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BUSINESS WEEK April 29, 2013 #02

caucasian business week

April 29, 2013, Issue 02,

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BE INFORMED, DO BUSINESS

Davit Usupashvili: Vladimir Putin is Responsible for 2008 Ethnic Cleansing

GEORGIA THE GOVERNMENT STARTS WORKING ON RETURN OF SOVIET DEPOSITS

eorgian Ministry of Finance declares that a special commission, working on the internal debt, conducts revision of the Soviet-time deposits. Pg. 5

Pg. 2

Finance Minister: The USA Continue Supporting Georiga

“BANK OF GEORGIA” REMOVES ABKHAZIA FROM THE LIST OF INDEPENDENT STATES

ank explains a “recognition” of Abkhazia by the changes in Russian money transfer system. Bank of Georgia” has made a comment regarding a released in the Internet photo. Pg. 8

ILIAUNI BUSINESS REVIEW CONDUCTS ALCOHOLIC BEVERAGES MARKET RESEARCH

he Iliauni Business Review has researched alcoholic beverages market. The 28 most demanded brands were selected in Tbilisi Pg. 6 based trade outlets.

CUSTOMERS GIVE PREFERENCE TO JACOBS COFFEE AND GURIELI TEA

KAZAKHSTAN KAZAKHSTAN TO DEVELOP AKTAU PORT WITH UAE FIRM

azakh railway monopoly Kazakhstan Temir Zholy (KTZ) reached an agreement with Dubai-based firm DP World to develop new special economic zones in critical regions of the Central Asian state. Pg. 9

AZERBAIJAN AZERBAIJANI SOFT DRINKS MARKET RECORDS OVER 10 MILLION LITERS, TO GROW IN LONG-TERM PERIOD

ARMENIA 2012 RATING OF ARMENIA’S TOP PROFITABLE BANKS

RKA agency has released its annual Top Profitable Banks of Armenia rating 2012. It is noteworthy that Armenian banks operated successfully last year, and 18 out of 21 banks posted profits. Pg. 11

Pg. 2

GEORGIAN PRIME MINISTER’S SPEECH AT THE COUNCIL OF EUROPE PARLIAMENTARY ASSEMBLY

onsieur lePrésident, Mesdames et Messieurs les Députés, Mesdames et Messieurs ! C’est pour la première fois qu’en qualité de Premier Ministre j’ai l’honneur dem’adresser à une institution européenne. Ce n’est pas un hasard si je me présente devant l’Assemblée Parlementairedu Conseil de l’Europe. En effet, vous représentez l’imminente institution pour le soutien et laprotection d’une véritable démocratie en Europe. Vous êtes les mieux placés pour savoir que la démocratie ne se construitpas par des effets d’annonce, elles’obtient par des efforts assidus et une coopération constructive. Je m’adresse à vous, car vous êtes à mon sens les meilleurs architectes dela démocratie européenne. Etant à Strasbourg en tant que citoyen français, je ne pouvais pasm’abstenir de m’adresser à vous en français et maintenant je vais continuer engéorgien qui est ma langue maternelle. You are theliving embodiment of Europe’s dream of peaceful cooperation. You not onlyproject a vision. You work hard to make it happen. Throughthousands of projects, meetings and consultations each year, you are living thedemocratic ideal in day-to-day life. In 1945,there were barely a dozen functioning democracies in Europe. Today 47countries, home to 800 million people,are joined in the Council of Europe, the world’s oldest and largest bodydedicated to the cause of democ-

racy. For many of you, this is anachievement which goes back many decades. The exhausted continent of 1949has become the most prosperous region on earth. Georgiabecame the 41st member of the COE in 1999. To mycountry, it is still a thrill to be here amongst you. We have come lateto the club of freedom, and we know we still have a long way to go. The election that brought my government power in October 2012, represented the precedent of thedemocratic transfer of power in my country. That is whyI feel a huge sense of responsibility addressing you. I know that we areinexperienced with the practice of democracy. As we debate issues withour opponents at home, I can feel how hard it is for us sometimes to pull backfrom disputes and place our trust in the good will of the other side. Naturally, it would not be easy for you torelate to this. Challengesthat Georgia faces today can be explained as follows. Our history has beendifficult. We live today in a difficult neighbourhood. Manychallenges of a globalized world are facing us. That is why we need yourhelp. We need the support of the many institutions of the Council ofEurope to help guide us through this transition. While continuing that part of the reformsfrom the previous government, instituted during first years in power, whichhave been for the benefit of the country, we must also replace theauthoritarian structures of his later years with a modern, civil society. Pg. 3

IMF - GEORGIA AND CENTRAL ASIA COUNTRIES WILL BECOME THE ECONOMIC GROWTH LIDERS

Pg. 7

David Kirvalidze: The New System, Which Should Change The Agriculture Pg. 4

Economy Minister Explains the Transfer of Batumi Technol ogy University to the City Hall by Pg. 5 Emzar Jgerenaia: Recession Is Obvious Pg. 5

Sandro Tvalchrelidze: Fee - The Biggest Problem In MineralsPg. 5

LOCAL BUSINESS SECTOR DEMANDS FOR REDUCING TARIFFS FOR PUBLIC UTILITIES

Bread factories talk about the danger of the gas price hike

eorgian companies ask to reduce utility tariffs. The head of the Association of Bakery Products Malkhaz Dolidze states commersant.ge that they have appealed to the Ministry of Energy and ask Parliamentary Committee on Sector Economy to reduce the utility tariffs. They will raise the issue in a meeting with the Minister of Agriculture and will demand a mediation. “In order Georgian products to be competitive, certain utility benefits are necessarily, utility bills

cuts will be a great privilege for companies in the backdrop when the Georgian and Armenian markets are saturated with products,” - says Dolidze and fears that a gas tariff may become even more expensive. In particular, Dolidze notes that the agreement under which Kazakh management in “KazTransGas” reduced the price for bread producers by 0.05 GEL to 0.70 GEL has ended on April 1. Although, Dolidze sees a risk of tariffs increase. “The price had to become 0.75 GEL from April 1 but the decision was suspended and bread com-

panies are waiting for the next step of “KazTransGas”,- says Dolidze. Entrepreneurs have been speaking about the problem for a long time. The current consumer gas tariff makes 0.51 GEL per cubic meter while for companies this rate reaches 0.75 GEL. As for electricity tariff, it is determined based on the consumed electricity. “Marneuli food factory” founder Mikheil Simonishvili also speaks about the need to reduce tariffs for companies. In his words, they are ready to apply to the government.

Whether or not the government plans to reduce utility tariffs for companies? Ilia Eloshvili, Deputy Minister of Energy, announces that “today or tomorrow this issue is not on the agenda, but the ministry will consider again the reduction of tariffs.” Eloshvili adds that the ministry observes how the reduced rates for individuals will be reflected in the company’s activities and depending on the efficiency of the change, the ministry will consider gas and electricity tariffs reduction for corporate customers as well. commersant.ge

TOP NEWS

April 29, 2013 #02

caucasian business week

DAVIT USUPASHVILI – VLADIMIR PUTIN IS RESPONSIBLE FOR 2008 ETHNIC CLEANSING

C GEORGIAN, ROMANIAN PMS MEET IN STRASBOURG

n the last day of his visit to Strasbourg on April 24 Georgian PM Bidzina Ivanishvili met his Romanian counterpart Victor Ponta. “The Georgian Prime Minister thanked his Romanian counterpart for steadfast support to Georgia’s territorial integrity and for active assistance in Georgia’s Euro-Atlantic integration,” Georgian PM’s office said in a press release, adding that the two PMs discussed bilat-

eral trade and economic cooperation, as well as cooperation in the sphere of transportation. Summing up his three-day visit to Strasbourg, where he held series of meetings and addressed the Parliamentary Assembly of Council of Europe, Ivanishvili told journalists on Wednesday: “The visit was very successful… All of our foreign trips were successful and this visit to the Council of Europe was not an exception.” Civil.ge

BIDZINA IVANISHVILI: WE HAVE GOOD MINISTERS, WE ONLY DOUBT OF ONE MINISTER AND I AM PREPARING PUBLIC FOR IT We have good ministers, I have doubts just with regard to one minister and I am preparing public for it, Prime Minister Bidzina Ivanishvili said in a talk show on Rustavi 2 yesterday. The PM did not identify the minister which may be dismissed. “I am very concerned. We are trying to solve it inside, but low chance has been left for it and thus, I am preparing the public for the change”, Ivanishvili said. He also made a comment on the NDI survey and

said he did not agree with the fact that the Education Minister was on the last position among the most successful ministers. According to Ivanishvili, Education Minister Giorgi Margvelashvili is the most successful minister. ‘I love Tsulukiani very much; she is a very successful minister like Garibashvili. Alasania does not work badly either. We have very good ministers, said Ivanishvili. IPN

NO ARMY PARADE ON INDEPENDENCE DAY

here will be no marching army parading down the Rustaveli Avenue in Tbilisi center, but “military component” will still be present on May 26 when Georgia marks its Independence Day, deputy PM and education minister Giorgi Margvelashvili said on April 26. Margvelashvili chairs a government commission in charge of organizing events for the Independence Day celebrations. “Troops will not be marching… but there will be a very beautiful military component, especially with the involvement of aviation… military equipment of course will also be involved,” he told journalists after a meeting of the government commission without elaborating details. He said that celebration events would embrace the regions throughout the country and not concentrated only in the capital city. PM Ivanishvili said on April 10 that he was skeptical about military parades; at the time no final decision was yet made about the issue. “We will probably refrain from holding a military parade… My personal stance is that we are not the country to show military force… I do not

think there is a need for Georgia in showing off military force,” Ivanishvili told journalists on April 10. President Saakashvili, who is also the commander-in-chief, said in response that the government did not want holding of military parade because it did not want to see him reviewing the marching troops. “I am ready to go to Afghanistan on that day [on May 26] and mark [the Independence Day] with our troops there. I am ready not to review the parade and let the defense minister, army chief of staff or other government members do it, but let the army march. This is of vital importance for the army; this is the army which saved Georgia in [war with Russia in August, 2008],” Saakashvili said in an interview with Rustavi 2 TV on April 16. Last year the Independence Day was marked by a military parade held in Kutaisi, Georgia’s second largest city; meanwhile in Tbilisi, Georgian-made products, among them armored vehicles manufactured in Georgia, wereexhibited on the capital city’s main thoroughfare, Rustaveli Avenue. Tradition of marking the Independence Day with military parade was restored in 2004 after about eight-year pause. Since then parades were held on each Independence Day on May 26, but 2009 was an exception; at the time the authorities had to drop the plans of holding the parade amid opposition’s protest rallies, which were ongoing at the time, as well as because of an incident, known as Mukhrovani mutiny, at the tank battalion outside Tbilisi in early May, 2009. civil.ge

BUSINESS WEEK

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hairperson of parliament of Georgia Davit Usupashvili said in the program “Accents” that Russia as a state and Vladimir Putin as the president of this state is responsible for the 2008 ethnic cleansing. The presenter also asked him why Ivanishvili didn’t directly answer to the Polish MP question in Strasbourg whether Putin was responsible for 2008 ethnic cleansing. “Russia is responsible for the 2008 ethnic cleansing as a state and Putin as the leader of the country and also those who carried out this barbaric act, ousting Georgian population from Tskhinvali. Everyone who gave this order is responsible for this, those who didn’t resist this order. As for Bidzina Ivanishvili’s answer, it was absolutely right. Mikheil Saakashvili’s tragic mistakes enabled Russia to carry out the large-scale military aggression, occupy Georgian territories and everything still remains the same. And indeed Mikheil Saakashvili’s mistakes brought us to this situation”, Davit Usupashvili said. He says that Ivanishvili openly declared in Strasbourg that Georgia is victim of Russian aggression and that’s why Russia has Georgian territories occupied. “He also made it clear that that is the reason why we need help of international commonwealth and that’s why he visited Strasbourg, he will go to Brussels, Washington, he always speaks about it”, the chairperson of parliament said. The Prime Minister said that “Mikheil Saakash-

vili had his part of mistakes in Relations with Russia and people must demand answers from the government first of all, Ivanishvili said on the session of parliamentary assembly in Strasbourg. He answered to the question of the Polish MP, who asked him whether Vladimir Putin was responsible for 2008 ethnic cleansing. “If not Mikheil Saakashvili’s grave mistakes, It would be difficult for Russia to carry out such large-scale aggression”, Ivanishvili said.

