively increasing its economic ties with the Central Asian region in its own bid to secure supplies of oil, gas and other raw materials for the fast-growing Indian economy. OVL already has a 25% stake in Kazakhstan’s offshore Satpaev block, and in March Indian officials proposed building a hydrocarbons pipeline from Kazakhstan to India. BNE

No Losses’ in Cyprus - Russia

hat happened in Cyprus has not in any way affected our programs, Medvedev says. Russian state-controlled and private companies have not sustained any losses due to the financial crisis in Cyprus, Prime Minister Dmitry Medvedev said on Wednesday. That refers to all “state structures and even a significant number of private companies,” he said in his address to the lower house of the Russian parliament, the State Duma. “What happened in Cyprus has not in any way affected our programs,” he said. “All the decisions that were made have been carried out.” Russian banks and companies have favored Cyprus since the 1990s, taking advantage of the nation’s low taxes and lax business regulations. Russian banks held about $12 billion on deposit with Cypriot banks at the end of 2012, while Russian corporate deposits accounted for another $19 billion, according to estimates by the international rating agency Moody’s. President Vladimir Putin said earlier this month that Russia had decided to restructure its multibillion euro loan to Cyprus, to help the island nation resolve its financial crisis. RIA Novosti

Lukashenko Warns Russia About Dangers of Privatization

elarussian President Alexander Lukashenko has warned Russia against charging headlong into privatizing state enterprises. He accused Russia, the International Monetary Fund and the European Union of “whistling to the same tune,” referring to their inclination to privatize and sell state property, in his annual state-of-the-nation address to both houses of parliament on Friday, Interfax reported. Lukashenko said that while he did not oppose privatization in principle, the time was not right given the unfavorable market conditions. ‘”We are not against the sale of enterprises, but you need to get a reasonable price for them,” he said. “It isn’t necessary to give in to privatization now, because market value is low and businesses are being sold for a song,” the Belarussian president said, adding that he would not consider selling state enterprises until market conditions improved. In March, Russia’s Finance Minister Anton Siluanov outlined the government’s plans to supplement the federal budget with at least 427 billion rubles ($13.5 billion) from privatization, RIA-Novosti reported.Prime Minister Dmitry Medvedev supported the position of the Finance Ministry, which insisted that all the planned privatization proceeds should go toward the budget. The Moscow Times

IMPORT TARIFFS ON LIGHT CARS

$20.11 bn transferred to CIS states from Russia in 2012

n March 14 the government announced import tariffs will be introduced on light automobiles starting in April. Tariffs of 6.46% will be applied to cars with engines between 1,000 and 1,500 cc, while a 12.95% tariff will be applied to cars with engines of 1,500 to 2,200 cc. The decision was originally reached in April 2012 by the Interdepartmental Commission on International Trade Issues. Commentator Alexander Paraschiy said, “This measure is aimed at protecting domestic car producers, including Bohdan Motors (LUAZ UK), an assembler of Russian Ladas, and UkrAvto (AVTO), which produces several of its own ZAZ models, as well as those of Daewoo, Chevrolet and Chery. A 40% year on year decline in Bohdan Motors’ car production to 13,500 units (or less than 10% of its annual production capacity), as well as a 60% year on year decline in the second half of 2013 output, is the best indicator the problems faced by all local producers. The protec-

1.139bn was transferred from Russia to Azerbaijan in 2012, according to sources in the Central Bank of Russia. The volume of personal transfers from Russia to the CIS states reached $20.11bn in 2012 which is almost 22% higher than the indicator of the previous year, Russian media report. Personal transfers represent the income of house economies from abroad from their members and from the family economies of non residents and usually associated with the temporary or constant migration of the population. The transfers can be carried out both via the banks, postal offices, money transfer systems and through transfer of cash and material values from a member of a family economy to his family economy or from one family economy to another. Uzbekistan was the leader for the volume of assets transferred from Russia in 2012 - $6.241bn (30% growth), followed by Ukraine - $3.397bn (11.5% growth) and Tajikistan-$3.125bn (+15.5%). $1.682bn was transferred to Kyrgyzstan, $1.96bn to Moldova, $1.398bn to Armenia, $843m to Belarus, $298m to Kazakhstan, $27m to Turkmenistan. News.Az

tive measures, therefore, were not a surprise.\\r\\ nBohdan Motors’s key market is Russia, plus Ukraine’s demand for Ladas declined 31% year on year in 2012 while total demand for new cars increased 15% year on year suggesting that import duties will not help the more fundamental issue of a radical shift in consumer preferences. UkrAvto brands (ZAZ, Chery, Chervrolet) only declined 10% year on year in 2012 thus may be helped by the duties. The biggest car importers do not believe that ad-

ditional fees can help the market. They say that authority has to stimulate the development of local production by other means. “We need long-term programmes which can save the industry. For example, the authorities may propose to the plants’ owners easier procedures to acquire sites for new production,” said the head of information-analytical group Auto-Consulting Oleg Omelnytskiy. Experts say that car prices may increase 10% in months. “It is expected that the price of cars incurring the special duty will rise. In particular, our company which imports cars under the brands Geely and MG will increase prices by 15% in April”, said Sergey Borovik, Marketing Director of AIS Group . Price increases could trigger a drop in sales. According to an official statement from Porsche Ukraine (Audi, Volkswagen, Seat), referring specifically to models that incur special duties, it is suggested that in some cases the decline in sales could even reach 40 to 50%. Ukrainebusinessinsight

