Caucasian Business Week #24 by Caucasian Business Week

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BUSINESS WEEK October 07, 2013 #24

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October 07, 2013, Issue 24

BE INFORMED, DO BUSINESS

GEORGIA

FORBES: GEORGIA’S POLITICS SHOOTS ITS ECONOMY IN THE FOOT

eorgian president Mikheil Saakashvili delivered a passionate anti-Kremlin speech at the UN General Assembly in New York last week. Pg. 4

RUSSIA’S BIGGEST AIRLINE “AEROFLOT “ ENTERS THE GEORGIAN MARKET

caucasian1

DOES AIRZENA STRIVE FOR REPLACING TBILISI AIRPORT OPERATOR TAV URBAN GEORGIA? Airline Threatens to Suspend Flights Pointing to Unsafe Runway

t became exclusively known to commersant. ge that the Russian state airline “Aeroflot” will come into the Georgian market. Pg. 2

SKODA HAS OPENED ITS NEW CENTER IN TBILISI

ross External Debt Statistics is harmonized with BOP statistics. Besides of public sector debt, it includes private sector’s external debt. Pg. 7

TBC BANK COMMENTS OVER A CBW ARTICLE ublished information that suggests that TBC Bank continues to “purchase” various Georgian companies is a misinterpretation of the truth.

Pg. 6

AZERBAIJAN SOCAR UKRAINE OPENS NEW FUEL STATIONS

ARMENIA ARMENIAN EURO BONDS PURCHASED BY WORLD INVESTORS

he Euro bonds, issued by the Republic of Armenia with the volume of $700 million, have been Pg. 11

CIS EU TELLS YANUKOVYCH TO IMPROVE BUSINESS CLIMATE

he European Union’s trade commissioner has urged Ukraine to improve its business climate and carry out other economic reforms in time for landmark agreements with the bloc in November. Pg. 12

WORLD NEWS BUSINESS AS USUAL: WALL STREET IGNORES GOVERNMENT SHUTDOWN

he government shutdown may instil short-term volatility in the global financial market, but so far, the markets haven’t roared in reaction to the political deadlock in the world’s biggest economy. Pg. 13

EU spokesman: Georgia will not join the Eurasian Union Pg. 3

ony Collis one of the UK’s most experienced reputation management and crisis communication specialists. A former journalist in newspapers, BBC TV and BBC radio Pg. 6

GROSS EXTERNAL DEBT OF GEORGIA

Pg. 3

BORIS YAROSHEVICH, Deputy Head of the EU delegation to Georgia

BE AUTHENTIC; BE PROACTIVE; BE POSITIVE

Billionaire Mashkevich to Invest in Georgia’s Healthcare Sector

EXPERTS SAY AIRZENA IS TRYING TO ATTAIN PRIVILEGED STATE ON THE MARKET

irzena airline demands from the civil aviation agency for temporarily closing Tbilisi Airport or imposing concrete restrictions for certain flights. The reasons are related to the runway. Airzena asserts the runway has been long in unsafe condition and it requires rehabilitation works as soon as possible. In July 2013 the airline was making statements on suspending flights. “What do you think about the real condition of Tbilisi International Airport from the security point of view? The current infrastructure contains real threats for catastrophes every day. The airport’s runway cannot withstand any criticism”, the airline head Tamaz Gaiashvili noted. Social networks have reacted to the information. Jemal Khakhutaisvili, a director for Georgian International Airlines (Air Caucasus) says Airzena plans provocations to sabotage the government and the civil aviation agency. The airline that knows the airdrome is not safe and continues flights is guilty! Airzena Head Tamaz Gaiashvili wants to attain several goals: - to frighten foreign airlines flights in Georgia are

unsafe and to make the market free for himself! - To sabotage the domestic aviation agency! - Firing specialists of the domestic aviation administration and staffing it by his own representatives. I think this is a good plan, but I don’t believe he will be a success!’, Khakhutaishvili noted. Economic expert Irakli Lekvinadze says the Airzena management statements have a sole goal to penetrate the airport management and reach a privileged state on the market. This is inadmissible from the standpoint of all principles of competition and antitrust policy, because the company will dominate on the market and will control prices to other airlines. Previously, Airzena had similar privileged state on the market. As a result, the market has seen high tariffs, the air market control. Today there are about 30 airlines on the Georgian market and the competition is quite intense. The market registers low-budget airlines and flights are cheaper. An Airzena demand for protection of Georgia airlines are just bluff and this rhetoric has got only one goal – to gain a privileged state on the market. Pg. 3

Preparations continue for Georgia-Turkey 154 kV transmission line Pg. 2 George Bachiashvili: Co-Investment Fund is not an Instrument to Issue Loans to Citizens and Companies

Pg. 4

“Active Transparency is Important for Georgia to Show Investors a Fair Environment for Doing Business”

Pg. 6

Marneuli Food Plant – Sample of Georgian-Swiss Successful Partnership Pg. 5

Hamlet Gonashvili’s 85th anniversary celebrated in Georgia Pg. 14

MAIN EVENTS caucasian business week

EU SPOKESMAN: GEORGIA WILL NOT JOIN THE EURASIAN UNION

spokesman for EU’s delegation to Georgia says although Russia has increased its pressure on Eastern Partnership countries, there is no risk that Georgia will join the Eurasian Union, because the Georgian government’s stance is clear. In 2010, the EU Council of Foreign Ministers granted the European Commission a mandate to hold talks with Armenia, Georgia, and Azerbaijan with the aim of signing bilateral association agreements. In November, there will be a summit in Vilnius about the Eastern Partnership and according to Keti Khutsishvili, executive director of Open Society Georgia Foundation, Russia has already begun putting pressure on Georgia, Ukraine, Moldova and Armenia. President of Armenia, Serzh Sargsyan, unexpectedly refused to associate with Europe and decided to join the Eurasian Custom Union (CU); a Russian initiative. Khutsishvili added, that Russia is putting economic pressure on Ukraine, has banned Moldavian wine on the Russian mar-

ket, and moved so-called administrative borders around South Ossetia; and other types of pressure is expected. Boris Yaroshevich, Deputy Head of the EU delegation to Georgia, said at a conference named Threats of the Eurasian Union on the way of Georgia’s EU integration, on September 30 that EU was disappointed with Armenia’s withdrawal but it won’t affect Georgia, because Russia and Armenia used to be partners before too and Georgia is against joining the Eurasian Union. “Membership of Eurasian Customs Union and DCFTA (Deep and Comprehensive Free Trade Area) are absolutely incompatible and Georgia have to chose which one to join (…) I don’t think that there is a threat that Georgia will join CU because the government’s position is clear,” Yaroshevich said. Tamar Beruchashvili, Deputy Minister of Foreign Affairs, said Georgia is a European country, that is Georgian people’s choice and like previous government, the new government’s priority is to become a member of the EU. Nino Evgenidze, Executive Director of Economic Policy Research, spoke about both trade unions requirements and their possible affects on Georgia. A membership in the CU includes partnership in military issues, common educational and banking space, one currency, the Russian ruble, and this will lead to reduced competition, low quality, increased prices and Georgia’s dwindling financial independence, while DCFTA gives Georgia the opportunity to bring its products on the European Union’s market and 12% export and 7.5% import growth is expected. At the end of the conference Eastern Partnership Civil Society Forum, an umbrella organization called Georgian National Platform presented a statement signed by 54 organizations which condemns Russia’s pressure against Georgia’s partnership with Europe and asks Russia to respect the sovereign decisions of other countries. dfwatch.net