FINANCE MINISTER: THE USA CONTINUE SUPPORTING GEORIGA

eorgian Minister of Finance Nodar Khaduri declared that “the US continues support to Georgia”. He made the statement after meeting today with William Remington, associate director of the US Treasury’s technical

assistance office. The US Treasury renders assistance to Revenue Service of Georgian Finance Ministry. “We have agreed that American side will continue its projects in Georgia”, Khaduri said. Sarke

VERSIA: “THE PRESIDENT’S PALACE IN AVLABARI REGISTERED FOR PRIVATE BODY”

he newspaper, based on own information source, was trying to find out who owns the President’s residence in Avlabar. The residence complex occupies 22,000 square m in Tbilisi, at that the President’s palace, which was built in 2004-2009, is located on 1,500 square m. Lawyer Levan Alapishvili excludes private ownership of the President’s palace. “I remember that Avlabar residence’s building was in ownership of one of the Parliament deputies, the permission was legally issued on his name, but a big dispute

has followed to it and the building has become state-owned”, he declares. National Agency of Public Register has declared to the newspaper, that information concerning to the governmental residences and similar buildings is confidential. The newspaper itself has revealed that Avlabar residence should have been on the balance of LLC State Provision, but registration of this LLC was concealed on December 24, 2012. The name of a new institution, on which the residence has passed, is unknown. sarke

“BUSINESS DOING CONDITIONS IN GEORGIA WILL NOT BE LOWER THAN IN AMERICAL AND EUROPE” “A truly new time began in Georgia”

ccording to Georgia‘s Prime Minister, “conditions for doing business in Georgia will not be worse than in European and American countries.” Bidzina Ivanishvili said while delivering a speech in Georgian Ukrainian Business Forum. Premier says that a truly new time began in Georgia and the attitude toward business is special, because they realize that only business can solve the current economic problems.

“In the next few years Georgia will be a unique country for doing business. There will be an independent media and a stable political and business environment. No official will dare to interfere with business activity, “- said Ivanishvili. He adds that three funds are being established, which will support business. Prime Minister assures business that he will be personally in the service of business and cooperate with it. Representatives of up to 50 business companies are participating in Business Forum.

POLITICS

April 29, 2013 #02

caucasian business week

BIDZINA IVANISHVILI’S RATING FELL GEORGIAN PRIME MINISTER’S BY 5% - NDI SURVEY SPEECH AT THE COUNCIL OF at the press conference at Courtyard Marriot hotel, EUROPE PARLIAMENTARY this rating has fallen by 5%, in comparison with the previous survey. 66% of respondents like Georgian parliament speaker Davit Usupashvili, 59% of those ASSEMBLY questioned like one of the majority leaders Tina Khi-

ccording to the National Democrativ Institute (NDI) survey, 75% of respondents like Prime Minister Bidzina Ivanishvili. As NDI Georgian office director Luis Navarro said

dasheli, Eka Beselia - 58%, Zviad Dzidziguri – 52%, minority leader Davit Bakradze – 48%, President of Georgia Mikheil Saakashvili 25%. As Luis Navarro said, compared to the previous survey, the approval rating of everyone has fallen, though Davit Usupashvili and Davit Bakradze’s approval rating has increased. The field work was conducted during the period of March 13th – 27th using the face-to-face interview method with a nationwide representative sample with 3,103 completed interviews. Sarke

4 344 BUSINESS COMPANIES REGISTERED IN MARCH

344 business-subjects registered In March 2013. Registration data in March is increased by 3,9% in comparison with analogic data of previous year, by 9,6% in comparison with previous month. As Public Registry Agency reports, 95,6% out of total number of business-subjects are business entities, 4,4% - non-profits. As agency informs, in comparison with previous month number of business entities (9,1%) and non-profit (24,2%) increased in March; analogic tendency is mentioned in comparison with 2012

analogic period: number of business entities registered in march declined by 19,9%, number of non-profits increased by 82,7%. In March majority of business subjects - 2 435 units (56,1% of the registered business entities) are individual entrepreneurs, LTD - 1 707 (39,3%). The registry states that 95,4% of the business subjects gives preference to this legal statuses and there are only 189 non-profits, 5 - branches of the foreign legal entities, 4 - joint stock companies, 2 - cooperatives, 1 - branch of the foreign non-profit, and 1 - Solidarity Liability Company.\ BPI

ABOUT 20 CHINESE COMPANIES TAKE PART IN TBILISI BUSINESS FORUM

eorgia-Chinese business-forum held today in Tbilisi, in which up to 20 Chinese companies have took part. The event was organized by Georgian National Investment Agency. The Chinese have acquainted with investment environment and prospects of business activity in Georgia.

According to Sakstat, Chinese direct investments to Georgia amounted in 2012 to $28.53 million, being almost tripled year-on-year. In 2012, Georgian export to China made up $25.6 million (1% of the country’s total export), while Chinese import to the country – $565.95 million (7% of total import). Sarke

RUSSIA MAY SIMPLIFY VISA REGIME FOR GEORGIA

ussia may simplify visa regime for Georgia.Radio Station First Radio disseminates this information based on Weekend’s interview of Zurab Abashidze, special representative of Prime Minister in the issues of relations with Russia.

In the interview with Weekend Zurab Abashidze talked about the details of the next meeting planned in early June with Gregory Karasin, deputy minister of Foreign Affairs of Russia. As Abashidze states, “kind of inventory” will occur on the negotiations planned in June, what was made during 6 months, what problems and issues should be discussed. „One of the important issues for Georgia sine is simplifying of visa regime. Russian side discusses simplifying of visa regime for some categories of Georgian citizens. I expect that on the next meeting we may have more complete picture, what they mean, to which categories of the citizens and from when will deal this change, since when it will validate... If the business intensifies, it will have problems without simplifying of visa regime”, - Zurab Abashidze stated in the interview with Weekend. Last meeting of Zurab Abashidze and Gregory Karasin happened on March 1. BPI

From 1st Page

In the recent years practically allfields were controlled by the ruling elite in Georgia, while the basic law of the country – theconstitution – was abused, being practically tailored to serve one man’s ambitions. Elite corruption made no room whatsoever forbusinesses to develop. Human rights were ignored. Pressurewas deployed upon not only those holding different views, but their familiesand acquaintances as well. The mediawere mostly under control. We have also begun a healing process, whichchannels deep anger and restores a sense of self-respect to our citizens. That includes indictments of some former officials for past crimes. But it alsoincludes keeping the thousands of loyal civil servants who have served the previous government. This is why we work hard to ensure that ourpolicies are fully transparent. We facilitate the work of the Westernpress and NGO’s in Georgia. We hope for as many visits by parliamentarydelegations as can be arranged. At my request, the EU has appointed ThomasHammarberg, the former Council of Europe High Commissioner on Human Rights, asa Special Advisor for Legal and Constitutional Reform and Human Rights inGeorgia. Observers from the OSCE and other intergovernmental andnon-governmental organizations will monitor all investigations, prosecutionsand trials of former government officials to ensure that they comply withinternational norms. Our Justice Minister, Ms. TeaTsulukiani is a veteran of the European Court of Human Rights and the list ofCOE bodies with which we cooperate is long. We are especially grateful tothe leaders of the Venice process who are helping with judicial reform. Weappreciate the debates in the Parliamentary Assembly as example for our ownpractices at home. We are working in many agencies and committees of theCOE to ensure that we meet the standards of this organization. We working inparticular on issues of minority rights which will help us transition to a newstage in ongoing relations with the COE. This ongoingcooperation will be pursued with the greatest energy. But our democraticvision – our dream - for Georgia goes beyond these important details. Ihave read the history of the European movement carefully. I understandthat building a united Europe was above all a project of peace. Looking backover the past century, one can see how recurring warfare was especiallydisastrous for small countries caught up in conflicts not of their making. Europe was once a battlefield where small countries were fighting and killingeach other. The award of the 2012 Nobel Peace Prize to the European Union wasin recognition of the historic achievement of Europe in building peace. As you allknow, however, warfare has not been overcome completely. Smallcountries, in particular, continue to suffer from aggression. The clear example to that is my home country. Twenty percentof our territory was occupied by Russia in 2008. There are other conflicts thatendanger the peace in our region. I have to say that the Caucasusis yet not a zone of peace. A specialchallenge will be to build relationships with our largest neighbour,Russia. With new pragmatic approach, we started bilateral dialogue withRussia. We are returning Georgianproducts to the Russian market. I can assure you that our position inrelations with Russia will be correct and yet principled. The appointmentof my special representative for relations with Russia clearly demonstratesthat we are willing to turn the page in dialogue. We both have our own red lines, which neither of us intendsto cross. In 2010, Georgia unilaterally pledged non-use of force inconflict resolution process. This pledge was endorsed by the Parliament’sresolution on March7, 2013. The format of Geneva negotiations establishedafter the August 2008 war represents the only international format whereGeorgian and Russian diplomats hold negotiation with the participation ofinternational mediators. In thischallenging process, Georgia needs international engagement and support morethan ever. The newly started dialogue between Tbilisi and Moscow should notcreate an impression, that Georgia is dealing with this problem on its own andno longer is in need of European partners support. We will berealistic about Georgia’s possibilities. We will recognize that Georgia is asmall regional power in a volatile neighborhood. No sustainable future can bebuilt by projecting military power. But there can be no progress towards peacein the region if Georgia is expected to abandon its legitimate interests,especially territorial integrity and the right of its citizens to return totheir homelands. Regulation of these relations will benefit not only Georgiabut Caucasus in general as well. Our intention is to use the tools of civil society to help build peacein our region. Aboveall, we will focus on democracy as we believe that security, unity andprosperity of Georgia largely depends on the quality of your democracy.

I would liketo emphasize that Georgia’s western aspirations – Euro-Atlantic integration –represent our strategic choice that has no alternative. This choice wasmade by the Georgian people long ago. Georgia’sdecision to apply for membership in NATO represents above all a deep commitmentamong our people to live the values of the West. This commitment wasechoed in the Resolution on Basic Directions of Georgia’s Foreign Policy,unanimously adopted by the Georgian Parliament. Herewith, I would like to touch on current and planneddevelopments in the country. The government is working actively on theemployment policy. In this regard, we are improving the Labor Code tomeet European standards to the fullest extent possible. I believe thatthe state should play a decisive role in the development of business andprovide this field with development guarantees. Today business is freefrom political pressure, and soon we will see concrete, positive results interms of growth of investments. We have already based utility rates on realistic calculationsand established fair rates. Cooperation and negotiations with ourpartners continue in this regard. The Georgian Government is implementing a largescaleagricultural reform, which is unprecedented for the country. A vital healthcarereform is also underway. The universal healthcare program has alreadybeen launched. At the following stage of this program, all citizens ofGeorgia will enjoy the benefits of the state universal medical insurancepackage, and this system will improve even further in the future. Building a country upon democratic values is impossible without freemedia. The journalist must be first to criticize the government andtherefore provide society with objective information. Our government isabsolutely open to media representatives and their objective appraisal andcriticism will benefit our work tremendously. Reform of the judiciary is the cornerstone at insuring genuinedemocratic processes in the country. The initiated reform is based on therecommendations of the local civil society organizations and reflects commentsfrom the Venice Commission and Georgian Judicial branch. I believe Georgia hasa unique chance to establish a truly independent judicial system, free from theexecutive branch and free from the political influence and the government ofGeorgia is aimed at not to miss this chance. The government pays special attention to the integration ofethnic minorities in Georgian society, so that they may feel at home inGeorgia. We will remain to be a country where differentconfessions coexisted for centuries. Empowerment of local self-governments is one of preconditionsfor their integration in Georgian society. You will be aware of the highlyemotional background in local self-government bodies following the Octoberelection. Throughout the years, the public at large has witnessed onepolitical force dominate all levels of government, and to this day societyfinds it difficult to comprehend a new reality when different political forcesare decision makers at different levels. The replacement on national level of the previouslydominating political force instilled a sense among the local population that asimilar replacement of that force was inevitable in local self-governments.There is also an unfortunate tradition that local officials in the regionschange their party belonging in favor of the ruling party on such situations.Also this time, a number of actions in this context soon became chaotic andeven exceeded legal boundaries in some cases. The Georgian Government is committed to theconstitutional principles of separation of powers, including the independenceof local self-government bodies. At the same time, as a ruling political team,we are obliged to address adequately violations of law. I would like toemphasize that the Georgian Government and law enforcements will deploy legallystipulated measures to address all instances of use of force, pressure, orintimidation, should such instancesoccur. Mr. President, as we enter our sixth monthin office, the Georgian Dream coalition has already established a solid recordof achievement. Our program to build civil society is well underway, theeconomy is returning to a solid foundation, recent polls show that the votersare increasingly supportive to theirgovernment, we are making steady progress towards Euro-Atlantic integration andthere have even been a few small steps forward in relations with Russia. Perhaps most encouraging is the fact thatafter a rough beginning, we are starting to apply lessons from the Council ofEurope on how to build consensus with former adversaries. I am confident that Georgia has finallyturned the corner. Our election victory in October was an important next steptowards sustainable democracy. Success at this task will be of greatimportance to the Georgia people. I am certain also that it will help usmake an important contribution to the project for peace, which is theunderlying foundation of the European ideal.

BUSINESS & ECONOMY caucasian business week

April 29, 2013 #02

THE VERSIA: “AMENDMENTS TO BE MADE TO THE BUILDING CODE”

amar Rukhadze, head of department in Georgian Ministry of Economy and Sustainable Development, declares that drafting of Construction Code is being underway and “many issues should be agreed with politicians as well as with the specialists”. “Currently, legislative documents on construction and spatial planning are scattered in several bills and legal acts, which are already outdated and no longer used in practice”, Rukhadze notes.