AZERBAIJAN caucasian business week

April 22, 2013 #01

AZPROMO and Chinese Council for Promotion of International trade sign agreement

FITCH AFFIRMS SOCAR AT ‘BBB-’; OUTLOOK STABLE

he China Council for the Promotion of International Trade (CCPIT) and the Azerbaijan Export and Investment Promotion Fund (AZPROMO) signed a memorandum of understanding in Baku on Thursday. The document was signed by the head of AZPROMO Rufat Mammadov and CCPIT Vice Chairman Chang Wei. The document was signed within the framework of the Azerbaijani-Chinese business forum held in Baku. According to the Deputy Minister of Economic Development Niyazi Safarov, there is a reliable legal framework for the development of relations between Azerbaijan and China which includes more than 20 signed documents. “The economy of both countries is developing dynamically which expands the potential of mutual trade relations,” Safarov said. According to him, 69 companies with Chinese capital operate in Azerbaijan. They are mainly involved in trade, construction, agriculture and communications. The business forum was attended by officials from both countries as well as representatives of companies representing the food industry, construction, production trucks, ICT, energy, logistics, processing and tourism. Trend.az

itch Ratings has affirmed State Oil Company of the Azerbaijan Republic’s (SOCAR) Long-term foreign currency Issuer Default Rating (IDR) at ‘BBB-’, Short-term foreign currency IDR at ‘F3’ and senior unsecured rating at ‘BBB-’. The Outlook on the Long-term IDR is Stable, the agency said. SOCAR’s ratings, Azerbaijan’s (‘BBB-’/Stable) wholly state-owned national oil company, are aligned with the sovereign’s at the current level, the statement said. SOCAR is an integrated second-tier oil company operating mature brownfields with about 250,000 barrels of oil equivalent per day (mboepd) hydrocarbon production in 2012 and a number of downstream, chemical and retail assets and pipelines. SOCAR controls Petkim, Turkey’s only chemical producer, and is currently constructing the 10m ton a year STAR refinery in Turkey. It is also a party to several production-sharing agreements (PSAs) and receives some volumes of oil, natural gas and gas condensate under PSAs. “SOCAR represents the state’s interests in the strategically important oil and gas industry,” the statement said. “SOCAR maintains close relations with the government and the State Oil Fund of the Republic of Azerbaijan (SOFAZ) on principal financial and investment decisions, e.g., the construction of $17bn Oil-Gas Processing and Petrochemical Complex (OGPC) outside Baku, Azerbaijan’s capital, new gas pipelines and other projects that SOCAR expects will be largely financed by the state via SOFAZ.” While SOCAR expects SOFAZ to provide a substantial portion of funds for the OGPC and other projects, there is no definitive agreement yet beyond 2013. Moreover, Fitch estimates that SOFAZ’s assets have peaked at around $34.1bn at end-2012 and expect these assets to decline through 2014 as SOFAZ contributions to the government budget stay high. Fitch notes that SOFAZ may not have sufficient funds for co-investment in all SOCAR’s projects, leading to SOCAR’s taking on additional debt, beyond its current estimates.

Another Azerbaijani bank enters in ‘billionaires club’

zerbaijan has increased the number of banks with assets of AZN 1 bn ($1.27 bn) and above. Xalq Bank (People’s Bank) reports that on 15 April its assets exceeded $1 bn and reached AZN 1.098 bn. “Our Bank has become the third financial institution of Azerbaijan whose assets have exceeded the barrier of AZN 1 bn,” Xalq Bank informs. The volume of loans given by the Bank has to-

taled AZN 831.4 million that is the third place indicator on the country. The size of the Bank’s deposit portfolio reached AZN 749.6 million, and AZN 598.285 million accounted for retail deposits. As of 15 April 2013 Bank’s balance sheet exceeded AZN 208 million and the registered capital is AZN 169 million. Abc.az

Baku to host AzerbaijaniKazakh business forum

aku is to host the Azerbaijani-Kazakh business forum on April 17 with the support of the Ministry of Economic Development and the Azerbaijan Export and Investment Promotion Fund (AZPROMO), according to AZPROMO’s statement published on Tuesday on its website. The forum will be held in the framework of the visit of a Kazakh delegation headed by Mayor of Aktau, Edil Zhanbyrshin to Azerbaijan. According to a statement, the business forum will be attended by entrepreneurs from the Mangistau region of Kazakhstan, representing the sector of urban development, landscaping, water and wastewater management, recycling and solid waste management, food security, alternative energy and other sectors. Foreign trade turnover between Azerbaijan and Kazakhstan by the end of 2012 amounted to $393.425 million. The share of export operations totalled $52.87 million, decreasing by 9.28 per cent, while imports grew by 56.72 per cent to $340.555 million. Trend.az

Under its base rating case, Fitch expects SOCAR’s oil production to decline yoy and its gas production to increase moderately in 2013-2015. The oil production decline follows the depletion of existing brownfields in Azerbaijan, SOCAR’s only upstream region. At the same time, the agency forecasts that the main production gains will be achieved in natural gas from Azerbaijan’s production-sharing agreements (PSAs), in particular the Stage 2 of Shah Deniz gas PSA, in which SOCAR has a 10% stake and which expects to increase its production by 16 bcm of gas and 4m tons of gas condensate from 2017, the statement said. Fitch expects that SOCAR will spend nearly $5.8bn over 2013-2015 on capex. “The company has little flexibility to postpone / phase out capex as most funds are earmarked for its upstream to arrest brownfield production decline, to meet its obligations under the PSAs and to complete investment projects that are already underway,” the statement said. “These include the construction of the 10m ton STAR refinery in Turkey scheduled to be completed in 2017.” The agency estimates that under its Brent price assumptions of $100 per bbl in 2013, $92/bbl in 2014, $85/bbl in 2015 and $75/bbl in 2016, SOCAR’s funds from operations (FFO) net leverage

will reach 3.2x in 2015, up from 0.8x in 2011. SOCAR’s ratings could be affected by a sovereign rating action. An increase in the level of state support through e.g., government guarantees for a large portion of the company’s debt, coupled with a sovereign rating upgrade would be positive for the ratings. An aggressive investment programme and/or acquisitions resulting in a significant and sustained deterioration of credit metrics would be negative for SOCAR ratings, the statement said. SOCAR had AZN1.263m of cash at 31 December 2012, which was insufficient to cover its short-term debt maturities of AZN1.895m on that date. A large portion of SOCAR’s cash including short-term deposits is held at the state-owned International Bank of Azerbaijan (IBA, ‘BB’/ Stable). Fitch notes that SOCAR’s short-term maturities at end-12 amounted to about 40% of its gross debt. In March 2013, SOCAR placed a 4.75% coupon $1bn bond due in 2023, to refinance part of its existing debt and for its capital investment program. 78% of SOCAR’s debt at 31 December 2012 was denominated in USD including the USD500m bond due in 2017, and about 60% of SOCAR’s debt had floating rates. Trend.az