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PREPARATIONS CONTINUE FOR GEORGIA-TURKEY 154 KV TRANSMISSION LINE

new 154 kilovolt transmission line will be built between Georgia and Turkey. Energy Minister Kakhi Kaladze and Nikolay Nikolov, Vice Director of Energo-Pro Georgia signed the memorandum of understanding Monday. A memorandum was first signed in 2009, but under the new government, the Energy Ministry proposed changes in the document, which required a new memorandum to be signed. According to the ministry, preparations to build the transmission line are now continuing. Energo-Pro Georgia plans to invest USD 123 million in the project. The Batumi-Muratli tansmission line will connect Didi Batumi substation with Muratli substation. It will be 17 km long and be able to transfer up to 350MW. The memorandum also includes the construction of a 220/154 kV high voltage substation which will be completed in 2016. Energo-Pro Georgia JSC was established in

2006. It is owned by Energo-Pro, the largest energy company in Georgia. dfwatch.net

PARTNERSHIP FUND: HUNGARIAN EXPORTS-IMPORTS BANK TO BOOST INVESTMENTS IN GEORGIA

BEST GEORGIAN WINE HARVEST IN DECADES

1 companies have received and produced the highest amounts of grapes for decades, according to the Agriculture Ministry: 80 097.6 tons of grapes have already been processed this season. Last year, the number was 52 000 tons. Of Saperavi, one of the most popular grape varieties in Georgia, 25570.8 tons had been processed by September 29, followed by Rkatsiteli – 51660,6 tons, Mtsvane Kakhuri – 1406 tons and

other species – 1406.2 tons. According to the Agriculture Ministry, 79 out of 81 companies are private. The two state owned ones, Gruzvinpromi Ltd and Akura Ltd, account for 15 percent of the total production. They purchased and processed 12479.6 tons of grapes this year. Last year, the state purchased and processed 65 percent of grapes, according to ministry figures. The maximum price of Saperavi grapes this year is GEL 2.10 (USD 1.26), which is the variety most in demand. The ministry informs that the private sector is not quite interested in the white grapes from Signaghi and Lagodeghi, and therefore the state companies purchased most of these. The Saperavi harvest is now over. Daily processing of the variety is about 30-40 tons, and production is still continuing. dfwatch.net

HEIDELBERGCEMENT PLANS TO INVEST ADDITIONAL $100M IN GEORGIA

conomy and Sustainable Development Ministry informed that German HeidelbergCement plans significant investment for modernization of recently purchased cement factory in

Poti. The Ministry also said that the company plans modernization of cement factory in Kaspi and expansion of concrete factories’ chain throughout Georgia. The Ministry specified to Sarke that in next 5 years, HeidelbergCement plans to invest $100

million in modernization of Poti and Kaspi factories, and that growth of this sum is not excluded. Today, board member of HeidelbergCement Andreas Kern met with Minister of Economy and Sustainable Development Giorgi Kvirikashvili, presenting the company’s investment plan for the next 5 years. According to the Ministry, HeidelbergCement has invested in Georgia more than 200 million EUR since 2006. The company owns 3 cement and 8 concrete factories, as well as cement terminal in Supsa.

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eorgian Partnership Fund declared that Hungarian Export-Import Bank is ready to allot 350 million EUR to companies, which make investments in Georgia. The Fund said the mentioned after today’s meeting between executive director of the Fund Irakli Kovzanadze and Hungarian state secretary for foreign affairs and international economic cooperation Peter Sziijarto. As Kovzanadze said, the sides discussed pos-

sibility of Hungarian participation in development of Georgian Railway’s infrastructure and in Georgian State Electrosystem. Besides, it was decided to hold in December Georgian-Hungarian business-forum, which will be organized in Tbilisi by Partnership Fund and Georgia’s National Investment Agency. To note, according to Sakstat’s preliminary data of 6 months, Hungarian investments made up negative $34,800. Investments from this country in 2012 were also negative ($32,500).

RUSSIA’S BIGGEST AIRLINE “AEROFLOT “ ENTERS THE GEORGIAN MARKET

t became exclusively known to commersant.ge that the Russian state airline “Aeroflot” will come into the Georgian market. According to the information we hold, the talks on the issue are being held at the state level. However, this information was not confirmed by the Civil Aviation Agency. According to the Head of the Agency Guram Jalaghonia, the issue was not discussed yet. “Aeroflot” is Russia’s largest company which headquarters are located in Moscow. Its story begins on March 17, 1923 when a jointstock company “Dobroliot” which became the basis for the establishment of “Aeroflot” was founded. Therefore, March 17, 1923 is considered as the day of the establishment of “Aeroflot”. In the 2000 years “Aeroflot” invited a British

consultants for the purpose of rebranding in order to change the image. A work in this direction has been going on for almost 3 years. In 2003 the company changed a color of the aircraft and the crew’s uniform as well as launched a large-scale advertising campaign. In the 2000 years “Aeroflot” has started to modernize its fleet in accordance with western standards. As of December 31, 2012, 51.17% of the company shares are owned by the state while 42.4% are owned by legal entities, 6.79% - are disposed by the individuals. A part of shares are in free circulation. Commeresant.ge

BUSINESS & ECONOMY October 07, 2013 #24

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43% OF GREENBERG, QUINLAN, EPRC: TAXES, ENTERED ROSNER RESEARCH RESPONDENTS CONSOLIDATED BUDGET, SUPPORT GEORGIAN DREAM INCREASED PER CAPITA THIS YEAR conomic Policy Research Center EPRC said. CANDIDATE IN THE ELECTIONS (EPRC) reported that tax revenues Remaining receipts are distributed as follows:

ccording to research of Greenberg, Quinlan, Rosner Research, by September 21 43% of the respondents would vote for George Margvelashvili. American organization made a research on September 15-25, with demand of President administration. Organization BCG carried out research field works. On the question - if elections were held today, to which presidential candidate would you vote?

43% voted for George Margvelashvili, 22% - David Bakradze, 8% - Nino Burjanadze, 5% - Shalva Natelashvili. George Targamadze and Koba Davitashvili got 1-1%; 17% has not decides. The research is conducted throughout country by the direct interviewing of 1 204 individuals. Random selection method among adults has been used. Error in the case of total selection is +/- 2.8%-; in the case of supposed voters in the elections - +/- 3.7%.

TURKISH ENTREPRENEUR PLANS OPENING OF TEXTILE FACTORY IN GEORGIA

pening of another textile factory is planed in Georgia. International Investors Association of Georgia informs that by the invitation of the association owner of Turkish company Gunkar Textile arrived to Georgia. He already conducted meeting with secretary general of the association Osman Chalishqan,

who informed the investor about Georgian investment environment. Owner of Gunkar Textile expressed wish to open textile enterprise in Georgia, where he plans investment of $1 million. Employment of 700 persons is planned in the new factory. It’s already known that in the near future the investor will meet with government institutions and make a decision about location of the factory.

DOES AIRZENA STRIVE FOR REPLACING TBILISI AIRPORT OPERATOR TAV URBAN GEORGIA?

Airline Threatens to Suspend Flights Pointing to Unsafe Runway

EXPERTS SAY AIRZENA IS TRYING TO ATTAIN PRIVILEGED STATE ON THE MARKET

From Pg. 1

Today no antirust legislation exists in Georgia, but the Economy Ministry should prevent privileged state of Airzena.