THE REZONANSI: “THE NEW SYSTEM, WHICH SHOULD CHANGE THE AGRICULTURE”

eorgian Agriculture Minister David Kirvalidze declares that the main goal is to increase revenues of rural population, reduction of poverty and to maintain food security in the country. The Minister points that lack of land ownership certificate is an important problem, as 30% of landowners at most have such certificates today. Kirvalidze declares that working inter-agency group is already established, which should draft a

project within 2 weeks, how to finish land registration in a short-term period. The Minister names large number of small land sites as another problem. There are more than 3.5 million land sites with area of up to 1 ha, which extremely hampers the activity, he notes. The Georgian Parliament already discusses a draft bill on cooperation. “Cooperation is not a panacea, but this is the way, which Europe and America have passed”, Kirvalidze declares.

According to her, the Code will support consolidation and “codification of basic principles”. In addition, the Code will feature new tools, such as landscape planning and integration of environmental impact assessment into the process of project planning. Simplification of permits’ issuing, which saves on administrative costs, and development of methodology of fee determination according to construction category are planned, Rukhadze declares. Issue of professional certification of architects and civil engineers is considered as well.

TI GEORGIA: FOOD LINE GEORGIA’S VICTORY IN DEFENSE MINISTRY TENDERS RAISES DOUBTS

ransparency International – Georgia (TI Georgia) comments on victory of Food Line Georgia, company of the Parliament’s procedural committee chair Irina Imerlishvili’s spouse, in tender of the Defence Ministry. “Appointment of Imerlishvili’s spouse (Shalva Beboshvili) as director just 1 day prior to the tender and alienation of the company with condition of won tender, announced by the Defence Ministry, rise reasonable doubts”, the organisation said in its statement. It should me noted as well that Food Line Georgia has never taken part in the state tenders.

Even more interest deserves one of articles of the company’s sell agreement, which envisages the investor’s liability to make investments according to schedule, based on victory in tender of the Defence Ministry, TI Georgia points. At that, the organisation notes that “we can not conclude, based on existing information, if there was violation of law or corruptive deal”. The matter concerns 2 e-tenders, announced on February 18, which envisaged supply of food to military servants of the Defence Ministry. Cost of contracts made up 73.93 million lari and 34.74 million lari, respectively. Results of these tenders were announced last week.

THE REZONANSI: “DRAFT LAW: FOREIGN CITIZENS WILL NOT BE GEORGIA’S Q1 FOREIGN TRADE ABLE TO BUY LAND PLOTS OF OVER DOWN BY 5% 2.5 HECTARES IN GEORGIA”

he experts have drafted amendments to the bill “On Agricultural Land Ownership”, which impose restrictions on land purchase by foreigners. Authors of the bill are doctor of economics Paata Koguashvili and doctor of law Zaur Jinjolava. Namely, the draft restricts foreigners to acquire agricultural land sites with total area of over 2.5

ha. Only 5% of agriculture lands might be in ownership of foreigners. In case of a legal person, the land can be purchased only if Georgian citizen is holder of 51% of the company. A foreigner, who wants to acquire agricultural land site in Georgia, should live legally in the country for the last 10 years and have agricultural education.

ROAD INFRASTRCUTURE COSTS GROW 2.3 TIMES IN 1Q13

s it was declared at the press briefing in the Ministry of Regional Development and Infrastructure today, major part of the Ministry’s allocations for the 1st quarter was spent for improvement of road infrastructure.

Namely, 64.81 million lari was spent, 2.3 times exceeding showing of the same period of 2012. Of that, road maintenance was funded with 23.73 million lari (year-on-year growth – 65.7%). Total cost of works for the reporting period made up 87.12 million lari (growth – 57%).

THE REZONANSI: “PUBLISHERS’ PROTEST CONTINUES”

ecause of Education and Science Ministry’s initiative on free distribution of school textbooks, 4 publishing houses have united. The initiative was announced on April 8, but it had turned out that publishing

houses had the information in advance, the newspaper reports. On March 29, joint liability company Joint Georgian Publishing House was already registered, uniting the following printing: Favorite Print, Forma, Sezani and MP (printing house of newspaper 24 Saati). According to Minister Giorgi Margvelashvili, negotiations were conducted with all publishing houses, of which 4-5 ones have been selected, which have the capacity to handle jointly “unprecedented order for Georgian market”. However, Bakur Sulakauri Publishing and Diogene declare that nobody held negotiations with them. Due to deprivation of right to print school textbooks, these companies plan to meet with diplomatic corps.

Georgia’s January-March foreign trade figures between 2007 and 2013 in million U.S. dollars. Source: Geostat.

eorgia’s foreign trade declined 5% year-to-year in the first quarter of 2013 to USD 2.14 billion due to reduction in imports, according to figures released by the state statistics office, Geostat, on April 24. Georgia’s export amounted to USD 565 million in January-March, up by 5% y/y and import was USD 1.58 billion, an 8% decline over the same period of 2012. Trade gap was slightly over USD 1 billion in the first quarter, a 14.7% y/y decrease. Trade with Turkey, which is Georgia’s long-time largest trading partner, accounted USD 306.2 million in January-March 2013; while import from Turkey amounted to USD 269 million, export from Georgia to Turkey was only USD 37.1 million. Turkey is followed by Azerbaijan with total trade turnover of USD 296.9 million; Ukraine – USD 157.3 million; China - USD 156 million; Russia – USD 121.3 million; Germany – USD 104.8 million; the United States - USD 102.6 million; Armenia – USD 84 million; Romania – USD 70.9 million; Bulgaria – USD 66.2 million. Re-export of cars amounted to 24.8% of the country’s total exports in the first quarter of 2013 with USD 140.4 million, a 33.1% y/y increase. Ferroalloys made 12% of Georgia’s exports in

January-March with 67.7 million, followed by nitrogen fertilizers with USD 36.3 million (its share in total export was 6.4%); hazelnut – USD 18 million (3.2%); non-denatured ethyl alcohol and spirits – USD 17.6 million (3.1%); raw or semi-processed gold – USD 16.5 million (2.9%); copper ores – USD 14.9 million (2.7%); Export of mineral waters made 2.8% of total exports, increasing 35.5% y/y in January-March 2013 to USD 15.6 million. Georgian wine export increased 34% y/y in value to USD 13.7 million in the first quarter of this year making its share in country’s total export 2.4%. Oil products top the list of imports totaling USD 174 million making its share in total imports 11% in January-March 2013; like most of the main imported commodities (exceptions are mobile phones, railway passenger cars and meat products), value of imported oil products also saw decrease over the same period of last year. Import of cars amounted USD 141.7 million; hydrocarbons - USD 102.5 million; medicines - USD 55.3 million; mobile and other wireless phones - USD 27.07 million (22.6% y/y increase); railway passenger cars – USD 27.01 million; wheat - USD 22.6 million; cigarettes – USD 19.3 million; meat products – USD 16.69 million; truck – USD 16.62 million. Civil.ge

April 29, 2013 #02

BUSINESS & ECONOMY

caucasian business week

THE KVIRIS PALITRA: “LABOR CODE ECONOMY MINISTER EXPLAINS HAS NOTHING IN COMMON WITH THE TRANSFER OF BATUMI CRIMINAL LAW” TECHNOLOGY UNIVERSITY TO THE reason as a criminal offense. CITY HALL BY Gocha Aleksandria, deputy chairman of Georgian

epresentatives of business agree in general with amendments, which should be made to the Labor Code, but “they strongly object several articles”, the newspaper reports. Namely, the business demands the possibility of signing fixed-term employment contract and is especially concerned about initiative, which considers dismissal of an employee without declared

Trade Unions’ Association, notes that restriction of fixed-term employment contact is a directive of EU. On the other hand, Andrea Wilson, executive director of International Chamber of Commerce, declares: “many people think that signing of a permanent contract with an employee is fair, but fixed-term employment contract gives employer much better option to establish business relations with a hired person”. Instead, lack of fixed-term employment contracts “will encourage unofficial employment”. Gogi Topadze, founder of Kazbegi brewery, declares that he will be forced to tighten terms of labor contracts. In his turn, director general of Golden Fleece Iveri Kutsnashvili considers that dismissal without reason could not be a subject of criminal justice.

THE REZONANSI: “FEE – THE BIGGEST PROBLEM IN MINERALS”

octor of geology-mineralogy Sandro Tvalchrelidze declares that bill on fee for natural resources is obsolete and should be amended. In Georgia, an entrepreneur pays

for natural resource extraction 4 times more than in Canada and 5 times more than in Australia, he points. “First, we have fee for mineral resources use, which is a percentage of the value of minerals, then we have a regulatory fee and then the due”, the expert says. According to him, 60% of the gained revenue is paid in different taxes. At that, Tvalchrelidze considers that fees on extraction should be established by law and the government should not have a right to increase or decrease it. To remind, the government decided recently to increase fee on mineral water 3 times, up to 9 lari per 1,000 l of mineral water. Fee on sweet water was increased 2 times and now makes up 8 lari. Georgian Ministry of Economy and Sustainable Development has declared to the newspaper that tax revision for extraction of other minerals is not planned at the moment.

THE VERSIA: “THE GOVERNMENT STARTS WORKING ON RETURN OF SOVIET DEPOSITS”

t was decided to transfer Batumi Technological University to the City Hall due to specific features of the building, “ - the Economy Minister said today. Commersant.ge revealed information about the failure of one of the most ambitious educational projects launched by previous government based on the statements made by President Mikheil Saakashvili and Batumi local government officials. According to Mikheil Saakashvili, a project of Batumi University of Technology has stalled after the first of October and the City Hall structures plan to move to the university building. Batumi City Hall confirmed that there are plans to move to the University building. At the same time, the City Hall states that a month ago, the City Council Chairman has requested the Economic Development Ministry about the transfer of the object under the city governance but so far they have received no response. According to the Minister of Economy and Sustainable Development Giorgi Kvirikshvili, it was decided to transfer the University building to the City Hall due to specific features of the building.

EMZAR JGERENAIA “RECESSION IS OBVIOUS”

octor of economics Emzar Jgerenaia declares in an interview with the newspaper that a few steps have been made forward after announcement of investment funds’ creation. These funds still exist at the level of declaration only, he notes. Jgerenaia points that it is necessary to define thoroughly investment fund’s structure, professional regulations, management scheme, etc. As for the agriculture sector, “positive steps are already made there, issuing of credits is starting and interest rate is low as well”, the expert declares, but indicates at small number of projects. He explains such deficit by non-existence of technical group, which will assist to the farmers in preparing of these projects. While commenting on recent reduction of credit cost, Jgerenaia points at the reduced effectual demand. “Unfortunately, stagnation in our econo-

will linked to the internal debt. Nodar Chichinadze, president of Young Financiers and Businessmen Association, mentions that inventory of the deposits has not been conducted up to now. “The main thing is to repay deposits, but if we have a respective database, it will give us full information”, he declares. Expert Irakli Lekvinadze positively estimates decision of Finance Ministry to extend authority of the special commission. At that, “if the government returns the deposits, discussion should be started how much money should be repaid annually, whom it will be given initially, etc.”, he declares.

my still continues and banks try to find a way out form the created situation”, he declares. BANKEBI DA FINANSEBI

“WHO MADE DEAL WITH WHOM ON INSTANT PAYMENT MARKET”

T eorgian Ministry of Finance declares that a special commission, working on the internal debt, conducts revision of the Soviet-time deposits. The next task is working out of a mechanism for their return, the article notes. At the same time, the Ministry says that nobody has illusion that the budget will manage to pay the debt in a year, moreover this year, the newspaper reports. As expert Michael Jibuti notes, issue of Soviettime deposits (recognized as an internal debt in 1998) has been frozen, as there was not a political

“I would say that this building is very complex and therefore, such a decision has been taken”, - Kvirikashvili states, however, as “Pirveli” agency reports, the Minister did not specify whether the building was transferred via a tender or via a direct purchase.

he article considers issue of commission fee (4% of the sum), established on replenishment of mobile phone balance through instant payment terminals since April. Until that, the commission fee was paid by mobile operators themselves. Jumber Takniashvili, director of instant payment company Nova Technology, says that mobile operators have made this decision as far back as last year, while now “they took the opportunity and put us under time pressure before April 1 – either we will switch you off, or you will add a certain percentage (to the payment)”. “We have agreed to this scheme, as we could not imagine if anyone on the market would work at the expense of their loss”, Takniashvili declares and notes that Sakartvelos Banki (Bank of Georgia) has made such step, paying the commission itself, as it “plans to occupy the market”. Slava Petelava, expert of Competition and State Procurements Agency, has declared to the newspaper that this problem is familiar to them more or less, but the Agency has not been given a right to work in this direction within frames of acting legislation. In her turn, professor of Black Sea University Ketevan Lapachi notes that it is important that consumers have a choice to use an alternative means for the balance replenishment. According to the newspaper, Georgian Ministry of Economy and Sustainable Development launches to study this issue in details. BANKEBI DA FINANSEBI

BUSINESS

6 “Israir Airlines” to Start Flights from Georgia in May

sraeli airline ‘’Israir Airlines” will launch flights in the Georgian market in May. Tbilisi airport operator “TAV’’ explains radio “Commersant” that the airline will perform the first flight on May 14. They also inform that flights will be performed once a week on Tuesdays. Georgian airline “Airzena” fulfills flights to Israel every day, except for Friday. Radio “Commersant,” FM 95,5