STATE INVESTMENTS PROVIDE 86.8% OF ALL INVESTMENTS IN AZERBAIJANI ECONOMY

nvestments in Azerbaijani economy in March grew by 15% compared to February 2013. The State Statistics Committee (SSC) informs that for Jan-Mar 2013 capital investments in country’s economy totaled AZN 2.9 bn ($3.698 bn in accord with average exchange rate by the end of the reported term (AZN 0.7846 to the US dollar) that is by 36.1% more versus Jan-Mar 2012. It was invested AZN 617.7 million in January, AZN 1.06 bn in February, AZN 1.2 bn in March of the year. According to the SSC data, for Jan-Mar 2013 domestic sources’ investments totaled AZN 1.978 bn that makes up 68.2% of all investments. Foreign investments reached AZN 924.1 million that

makes up 31.8% of all investments. In January home investments totaled AZN 398.8 million (64.6% of all investments), in February AZN 691.5 million (65.1%), in March AZN 887.8 million (72.6%). Over Jan-Mar 2013 the key sources of investments were enterprises’ funds (AZN 1.25 bn with a rise of 17.7%), budget assets (AZN 1.338 bn with a rise of 1.55-fold), bank loans (AZN 177.9 million, +1.7-fold), population’s funds (AZN 66.1 million, +12.2%), and extrabudgetary funds (AZN 58.3 million; +1.5-fold). Budget investments, which exceeded corporate investments for five months running until December 2012, failed to exceed corporate sector investments by the end of 2012 and Jan-Mar 2013. Over Jan-Mar of the year state investments reached AZN 2.519 bn (86.8% of all invest-

ments) and non-state investments AZN 383.1 million (13.2%). In 2012 capital investments in country’s economy totaled AZN 15.338 bn (+18%) and in December 2012 investments totaled AZN 2.7 bn (last year’s best index). In 2011 capital investments in country’s economy totaled AZN 12.776 bn, including AZN 2.759 bn in December (the best monthly indicator for the entire history). In 2010 investments made up AZN 9.715 bn, including AZN 2.01 bn in December. In 2012 domestic sources in the economy made up 78.8% of all investments. Last year state investments ensured 71% of all investments and and state budget 2012 investments totaled AZN 6.46 bn. abc.az

FOREIGN INVESTMENTS IN AZERBAIJAN FELL BY 9.9% FOR MARCH

n March foreign investments in the economy of Azerbaijan decreased by 9.9% versus February 2013. The State Customs Committee (SCC) informs that for Jan-Mar of the year foreign investments made up AZN 924.06 million that is by 1.63-fold more against Jan-Mar 2012 (AZN 570.2 million). Foreign investments totaled AZN 334.3 million in March versus AZN 370.9 million in February, AZN 218.9 million in January 2013 and AZN 172.1 million in March 2012.

Following Jan-Mar 2013 the list of the leaders on external investments in national economy did not change. The Great Britain with investments for AZN 427.116 million provided 46.2% of their volume. The US invested AZN 112.06 million or 12.1% of foreign investments, Japan AZN 88.7 million (9.6%), Norway AZN 70.3 million (7.6%), Turkey AZN 44.001 million (4.8%), France AZN 22.376 million (2.4%). Major investments were carried out by the World Bank (AZN 33.26 million or 3.6% of all investments), the Asian Development Bank (AZN 17.35

million or 1.9%), and Islamic Development Bank (AZN 1.08 million). In 2012 foreign investments made up AZN 3.258 bn, including AZN 527.047 million in November (best index for 2012). In 2011 foreign investments made up AZN 2.515 bn, including AZN 320.9 million in December (best indicator for 2011). In 2010 overall foreign investments reached AZN 2.405 bn, including AZN 571.1 million in December (the absolutely best indicator a month in 2009-11). abc.az

ARMENIA

April 22, 2013 #01

FRENCH FINANCIAL INSTITUTION PROPARCO ENTERS ARMENIAN MARKET Yerevan Brandy Factory expects up to 28% growth this year

erevan Brandy Factory (ArArAt brand) increased its sales by 25% (3.5mln liters) in 2012 and the factory is expected to register 27-28% growth this year which is equal to 1.2mln liters of brandy or 2mln additional bottles, General Director of Yerevan Brandy Factory Ara Grigoryan said this today. According to him, the factory is going to store a record-breaking 35 thousand tons of grapes this year. In March 2013, the official presentation of ArArAt brandy was held in the capital of Slovakia Bratislava where the Armenian brandy will be available in stores, stores network, hotels, restaurants and cafes from now on becoming the first Armenian brandy to be exported to Slovakia within “Premium Beverage” category. Until now, ArArAt’s 5-star Selected, Akhtamar and Nairi brandies (total volume of 20 thousand liters) were imported to Slovakia. Touching upon ArArAt’s share in Armenian market, Ara Grigoryan said that the growth potential here is almost exhausted. “ArArAt brandy share on the domestic market is 18-19% but it’s in case when about 65% of the market is up to AMD3000 brandies which should be eliminated for good and we have zero share there. Our share in the “Standard” (3-5star) segment is around 30%. We take the 65% of the market of “Premium” category brandy in Armenia, while in “Super Premium” category - 97%”, said the head of the Yerevan Brandy Factory.