CIVIL AVIATION AGENCY: TBILISI AIRPORT IS SAFE FOR FLIGHTS Last period media agencies have spread information on unsatisfactory condition of Tbilisi International Airport, as well as on unsafe flights and this information is false and ungrounded, the civil aviation agency says. The agency permanently examines and supervises Georgia based airports, including Tbilisi International Airport and in case of problems the agency takes adequate steps. As a result, several months ago Tbilisi Airport operator TAV Urban Georgia started intense repair works at the runway and damaged parts. Moreover, the agency has intro-

duced restrictions in certain damaged zones. “At this stage planned rehabilitation works are underway at the airdrome that are agreed with the civil aviation agency and are being carried out under the permanent monitoring of the agency specialists. Photo and video materials that were spread by television represent the footage of the working process, when the airport was closed and flights were not carried out. It is worth noting the current runway of Tbilisi airport was put into exploitation in 1995 and taking into account the growth in intensity of flights the issue of constructing a new runway has become relevant. However, according to the current condition, the runway is safe and meets international standards. Therefore, the runway does not require to be closed and no additional restrictions will be imposed due to tonnage of airplanes”, the civil aviation agency statement reads.

TURKISH ENTREPRENEUR TO OPEN TEXTILE FACTORY IN GEORGIA

urkish airline Atlasjet enters Georgian market and starts daily flights between Tbilisi and Istanbul. The company’s official website informs that the first flight to Georgia’s capital will be carried out on October 11. At the presentation, held by Turkish company in Tbilisi yesterday,

Georgia’s Minister of Economy and Sustainable Development Giorgi Kvirikashvili said that Atlasjet has well mastered relatively low-cost segment of the market, stressing that low-cost tickets mean more tourists. Atlasjet was founded in 2001. Besides local flights, the airline implements international flights to Iraq, Iran and Ukraine.

(7.24 billion lari) account this year for 81.1% of consolidated budget’s total receipts. Taxes per capita made up 1,616 lari, while 10,932 lari – per hired employee. In 2012, these showings made up 1,483 lari and 10,068 lari, respectively. Borrowings account for 9.7% (i.e. 868 million lari) of the budget’s receipts, resulting in 194 lari per capita and 1,310 lari – per hired employee,

grants – 2.3% (203 million lari, respective volume per capita – 45 lari, per hired employee – 306 lari), revenues from privatization – 1.5% (133 million lari, 30 lari and 201 lari, respectively), repaid previously allocated loans – 0.4% (36 million lari, 8 lari and 54 lari, respectively). Total receipts of this year’s consolidated budget make up 1,992 lari per capita, while 13,477 lari – per hired employee. Last year, these showings made up respectively 1,918 lari and 13,018 lari.

MASTER FOREX OPENED ITS REPRESENTATIVE OFFICE IN GEORGIA

aster Forex opened its representative office in Georgia (Forex Group – MFX Group Georgia), which became their first one in the region. Managing director of the company Margarita Zhiznevskaya declared that there are many potential projects in Georgia. The company is going to operate primarily in 4 areas: foreign exchange

markets, informational technologies, construction and education. Opening of office in Georgia coincided with 7th anniversary of Master Forex. In this regard, the company offers customers free trainigs, new raffles, personal consultation, doubled initial amount, etc. Master Forex has experience of working in 30 countries, including CIS.

BILLIONAIRE MASHKEVICH TO INVEST IN GEORGIA’S HEALTHCARE SECTOR

illionaire Alexander Mashkevich, who is one of the investors of Coinvestment Fund, plans to invest in the healthcare sector of Georgia. Prime Minister Bidzina ivanishvili stated about it during his meeting with media representatives on Wednesday. Ivanishvili asked for reasoned criticism from Media and recalled meeting with politics experts and comment of expert Vazha Beridze, who stated that Mashkevich would not invest in Georgia. “I’ve spent a lot of time with Mashkevich and before I responded to Vazha Beridze, I’d brought him here 2 days before and we discussed a specific project, the most interesting in the healthcare, which will be useful for the people. It will appear a little alter... We are making a right fundament; how do you want to plant a little sapling and get tons of harvest on the very first day. Economy is like that”, - Ivanishvili stated. It’s noteworthy that several years ago Bidzina Ivanishvili stated that one of his friends, a foreign businessman plans to invest in Georgia’s pharmaceutical business and this project will cause considerable price decline on Georgian pharmaceutical market. Alexander Mashkevich is a citizen of Israel. His business is the company Eurasian National Resources Corporation. Billionaire is occupied with

cargo transportation business, possesses metal obtaining business and mechanical engineering factory in Kazakhstan. According to Forbes evaluation, his property equaled to $2,8 billion in 2012 and with these actives he rated 7th in Israel and 418th in the world richest people. Reminding that Co-investment Fund was created by initiative of Prime Minister and Ivanishvili stated that his share in the 6-billion fund would be $1 billion. BPI.ge

ANOTHER CLOTHING BRAND “MANGO” MAY LEAVE THE GEORGIAN MARKET

he reason is bank debt and financial problems. It became known to commersant.ge that clothing brandstores “Mango” and “Mexx” located in Tbilisi are sequestered and might leave the Georgian market. “Commersant” radio reports that tax audit has been carrying out in the brands’ Georgian representation for a week and this time both of the shops facefinancial problems. In particular, according to commersant.ge’s reliable source, the company has taken a loan from the bankand cannot cover the debt. “Commersant” is waiting for clarifications on this topic from the Revenue Department. Recall that women and men’s clothing brand store “Mexx’’ has left the Georgian market. The official representation of “Mexx” in Georgia

‘’Novo Group’’ didn’t explains the reasons for the company’s closure but noted that “Mango’’ brand faced no danger of closing. A few weeks ago another brand store “1,2,3,’’ closed. “1,2,3,’’ is in ‘’Adress Group” that includes 7brands and 8 stores in the Georgian market.

INTERVIEW October 07, 2013 #24

caucasian business week

FORBES: GEORGIA’S POLITICS SHOOTS ITS ECONOMY IN THE FOOT

eorgian president Mikheil Saakashvili delivered a passionate antiKremlin speech at the UN General Assembly in New York last week. He warned that it’s not in Russia’s interest to have strong, peaceful neighbors. As their independence grows, so shrinks the chance they’ll join Putin’s Eurasian Union. The speech is Saakashvili’s farewell to his twoterm presidency, which ends in October. It was also his address to Georgia’s current government, headed by Prime Minister Bidzina Ivanishvili, Georgia’s richest man (net worth $5.3 bln). Ivanishvili, his fortune made mostly in banking and trading metals in Russia, is known for his diplomatic attitude towards Georgia’s sometimes overpowering Slavic neighbor. The end of Saakashvili’s presidential term coincides with Georgia entering a phase of political uncertainty and economic instability—a sharp decline after all the progress observed over the past decade. Since Saakashvili became president following the peaceful Rose Revolution in 2003, Georgia has improved its infrastructure, modernized cities and become a relatively safe and comfortable place to live. Rich in tourist attractions — the Caucus Mountains, the Black Sea, skiing, winery tours, ancient churches – Georgia now attracts travelers from all over the world. Saakashvilli’s government became famous for its success in fighting lower-level corruption and bureaucracy. But the high economic hopes the president had for his country are taking a pessimistic turn. This year the Georgian economy has slowed down as foreign capital dried up—after Ivanishvili’s coalition, Georgian Dream, won majority in parliament a year ago. Frustration and decline have been creeping into all industries, from construction to banking to retail. The forecast for foreign direct investment has recently been cut to about $1 billion in 2013 (down from the expected $2 bln) and the GDP growth stalled to 1.4% in the second quarter of 2013, compared to 8.2% in last year. One might blame the decline on political change, but there are several reasons. “The previous regime has built some economic