In April Burger King to Launch Construction Works in Batumi

he American fast food restaurant chain ”Burger King” opens a new branch in Batumi. The Head of the International Investors Association Osman Chalishkan informs commersant.ge that the chain plans to invest one million hundred thousand dollars in Georgia, negotiations with investors are still underway. Chalishkan explains that “Burger King” plans to start construction in April as well as to hold the next meeting with investors. He named “McDonald’s” the main competitor. Note: “Burger King” is a global American fast food restaurant chain, the second largest hamburger fast food chain in the world that serves 11 million people around the world every day. сommersant.ge

Shopping Mall Construction Works to Start in 2014 to Replace Hayat hotel

shopping center construction will begin in 2014 instead of “Hyatte” hotel. As the head of the project proponent “Loyal Estate” explains radio “Commersant’’, at this stage negotiations with foreign investors are being held and the project details are being specified. Mindia Gadaevi doesn’t reveal detailed information yet. Investors refused to made money in Tbilisi “Hyatte” project due to Russia - Georgia war and the global crisis and the hotel’s construction has been delayed for several years, after which it was decided to build a shopping center. Radio “Commersant,” FM 95,5

CUSTOMERS GIVE PREFERENCE TO JACOBS COFFEE AND GURIELI TEA

Georgian Manganese Goes to New Owner

ustomers give preference to Jacobs coffee and Gurieli Tea. The survey was carried out as part of the Iliauni Business Review to determine which of the coffee and tea products are the most demanded on the market. Supermarket advisors and sellers were asked to name three most demanded coffee and tea brands. According to the survey, 75% to 80% prefer instant coffee, mostly in single serve packs. As to the coffee brands, Jacobs ranks first with 59% at 41 stores, McCoffee is second with 57% at 40 stores and Nescafe is third with 53% at 37 stores. As to tea brands, black tea is bought by 80% to 85% of the consumers, mostly in single serve packs. Gurieli

LC Georgian Manganese that owns three major enterprises in Georgia - Zestaponi Ferroalloy Plant, ChiaturManganum and Vartiskhe Cascade of HPPS has been sold to LLC Georgian-Amarican Alloys, the Netgazeti news agency reports. According to an extract from the National Agency of Public Registry (NAPR), LLC G.M. Georgian Manganese Holding Limited, the owner of Georgian Manganese, sold a stake to LLC GeorgianAmerican Alloys on March 21, 2013. Despite the deal, Volodimir Lozinski remains the company dirctor. Georgian-American Alloys was founded in line with the legislation of Luxemburg and its head office is located in Miami, the USA. The company manufactures high-quality ferroalloys for iron production. Its subsidiary companies Felman Production, LLC (“Felman Production”), Felman Trading, Inc. (“Felman Trading”) CC Metals & Alloys, LLC (“CCMA”) that are located in the USA use the ferroalloys for iron production. The Georgian Ministry of Economy sold ChiaturManganum, Zestaponi Ferroalloy Plant and Vartsikhe Cascade of HPPs to Georgian Manganese at 112 million USD at the beginning of 2007.

Tea ranks first with 74% at 52 stores, Lipton is second with 72% at 51 stores and Mariam is third with 53% at 37 stores. The survey was carried out on April 5 to April 10 in all districts of Tbilisi. A total of 70 stores, 5 stores in each district, was surveyed.

ILIAUNI BUSINESS REVIEW CONDUCTS ALCOHOLIC BEVERAGES MARKET RESEARCH

he Iliauni Business Review has researched alcoholic beverages market. The 28 most demanded brands were selected in Tbilisi based trade outlets. Spirits: BELUGA, GREY GOOSE, FINLANDIA, ABSOLUT, RUSSKI STANDART, SMIRNOFF, CELSIUS, MEDOFF, NEMIROFF, ERISTOFF. JACK DANIELS, JOHNNIE WALKER, JAMESON, BALLANTINES, CHIVAS REGAL. Brandy: HENNESSY, REMY MARTIN. SARAJISHVILI, ASKANELI. Vermouth: MARTINI, CINZANO. Liqueur: BAILEYS, SHERIDANS. Rum: BACARDI, CAPTAIN MORGAN. Tequi-

la: JOSE CUERVO, OLMECA, PATRON The research was carried out in Carrefour, Goodwill networks and Whisky House networks. The most demanded alcoholic beverages in the Carrefour network are as follows: Beluga (Premium Class), Finlandia (medium class) and Celsius (low class); Whisky: Jack Daniels; Brandy - Hennessy, Saradjishvili brandy; Vermouth - Martini, Liqueur: Baileyes; Rum - Bacardi, Tequila - Jose Cuervo. In the Goodwill network the most demanded alcoholic beverages are as follows: Beluga (Premium Class), Absulut (medium class), Medoff (low class), Whisky - Jack Daniels , Brandy - Hennessy, Saradjishvili brandy, Vermouth- Martini, Liqueur - Baileys, Rum - Bacardi, Tequila - Jose Cuervo. Whisky House - Beluga (Premium CLass), Absulut (Medium Class), Whisky: Chvas Regal; Brandy - Hennessy; Vermouth - Martini, Liqueur - Baileys, Rum - Captain Morgan, Tequila - Olmega. The research was carried out from April 1 to April 12.

“BARAMBO” POSTPONED COFFEE, CHIPS AND CRACKERS PRODUCTION INDEFINITELY

Shell Presented Production To Georgian Companies

lobal office of Shell has held seminar in Tbilisi today, presenting premium brand lubricants to consumers. Representatives of about 50 Georgian companies have attended the seminar. The event was organized by Tegeta Motors, exclusive distributor of Shell in Georgia.

Fly Georgia to Perform Regular Flights to Brussels Starting May

eorgian air company FlyGeorgia announced that regular flights from Tbilisi to Brussels will be started on May 6. One-way ticket to cost from 261 lari, while return one – from 424 lari. Currently, FlyGeorgia implements regular flights to Kiev, Dusseldorf, Amsterdam, Erbil (Iraq), Dubai and Tehran and plans to launch Cairo route.

April 29, 2013 #02

caucasian business week

Trigon Capital Studies Georgia’s Investment Environment

epresentatives of Estonian investment company Trigon Capital have been visiting Georgia, aiming became acquainted with the country’s investment environment on the spot. Host of Estonian company is Georgian National Investment Agency. Today, Estonians met with Georgian Minister of Regional Development and Infrastructure David Narmania. The sides have discussed infrastructure projects, both ongoing and planned for near future. Representatives of Trigon Capital are going to meet other members of Georgian government as well. According to Sakstat, Estonian investments to Georgia amounted in 2012 to $260,500. In 2011, negative showing of $332,500 was fixed.

Ukrainian Company to Build Laundry Detergent Plant in Poti Industrial Zone

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rime Minister’s Office has not responded to an open letter written by “Barambo” company. Commersant. ge was told at the company. According to them, Finance Minister Nodar Khaduri was the only government member who commented on the matter. Recall that the heads of four large companies “Barambo”, “Mixor”, “Concrete Sleeper Factory” and “Zedazeni” appealed to Bidzina Ivanishvili in an open letter a few days ago. A letter contains the problems their business group have faced in the recent period. In their words, “their fault is that one of the group’s founders is a former governor Cesar Chocheli, who was a successful businessman before going into politics”. “Barambo” representative explains that after the

properties were sequestered by the court’s decision, the company had halted several investment projects, including chips, crackers and coffee production. As it is said at “Barambo”, the company started negotiations regarding these projects in January, and new products manufactured at “Barambo” factory had to appear on the market in September. They also say that the implementation of investment projects will depend on lifting of the seizure and as soon as it happens, the company will resume a work on chips, crackers and coffee production. According to the company, “Barambo” was forced to reduce production due to the fact that they can no longer take part in tenders because of the legal restrictions. сommersant.ge

new project will be implemented in the Poti Industrial Zone. Namely, Ukrainian company Aroma Fragrans has started constructing a laundry detergent plant on 1000 square meters. Initial investments make up 800 000 USD. At the same time, United Arab Emirates based Global Gases Georgia will also construct a liquid helium plant in the Poti Industrial Zone. Moreover, Indian company Geborga Gold has also launched territory preparation works. As reported, the Georgian President proposed to create a free industrial zone in Poti in 2007. However, the Georgian government has criticized the zone’s management several timers for inefficient work.

ECONOMY

April 29, 2013 #02

caucasian business week

REZONANSI: GEORGIA EXPORTS 40 MILLION BOTTLES OF WINE FOR A YEAR

IMF - GEORGIA AND CENTRAL ASIA COUNTRIES WILL BECOME THE ECONOMIC GROWTH LIDERS GDP will increase by 6 percent and unemployment rate will decrease in 2013–2014

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ational Wine Agency reports that wine export was implemented in the 1st quarter to 26 countries. The following countries compose the top five export markets: Ukraine (47%), Kazakhstan, Belarus, China and Poland. Wine export is increased by 21%, if compared with the same period of 2012, the article says.

Wine accounts for 2.4% of total Georgian export (the 9th position). As for Russian market influence, the Agency forecasts that export of 8-10 million bottles will be possible during the first year. Envisaging this showing and growth pace, “our wine expert might reach 40 million bottles in a year”, the Agency declares.

GEORGIAN WOOL HAD LOSS IN 2012

SC Kartuli Shali (Georgian Wool, Tbilisi-based woollen and semi-woollen yarn manufacturer) reported loss of 30,600 lari for 2012. In 2011, the company had profit of 521,900 lari. It should be noted that for 2012, the company had reported revenues from selling of realty only, making up 413,500 lari (in 2011, the showing

was 1.18 million lari). As of December 31, 2012, fixed assets of the company amounted to 468,500 lari, declining by 22% year-on-year. Kartuli Shali issued 395,394 shares with nominal value of 3 lari. Major shareholders are Nugzar Janjalia (director general, 70.3%) and Jemal Janjalia (25.4%). Sarke

AUTOMOBILES RE-EXPORTS GROW BY 33% YEAR ON YEAR

otorcars remain Georgia’s leading exports items in 1Q13. Georgia exported 140.456 million USD automobiles to foreign markets in January to March 2013, that is a 24.8% ratio in total exports, says Geostat, the national statistics service of Georgia. The automobiles exports have gorwn by 33%

year on year compared to the same period of 2012 (105.49 million USD). Azerbaijan is recorded as Georgia’s major market for automobiles exports. The country exported 83.811 million USD automobiles to Azerbaijan in January to March 2013, while the figure marked 55.492 million USD in the same period of 2012. BPI

REZONANSI: ISSUE WITH ESTABLISHMENT OF TWO INVESTMENT FUNDS REMAINS OPEN

eorgian government decided to redesign Partnership Fund into Sovereign Fund. In order to assist the Fund in reorganization process, a legal company will be selected. Giorgi Kvirikashvili, Minister of Economy and Sustainable Development, explains that “concept of Partnership Fund is vague for many foreign investors”. “Because of this, term “Sovereign Fund” is more acceptable”, he adds.According to the Minister, the Sovereign Fund will fund development projects. The Fund will have function of holding, which will hold state assets, the article reports. Assets of the Fund will make up about $2 million. As for the remained 2 funds (Youth and Investment), announced by the new government, the concrete steps have not been taken in this direction so far, the newspaper reports.

ommonwealth of Independent States: An Improving but Vulnerable Outlook Growth in the CIS is likely to pick up somewhat from its mediocre pace in 2012 as the external environment gradually improves and oil prices stabilize at high levels. Growth will be stronger in the Caucasus and central Asia than in the European CIS countries, underpinned by remittances and high commodity prices. Most countries in the region would benefit from structural policies to boost medium-term growth, but some, including Belarus and Ukraine, also have macroeconomic imbalances to address. After a relatively strong start, activity decelerated in the CIS during the course of 2012, bringing growth down to 3½ percent for the year, from 4¾ percent in 2011 (Figure 2.14). The global slowdown affected exports across the region, although the impact was stronger in the European CIS countries than in the Caucasus and central Asia. Domestic demand also weakened, for varying reasons: in Russia because export prices for oil stopped rising, and in Ukraine because of higher interest rates used to defend the exchange rate. Georgia’s economy slowed in the second half of the year because of uncertainties stemming from October’s election and the ensuing political transition. Moldova’s growth came to a halt in 2012, the result of a poor harvest, slowing trade, and stagnating remittances. Growth in the Kyrgyz Republic fell sharply, induced by shortfalls in gold production. A temporary decline in oil output accounted for the slowing of GDP growth in Kazakhstan. Growth in the CIS is projected to remain at 3½ percent in 2013 and pick up to 4 percent in 2014, underpinned by the gradual global recovery and stable commodity prices. Improved financial conditions lend further support. Since the middle of 2012, the reduction in euro area tail risks has helped reduce credit default swap spreads in the region significantly and ease access to international capital markets. In the Caucasus and central Asia, growth is projected to remain near 6 percent during 2013–14, well in excess of the CIS regional aggregate. Growth will continue to be underpinned by healthy remittance flows from Russia and high commodity (energy and minerals) prices. • Russia’s growth is projected to remain at 3½ percent this year because the output gap is essentially closed and growth is running close to potential. • In Ukraine, after nearly zero growth in 2012 because of deteriorating terms of trade, GDP growth is likely to remain subdued in 2013 under unchanged policies. • Growth in Armenia will moderate to about 4¼ percent during 2013–14 compared with more than 7 percent in 2012, as a return to more normal