roparco (French financial institution) signed a USD 15 million credit facility agreement, it being the first investment of Proparco in Armenia and the second one in South Caucasus. The CFA signatories are Mr. Jerome Bertrand-Hardy, Deputy Chief Investment Officer at Proparco and Mr. Artak Hanesyan, Chairman of Management Board-General Director at Ameriabank. The signing ceremony was attended by French ambassador in Armenia Mr. Henri Renaud. This new financing project implemented by Proparco and Ameriabank will open new long-term financing opportunities for small and medium businesses in food processing industry, boosting Armenia’s economy and job creation. “As a first operation in Armenia, Proparco is proud to support America Bank, a leading financial institution with a dynamic

growth strategy which supports investments in the agribusiness sector. This sector is indeed one of the main focuses of Proparco in the Caucasus region and in Armenia in particular. Its market position, financial strength, competent management and privileged partnership with development finance institutions make it a partner of choice,” Jerome Bertrand-Hardy said. “We welcome Proparco’s entry to Armenia. We highly appreciate our partnership with Proparco, enabling us to diversify our loan portfolio and increase SME lending. This credit facility will allow us to keep financing SMEs, particularly those with their focus on Agribusiness/Food processing, considering them as the main drivers of our national economy. Under this credit facility SMEs will be able to obtain long-term financing to expand their businesses, strengthen their competitiveness,” Artak Hanesyan, Ameriabank General Director said.

Proparco is a financial institution jointly held by Agence Française de Développement (AFD) and public and private shareholders from the North and South. Its mission is to catalyze private investment in emerging and developing countries with the aim of supporting growth, sustainable development and the achievement of the Millennium Development Goals (MDGs). Proparco finances investments that are economically viable, socially equitable, environmentally sustainable and financially profitable. Proparco is one of the main bilateral development finance institutions in the world. It invests on four continents encompassing the major emerging countries and the poorest countries, particularly in Africa, and has a high level of requirements in terms of social and environmental responsibility. PanARMENIAN.Net

TEN TOP BANKS WITH HIGHEST PAID JOBS IN ARMENIA

RKA Agency has ranked ten Armenian banks with highest banking salaries as of the end of September, 2012. The following banks appeared on the first top ten list: HSBC Bank Armenia, Byblos Bank Armenia, Armswissbank, Ameriabank, Armenian Development Bank, Conversebank, Areximbank-Group of Gasprombank, ProCredit Bank, Inecobank and Bank VTB (Armenia). Average banking salary was 352,704drams in top ten banks as of the end of the third quarter, as compared with 275,942 drams in the banking system in general. There are currently 21 banks (and 458 branches) operating in Armenia. HSBC Bank Armenia tops the list with an average monthly salary of 621,000drams. At the same time, the salary of the bank’s employees reduced by 10.9% in the third quarter as compared with Q2; number of staff has reduced from 395 to 389 respectively. The second is Byblos Bank Armenia with an average of 434,000drams, an 11.8% reduction against Q2; the staff has increased from 93 to 96 respectively. Armswissbank is the third in ARKA’s ratings, with an average salary of 386,000drams in the third quarter, which is a 16.6% increase as compared to the level in Q2. The number of staff remained the same (98). Ameriabank has taken the fourth place with an average salary of 367,000drams (an 11.5% reduction against Q2); number of employees has reduced from 471 to 457 (as of 30.09.2012). Armenian Development Bank takes the fifth line with an average of 323,000drams (3.5% increase over the quarter); the number of staff has gone up from 168 to 182. Conversebank is the sixth in the top-ten list: the average salary is 317,000 (3.4% increase), number of employees has reduced from 642 to 610 people.

caucasian business week

The seventh bank in the list, Areximbank-Group of Gasprombank, pays an average salary of 284,000drams (reduction of 13.1%); 441 people are employed by the bank in the third quarter as compared to 422 in Q2. ProCredit Bank with an average salary of 275,000drams (3.2% lower than in Q2) has taken the eight place in the ranking; the bank has increased number of its staff from 322 to 355 people. The ninth best paying bank is Inecobank where the average salary is 267,000drams in the third quarter (a 21.7% contraction from the quarter before); the bank’s staff has gone up from 514 in Q2 to 520 people in Q3. Bank VTB (Armenia) is the last in the top-ten list: it pays an average salary of 253,000drams (15% rise against Q2). The bank has the highest number of staff and the largest network through-

out the country; number of employees grew from 1,146 to 1,180 over the third quarter. Of the top-ten banks with highest banking salaries, six banks have also recorded a salary increase in yearly terms (September 2012 against September 2011). The highest salary increase was recorded in Bank VTB (Armenia), where the average salary rose by 44.6% over the period. The second is Conversebank (24.5% salary raise), followed by Armenian Development Bank (8.7%), Areximbank-Group of Gasprombank (7.9%), Inecobank (6.4%) and ProCredit Bank (0.4%). The source of the rankings is “Banks of Armenia” quarterly bulletin of ARKA Agency prepared on the basis of financial reports and other information from the banks. ARKA

Armavia starts refunding price of tickets sold earlier

n Thursday, Armavia, Armenia’s national air company, started refunding the price of tickets sold earlier, said Norayr Beluyan, the president of the company. He refrained from saying how many people applied for the refunding and how long this process will last. “We will try to do everything as quick as possible,” Beluyan said. ARKA News Agency failed to reach the central ticket office of the air company and obtain information about the number of passengers having applied for refunding. Earlier, Armavia stopped operating flights and launched its bankruptcy procedure. ARKA

South Caucasus Railways conducting regular spring examination of railroad

he South Caucasus Railways CJSC is conducting now a regular spring examination of the railway, infrastructure and trains, the press office of the company reported today. The examination is being conducted by the company’s administration headed by CEO Viktor Rebets. The examination will last until late May. The company will repair dilapidated sections of the railroad. Energy, automation and telecommunication systems will be carefully examined as well. Special attention will be paid to the facilities ensuring traffic safety. In examination of trains, special attention will be paid to fire-prevention devises, fans and conditioners. South Caucasus Railways, a 100-percent subsidiary of Russian Railways, runs Armenian Railway. Armenian Railways was handed over to the South Caucasus Railways on February 13, 2008 for 30-year concession management with a right to prolong the management term for other 10 years. ARKA