growth, largely on borrowing money and foreign assistance. There was no real sustainable growth, real energy to the economy,” says Lincoln Mitchell, an expert on the Caucuses at the Harriman Institute at Columbia University in New York, who advised Ivanishvili’s Georgian Dream. Some hold the Ivanishvili’s administration accountable at least partially for what’s happening today, asserting that the new government didn’t offer a clear strategy for economic development. “Ten months is enough to at least understand which way they are going and what they are going to achieve,” said Ghia Nodia of the Caucasus Institute for Peace, Democracy and Development and a professor of politics at Illia State University in Tbilisi. Nodia briefly served as the Minister of Education and Science in Saakashvili’s government. “Frankly, I don’t see anything that provides any hope or indication that they have a sense of direction.” Mitchell suggested that the Georgian government is playing a waiting game: “Everyone in the government cares about the economy, no one really knows what to do about it.” It’s not uncommon for the political lead to wait and see how the situation develops, he added. Since Ivanishvili took office, Georgia has restored some diplomatic ties with Russia in order to reinstate the trade between the two countries (under Saakashvili there was no cooperation between the two countries. In fact, in 2008 there was a five-day border war that received close international attention and caused much distress to Georgian society.) Today’s uncertainty in Georgia hasn’t been helped by Ivanishvili’s announcement this summer that his job is done and he’s leaving office after the presidential elections in October 2013. “[Ivanishvili] is leaving in one year, when nothing is accomplished,” Nodia said. “He has the mentality of a businessman who acquired a company – its name is Georgia – and now he wants to give it to one of his lieutenants to be managed.” Ivanashvili’s leave would have a more serious impact on Georgian politics and economy than the presidential elections because in Georgia the PrimeMinister plays a bigger role than the president.

For the U.S. and Europe, Georgia was an example of successful democratic reforms in the post-Soviet territory. However, many Georgians themselves are not so sure about the democratic nature of Saakashvili’s methods as the government has appeared authoritarian and heavy-handed, arresting thousands of people in an effort to fight bribery and create transparency. Meanwhile corruption flourished in the upper echelons. Georgians were happy to transition from a struggling existence without running water and electricity before the Rose Revolution, towards an improved quality of life and a functioning economy. To less fortunate post-soviet countries – permanently stuck in economic decline, political turmoil and corrupt mentality – Georgia has become some sort of a role model. “Clearly, the previous government did a lot to improve the economy and the investment environment. Georgia is the post-soviet country that has undertaken massive improvement,” said Anders Aslund, a Swedish economist specializing in the Post-Soviet economic reforms. He said that the uncertain situation scares foreign investors. Mitchell argues that there are other reasons not to invest in Georgia: tough market and tough economy in general. Territorial disputes with Russia won’t be easily resolved by any government. And “wine and tourism are extremely competitive industries,” he adds. Today, Ivanishvili’s team sees the urgency in issues other than simply economic: they work on de-politicizing the state institutions and criticizing the previous rule. Both Saakashvili’s and Ivanishvili’s proponents agree that the previous government went overboard with enforcing power and applying a strong hand. A member of Ivanishvili’s government, Irakli Sesiashvili, Chairman of the Georgian Parliamentary Defense and Security Committee said: “For me, the parliamentary control, democracy of the security system, is one of the main goals — to strengthen the democratic control over the security system.” In the past, Sesiashvili accused Saakashvili’s party United National Movement of embezzlement and using state power for Saakashvili’s political interests.

The Prime-Minister doesn’t plan on encouraging Russian abuse. Russia continues pushing onto Georgian territory at its northern border. Complicating that issue, Ivanishvili has stated that he is interested in Georgia joining NATO, which gives the Kremlin reasons for concern. Ivanishvili’s leave may destabilize the economic situation further and deepen Georgian problems. While it’s not benefiting Georgian financials, the good news is it could benefit Georgian democracy, says Mitchell. “One of two things could happen: either everything collapses or it really moves beyond the politics of one kind of big man, charismatic leader,” Mitchell says. Without Ivanishvili, Georgian Dream – the coalition of six rather diverse political groups — could crumble and that would lead to real debates in parliament and allow more voices to be heard. “That would actually move democracy forward,” he said. Forbes

GEORGE BACHIASHVILI: CO-INVESTMENT FUND IS NOT AN INSTRUMENT TO ISSUE LOANS TO CITIZENS AND COMPANIES A Work of Co-investment Fund will be Regulated by the British Law An interview with the Co-investment Fund CEO GEORGE BACHIASHVILI

- A presentation of the Co-investment Fund was held yesterday where Prime Minister said that 6 billion USD had been mobilized in the Fund. Energy, tourism, logistics and agriculture are declared a priority. If the fund is working at this point and on what projects and in what directions? - Fund started to work one month ago. The presentation for the general public took place yesterday because the preparatory work was carried out. At the same time we were discussing projects. At this stage 9 projects are being considered. A total cost of these projects is 500 - 600 million USD. -Energy is one of the most attractive areas for foreign and local investors. Why did the Co-investment Foundation decide to focus on energy as well? - We are not going to oppress any of the fields. The energy sector has some opportunities and it-

would be inappropriate not to use them. Just as in other areas. - What is the legal basis? Prior to the presentation, the experts had questions, in particular, it was unclear on what the activity of the fund will be based. Were any new changes initiated or the Fund will work on the basis of the already existing legislation? - Co-investment fund will operate in accordance with current legislation, we should emphasize that themanagement company will operate under the laws of Georgia, or the projects will be implemented in accordance with the Georgian legislation, but the Fund is regulated by the British law. That’s because itgives investors such a level of safety that is acceptable for them. Unfortunately, there is no such law in Georgia. - Will a taxation regime comply with the Georgian legislation? Doesn’t it provide any benefits? - No relief. Everything will be in accordance with the legislation, including the taxation. - Co-participation of the fund is defined at 25 75 percent, will the distribution of the proceeds from the project be carried out according to the same percentage figure ? Can a company redeem contribution in some period of time and fully return this project? - The main purpose of the Fund is to make an investment and come out of it in 7-9 years. The first possibility is to sell these shares to the partner. Consequently, they will be able to look for another strategic financial partner. It may be disposed on the stock market in Georgia or outside, and so on.

- What documents must a company or individual submit in order the foundation to begin work on the project ? - At the first stage the business plan is sufficient, but later different documents will be required depending on the area. It’s difficult to list all the documents. - Will the Co-investment Fund focus on longterm projects or short-term project will be financed as well? - It depends on what you mean by a short-term project. For us a project that is meant for more than 1 year may be financed. - Can a businessman come with a particular idea without a detailed business plan, will you consult him? - It depends on what level. We need a formulated business idea. - You mentioned nine projects. Are they mostly Georgian companies and businessmen or foreign investors are also interested? Are there well-known businessmen among them? - There are several Georgian companies in hotel field. However, I cannot reveal them. There are also foreign investments, including hydropower and milk production, which we plan to build in western Georgia. - When should we expect the first results of the Fund’s work? When will the foundationcontribute to the economic growth? - We plan to get the first results this year. I cannot mention a specific date, but some projects will start this year and next year we will actively participate in the growth of the country’s economy.