weather conditions, a slowdown in credit expansion, and a continuation of fiscal consolidation bring the economy back toward trend growth. • In Turkmenistan, growth during 2013–14 will be close to 8 percent, led by growing gas exports to China and public investment expenditures. Inflation is expected to remain close to current levels in 2013. In Russia, it will average about 7 percent. In Ukraine, inflation is projected to remain at ½ percent in 2013. There is concern that premature policy loosening might impede disinflation in Belarus. Inflation in Uzbekistan will likely remain in double digits in 2013, underpinned by higher administered prices. The regional balance of risks to the outlook remains on the downside, reflecting the balance of risks at the global level. Under a number of scenarios, such as the emerging market investment slowdown and the euro area downside scenario explored in Chapter 1, lower oil prices would transmit adverse global developments to Russia and Kazakhstan, with secondary effects from the former throughout the CIS. Trade, FDI flows, and remittance linkages are additional key spillover channels from Russia to other CIS economies— for example, remittances from immigrants working in Russia are a key driver of economic activity in Armenia, the Kyrgyz Republic, and Tajikistan. As for financial system risks, bank balance sheets remain impaired in economies with sizable nonperforming loans (Kazakhstan, Tajikistan). Rebuilding fiscal policy buffers remains a key priority for several CIS economies. Among the energy importers, reducing fiscal deficits will help ensure pub lic debt sustainability (Kyrgyz Republic, Tajikistan) and help narrow large current account deficits (Georgia). Fiscal consolidation is also important for Azerbaijan, whose non-oil fiscal position is well above the longterm sustainable level.The region needs to spur structural reforms to lift its growth potential. In Russia and Kazakhstan, this means delivering on pledges to improve the business climate and diversify the economy. Gas sector reform is overdue in Ukraine. In the Kyrgyz Republic and Tajikistan, growth could be spurred by prudently financed and prioritized infrastructure investment. For Belarus, price liberalization, enterprise reform, and privatization should be priorities. In addition, European CIS countries need to maintain flexible exchange rates, and Belarus and Ukraine should address macroeconomic imbalances: Belarus needs to ensure further disinflation, and Ukraine should reduce the large current account and fiscal deficits. Further strengthening and development of institutions will help successfully implement the required policies in the region. imf.org

BANKING NEWS

8 ASSETS AND LIABILITIES OF BANKING SECTOR DECLINED IN Q1

BASISBANK TO UNVEIL FIRST SERVICE CENTER IN IMERETI REGION

ational Bank of Georgia reported that total assets of Georgian banking sector exceeded 14.1 billion lari as of March 31. Quarter-on-quarter decline made up 1.6%. The decline is explained by sum decrease of 8% on interbank accounts. Besides, the bank’s money in cash has decreased in volume by 12.6%, amounting as of reporting date to 646.81 million lari. All other assets have increased. Total liabilities of the banking sector amounted to 11.59 billion lari (decline – 3%). Sarke

asisbank will open the first new service center at no 1 Tsereteli Street in Kutaisi, the Imereti Region at 14 o’clock on April 29. The new service center will offer a full package of bank services to the customers. The center will serve both individual and corporate segments. Basisbank provides active job for the network expansion and to create favorable environment to the customer. BPI

BANKING SHARE IN GDP

ational Bank of Georgia reported that ratio of total banking assets to GDP made up 54% as of March 31. To compare, at the beginning of this year, this ratio made up 54.9%, while it was 50.5% at the beginning of 2012. Loans to GDP made up 32.5%, remaining unchanged through the quarter, while increasing from 30.8% in the 1st quarter of 2012. Banking deposits to GDP made up 24.3%, instead of 24.3% and 22.4%, respectively. Sarke

BUSINESS CREDITING DECLINED BY 2% IN Q1

ational Bank of Georgia reported that total crediting of Georgian economy by local banks amounted as of April 1 to 4.66 billion lari. This volume declined by 2% quarter-on-quarter. At that, 2.27 billion lari were issued by Georgian banks to trade operations (48.6% of total business credits). Quarter-on-quarter growth of crediting in this sphere made up 1.3%. Industry accounts for 18.9% (885.46 million lari, decline – 10.1%), construction – for 9% (426.99 million lari, decline – 2%). Crediting of agriculture, forestry and fishery to 56.25 million lari, accounting to 1.2% (decline 5%). Sarke

BANKING DEPOSITS IN LARI INCREASED BY 2.6% IN Q1

HILE IN FOREIGN CURRENCY – BY 3% National Bank of Georgia reported that deposits, attracted by commercial banks, totaled as of April 1 to 8.43 billion lari. At that, deposits in lari amounted to 3.06 billion lari (growth since the beginning of the year – 2.6%), while ones in foreign currency – equivalent to 5.37 billion lari (growth – 3%). Dollarization rate of non-banking deposits made up 64.14% as of the reporting date. To compare, at the beginning of the year, it was 64.08%, while a year ago – 60.74%. Sarke

FOREIGN PARTICIPATION IN BANKS’ PAID CAPITAL TOTALED TO 74.3%

ational Bank of Georgia reported that foreign participation total paid chartered capital of Georgian banks made up 74.3% as of April 1. As of the reporting date, total chartered capital of Georgian banks amounted to 947.42 million lari, while total share capital – 2.53 billion lari. Out of 20 banks, operating in Georgia, 15 ones are created with foreign participation, while 3 ones represent foreign banks’ branches. Sarke

NUMBER OF BANKING BRANCHES DECLINED AS WELL AS OF EXCHANGE OFFICES

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ational Bank of Georgia reported that 20 local banks had run as of April 1 branch network, totaling to 134 branches and 705 service-centers. During the 1st quarter, number of branches has declined by 8 units, while number of service-centers

– by 14. Number of currency exchange offices has declined also – by 61 outlets, making up 968 as of April 1. Number of micro-financial organizations (62 ones) did not change in the reporting quarter. Number of insurance companies declined by 1, making up 14 as of April 1, while number of credit unions remained unchanged – 18. Sarke

PRO CREDIT BANK RENEWED INTERNET BAKING

rocredit Bank announced about new design and comfortable and innovative functions of Internet banking. “Persons and legal entities will use time-saving wide range of banking services with the simple functions. Internet banking enables customer to use banking services in the comfortable environment without visiting bank”, states press release, published by the bank. The functions include: opening of accounts and deposits online; funds transfer to the branch 20-40% cheaper than existing fee; checking of all communal taxes simultaneously; filling mobile balance for free; one-click payments and conversion of several various kinds; ordering of various kind of plastic card. Registration of any package and service of standard package is gree. As Pro Crredit Bank informs, statiscitally, number of internet bank users sharply increase. Last year it increased by 35% and for now it equals to 30 000. Number of transactions made by internet banking also stably increases. According to latest data, it equaled to 76% of overal banking operations

EMEA FINANCE NAMED TBC BANK THE BEST BANK

ondon-based EMEA Finance magazine named TBC Bank as best Georgian bank of 2012. As the bank commented, the magazine has started rating of Georgian banks in 2011, naming then TBC Bank as the best one also. According to EMEA Finance, TBC Bank has managed to maintain high pace of development, while it’s “rate of idle loans makes up 1% only, being the lowest one in Georgia”. EMEA Finance is a monthly edition, being published by the UK company Exporta Publishing & Events Limited since 2008 and focused on finance markets of Europe, Middle East and Africa.

CONSTANTA FINISHED 2012 WITH PROFIT OF 4.39M LARI

“BANK OF GEORGIA” REMOVES ABKHAZIA FROM THE LIST OF INDEPENDENT STATES

Bank explains a “recognition” of Abkhazia by the changes in Russian money transfer system

ank of Georgia” has made a comment regarding a released in the Internet photo. Recall that yesterday a photo depicting the bank’s ATM screen was spread in the social networks where Abkhazia was mentioned as a separate country along with Russia, Sweden and other countries in a Russianlanguage version of the list of the countries from which the money transfers are made. This photo in the social networks caused a great resonance. “Bank of Georgia” makes explanations on this issue and claims that Abkhazia is not mentioned as an independent country in the agreements signed between the bank and the Russian money transfer system. “Before integration into money transfer system the bank had thoroughly checked that Abkhazia was not included in the list of the countries but afterwards, the money transfer system added it to the list without any notice. Since “Bank of Georgia” is connected with the transfer system via web services, the above-mentioned change was automatically reflected in the bank’s ATM screen. The bank responded immediately and corrected a list of countries “- the bank’s statement says. The bank also specifies that this bug had been eliminated before the photo was published. commersant.ge

VTB CREDITED VAZIANI COMPANY IN THE FRAMEWORK OF PREFERENTIAL

TB Bank (Georgia) approved $1 550 000 loan to LTD Vaziani Company to build wine factory. As bank informs, $600 000 was issued in the framework of Preferential Agro Credit. According to Agro Credit conditions, in the framework of the 3rd component loan aims to create new agricultural enterprises and interest rate does not exceed to 3%. With $950 000 main and working capital will be funded. Vaziani Company is a corporative client of VTB. Its produced wine is sold in Ukraine, Kazakhstan and China. GBC

PROCREDIT BANK COMPLETES 1ST QUARTER WITH 3,3 MILLION PROFIT

LIBERTY BANK SOLD LARGE PACK OF PRIVILEGED SHARES

CARTU COMPLETED 1ST QUARTER WITH 1,938 MILLION GEL PROFIT

ank Constanta reported profit of 4.39 million lari for 2012. The showing is increased by 44%, if compared with 2011. In the 1st quarter of this year, the bank had profit of 2.6 million lari. As of December 31, 2012, total assets of Constanta amounted to 244.31 million lari (year-on-year growth – 51%). In the 1st quarter of 2013, this showing made up 272.3 million lari (quarter-onquarter growth – 11%). In 2012, total liabilities of the bank amounted to 209.7 million lari (year-on-year growth – 63%). In the 1st quarter of 2013, the showing made up 232.3 million lari (quarter-on-quarter growth – 10.7%). As of March 31, Constanta’s shareholders were TBC Bank – 86.69% (against of 84.56% as of December 31, 2012), OikoCredit – 9.43% (against of 11.01%) and Levan and Tamar Lebanidze – 2.54% jointly (against of 2.91%).

iberty Bank reported that it has additionally sold privileged shares of 3.3 million lari to the third side undisclosed investor in February. To remind, in August 2012, Liberty Bank has issued convertible privileged shares of 10 million lari. Placement cost per share made up 1 lari (nominal value of ordinary share – 1 tetri). On October 25, Liberty Holding Georgia and Liberty Capital, two major shareholders of Liberty Bank, have replenished the bank’s capital through purchase of these shares by 561,198 lari and 67,355 lari, respectively. According to audited report of Liberty Bank, there were 892,553 outstanding privileged shares as of December 31, 2012. Remained emission was subject to public offer (which deadline expires on June 30, 2013). The bank is going to pay dividend of 17% of placement cost per privileged share in every June.

SC ProCredit Bank (Georgia) competed 1st quarter of 2013 with 3,3 million profit For the end-2012 bank profit equaled to 21,58 million GEL. As bank informs, by April 1, 2013 deposit amount equals to 525,2 million GEL, credit portfolio - 720,2 million GEL. Overall obligations are 873,9 million GEL. By April 1, 2013 bank actives are defined by 1,011 billion GEL, market share - 7,2%. JSC Procredit Bank is a member of international banking group, operates in Georgia since 1999. It’s mainly oriented on the crediting of small and medium-size businesses. 100% of the bank stocks belong to Procredit Holding (ProCredit Holding AG &Co. KGaA). Out of 9 beneficiaries, more than 10% belongs to: IPC (17,88%), KFW (13,74%), DOEN Foundation (13,44%), IFC (10,39%). Stock capital of the bank equals to 137,1 million GEL . GBC

SC Bank Cartu completed 1st quarter of 2013 with 1,938 million GEL profit. By the beginning of the year, by January 1 bank’s loss equaled to 75.3 million GEL. By the end of the 1st quarter, bank’s deposit portfolio equals to 119,4 million GEL, quarterly growth - 77% (01/01/13 - 67,6 million GEL). Loans increased by 8,3% and by April 1 equals to 282,05 million GEL (01/01/13 - 260,5 million GEL). For the reporting period, bank actives is defined by 397,6 million GEL (01/01/13-372 million GEL). Cartu operates since 1998. 100% of the stocks belong to JSC Cartu Group, represented by 11 foreign companies since May 2012. Bank beneficiaries include Uta Ivanishvili (8,25%, Marina Jinjikhashvili (9,05%) and 10 non-residents. Stock capital of the bank equals to 135,3 million GEL (01/01/12111,8 million GEL). GBC