Ameria: Beverage and tobacco are promising for export

meria consulting company today presented the research on Armenian and regional food processing which aims to reflect the market situation and provision of accurate information on the market to the customers. “Taking into account the fact that the sphere is one of the most interesting ones for Armenia in terms of investments and business development, this time we touched upon the food production. We have assessed a number of subfields, for instance, beverage, tobacco production which have more promising potential in terms of export”, said Director for Development of “Ameria” group, Head of “Ameria” consulting company Tigran Jrbashyan. The research involves macro-economic analysis of food processing and drink production fields, research of the major representatives of the sphere and their activity in Armenia, assessment of potential of target markets - EU and CIS, surveys on prospects of food processing, natural growth, obstacles, risks, expectations within coming 3-5 years, new projects of 1-3 years, regulatory legal acts, forecasts on general development of food processing fields. “The main part of the food is imported to Armenia from EU and Russia, in some cases - from a number of CIS countries”, Deputy Director of Management Consulting Karen Martirosyan quoted this from the research. The full package of the research is available at “Ameria” consulting company. ARKA

WORLD NEWS

caucasian business week

April 22, 2013 #01

GOLD BOUNCES BACK – BUT FOR GOOD?

old is on the rebound after a 4.5% drop this week, and the plunge has triggered serious concern about the condition of the global economy. The Comex index has passed the $1,400 mark, gaining 21.5 points to $1,412.60 an ounce at 15:17 DST. “We are already seeing a strong response to the fall in prices, with a sharp pick-up in physical gold sales by investors and retail consumers in the two key consumer markets - India and China,” Mark Pervan, head of commodity strategy at Australia & New Zealand Banking Group, wrote to Bloomberg today. While the value of the biggest gold producers declined by $169 billion, jewelers took advantage of the 30-year record-low gold prices to stock up for anticipated high demand retail and jewelry sales. Chinese and Indian jewelers are optimistic that gold will rebound as much as 29% by December 2013, to as high as $1,800 an ounce, as demand increases, according to billionaire Indian jeweler T.S Kalyanaraman, Reuters reported. “There’s been continued buying interest, particularly into China,” Nigel Moffatt, treasurer of Australia’s Perth Mint said on Bloomberg Television Friday. Americans took advantage of the price dip to buy stock in a historically high yielding investment. In April, the US Mint sold 153,000 ounces of American Eagle gold coins, a three year high, according to its website.

Red flag for continued recession The recent slump in gold has been paired with disturbing economic data forecasting significant slowing in some of the world’s largest economies – the US, China, and Russia. The gold drops are “signaling concerns about global growth,” said Mohamed El-Erian, the cochief investment officer of PIMCO, which oversees $2 trillion in assets, Reuters reported. “Commodities have been sending the signal on growth for a while, and now even louder,” ElErian added. Gold has certainly been the ‘loudest’ of the flailing indexes, after it plunged 14% in the first two April sessions, hitting a 30-year low as slowed growth data from the US and China trickled in. Prices also dropped as the Cypriot bailout payment plan toyed with the idea of selling 75% of their reserves to help finance the bailout, which spooked investors other cash-strapped European states, like Spain and Portugal, might do the same. The economic slowdown was confirmed by the International Monetary Fund on Tuesday when it trimmed back its forecast on economic growth in 2013, down to 3.3% from the earlier 3.5% projection. Citigroup predicted, and was correct, that 2013 would be the first year when commodity prices at the end of the year were lower than at the beginning.

EUROPEAN CAR SALES CRISIS SPREADS TO THE NORTH

uropean car sales continue to tumble and the problem is spreading from southern countries to the more prosperous north. For the whole region, registrations dropped to 1.35 million vehicles last month from 1.5 million a year earlier, the Association of European Carmakers said. A 10 percent decline In the first three months of the year has manufacturers trimming their sales outlooks for this year and preparing the ground for possible profit warnings. Most worrying, previously solid German sales fell 17 percent in March and 13 percent in the first quarter. Comparing the month of March over a five year period, sales were still weak from the economic crisis in 2009, picked up in 2010 and have been sliding ever since. March 2013 saw them down by 10.3 percent from a year earlier.

PSA Peugeot Citroen, Toyota and Ford were the worst performers – down around 16 percent from a year earlier. But even Volkswagen posted a 15 percent yearon-year decline for its main brand and nine percent for the VW group, with Audi down 8.6 percent. Britain was a rare bright spot with a 5.9 percent acceleration in sales in March, but the introduction of the newest 2013 number plate during the month artificially boosted showroom traffic. And there is evidence that carmakers are having to offer big discounts to get sales, which adds to their losses. One report quoting industry data said average retail sales incentives in the top five markets – Germany, Britain, France, Italy and Spain – rose 13 percent to an average of almost 2,400 euros per vehicle among volume automakers in JanuaryFebruary. euronews

Citigroup predicted the end of the ‘super-cycle’ – when rising prices commodities supersede demand. As growth slows, governments are scrambling to find a way to stay afloat. Most governments are doing this via cash stimulus- simply printing more money to avoid deflation, the Bank of Japan the premier example. The recent retreats in gold, oil, and other precious metals and energy stocks, are evidence to many of a weak - and maybe slightly unstable - economy. Because metals and energy are so closely tied to industrial growth, a decline in their demand can provide an accurate reading of an global economic performance.

The investors who saw it coming As inflation falls, this in turn reduces the value of gold as a fortification against rising prices. If investors forecast an inflation dip, gold will also lose its value. “Because the global economy is on the downside of a global credit bubble, it seems unreasonable to expect abnormal inflation,” said Richard Bernstein, the head of an investment advisory firm in New York,Reuters reported. Gold, a major investment for both individuals and institutions, provides a viable alternative to currency that their government can just print more of. It also provides and investment alternative to stocks. George Soros cut his holdings in SPDR Gold Trust by 55% last quarter. He predicted the prices would tumble, and wasn’t sure how quickly they’d recover.