- Anaklia port was named among the fund-initiated projects yesterday. If any other projects of strategic importance will be considered? - I want to make some small clarification on Anaklia port project, the Partnership Fund has already begunthe implementation of Anaklia port project. The Fund is considered as one of the coinvestors in order to create a capital along with other investors which will finance the port. At this stage we are not theproject’s implementers. - As for the projects? - I canot tell at this point. - If there will be open meetings or press conferences where a report will be delivered to journalists? - All the projects we start will be placed on our web - site and will be available for everyone. In addition,before the start of each project a certain event will be held to familiarize the public with what we do.From time to time news conferences may be held, where the media and the public representatives will be able to ask questions. - If you had conversations with representatives of the banks, and if they are ready for cooperation, how open is the relationship between you and the banks? - We have a very good relationship with all major banks and I personally know the banks’ leadership quite well. All have a positive attitude towards the Fund. There were some questions, but when weintroduced our strategy, it became clear to everyone that the Fund is not a tool that gives loans topeople and companies. Commeresant.ge

BUSINESS October 07, 2013 #24

caucasian business week

MARNEULI FOOD PLANT – SAMPLE OF GEORGIAN-SWISS SUCCESSFUL PARTNERSHIP

SKODA HAS OPENED ITS NEW CENTER IN TBILISI

zech Auto manufacturing brand – Skoda has opened its new center in Aghmashenebeli alley 15km. The opening ceremony was attended by representatives of state agencies, business sector, diplomatic corps and media. Also, the biggest auto holding Georgia Iberia Business Group’s president Tariel Khechikashvili and the ambassador of Czech H.E. Ivan Jestřáb, Skoda’s new model Rapid which has been manufactured since 2013, was presented at the opening ceremony. Skoda Rapid is more economical compared to other models, its more comfortable and distinguished with elegant design. As the official representative of the Skoda – Iberia Business Group management states, interest in the brand has significantly increased in Georgia recently.” Increased demand for Skoda vehicles is rte reason of changing the location of Skoda centre and enlarging the store. Skoda has

proved that it is possible to buy a new quality car at a very low price“- said Iberia Business Group’s executive director David GogoriSvili. Skoda’s upgraded model – Superb was also presented at the opening ceremony. This model is equipted with TSI motor and is distinguished with power and is economical. Invited guests took part in the lottery conducted by the IBG company. The winner won the traveling ticket to Prague for two persons. Customers have possibility to purchase cars presented at the Skoda Center, moreover they can order the desired vehicle. “We consider that Skoda Center will propose more comfort to customers. There is an auto service on the territory where spare parts for cars can be purchased” – said director of Skoda David Jokhadze. Iberia Business Group is official representative of Skoda in Georgia. Today Skoda is one of the most popular brand in Georgia’s corporate segment.

CO-INVESTMENT FUND TO FINANCE CONSTRUCTION OF ANAKLIA PORT

eorgia’s Prime Minister Bidzina Ivanishvili reported that the government’s economic group was considering financing allocation from Co-Investment Fund for one of three ports’ construction. Finally, it was decided to finance construction of Anaklia port, Ivanishvili said.

Prime Minister declared that Anaklia port will have annual capacity of about 110 million t. Lazika port, which financing was also discussed, has several times lower capacity, Ivanishvili noted. The Premier reported that currently, works regarding establishment of consortium are underway. “This may become the biggest project in Georgia very soon”, he said.

ROCHE WILL COMPLETE PRODUCTION OF HEPATITIS C MEDICINE IN GMP FACTORY

ooperation agreement was signed between Swiss company F.Hoffmann- La Roche and Georgian GMP. GMP informs that on Swiss-Georgian forum held on October 3, officially was announce information about this partnership. Active ingredient of Peginterferon will have final stage of procession in Georgian pharmaceutical enterprise GPC and finally formed as a local product. Swiss side selected Georgian GMP, which was preceded by numerous strict audits by them. Hepatitis C is one of the important problems of the medicine. According to data of the World Health Organization, about 170 million people

are infected with Hepatitis C virus. Hepatitis C prevalence in Georgia is about 6,7% of the adult population. Combination of Ribavirin and Interferon is considered as international standard of hepatitis C management. Treatment of hepatitis C is related to high expenditures and has not been available for many persons till now. In order to increase medicine availability, removal of final stage of the Swiss peginterferon in Georgia, which will considerably reduce treatment value. “Partnership of Georgian pharmaceutical industry flagship GMP, oriented on the quality with Swiss producers is a guarantee that in Georgia modern, high-technology medicines are produced. It’s reflected on the improvement of Georgian patients,” - GMP stated.

Nearly 50 Businessmen Visit the Plant

n October 4 nearly 50 Swiss and Georgian businessmen visited Marneuli Food Plant. The visit was organized by the Swiss Embassy to Georgia as part of the Georgia-Switzerland Business Forum. The presentation of Margebeli Holding was held during the visit and the guests also had a tour at Marneuli Food Plant. The Georgian-Swiss Business Forum was over on October 4. The forum was a good chance for Swiss companies and potential investors for receiving detailed information on Georgia’s economic climate and investment opportunities. Interested bodies met with representatives of Swiss companies, the Georgian government members, the private sector figures during the two-day forum. The tour to enterprises of Margebeli Holding represented one of the similar visits. Guenther Baechler, the Swiss ambassador to Georgia: “We have visited this place as part of the Georgia-Switzerland Business Forum. Plenty of potential investors have arrived in Georgia and we are discussing various issues in the business sector with them. Today we have visited Marneuli Food Plant that was founded through Georgian-Swiss partnership. This plant is a wonderful sample for investors to see what will be the benefit from making investments in Georgia. We are proud of Margebeli Holding”. Mikheil Simonishvili, a Margebeli Holding head: “Today we held the first Georgia-Switzerland Business Forum in Georgia. About 50 Swiss investors and businessmen visited the plant. They saw Marneuli Food Plant that is an important part of the Georgian-Swiss Margebeli Holding and represents a sample of the successful partnership. We have started discussing various projects and we will implement them jointly soon”.

Irina Gaprindashvili, a Marneuli Food Plant director: “We had very interesting tour. These people are interested in implementing joint projects. They have seen the production process. At this stage it is active season for cucumber production. They have received information on the history of our holding, discussed activities of all companies that are united in this holding. The visit was successful. We will definitely cooperate with them, because they receive information on investments opportunities in our holding”. Margebeli Holding was founded by Georgian and Swiss partnership in 1997. The Holding unites Tskali Margebeli, a manufacturer of Nabeghlavi Mineral water, as well as Marneuli Food Plant, Engadi distribution company, Marneuli Agro, one of the innovative enterprises in the agriculture sector and Farm Margebeli in Teleti. In 2007 Margebeli Holding received a preferential loan of 0.5 million Swiss Francs from the Start-up fund of the State Secretariate of Economic Affairs of Switzerland (SECO). Marneuli was quite risky and innovative venture in due time. Consequently, Marneuli Food Plant represents a sample of successful project of Georgian-Swiss investments and Nabeghlavi.