CIS

April 29, 2013 #02

RUSSIA REMAINS MAIN INVESTOR FOR BELARUSIAN ECONOMY

ussia puts more money into the Belarusian economy than any other country – in 2007 it contributed 33.5% of all foreign investments in the country. This fact was announced to BelTA by Belarusian Minister of Foreign Affairs Sergey Martynov. The Minister said that apart from Russians, there are some other nations keen on investing in Belarus: the British invested 860.7 million US dol-

lars last year (15.9% of the total); Swiss – 606.4 million dollars (11.2%), Austrians – 594 million dollars. The total foreign investments in 2007 are 5.4 billion dollars, said Martynov. Interestingly, the country of precise watches and delicious chocolate, Switzerland, has been our main direct investor for several years. In 2007, Swiss direct investments totalled to 580.3 million dollars or 44.2% of all direct investments. “Offers from foreign investors don’t just come from nowhere – it’s the result of the systematic work the government does to improve the business climate in the country,” pointed out the Foreign Minister. “Belarus is the only CIS country that has the Investment Code which facilitates investments, ensures governmental support, and protects the rights of foreign investors in the country. There is the Foreign Investments Consultation Council chaired by the Prime Minister, which aim is to improve the business climate. The National Investments Agency has been founded; there are six free economic areas with business preferences.” The Minister also said that Belarus is the leading CIS country for economy growth rates. Sounds pushy, doesn’t it? If it concerns the GNP rates, then last year, and today we are third in the Commonwealth. The CIS Statistics Committee said that GNP growth in January 2008 in Belarus was 8.3%, while in Azerbaijan it was 11.3%, Armenia 9.9%. The GNP growth in Russia was 7.9%, Kyrgyzstan 7.4%, Ukraine 4.9%, Kazakhstan – 3.8%, Tajikistan – 1.5%. The industrial output growth of 12.1% is in fact the biggest. But it can be explained by seasonal holidays as is the case in Russia, and by slower economic activity in the beginning of the year. We also come third with wages – after Russia and Kazakhstan. The Belarusian Ministry of Statistics said that Russians on average earn 529 dollars a month, Kazakhs – 434, Belarusians – 326, Ukrainians – 268. If Belarus is the best at something in the post soviet area, then it is the depreciation of the national currency. BelaPAN made this conclusion after examining the official dollar exchange rates on 1 January 2008 without taking into account money reforms and direct denominations of the national currencies. Turkmenistan comes second, Georgia – third. The Belarusian ruble depreciated against the US dollar 6.9 times more than the national currency in

Turkmenistan; 13.5 times more that in Georgia; 16.7 times more than in Uzbekistan, 42.6 times than in Ukraine; 62.1 times more than in Tajikistan’s; 353 times more than in Armenia; 357 times more than in Kazakhstan; 509 times more than in Azerbaijan; 876 times more than in Russia; 1,899 times more than in Moldova; 3.028 times more than in Kyrgyzstan; 91,210 times more than in Lithuania; 202,102 times more than in Estonia; and 22.107 times more than Latvian lat! Various international business ratings that are not appreciated in this country, also keep quiet about any progress in the Belarusian economy. For instance, the annual rating of economically free countries ranked Belarus the 150th out of 157 countries featured. The Heritage Foundation American Research Fund and The Wall Street Journal also regularly evaluate national economies in 10 nominations, including, investment freedom, trade liberalisation, the size of the government, etc. “Belarus’ low position in the rating is explained by the fact that the country refused to carry out post-soviet reforms,” explained the experts. “If compared to last year, Belarus’ rating fell down by another 1.8 point primarily because of the diminishing freedom of trade.” Foreign experts also found other indexes low in Belarus – for instance, financial freedom, the right of proprietorship, freedom from corruption. They said that the country comes last in the European economic freedom rating. In fact, economic freedom was something that the Belarusian government did not really need in the past. In his speech at the Russian Duma the other day, Russian Minister of Finance Sergey Shatalov stated that Russia had been subsidising the Belarusian economy for the past several years by supplying cheap gas and by “not making the final decision about the export duty for crude oil particularly when Belarus sells on oil processed products. However, we have solved the issue with export duties a couple of years ago, and undertook a programme to increase prices in gas”. Shatalov also said that the trade balance between Belarus and Russia has consistently been in Russia’s favour despite the fact that Belarus sells 4045% of all its good to Russia. So, Russians for us are not just the main investors – they are the main suppliers, and the main customers. Belorusskie Novosty

AGRICULTURE MINISTRY: UKRAINE, FINLAND TO DEEPEN AGRICULTURE COOPERATION

kraine and Finland agreed to enhance cooperation in agriculture. This has been discussed at a meeting of Ukraine’s Deputy Minister of Agrarian Policy and Food Ivan Bisiuk with members of the parliamentary delegation of the Republic of Finland, UKRINFORM reported, citing the ministry’s press office. “Our countries are reliable partners, but we would like to strengthen cooperation. Thus, Ukraine is interested in implementing investment projects in the field of fisheries, particularly in the area of crayfish breeding. Finland also has a positive experience of developed forest management, so

caucasian business week

we are interested in joint implementation of a project of technical assistance. Apart from this, Ukraine is interested in the analysis of the status and prospects for the production of biodiesel, bioethanol, biogas and other alternative fuels,” the official said. He said that Ukraine’s Agrarian Policy Ministry is considering the possibility of developing a specific programme of cooperation in the field of forestry between the ministries, setting up a separate working group and signing a memorandum of partnership. A reminder that the trade turnover of agricultural products between Ukraine and Finland in 2012

was $ 15.7 million. In the first three months of this year the trade turnover stood at $ 3.3 million, imports - $ 2.9 million, and exports - $ 0.4 million. UKRINFORM

VTB CUTS OPERATION IN CYPRUS

tate-controlled lender VTB will сut back its operation in Cyprus and transfer most of its loan portfolio held by a local subsidiary to other affiliates, a report said Thursday. The decision was made because most of the loans by the bank’s Cyprus branch, Russian Commercial Bank, had been provided to Russian businesses, VTB’s financial director Herbert Moos said Wednesday, Vedomosti reported. Russia’s second-largest lender also has no confidence in the Cypriot economy, “which we expect to face serious changes,” Moos said. “We don’t believe that it will return to the status quo.” But he added that VTB doesn’t anticipate any losses

from transferring its Cypriot operations to other subsidiaries. The total size of deposits in VTB’s Cypriot branch stands at about $2 billion, Moos said. The Cypriot banking system is facing a largescale shake-up after the country’s government approved the conditions of getting a 10 billion euro bailout loan from the European Union and the International Monetary Fund. As part of the bailout plan, deposits of less than 100,000 euros with Cyprus Popular Bank, also known as Laiki, will not be affected, while depositors with more than that amount will face a large surcharge to help fund the bailout. The Moscow Times

Kazakhstan

Kazakhstan to develop Aktau port with UAE firm

azakh railway monopoly Kazakhstan Temir Zholy (KTZ) reached an agreement with Dubai-based firm DP World to develop new special economic zones in critical regions of the Central Asian state. Two of the projects will be located at the Aktau seaport in the west of the country, while another project will build Khorgos ‘Eastern Gate’.

Swiss businessmen interested in investing in Kazakhstan economy

epresentatives of more than 40 biggest companies of Switzerland took part in a meeting devoted to the issues of trade and economic cooperation between Switzerland and Kazakhstan. Representatives of such Swiss companies as Novartis International AG, ABBSchweizAG, StadlerRailAG, AebiSchmidt, BMFGroupAG, Rieter, Schindler Holding, Ammann Group, Bühler Group, Centravo, SwissRail, LeicaGeosystemsAG, FlughafenZürichAG, Sika, Burckhardt Compression AG, AxpoTradingAG, Socar Energy Switzerland, V-ZugAG were among the members of the delegation.

Jerooy was put up for tender

he Kyrgyz government has announced a tender for the right to use natural resources for the development of gold deposits and geological studies of Jerooy area. The right to use deposits will cost at least $ 300 million. Gold reserves at the field are about 100 tons.

Tajikistan

Total and CNPC are planning to open their offices in Tajikistan

inister of Energy and Industry of Tajikistan Sherali Gul met on Tuesday with VicePresident of the French oil company Total Philippe Ergo and representatives of China National Petroleum Corporation (CNPC). The meeting discussed issues of cooperation in the oil and gas sector, in particular the opening of offices of these companies in the country. Following the meeting, it was stated that the cooperation in the exploration and production of hydrocarbons in Tajikistan is in interest of all three parties.

Turkmenistan

Draft Resolution

y order of the President of Turkmenistan, a draft Resolution “On approval of the Concept of development of electric power industry of Turkmenistan for 2013-2020” was designed. At present, Turkmenistan has 10 power plants, 32 turbines, of which: 14 - steam, 15 - gas, and 3 - water. From 2007 to 2012 the amount of electricity produced has increased by 138 percent. The Concept envisages two phases: by the years 2013-2016, it is planned to build eight gas turbine power plants, as well as to construct high-voltage power lines. According to the document, by the second phase - 2017-2020 years – it is planned to build 6 more power plants, and to switch at gas-turbine plants to the combined management, which will increase power capacity without additional natural gas production.

AZERBAIJAN caucasian business week

April 29, 2013 #02

REGULATOR: AZERBAIJANI MARKET AZERBAIJANI SOFT DRINKS ABLE TO ACCEPT SOCAR PLANNED MARKET RECORDS OVER 10 BOND ISSUE MILLION LITERS, TO GROW IN LONGtime SOCAR can enter the market with bonds. We TERM PERIOD evaluated the market for the possibility of absorp-

he State Securities Committee welcomes the expected appearance of the securities of the State Oil Company of Azerbaijan (SOCAR) at the market. Rufat Aslanli, head of the State Committee for Securities of Azerbaijan, says that today the domestic securities market has not so-called “bluechips”, and the presence of SOCAR on the market, although as a bond issuer, would be a very important signal to global investors and funds. “The Committee held discussions with the management of the oil company, and following the negotiations a consensus was reached that in a short

tion and with what volume of bonds it is ready to offer and enter the market,” Aslanli said. SOCAR announced the release of manat bonds worth up to AZN 500 bn at face value. Previously, the Company placed 2 issues of eurobonds in the amount of $1.5 bn. “At primary stage, SOCAR should place successfully its first bond issue, and in this connection it is necessary to take some preparatory measures. So far we did not received an official request from the Company. It can raise resources from the domestic market, which would be positive for the country’s securities market. We look forward to SOCAR appearance on the stock market already this year,” Aslanli said. The absence of Company’s request to the regulators of the market is linked with, according to SOCAR vice president Suleyman Gasimov’s previous explanation, the preparation of a work program for which SOCAR will raise funds. ABC.AZ

PASHA HEYAT SIGORTA REPS TOOK PART IN IX INTERNATIONAL RISK MANAGEMENT CONFERENCE

epresentatives of Azerbaijani insurance company PASHA Heyat Sigorta participated in the IX International Risk Management Conference. The Company informs that at the event PASHA Heyat was represented by Risk Management Department’s head Parviz Guliyev and specialist Tural Hasanov. “During the conference, in addition to risk man-

agement the participants also discussed prospects of the insurance market, reinsurance, financial stability in Central Asia, the prospects for the development of China’s economy,” PASHA said. Besides Azerbaijan, the conference was attended by representatives from Russia, Uzbekistan, Belarus, Great Britain, USA, France, Sweden, India, UAE, Egypt, Turkey and other countries. Azerbaijan was represented by three companies. ABC.AZ

uromonitor International has prepared an overview of the soft drinks market of Azerbaijan, noting its healthy growth. According to the review, in 2012, soft drinks continued to record healthy growth. The area benefited from the expansion of the domestic segment and the increasing interest of consumers in soft drinks as a whole. Overall, growth is being driven by the healthy characteristics of soft drinks, the diminishing quality of tap water, very hot summer weather, new product launches, wider product assortments and the dynamic development of functional beverages. As a result, during 2012 total volume growth within soft drinks was higher than in 2008-2012 period CAGR and quality improvements and a widening product range provide a good base for expansion over the next five years. Towards the end of the review period, both dynamic and less dynamic areas enjoyed an inflow of new brands. Carbonates, fruit/vegetable juice, bottled water and energy drinks areas recorded new product launches, with the domestic segment leading the way and triggering growth in soft drinks as a whole. During 2012, domestic companies were able to offer their products at a reasonable quality/price ratio and strengthened their distribution channels. The offering of good quality lower priced products attracted consumers during the year. Overall, soft drinks is a highly competitive area in Azerbaijan. The leading positions of major international players such as Coca-Cola (Baku Coca-Cola Bottlers) and PepsiCo (Mars Overseas Baku Ltd) can be attributed to very strong and well-established brands and local production. Coca-Cola and PepsiCo have long been the leading players in this area as they enjoy an early-mover advantage and have consistently offered innovations and new product launches (energy drinks, RTD tea, etc). However, domestic companies are catching-up with multinationals and hold strong positions across soft drinks, especially within fruit/vegetable juices. In addition, they also employ Western-style competitive and marketing strategies and offer products in differ-

ent price segments and various packaging. Despite the expansion of supermarkets/hypermarkets and the increasing number of kiosks in parks and on the street, independent small groceries remained the leading distribution channel in 2012 within soft drinks. However, it should be noted that the channel’s total volume share fell over the review period. The main reason for this distribution trend is the convenient location of such stores. Moreover, such stores are the only distribution option in rural areas. However, modern retailers attract consumers by offering better prices for beverages, a wider range of products and promotions for leading brands. Soft drinks will continue to develop over the forecast period. Due to market saturation and stronger competition within soft drinks, many companies will look to develop their existing brands by adding new flavours, changing formulations, introducing new packaging and making consistent new product launches. Strong marketing campaigns and rising consumer incomes will help to increase per capita consumption. RTD tea and sports and energy drinks are expected to grow in popularity and will benefit from heavy promotional activities for these products by manufacturers. ABC.AZ

MANCHESTER UNITED’S LEGEND PLAYER TO PLAY IN BAKU FINAL OF YOUTH ENTERPRISE SUPPORT PROGRAM BY PASHA BANK AND JUNIOR ACHIEVEMENT AZERBAIJAN TO BE HELD IN BAKU

ithin the framework of Sustainable Enterprise Development Program, PASHA Bank and Junior Achievement Azerbaijan will conduct presentation of business ideas of first-time entrepreneurs from Baku and Guba. The Bank informs that the event will be held at Four Seasons Hotel on 2 May. Started in April 2012 the Program benefited more than 60 participants, who are involved or plan to be involved in small and medium entrepreneurship. The program participants were selected through an open application process that factored in the applicants’ enterprise experience, and projected action plan upon the program graduation. Junior Achievement Azerbaijan assisted participants in forming enterprises and supported them through business trainings and regular consultancies. Additionally, the program conducted monthly public awareness campaigns to raise the participants’ financial literacy and entrepreneurial skills.