Is it safe to follow the yellow brick road? The title of JPMogran’s gold futures report is ‘The slide in global inflation may not be over.’ Morgan Stanley has cut its 2013 gold forecast by 16%, down to $1,487, as investors continue their selling frenzy. The sell-off “has all the hallmarks of panic-driven, stale long liquidation, stop-loss and capitulation selling in the face of a concerted short sale” Peter Richardson, a Morgan Stanley analyst, wrote in a report. According to JPMorgan’s report, it’s not a time to invest, or reinvest in gold. Merrill Lynch recently warned that gold could fall to $1,200 before stabilizing, citing “fears of disinflation combined with news of potential central bank gold selling,” in their Tuesday report. “Even at these levels, gold is still not attractive. The odds favor the bull market being over,” said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Global Investments, which in early March told clients to stop allocating a position to gold, Reuters reported. rt.com

GREECE REACHES BAILOUT DEAL, PORTUGAL OFFERS NEW AUSTERITY

reece has been given a clean bill of health by the “troika” of creditors – the European Commission, International Monetary Fund and European Central Bank – which means it will get its next chunk of rescue aid soon. That comes after Athens ended opposition to 15,000 public sector job cuts – a key condition of the latest bailout deal agreed late last year. Greek Prime Minister Antonis Samaras said: “While insecurity and anxiety are gripping the world, Greece is being stabilised and our position is being bolstered. We have reached an agreement for the disbursement of the next instalment of 2.8 billion euros, and the way is now open for the May instalment of six billion.” The troika members said Greece is on course to contain its debt and pull itself out of a crippling recession next year. Athens has been promised further help – such as lower interest payments on the money it is being

loaned – if it keeps meeting its bailout targets. Meanwhile in Lisbon, more troika auditors are checking out Portugal’s new austerity measures. Additional spending cuts were forced on the government by the country’s constitutional court ruling that reducing pensions and state workers’ wages was unconstitutional. Half of the 1.3 billion euros shortfall will come from cuts in ministries’ operating budgets and the rest from lower health, education and social security spending. The trokia has to agree that is viable for Portugal to get the next two billion euro instalment of bailout loans and a seven year extension of the time to pay them back.

WORLD NEWS

April 22, 2013 #01

caucasian business week

NOKIA SELLS FEWER PHONES, BUT LOSSES TRIMMED

okia’s shares tumbled after it announced a big fall in sales of its basic phones and it said it expected operating margins to deteriorate. On the plus side its underlying losses were less than analysts has feared in the first three months of this year and there was a stronger performance from its Lumia smartphones, which bring in more profit. It sold 5.6 million Lumia handsets in the first quarter, up from 4.4 million in the previous quar-

ter and in line with expectations. However the Finnish mobile phone maker sold 30 percent fewer phones than in the previous quarter and is burning through its cash reserves. Shipments of mobile phones slumped 21 percent to 55.8 units, a far steeper decline than the eight percent fall that markets expected, with unit sales down in every region.

Elop running out of time The results renewed pressure on Chief Executive Stephen Elop, who was hired in 2010 to turn the Finnish mobile phone maker around after falling behind rivals Samsung and Apple in the smartphone race. He made the controversial decision to switch to Microsoft’s untried Windows Phone software in early 2011 and had said the transition would take two years, a period that is now over. Analysts said he was running out of time.

“Basically, he has only the second quarter,” said Mikko Ervasti at Finnish investment banking and wealth management group Evli.

‘Second-tier player’ Nokia’s future is seen as depending on highermargin smartphones as a growing number of global consumers want access to apps such as Twitter from their handsets. However, it also needs to protect its position in the basic phone market so buyers of its lower-end handsets do not defect to other brands when they eventually upgrade to smartphones. In markets such as China, Nokia faces strong competition not only from rivals such as Samsung but also from emerging, cut-price competitors. “The fall in numbers for the low-end devices is quite alarming,” said Nordea analyst Sami Sarkamies. “Even with Lumia doing better, we still care about those. Nokia is still a second-tier player in smartphones, and it’s only because of its position in mobile phones that it’s still relevant.” euronews

PROFITS UP FOR GOOGLE AND MICROSOFT

oogle’s core Internet advertising business saw its net revenue rise by 23 percent in the first three months of the year even as its Motorola mobile phone division suffered a sharp decline. Analysts said Google does seem to be holding its own in the rapidly changing technology landscape where consumers increasingly use mobile devices instead of PCs. “Google eked out an acceptable quarter, but it wasn’t easy,” said Stifel Nicolaus analyst Jordan Rohan. Google’s search advertising business remains solid but unexciting, Rohan said. He noted that Google’s adjusted profit of benefited from a significantly lower tax rate due to a retroactive research and development tax credit. Without that benefit, Rohan said Google would have missed Wall Street’s earnings target. Different is vital Releasing the results, Google CEO Larry Page focused particularly on new products such as the Google Glass wearable computers and highspeed fiber networks that the company is developing, which he said were vital to the company’s future success. “If you look at most companies they never do anything different, and eventually they run into problems for that reason,” said Page. He said the new lineup of yet-to-be-released Motorola devices would offer a variety of improve-

apan celebrated the birthday of the world’s oldest living person, Jirouemon Kimura, who turned 116 on Friday, dpa reported. Prime Minister Shinzo Abe sent Kimura a video message to congratulate him while Kyotango Mayor Yasushi Nakayama and an official from Guinness World Records visited his home, said Michiko Arata, a city employee. Kimura, who lives in Kyotango city in Kyoto prefecture, was recently hospitalized, but he was discharged on April 9, Arata said. Kimura was born on April 19, 1897 and became the oldest living person in the world in December. He has a good appetite, eating three meals a day, Arata said. Kimura has five living children, 14 grandchildren, 25 great-grandchildren and 14 great-greatgrandchildren. Kimura worked at a local post office for 38 years. He turned to farming after his retirement and continued until the age of 90. trend.az

Iran and North Korea negotiate energy issue

I ments over current smartphones, with features such as longer battery life and better resistance to shattering or damage from spilled drinks. Microsoft surviving PC sales decline Microsoft’s quarterly results came in better than expected. Its strategy of selling more long-term licenses for Windows and Office software to big business customers is helping to cushion the blow from plummeting sales of personal computers and a faltering start for its Windows 8 operating system. Personal computer sales fell 14 percent in the first three months of the year, just as Microsoft tries to ramp up sales of the latest iteration of Windows.