“ARGO” COMPLEX IN BATUMI FAILED TO INTEREST COMPANIES

multifunctional complex “Argo’’ located in Batumi has failed to interest companies. The complex opened in August and restaurants, cafes, an amphitheater and exhibition halls should be placed there. “Argo” Director General states “Commersant” that the complex will be able to work at full capacity next year. However, Giorgi Kavzharadze notes that an agreement has not been achieved with any company regarding entering into the complex. According to him, this time only a cableway connecting with the complex continues to work. In Kavzharadze’s words, the cableway carried two thousand passengers per

day , however, after the end of the tourist season the number of passengers has halved. “Argo” complex is four-storey and has a shape of ship while an investor is British-based Georgian businessman.

INTERVIEW

“ACTIVE TRANSPARENCY IS IMPORTANT FOR GEORGIA TO SHOW INVESTORS A FAIR ENVIRONMENT FOR DOING BUSINESS” An interview with the Dean of the Stockholm School of Economics ANDER LILJENBERG

- What economic model is the most effective for a little country with such geopolitical location as Georgia? - Transparency in everything is very important. Not just transparency, but an active transparency to demonstrate fairness to investors - fairness of the terms and conditions of doing business. This is the most important. From regional point of view for Georgia, there is also a geopolitical

October 07, 2013 #24

caucasian business week

interest, but so far transparency is the most important. And this is so in all areas of society, from government and institutions to the running of small businesses - The new government proposed a new, as they say, natural and European way of economic development. It envisages the economic and trade relations with Russia. How do you assess the prospects of economic relations with Russia for Georgia? - Sweden is a small country too, they are also actively collaborating with Russia in terms of investments and other issues. Russia is often uncertain. We cannot move it geopolitically elsewhere, so diversification and balance are needed generally in relations ad in particular, in trade. Russia is such as it is, it’s a fact. I am in favor of balanced and diversified relations with Russia. And properly to make good use of all opportunities that reside in Russia. I arrived in Istanbul from Brussels and then from Istanbul to Georgia. the Brussels airport is not as crowded with people as Istanbul. Istanbul airport is full. That’s mirroring economic, development! You feel it! - Where do Russian students whom you teach want to develop their career - in the West or in Russia ? What are their values ? - The Russians like most other nationalities are very rooted in their land. This is the third higher education for the Russian students who are completing the Stockholm School of Economics Russia Executive MBA program. . They are not 18 years old, they reached the age of 35 and more and have a successful career. Russian program

participants are very often already globally active but with a kind of anchor in Russia and the majority of them, although acting globally, surely imagine their future activities with Russia as the main base. - We have a billionaire Prime Minister, do you think this is an advantage for our country when an experienced business person leads the government? - I cannot comment on this issue, because I do not know enough about Georgian politics but there are obviously in theory both pros and cons with successful business leaders in politics. I definitively know of one very bad example which is Italy’s Berlusconi who is putting his country in jeopardy. - After the new government came to power, a greater emphasis was placed on agriculture. How justified is putting a strong emphasis on agriculture in the long run for a country like Georgia? Some believe that the emphasis should be made on transit, or these two fields do not interfere with each other? - I don’t see that you have to choose either or – I guess these two areas complement each other in a nice way. Own agricultural production is important for any country and local ecological production is nowadays becoming very popular in Europe. - What are your plans in the framework of your visit and how can you assess a level of business education in Georgia? - I met with the rector of the State University Vladimir Papava and Director of Free University WHAT IS HIS NAME?. At the meeting we spoke not about competition but the opportunities of making a joint program as well as organization of courses once or twice a year. In the future this could turn into something very interesting for Stockholm School of Economics I also met with “TBC Bank” and “Bank of Georgia” leadership, ie those who are engaged in “live business”. I had about eight meetings. Impressions of the meeting exceeded my expectations. I noticed the optimism and the bright ideas of the future and I was really inspired by that. Commeresant.ge

TBC BANK COMMENTS OVER A CBW ARTICLE

ublished information that suggests that TBC Bank continues to “purchase” various Georgian companies is a misinterpretation of the truth. The reality pertaining to the Berta Company is as follows: It has been one year already since Berta has ceased functioning and is unable to serve its liabilities against TBC Bank. For this reason, TBC Bank was urged to appeal to the court. Under the decision of the court, an auction was held and part of the company’s property was presented at the auction. However, no buyer was interested in purchasing the property at the auction. Therefore, TBC Bank had to purchase this property in order to at least partially cover the liabilities. Regarding the insinuations that TBC Bank also attempted to buy the Goodwill Company, the company, with the purpose of receiving a loan, systematically provided the bank with inaccurate information about the company’s financial status. Not long ago, the company appealed to the court with the demand to be considered insolvent. False information was also disseminated regarding the Chateau Mukhrani and Gurieli companies. It was stated that the bank held a liberal policy regarding these two companies, as the founders of the bank are also the shareholders of those two companies. In reality, these two companies have no liabilities against TBC Bank, hence, the rumors suggesting that TBC Bank approached them more liberally is without any factual basis.

BE AUTHENTIC; BE PROACTIVE; BE POSITIVE

ony Collis one of the UK’s most experienced reputation management and crisis communication specialists. A former journalist in newspapers, BBC TV and BBC radio, he also works as a writer, producer and director in TV drama, film, light entertainment and corporate video. He now uses his knowledge of the media, how it works, and of the key concepts of news and storytelling, to help individuals and organisations maintain and improve their reputations, in good times and bad. His consultancy covers writing, speeches, video and media interview training. Tony is one of the key note speakers at the“Marketing Brilliance Awards”, Georgia, held in Tbilisi on 25th October 2013. MARKETING BRILLIANCE AWARD OFFERS: • One-day conference featuring world-class speakers from Microsoft, BBC, London Transport Museum, Nokia, Philips and many more • Gala dinner and the Awards Ceremony Q: What would you say the critical success fac-

tors are and how difficult was your journey to success? A: One of my favourite sayings is “find your song and sing it with joy” because I think that’s the key to human happiness as well as material success. But it’s a lot harder than it sounds. First you have to know yourself, and get a realistic understanding of what you are good at and what you are not so good at. Only then can you decide where you want to go and what you want to achieve. It took me many years to go through that process personally and realise that communication, particularly on behalf of people and causes that deserve a wider hearing, was where both my heart and my talents lay. Q: How important is reputation management for companies and what damage it can do? A: Reputation management can be a matter of life and death for an organisation. A good reputation can take years to build, and can be destroyed in seconds, by a foolish mistake, one person’s bad behaviour, or even matters beyond your control. In my presentation I will be telling some stories of individual crises, how they occurred and how

well or poorly they were handled. Q: What would be your advice on the best approach to crisis communication? A: First of all you have to be honest about what has happened. Many organisations damage their reputations still further by trying to deny the undeniable or defend the indefensible. If people have been hurt by your actions, you have to say sorry, and mean it. Then you have to show that you are taking action to fix the crisis. Those are by far the most important factors, particularly in the first stages of the crisis. After that comes the inquiry – how did this happen? How do we make sure it never happens again? And it’s important that the recommendations that result from your inquiry are actually implemented. Of course, a crisis is never full predictable. But you can prepare to some extent by having a crisis plan and a crisis team that hold regular practice sessions. Q: You are delivering the topic: ‘Reputation management and Crisis Communications’ at the marketing brilliance awards, Tbilisi. Could you please tell us what the delegates will take away from your presentation? A: My key messages are summed up in the tagline “be authentic; be proactive; be positive”. An organisation that is not authentic, that is pretending to be something other than it really is, will always suffer during a crisis, because the pretence will be discovered and you will look foolish or hypocritical. Being proactive is about being flexible and prepared for change, so that when an unexpected crisis happens, you are quick-witted enough to respond quickly and appropriately. And being positive means having the confidence to be proud of your real achievements and not be cowed by