Junior Achievement Azerbaijan also linked the program participants with business advisers who assisted in transition from a ‘paper model’ of the business plan to a real entrepreneurial activity. Business meetings gave the participants the opportunity to discuss challenges they have faced while starting up their affairs, explore distribution and sales channels, study requirements of the consumer market, and explore innovative solutions applied in commercial activity. At the event the program participants will exhibit their businesses and make presentation on products and services that will improve the quality of their lives and will give them financial sustainability. The jury panel consisting of business representatives will evaluate the proposed ideas according to their feasibility, sustainability, innovativeness and team’s presentation skills. The event will be concluded with an awards ceremony when the best three enterprises will receive in-cash awards from PASHA Bank. ABC.AZ

wight Yorke, the legendary striker of Manchester United will visit Baku within the frames of partnership between Bakcell and Manchester United. The cellular operator informs that Dwight Yorke will participate in lot of activities as Bakcell’s special guest including the match between World football Veterans against Local football veterans on May 1st to be organized by AFFA and devoted to Heydar Aliyev’s 90th birthday as well as in Charity Auction to be organized by Bakcell on May 3rd. The money collected from the auction will be donated to UNICEF to support children in need. Bakcell is Manchester United’s first official telecommunications partner for all CIS countries, bringing a range of unique and exclusive content to the country’s Manchester United fans as well as more than 2.6 million Bakcell customers. Yorke, United’s smiling assassin was one of the leading names in the club’s unforgettable Treble season. After joining from Aston Villa in September 1998, the Trinidad and Tobago international striker enjoyed a debut campaign bagging 29 goals to finish top scorer as the Reds swept the honours. Yorke’s on-field mutual understanding with Andy Cole had formed one of the best attacking tandems in the history of modern football. Thereafter, the arrival of Ruud van Nistelrooy limited Yorke’s involvement, but he did turn into an icon in hearts of most United fans after his unforgettable 22-minute hat-trick against Arsenal.

Dwight left Old Trafford in 2002, but his returns to Old Trafford as an opponent invariably provoked a warm reception from the grateful home support. ABC.AZ

ARMENIA

April 29, 2013 #02

2012 RATING OF ARMENIA’S TOP PROFITABLE BANKS

RKA agency has released its annual Top Profitable Banks of Armenia rating 2012. It is noteworthy that Armenian banks operated successfully last year, and 18 out of 21 banks posted profits. The net profit of the banks shot up by 15.1% in 2012 year over year to nearly 42.7 billion drams, and the loss of three banks stood at about 3 billion drams. In 2011 the loss at 312.6 million drams were reported just by one bank. ARKA ranked HSBC Bank Armenia as the leading bank in the net profit (over 7.4 billion drams). In 2011 this bank was also first in the rating. The net profit of HSBC Bank Armenia in 2012 climbed by 12.6% from a year earlier. Ameriabank follows HSBC Armenia with the 6.1-billion-dram profit, an increase by 52% from 2011. ARKA ranked this bank the fourth in 2011. The third position in the rating is given to Ardshininvestbank. The bank’s net profit amounted

LOT POLISH AIRLINES TO RESTORE WARSAW-YEREVAN FLIGHT IN JULY

he Warsaw-Yerevan flight will be restored in July. This was stated by the Deputy Minister of the Republic of Poland Tomasz Tomczykiewicz at the briefing. “Before we came to Yerevan, we had discussed the issue of the restoration of the Warsaw-Yerevan flight with the new director of LOT Airlines. In July of the current year the flight will be restored”, - said Tomasz Tomczykiewicz, as reported by Armenpress. As stated by the Deputy Minister of the Republic of Poland, it is quite an important precondition

for deepening the economic relations with Armenia and without a direct connection there would not be any economic cooperation. On April 23 the 3rd session of the joint intergovernmental commission on the Armenian-Polish Economic Cooperation Issues was completed in Yerevan. The Deputy Minister of Economy of the Republic of Armenia Ara Petrosyan and the Deputy Minister of the Republic of Poland Tomasz Tomczykiewicz signed a corresponding protocol, in which the decisions, made during the session, were fixed. ARMENPRESS

to 4.8 billion drams rising twice year over year. In the previous rating the bank took the seventh position. VTB Bank (Armenia) dropped from the third position in 2011’s rating to the fourth in the current ranking. Its net profit valued at nearly 4.6 billion drams. It is said to jump 2.8 times from 2011. ACBA-CREDIT AGRICOLE BANK appears on the fifth position in the current ranking falling from 2011’s second position. The bank’s net profit dove by 30.5% to 4.2 billion drams year over year. The highest growth of the net profit was recorded by Converse Bank –12.3 times to 943.5 million drams versus 76.4 million drams in 2011. Artsakhbank posted the lowest growth of its net profit at 6.6% (1.8 million drams). Despite the hike in the aggregate net profit in 2012, six banks earned less from 2011. In addition, the loss of one of the banks dropped last year. ARKA

ARMENIA TO HAVE EXPORTS INSURING ORGANIZATION eputy economy minister Karne Minasian said Tuesday that an organization will be created in Armenia to insure exports. “The government will soon consider a relevant concept and we expect that beginning from autumn of 2013 we will start providing export insurances,” she said at the final press conference in connection with the termination of a USAID-funded Partners for Financial Stability (PFS) project worth a total of $1 million. She said the concept was designed by experts from the Czech Republic, invited by USAID. USAID/Armenia Mission Director Karen Hilliard called Tuesday on Armenian partners to continue and successfully conclude the reforms. She said the government should cooperate with specialized agencies and private sector. She said the USAID is also ready to continue cooperation within the framework of a new PFS project. Over the past three years, PFS worked with the Armenian government, the Central Bank

caucasian business week

of Armenia (CBA), the private sector, business associations, and other key stakeholders in the financial sector to reform the processes that limit enterprise competitiveness in Armenia. The project also helped to explore and test innovative solutions targeting various segments of the financial sector. PFS assisted the government of Armenia to establish the Export Credit Agency, supported the CBA to develop the concept of the Dilijan Research and Training Center, enhanced the CBA’s crisis preparedness capacity, and assisted the ministry of finance to enhance the quality of accounting and auditing services. In addition, PFS worked with professional associations to update financial reporting standards and launch an electronic library for financial sector professionals. PFS also facilitated dialogue between public and private counterparts to tackle the challenges of micro, small and medium enterprises in accessing financial services. ARKA

ARTSAKH CAPABLE TO EXPORT LARGE AMOUNT OF WATER

n near future the Artsakh Republic will export a large amount of water. The Press Spokesman of the Artsakh Republic President, Davit Babayan stated this in a conversation with “Armenpress”. Davit Babayan underscored: “I am confident that time will come and we shall export water resources to various countries, as we have vast reserves and we can export about 2,5 billion cubic meters water without damaging the environment.” Among other things the Press Spokesman of the Artsakh Republic President noted that in coming two decades it will become possible to export water from Artsakh via various pipes. In addition Davit Babayan emphasized: “One can imagine the significance of that geopolitical factor along with the whole range of issues springing from that. Water is a serious natural resource and in future its price will raise.” ARMENPRESS

ECONOMIC ACTIVITY IN ARMENIA RAISED BY 8,7% IN JANUARYMARCH

he indicator of the economic activity of Armenia during the months of January-March 2013 exceeded the indicator of the same period of the last year by 8,7%. As Armenpress was reported by the National Statistical Service of the Republic of Armenia, growth was registered in nearly all the fields, except for the construction and electric energy production. In comparison with the months of January-March 2012, during the first months of the current year the volumes of the services have increased by 7,1% and the gross agricultural output has in-

creased by 2,3%. The volumes of the industrial production have increased by 15,8%. The sphere of construction continues declining, making 93,5%. Electric energy production has decreased by 0,7% and the average monthly salary has increased by 3,8%. The volumes of the foreign trade turnover in comparison with the months of January-March of 2012 have increased by 2,2%. The export has grown by 3% and the import – by 1,9%. By the way, in March, in comparison with February, the foreign trade turnover has declined by 4,2%. ARMENPRESS

MORE TOURISTS FROM LATIN AMERICA VISIT ARMENIA

ore and more tourists from Latin America are visiting Armenia, according to Armine Adamian, head of Amistad Tour travel agency, who spoke to a news conference today. She said tourists from Argentina, Uruguay, Ecuador, Puerto Rico and some other Latin American countries choose Armenia as a tourist destination and many of them are not Diaspora Armenians. She said an increasing interest in Armenia may be motivated by search for new experiences, as well as by a desire to visit a new faraway country. “So far, they are not very many, but in view of the fact that each of Latin American tourists visiting Armenia may act as a “live advertisement” for their country fellows, it is extremely important for Armenia”, she said. She said many of foreigners who visited Armenia last year had planned originally to visit Syria, but then refused to travel to that country because of the clashes between the government and opposition forces. She said the major obstacle to the development of tourism in the country is the high cost of airfares. “Prices for flights to Armenia are much higher than to many neighboring countries, and this makes foreign tourists to choose other than Ar-

menia countries,’ she said. The executive director of Eurasia travel agency, Gagik Mkrtchyan, said another obstacle to tourism development is lack of advertising and low level services in eateries outside the capital city. According to the National Statistical Service of Armenia, some 843,330 foreign tourists visited Armenia in 2012, an increase of 11.3% from the previous year. ARKA

WORLD NEWS caucasian business week

April 29, 2013 #02

GLOBAL CRUDE STEEL PRODUCTION ROSE TO 135 MILLION TONNES IN MARCH 2013

russels, 22 April 2013 World crude steel production for the 63 countries reporting to the World Steel Association was 135 million tonnes in March 2013, an increase of 1 percent compared to March 2012. According to World Steel Association, in the first three months of 2013, Asia produced 259.8 Mt ofcrude steel, an increase of 6.4% over the first quarter of 2012. The EU produced 41.5 Mt of crude steel in the first quarter of 2013, down by -5.4% compared to the same quarter of 2012. North America’scrude steel production in the first three months of 2013 was 29.7 Mt, a decrease of -5.7% compared to the first quarter of 2012. New Report by World Steel Association China’s crude steel production for March 2013 was 66.3 Mt, up by 6.6% compared to March 2012. Elsewhere in Asia, Japan produced 9.4 Mt of crude steel in March 2013, up by 1.3% compared to the same month last year. In March 2013, South Korea’s crudesteel production was 5.7 Mt, down by -7.0% over March 2012. In the EU, Germany produced 3.8 Mt of crude steel in March 2013, a decrease of -2.2% on March 2012. Italy’s crude steel production was 2.2 Mt, down by -18.4% compared to March 2012. Spain

produced 1.3 Mt of crude steel, -2.3% lower than March 2012. France’s crude steel production was 1.3 Mt, a decrease of -9.6% on March 2012. Turkey’s crude steel production for March 2013 was 3.0 Mt, down by -4.6% compared to March 2012. The US produced 7.3 Mt of crude steel in March 2013, down by -8.4% on March 2012. In March 2013, Russia produced 6.0 Mt of crude steel, a decrease of -2.8% compared to the samemonth last year. Ukraine’s crude steel production for March 2013 was 2.9 Mt, -2.9% less than March 2012. Brazil produced 2.9 Mt of crude steel production in March 2013, a decrease of -7.6% compared to the same month last year. The crude steel capacity utilisation ratio for the 63 countries in March 2013 slid to 79.4% from 80.5% in February 2013. Compared to March 2012, it is -2.1 percentage points lower. Albanian Minerals President and CEO Sahit Muja said world steel production and consumption is expected to rebound by 3 percent in 2013 to near 1,500 million tonnes, The demand for steel will gradualy increase in May do to the start of more active constructing season. New York News

INTERNATIONAL INVESTORS PULL OUT $2BN FROM EMERGING MARKETS

s much as $2 billion of investment has been pulled from the emerging markets in the past week. The number is a record for the past 12 months. Russia-oriented funds lost $310 million. The numbers are double those of last week, foreign investors with money in emerging markets pulled $0.9 billion, data from Emerging Portfolio Fund Research showed. This result was the highest since May 2012, when funds lost $ 2.25 billion. In total over the three weeks of continuous withdrawal, funds have lost more than $ 3.5 billion. The main cash outflow from Russia has been from traditional funds and amounted to $111 million, while from ETF-funds clients withdrew about $60 million. With all types of funds including the outflow from the Russian market it was $310 million. It comes as investors have been continuously withdrawing money from Russian assets for 10 consecutive weeks.