UK STRIPPED OF AAA RATING BY FITCH ritain’s credit standing has suffered a further blow after Fitch became the second international agency to strip the country of its AAA rating. Citing a weaker economic and fiscal outlook it now rates the UK as AA+ with a stable outlook. It was bad news for Britain’s Conservative-led government which promised to slash the deficit

World’s oldest person turns 116

and protect the rating when it took power three years ago. Moody’s was the first to strip the UK of its triple A rating in February and Standard & Poor’s has said there is at least a one-in-three chance it will follow suit. Sluggish economic growth has pushed the government’s deficit reduction programme several years off track, leading to criticism that its harsh

“Microsoft has successfully transitioned into an enterprise software company and these results show that, because the strength of server and tools and the actual way they sell licenses to business is making up for the missing PC sales,” said Kim Caughey Forrest, an analyst at Fort Pitt Capital. Effectively, Microsoft no longer relies on a new PC to make money from software. Only 20 percent of the company’s product revenue comes from computer makers paying license fees to put Windows on their machines. About 45 percent comes from multiyear licensing agreements with customers. euronews austerity programme is counter productive. Even the International Monetary Fund, once a key ally in the case for fiscal austerity, has urged Britain to consider slowing the pace of deficit cuts.

Osborne defiant Finance minister George Osborne admitted last month that growth this year would be half the level previously assumed and public debt would rise for several more years. Fitch’s downgrade will be seized upon by critics of the government’s austerity policy, but market reaction is likely to be more muted. France and the United States have both lost their triple-A rating with more than one agency without any major loss of investor confidence. The move comes just days after the International Monetary Fund cut the UK’s growth outlook for 2013 to just 0.7 percent, down from 1.0 percent – more than any other advanced economy. The IMF said Osborne should reconsider his austerity plan to hasten the recovery. Osborne’s aides have said he will defend his plans “aggressively” when an IMF team arrives in London next month to make their annual assessment of the British economy. Euronews

ranian oil minister met with his North Korean counterpart during international energy exhibition held in Tehran, Fars News Agency reported on Apr.18. According to the report, Rostam Gasemi and Pae Hak met during Iran’s 18th International Oil, Gas, Refining and Petrochemical Exhibition started work on Wednesday. The report didn’t give further information about the details of talks between Tehran and Pyongyang, but said that Hak met with Ahmad Qalebani, Managing Director of the National Iranian Oil Company (NIOC) as well. Before on April 16, South Korean Yonhap News Agency reported that North Korea sent a delegation to the energy exhibition in Iran, indicating that Pyongyang wants to maintain close relations with the oil-rich Middle Eastern country. According to the report, a delegation of the Ministry of Oil Industry, led by the minister Pae Hak, left Pyongyang on Tuesday in order to participate in the international energy event in the Iranian capital of Teheran, according to the (North) Korean Central News Agency. Some North Korean observers in Seoul claimed that the impetus behind sending the delegation may be to strengthen economic and political relations with Iran. The two countries are believed to be cooperating closely, technically and financially, in their development of nuclear arms, missiles and other weapons of mass destruction (WMD). They have both been sanctioned by the international community, which sees the countries as global security risks. Pyongyang recently detonated its third nuclear device on Feb. 12, launched a long-range rocket in December and has several times threatened South Korea, the United States and Japan with pre-emptive nuclear attacks. trend.az

ring a bunch of French geeks together, add millions of random entries from Facebook, Twitter or Tumblr, stir and serve. What do you get? From one Paris-based startup: A hefty dose of math -- and a faceoff between U.S. President Barack Obama and Canadian singer Justin Bieber. MFG Labs set up shop three years ago in the 9th arrondissement of the French capital with the idea of using complex algorithms -- like the ones that made you sweat in college, just much harder -- to make sense of oceans of data. The skill is in high demand. Advertisers need it to better target shoppers, while companies experi-

TECHNOLOGIES caucasian business week

April 22, 2013 #01

OBAMA VS. BIEBER: French Geeks Compute Who’s Bigger on Twitter

ment with it to figure out consumers’ tastes and purchasing behavior. Such opportunities have made so-called big data fashionable in France. Afdel, an association of software and web application makers, asked the French government in February to co-finance a 300 million euro ($390 million) investment fund to help create 100 big data startups by 2018. “There’s all this data available on Twitter, Facebook, Google Maps ... but it’s dirty data, it’s in a raw state,” said Joachim de Lezardiere, MFG’s chief operating officer. “We’ll clean it all up.” French mathematics professors Pierre-Louis Lions, a Fields medalist, Jean-Michel Lasry and Olivier Guéant joined with local entrepreneur Henri

Verdier to found MFG. The startup, whose name stands for Mean Field Games, a math theory developed by Lions and Lasry, employs about 20 people, including specialists in theoretical math, statistics, the web and advertising. Together they build platforms to help companies gather online data about consumers. The point: Figure out a way to parse the free information and make a working app from it -- fast. In a country where innovation often has trouble making it out of the lab, MFG’s goal is to whip ideas into products in just a few months. MFG is taking advantage of one of France’s strong points: math. The country produces the highest number of math, science and technology graduates in the European Union. An increasing number of them are putting their talents to use in digital entertainment and online services. The startup, which advises companies on their online advertising and brand strategy, already has film studio Warner Bros. and book publisher Hachette among its clients. And MFG is hiring -- a note of optimism amid France’s unemployment rate, which is at a 13-year high. Among MFG’s applications, one it’s experimenting with draws a constellation graph of your Facebook social life to help you visualize your network. Another, created for a client, uses data

from pictures on Flickr to map out where tourists go when they visit France. Evaluating your impact on Twitter is another one they’re working on. It took MFG three months to go from idea to beta product with Where Does My Tweet Go?, a Twitter scorecard that measures the range and path of a person’s tweets. This can indicate how far-reaching the posts are. That’s where Obama and Bieber come in. The singer has the most followers on Twitter, with almost 38 million, ahead of fellow pop star Lady Gaga (36 million) and Obama (30 million). But does being the most popular person on Twitter also make you the most influential? MFG’s app shows that while Bieber’s tweets reach more people in the first circle of followers, his missives don’t make it very far beyond that because people tend not to retweet his posts. Obama, by contrast, gets retweeted more and for a longer time, giving him a bigger impact overall. A beta version of Where Does My Tweet Go? was made available to the public last week. Discussions are under way to figure out how Twitter could use the app to show the kind of impact Web media can have, Lezardiere said. If MFG’s apps catch on, the startup could soon find its own following of true “Beliebers.” Bloomberg