unfair negative publicity, even in the face of a crisis. Q: Have you been to Georgia before? A: Never! I am really looking forward to it. I know it is a beautiful and mountainous country with a very independent spirit and a fascinating history and cultural heritage. As a linguist I will try to learn at least a little of the language, which is seemingly related to no other language in the world, and the very intriguing alphabet! Georgia gets very little coverage in the Western media. Maybe I can do something to change that...? Q: Have you worked with the organisers of the event before? A: Yes, I ran a workshop for them at the ‘Cutting Edge Marketing and PR’ conference in London earlier this year. BOC-Global Events Group are very professional and good to work with, and I’m sure they will create a truly amazing conference in Georgia. Tony Coll is one of the keynote speakers at the “Marketing Brilliance Awards”, Georgia, held in Tbilisi on 25th October 2013. The ceremony is organised by a British company – BOC Global Events Group - supported by most of Georgian Media: Event Marketing Partner: Marketer.ge; General Media Partner: Palitra Media, Official Radio: Palitra Radio, Radio Imedi ; Official Online TV: Palitra TV, ITV.ge; Media Partners: BPI, Caucasus Business Week, Ambebi. ge, iMarketing.ge, Presa.ge, People.ge, Droni.ge. Find Out More: www.Marketing-Brilliance. boc-uk.com

BANKING AND FINANCE October 07, 2013 #24

caucasian business week

FINANCE MINISTER DISCUSSED ECONOMICS’ LENDING WITH LARGEST BANKS

inance Minister Nodar Khaduri met today members of Georgian Banks Association and discussed situation existing in banking sector. As the Ministry reported, the meeting was attended by representatives of TBC Bank, Sakartvelos Banki (Bank of Georgia), ProCredit Bank and Liberty Bank.

As Khaduri declared after the meeting, discussion scoped banking sector’s topical issues, namely broader involving of banking sector in lending Georgian economics, and future plans. The parties agreed to hold another meeting in 2 weeks, being represented by broader range of Georgian banks, and make concrete solutions.

INTERNATIONAL INVESTMENT POSITION OF GEORGIA

et international investment position (IIP) of Georgia amounted to -16.1 billion of USD (-26.5 billion GEL) by 30th of June 2013, that is 100.9 percent of Georgian GDP. This figure is decreased by 1.4 billion USD (2.2 billion GEL) compared to the number of the second quarter of 2012 and by 176.7 million USD (291.7 million GEL) compared to the previous period data. Transactions and exchange rate changes were negative; and price changes and other changes were positive during the quarter. Total international assets amounted to 5.8 billion of USD (9.6 billion GEL) as for 30th of June 2013. 51.3 percent out of total international assets consists of reserve assets; 25.2 percent - of other investments; 22.9 percent - of direct investment abroad; and 0.6 percent of portfolio investment and financial derivatives. 16.9 percent of total international assets consists of currency and deposits; 5.9 percent - of trade credits; 2.1 percent - of loans. Reserve assets increased by 200.7 million of USD (331.4 million GEL) compared to the record of 30th of June 2012. By the end of the second quarter of 2013 Reserve assets amounted to 3.0 billion of USD (4.9 billion GEL). 201.0 million of USD (331.9 million of GEL) out of net annual changes of reserve assets was due to transactions and -4.9 millions of USD (-8.1 million of GEL) - due to exchange rate changes.

As for liabilities, by the end of same period, total liabilities amounted to 21.9 billions of USD (36.1 billion of GEL), that is 2.0 billion of USD (3.3 billion of GEL) increase on annual base. The liabilities to direct investors has increased by 13.1 percent compared to the second quarter of 2012 and amounted to 11.4 billions of USD (18.8 billion GEL). Portfolio investment liabilities grew by 5.5 percent annually, and amounted to 2.0 billions of USD (3.2 billion of GEL). Out of total portfolio investment liabilities 545.4 million USD (900.4 million of GEL) are Georgian government’s Eurobonds, 596.9 millions of USD (1.0 billion GEL) - Eurobonds of Georgian railway and 261.9 millions of USD (432.0 million of GEL) - Georgian Oil and Gas Corporation bonds. Treasury bills and treasury notes bought by nonresidents, total 96.0 millions of USD (158.6 million GEL) is included in this component. By the end of the second quarter of 2013 other investments liabilities increased by 7.5 percent compared to the same period record of preceding year, and amounted to 8.6 billion of USD (14.2 billion of GEL). Out of that amount, 6.7 billion of USD (11.0 billion GEL) is comprised by loans. Monetary authorities’ loans decreased by 55.3 percent as compared to the same period record of the previous year and amounted to 217.7 million of USD (359.3 million GEL). External liabilities of general government grew by 9.1 percent an-

nually due to increase of long-term liabilities. Liabilities of other sectors increased by 21.7 percent annually and amounted to 1.8 billion of USD (2.9 billion of GEL) by 30th of June 2013. On the contrary, banking sector loans decreased by 3.7 percent totaled to 1.3 billion USD (2.1 billion GEL). This fall was mainly conditioned by the decrease of short-term external liabilities in banking sector. Currency and deposits liabilities increased by 37.7 percent compared to the previous year record and reached 906.6 million USD (1.5 billion GEL). By the end of June 2013, other long-term liabilities of the National Bank of Georgia amounted 216.5 millions of USD (357.5 million GEL), which is the allocation of Special Drawing Rights (SDR).

GROSS EXTERNAL DEBT OF GEORGIA

ross External Debt Statistics is harmonized with BOP statistics. Besides of public sector debt, it includes private sector’s (Banking and Other sector) external debt. Gross External Debt of Georgia by June 30 of 2013 amounted to 13.4 billion of USD (22.2 billion of GEL), which composes 84.3 percent of GDP. Out of that 4.1 billion of USD (6.8 billion of GEL, 25.9 percent of GDP) is government sector debt; 435.7 million of USD (719.3 million of GEL) - National Bank’s debt; 2.5 billion of USD (4.1 billion of GEL) - Banking sector’s debt; 3.3 billion of USD (5.5 billion of GEL) - other sector’s debt and 3.0 billion of USD (5.0 billion of GEL) is intercompany lending. The Gross External Debt of Georgia denominated in foreign currency constitutes 93.7 percent of total. During the second quarter of 2013, Gross External Debt of Georgia decreased by 45.8 million of USD (75.6 million of GEL), of which, price changes led to decrease in gross external debt of