The numbers are worse than for most of the other BRIC countries. Thus, Brazilian funds lost $114 million, Indian - $50 million and only Chinese funds showed a worse performance and lost $570 million over the past week. The trend has been in place since the beginning of the year, in total $1.5 billion has been pulled from the Russian funds in four months. This is the second time in past eight years, such a massive outflow has taken place in the first quarters of the year. Only 2007 bears comparison, when funds lost over $ 100 million in the opening months of the year. However despite increased outflow on the part of foreign investors, the Russian stock market was among the leaders in terms of growth among the emerging markets and developed countries. Since the beginning of the week the RTS index gained 3.2% and the MICEX was up by 2%. The leading Asian markets rallied 1.3-2% and in the US major indices gained 1-2,6%. European indices and the Japanese NIKKEI 225 also showed positive dynamics and they were up 4-4.5%.

SINGAPORE CHANGI AIRPORT IS VOTED THE WORLD’S BEST AIRPORT

ingapore Changi Airport has been voted the World’s Best Airport at the 2013 World Airport Awards held at Passenger Terminal EXPO in Geneva. This is the fourth time Changi airport has achieved the top prize - last claiming victory back in 2010. The awards are voted for by airport customers from around the world and this year the survey garnered 12.1 million responses. Last year’s winner, Incheon International Airport achieved a second place finish in the global rankings, and achieved major success in taking the

awards for Best Airport Staff Service - Asia and Best International Transfer Airport For the first time in 6 years, there was a change to the top-3 global airlines with Amsterdam Schiphol Airportaccomplishing an excellent third place finish in the survey. Hong Kong International Airport achieved fourth position in this year’s global rankings being usurped from the top-3 for the first time in 12 years - the airport did however achieve top-5 finished in 6 of the awards categories indicating that it continues to be highly regarded amongst passengers.

Beijing Capital International Airport retained its top-5 position in the global rankings and with it took the award for Best Airport in China. Munich Airport again proved popular with survey respondents finishing in sixth place in global standings and securing the awards for Best Airport in Central Europe and for the first time, being named as having the Best Airport Dining Experience. Zurich Airport secured seventh place in this year alongside the awards Best Airport Baggage Delivery and Best Airport Staff Service - Europe. Vancouver International Airport improved its position by one place in the overall global rankings moving up into eighth in this year’s survey, and this ensured it retained its award for Best Airport in North America. Tokyo International Airport (Haneda) stormed into the top10 of the global survey this year moving up 5 places to ninth and in doing so it took home the prize for World’s Best Domestic Airport - a new award

introduced for 2013. Heathrow Airport achieved its best ever result entering the top-10 airports for the first time and also scooping the awards for World’s Best Airport Terminal for Terminal 5 and for the third year running the prize for Best Airport Shopping. worldairportawards.com

April 29, 2013 #02

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IMF: EUROPE – DIMINISHED CRISIS RISKS AMID PROLONGED STAGNATION

ince the October 2012 WEO, financial stress in the euro area has moderated in response to policy actions at both the national and European levels. But economic activity remains weak, and growth projections for 2013 have been lowered because weakness has spilled over from the periphery to the core. Downside risks to the outlook include stagnation and the reemergence of stresses if policy momentum is not sustained or if events in Cyprus lead to prolonged financial market fragmentation. Since the October 2012 WEO, acute crisis risks in the euro area have diminished. ecisive policy actions at the European level—including Outright Monetary Transactions (OMTs), the completion of the European Stability Mechanism, the deal on Greek debt relief, and the agreement on the Single Supervisory Mechanism—have increased confidence in the viability of the Economic and Monetary Union. Along with progress on economic adjustment by national governments, this has greatly improved financial conditions for sovereigns and banks. But lower sovereign spreads and improved bank liquidity have yet to translate into either improved private sector borrowing conditions or stronger economic activity. Achieving these gains could prove even more challenging given that financial conditions remain highly vulnerable to shifts in market sentiment, as evidenced by the renewed volatility in the wake of the inconclusive outcome of Italy’s elections and recent events in Cyprus. Analysis in the April 2013 Global Financial Stability Report (GFSR) suggests that euro area bank deleveraging is proceeding broadly in line with the baseline scenario in the October 2012 GFSR. Euro area credit has continued to contract, mainly because of conditions in the periphery economies, and lending conditions remain tight. This delayed transmission to credit conditions led euro area activity to contract by 2¼ percent in the fourth quarter of 2012, with deep recessions continuing across much of the periphery and weakness spilling over to the core, reinforcing weaker near-term growth dynamics in these economies. The need to repair public and private balance sheets, as well as ontinued policy uncertainty, appears to be weighing against a robust recovery in investment and consumption in both the periphery and the core, which has contributed to a steady rise in unemployment rates in many countries. • The near-term outlook for the euro area has been revised downward, with activity now expected to contract by ¼ percent in 2013, instead of expanding by ¼ percent as rojected in the October 2012 WEO (Table 2.1). This reflects declines in growth projections across all euro area countries, with notable revisions in some core members (France, Germany, Netherlands). Growth will strengthen gradually through the year, reaching 1 percent by the fourth quarter, as the pace of fiscal consolidation (at ¾ percent of GDP) is eased by almost half during 2013. But growth will generally remain subdued as improvements in private sector borrowing conditions are hampered by financial market fragmentation and ongoing balance sheet repair. Further headwinds to growth could result from a sustained appreciation of the euro that lowers competitiveness and dampens export growth. • Activity is also subdued in the other advanced economies of the region. In the United Kingdom, the recovery is progressing slowly, notably in the context of weak external demand and ongoing fiscal consolidation. Growth is forecast at ¾ percent this year, down ¼ percentage point from the October 2012 WEO. Here too, domestic rebalancing from the public to the private sector is being held back by deleveraging, tight credit conditions, and economic uncertainty, while declining productivity growth and high unit labor costs are holding back much needed external rebalancing. Growth in other advanced economies (Sweden) has generally remained stronger, largely owing to more resilient domestic demand and relatively healthier financial systems. Current account balances of adjusting economies have improved significantly, and this improvement is expected to continue this year. This increasingly reflects structural improvements, including falling unit labor costs, rising productivity, and trade gains outside the euro area. But cyclical factors also play a role, notably layoffs of less productive workers, and would reverse with eventual economic recovery. Both core and other advanced economies continue to benefit from trade with faster-growing emerging market Inflation pressure has moderated in the euro area and is expected to moderate further. Headline inflation declined throughout 2012 and has recently been close to target, and core inflation has been subdued, declining since mid-2012. Inflation is expected to be reduced further, to 1¾ percent from 2½ percent in 2012, because of negative growth revisions, the diminishing effects of crisis-related fiscal measures, and lower oil prices. Amid reduced market pressure and very high unemployment, the near-term risks of incomplete policy

implementation at both the national and European levels are significant, while events in Cyprus could lead to more sustained financial market fragmentation. Incomplete implementation could result in a reversal of financial market sentiment. A more mediumterm risk is a scenario of prolonged stagnation in the euro area. Under such a scenario, described in more detail in Chapter 1, growth would hover around 1 percent in the medium term, gradually deepening disinflation pressure and exacerbating the challenge of reducing debt and generating negative spillovers to other regions. There are also some upside risks to the outlook, as described in Chapter 1. If euro area policymakers were to quickly implement a comprehensive banking union and if structural reforms already implemented were to deliver a larger-than-expected growth dividend, growth in the euro area could reach 2 to 2¼ percent, driven by a strong rebound in the periphery economies. Minimizing the downside risks and bolstering the upside risks will require sustaining policy momentum. For the euro area, this means arresting the decline in demand and making further progress on banking union and fiscal integration. • At the national level, countries should press on with needed balance sheet repair and structural reforms. Long-standing structural rigidities need to be tackled to raise long-term growth prospects. Southern Europe needs to increase competitiveness in the tradables sector, especially through labor market reforms. In the North, reforms would help generate a more vibrant services sector. These measures will help reduce unemployment and rebuild competitiveness in the periphery; as Box 1.3 notes, relative unit labor costs have fallen from their peaks in these economies. The pace of fiscal consolidation should remain credible, with targets set in structural rather than nominal terms. • Given moderating inflation pressure, monetary policy should remain very accommodative. Room is still available for further conventional easing, as inflation is projected to fall below the European Central Bank’s target in the medium term. • The mere existence of the OMTs may be insufficient to keep sovereign spreads low. OMTs should be made available to countries with programs that are delivering on adjustment, which may accelerate the countries’ return to durable market access. • The Single Supervisory Mechanism is a key step toward strengthening financial stability and reducing fragmentation. To ensure its timely and effective implementation at the European Central Bank, legislative agreements should be swiftly adopted, a single rulebook established, and operational details clarified. • Tangible progress toward a single resolution authority and a deposit insurance fund—both backed by common resources—is essential to weakening sovereign-bank links and should be further supported by making direct European Stability Mechanism ecapitalization available as soon as possible. • Greater fiscal integration is needed to help address gaps in Economic and Monetary Union design and mitigate the transmission of country-level shocks across the euro area. Building political support will take time, but the priority should be to ensure a common fiscal backstop for the banking union. Continued near-term support is important in other advanced economies while fiscal buffers are secured to guard against future risks, including from large financial sectors (Denmark, Sweden). In the United Kingdom, other forms of monetary easing could be considered, including the purchase of private sector

assets and greater transparency on the likely future monetary stance. Greater near-term flexibility in the path of fiscal adjustment should be considered in the light of lackluster private demand. Emerging Europe Emerging Europe experienced a sharp growth slowdown in 2012, reflecting spillovers from the euro area crisis and domestic policy tightening in the largest economies in response to new capacity constraints. Only a moderate recovery lies ahead for 2013–14. The intensification of the euro area crisis took a toll on activity in emerging Europe in 2012. Exports decelerated, confidence suffered, and beleaguered western European banks decreased funding for their subsidiaries (Figure 2.4). Compounding these effects were restrictive domestic policies—in Turkey to rein in the overheated economy and in Poland to address above-target inflation and a sizable fiscal deficit. As a result, growth in the region plunged from 5¼ percent in 2011 to 1½ percent in 2012. Several economies in southeastern Europe that had yet to fully emerge from the 2008–09 crisis fell back into recession. Growth in emerging Europe is projected to pick up to 2¼ percent in 2013 and 2¾ percent in 2014 (Table 2.1), with positive impulses from improved financial market sentiment and easing external financing conditions resulting both from recent EU-wide policy decisions and from gradual recovery in the euro area. Economic activity should also benefit from monetary easing in the second half of

2012 and smaller drag from fiscal consolidation than during 2012. Nonetheless, various factors will constrain the recovery. Emerging Europe’s principal export market, the euro area, will remain lackluster, only starting to grow in the second half of 2013. And the ongoing rebalancing of funding for the region’s foreign banks from parent banks to local sources will continue to weigh on credit availability. Emerging Europe is also burdened by such crisis legacies as high nonperforming loan ratios and incomplete repair of public finances. • Growth in Turkey is projected to accelerate to 3½ percent in 2013 and 3¾ percent in 2014—helped by recovering external demand and capital flows. • Poland’s growth will slow further to 1¼ percent in 2013 before picking up to 2¼ percent in 2014, on account of lackluster private consumption, fragile export demand from key trading partners in core Europe, and a further decline in EU-funded public investment. • Southeastern Europe will see the most tepid recovery, reflecting to various degrees entrenched structural impediments and competitiveness problems, a continued rise in nonperforming loans, and challenging public finances. • Hungary faces a difficult outlook due to high public and external debt, along with unconventional policies that have eroded confidence and investment. Overall, annual average inflation is expected to remain moderate this year in most of emerging Europe. Elevated rates are projected only for Turkey (6½ percent) and Serbia (9½ percent), largely reflecting inflation inertia. The balance of risks to the outlook is tilted to the downside, though less than in the October 2012 WEO, reflecting diminished crisis tail risks from the euro area. The key downside risk is prolonged stagnation in the euro area countries, given the strong economic linkages between them and the central and eastern European countries. In addition, domestic vulnerabilities and weaknesses relating to fiscal sustainability, the banking sector, or both—particularly in some countries in southeastern Europe and in Hungary — could exacerbate the impact of external shocks. While keeping an eye on these risks, policymakers should continue to work off crisis legacies, addressing in particular high nonperforming loans and elevated fiscal deficits or public debt in several countries. In countries with flexible exchange rates, monetary olicy should support the recovery. More fundamentally, many challenges that the 2003–08 boom had obscured have now resurfaced. Depending on the country, these challenges include high structural unemployment, low labor force participation, undersized tradables sectors, and incomplete transition agendas. imf.org

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April 29, 2013 #02

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

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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

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