APPLE FALLS BELOW $400 AS SUPPLIER REPORTS IPHONE CHIP GLUT

pple Inc (AAPL) (AAPL). dropped below $400 for the first time since December 2011 after one of its audio-chip suppliers, Cirrus Logic Inc (CRUS)., reported an inventory glut that suggests iPhone sales may fall short of analysts’ expectations. Apple’s shares declined 5.5 percent to $402.80 at the close inNew York, and earlier touched $398.11. Cirrus, which makes sound components for the iPhone and iPad, is an indicator of demand for Apple’s top-selling products, according to Peter Misek, an analyst at Jefferies & Co. “We blame Apple for losing its mobility mojo,” Vernon Essi, Jr., an analyst at Needham & Co., wrote in a research report today. “This was simply an inventory overbuild for the iPhone 5 relative to Apple’s forecast.” Apple’s stock has fallen 43 percent from a record in September amid concerns about slowing profit and sales, narrowing margins and intensifying mobile competition. While the iPhone is the most popular handset, Samsung Electronics Co. has become the leading smartphone provider by introducing a variety of devices with different designs and prices. “Apple is reducing expectations,” Misek said in an interview. In the months since Apple’s record close on Sept. 19, the Standard & Poor’s 500 Index has gained 6.4 percent. After commanding a premium for most of the past decade, Apple is trading at about a 40 percent discount to the index on a price- earnings basis, according to data compiled by Bloomberg.

Cook’s Performance Among the 86 CEOs in the S&P 100 who have been in their jobs at least a year, Apple Chief Executive Officer Tim Cook has led the tenth-worst performance relative to the index over the course of his tenure, with Apple lagging by 12 percentage points, according to data compiled by Bloomberg Rankings as of yesterday’s close. Hewlett-Packard Co. (HPQ) CEO Meg Whitmantopped the list, underperforming by 29 points. After Apple on Jan. 23 reported its slowest profit

growth since 2003, more than 20 analystslowered their price targets, according to data compiled by Bloomberg. Today’s stock slump is the biggest since Jan. 24, when Apple tumbled 12 percent following the earnings report. For the fiscal second quarter, which ended in March, they’re predicting an 18 percent decline in net income to $9.5 billion -- the first decrease since 2003.

Worse Results The results may be even worse that those expectations, according to Toni Sacconaghi, an analyst at Sanford Bernstein & Co. He lowered his iPhone estimate for the quarter, which ended in March, to 34.2 million units, from 35.2 million. Sacconaghi also reduced his iPad projection by 1 million to 18.5 million units. Apple is set to report earnings on April 23, when the company is also expected to provide an outlook for the current period. Cirrus yesterday reported preliminary fiscal firstquarter net revenue of as much as $170 million, less than analysts’ average $197.3 million estimate, according to data compiled by Bloomberg. Because Cirrus relies on Apple for most of its revenue, this suggests that the iPhone maker told the chipmaker to anticipate fewer orders, Misek said. Cirrus will record a net inventory reserve of $23.3 million for the fiscal fourth quarter, which ended in March, the Austin, Texas-based company said in a statement yesterday. Most of that -- $20.7 million -- is

from a high-volume product from one customer, Cirrus said, without naming the client.

Cirrus Inventory Apple accounts for more than 90 percent of Cirrus’s revenue, according to supply chainestimates compiled by Bloomberg. Cirrus may have excess inventory after overestimating how many chips Apple would order, or because Apple is switching to a cheaper alternative, according to Andy Hargreaves, an analyst at Pacific Crest Securities. “It’s clear that Cirrus’s revenue from Apple is going down, but it could be because Apple doesn’t need their part,” Hargreaves said in an interview. Steve Dowling, a spokesman for Apple, and JoDee Benson, a spokeswoman for Cirrus, didn’t respond to a requests for comment. Apple may raise its current quarterly dividend payout of $2.65 by 13 percent to about $3 a share, for an indicated yield of 2.6 percent, according to

a Bloomberg projection. That would give it one of the highest yields among peers, after Intel Corp. (INTC) and Microsoft Corp. (MSFT)Bloomberg analysts take into account the payouts of other large technology companies, Apple’s projected earnings for next year and the amount of money on its balance sheet.

Dividend Increase Cook, who reinstated Apple’s dividend and announced a $10 billion buyback in March 2012, faces mounting pressure to take bolder steps to pay out more of Apple’s $137.1 billion in cash and investments. Investors including David Einhorn’s Greenlight Capital Inc. are pushing for more money as growth slows and competition from rivals such as Samsung intensifies. Apple has said it’s in active discussions over how to manage the cash, and considering buybacks or a higher dividend among other options. Bloomberg

April 22, 2013 #01

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 12 T. Tabidze St. Tbilisi Tel: 55 03 20, Fax: 25 12 26 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

TBILISI GUIDE

caucasian business week

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 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 Resident Mission of the Asian Development Bank (ADB) Address: Chavchavadze Ave. 39a 0162 Tbilisi Tel: 225-06-19, 225-06-20, 225-06-21 Fax: 225-06-22 e-mail: tpapuashvili@adb.org www.adb.org

State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05,

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

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

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

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

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 Tbilisi 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

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

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 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

PUBLICITY

caucasian business week

KEEP CALM AND

April 22, 2013 #01

BECOME OUR PARTNER BUSINESS WEEK caucasian

MOBILE PHONE: 555 472234 EMAIL: CAUCASIANBUSINESS@GMAIL.COM