Georgia by 35.7 million of USD (59.0 million of GEL), transactions - by 30.4 million of USD (59.0 million of GEL), other changes - by 11.9 million of USD (19.8 million of GEL), while exchange rate changes led to increase by 32.2 million of USD (53.1 million of GEL). Public sector debt decreased by 101.4 million of USD (167.3 million of GEL) during the reporting period, of which, transactions resulted in decline by 111.8 million of USD (184.5 million of GEL) and price changes by 4.3 million of USD (7.0 million of GEL); while exchange rate changes increased the public sector external liabilities by 14.6 million of USD (24.2 million of GEL). External liabilities of the National Bank of Georgia decreased by 64.5 million of USD (106.5 million of GEL), of which 66.3 million of USD (109.4 million of GEL) decline was due to transactions and 1.7 million of USD (2.8 million of GEL) growth was due to exchange rate changes. External liabilities of banking sector, increased by 134.5 million of USD (221.9 million of GEL); of

which 128.2 million of USD (211.6 million of GEL) growth due to transactions and 5.1 and 1.1 million of USD (8.4 and 1.9 million of GEL) due to exchange rate and price changes respectively. During the reporting period, 69.4 percent of banking sector’s liabilities growth comes to short-term liabilities. Other sectors’ external liabilities decreased by 48.0 million of USD (79.2 million of GEL), of which 71.0 million of USD (117.1 million of GEL) was the decline in nonfinancial corporations’ external liabilities. While the liabilities of nonbank financial corporations increased by 23.0 million of USD (37.9 million of GEL). Other sectors’ liabilities decreased due to price changes by 32.6 million of USD (53.8 million of GEL) and due other changes and transactions by 12.1 million of USD (19.9 million of GEL) and by 10.4 million of USD (17.1 million of GEL) respectively, while increased by 7.1 million of USD (11.7 million of GEL) due to exchange rate changes. Intercompany lending increased by 33.6 million of USD (55.5 million of GEL) during the second quarter of 2013. Transactions led to growth by 29.8 million of USD (49.4 million of GEL) while exchange rate and other changes led to decline by 3.6 million USD and 0.2 million USD (6.0 million GEL and 0.3 million GEL) respectively. Liabilities denominated in foreign currency decreased by 25.4 million of USD (41.8 million of GEL), and amounted to 12.6 billions of USD (20.8 billion of GEL). The liabilities denominated in national currency also decreased by 20.5 million of USD (33.8 million of GEL) and totaled 851.2 million of USD (1.4 billion of GEL). Compilation of the External debt of Georgia has begun from 2007. The Gross External Debt data from December 31, 2006 are available on the Georgia’s National Bank’s website. To meet better the interests of users the National Bank of Georgia decided to compile the Gross External Debt data from the period of December 31, 1999. Namely, to expand the main table (SV1), in which the Gross External Debt is presented with breakdown by sectors of economy and debt instruments.

4 GOLD BAR CERTIFICATES AND 20 GOLD INVESTMENT ONES SOLD IN Q3

ational Bank of Georgia (NBG) reported that 4 certificates for 20-g gold bars were sold in the 3rd quarter. Price per gold bar ranged within 1,399-1,561 lari. In the previous quarter, 2 such certificates were sold, while in the 3rd quarter of 2012 – 5 ones. To remind, NBG started sales of gold bar certificates in the beginning of last year. According to NBG, growth of price (being defined by NBG daily) made up 4-16% if compared with the previous quarter (when certificates were sold in one day for 1,563 lari), while at the end of the reporting quarter, the price made up 1,501 lari. Besides, NBG said that 20 investment certificates for 1 troy ounce of gold (31.1 g) were sold in the 3rd quarter. Price per certificate made up 2,184 lari (all certificates were sold in one day). NBG started selling/buying of these investment certificates in the 3rd quarter of 2012 (only 1 certificate was sold in that quarter). In the reporting quarter, number of sold certificates has increased 2 times quarter-onquarter.

İŞBANK BATUMI BRANCH COMPLETED 8 MONTHS WITH 245 600 GEL LOSS

atumi branch of Turkish İşbank completed January-August with 245 600 GEL loss. By June 1, deposits (current accounts) equal to 721 000 GEL, loans 12,5 million GEL, Bank’s actives - 25,8 million GEL. Batumi branch of Turkish İşbank operates for a year. It’s represented by 1 branch and a service center (Batumi Airport) in Batumi; it will be opened in Tbilisi in autumn. Owner of 40,4% of the bank’s stocks is İşbank Pension Fund, 28,1% belongs to Republican People Party, other - to employees of the bank and other individuals.

LIBERTY COMPLETED 8 MONTHS WITH 11,5 MILLION GEL PROFIT

SC Liberty Bank completed January-August with 11,5 million GEL profit. Profit in the analogical period of last year equaled to 5,4 million GEL. By September 1, 2013 clients’ deposits equal to 1,052 billion GEL (01/09/12 - 703,1 million GEL), credit portfolio - 515,5 million GEL (01/09/12 - 450,3 million GEL), overall obligations - 1,09 billion GEL (01/09/12 -805,1 million GEL). Bank’s actives equal to 1,213 billion GEL, market share - 7,8% (01/09/12 -894,5 million GEL, 6,3%). Bank’s stock capital equal to 125,4 million GEL (01/09/12 -89,4 million GEL). Liberty Holding Georgia is a main stockholder of Liberty Bank (former People’s Bank) (73,1%). BNY owns 11,3%, 8,3% belongs to JSC Liberty capital. Bank’s beneficiaries are Dan Cortache Patriciu (73,1%) and Lado Gurgenidze (8,1%).

NUMBER OF BASISBANK LADY CARD PARTNERS EXCEED 40

asis Bank informs that Picasso, Seidabad and Siangan were added to the list. Credit card owners enjoy benefits in the partner network. The credit card is for ladies and has 60day preferential period (annual rate of 15%). It has been on the market since May and has exclusive discounts in the certain trade and service objects.

BANK OF GEORGIA CAPITALIZATION EXCEEDS 1 BILLION USD

apitalization of the bank of Georgia exceeded to $1 billion (643 million pounds) last week. Maximal price of the bank of Georgia Holding (BGEO LN) stocks equaled to 19,6 pounds. Session week closed with 18,88 pounds. BG Capital informs that in the reporting period minimal price was 18,6 pounds. In total 180 000 stocks were traded. Bank of Georgia stocks has been traded in the premium listing of the London Stock Exchange since February 28, 2012.

STATISTICS & FINANCE WB SURVEY: THERE ARE 4.5 NEWLYREGISTERED FIRMS PER 1,000 ABLE-BODIED PERSONS IN GEORGIA

SEPTEMBER RECORDS 1.3% ANNUALIZED DEFLATION

akstat reported that in September, annual deflation (i.e. compared with September 2012) made up 1.3%. To note deflation of 0.4% was fixed in August. Price decrease was fixed in transport (by 4.9%), healthcare group (4.5%), food and non-alcoholic beverages (1.6%), apparel and footwear (1.5%), recreation, entertainment and culture (0.6%), furniture, household goods, home care (0.3%), communications (0.1%). Prices are increased on alcoholic drinks and tobacco – by 6.6%, HoReCa group (hotels, restaurants and cafes) – 2.8%, education – 0.3%, housing, water, electricity and natural gas – 0.1%. If compared with the previous months (August), deflation in September made up 0.1%.

REAL GDP GROWTH FORECAST FOR 2014 IS 5%

raft state budget-2014 envisages real GDP growth of 5% and GDP deflator of 3.5%. Nominal GDP should amount to 31.16 billion lari. The draft points that fiscal and macroeconomic showings are planned with conservative approach. To remind, during 6 months of this year, real GDP growth made up 1.9%, while GDP deflator – 0.1%. Initial forecast for economic growth by the end of the year made up of 6%, while the government hopes now for 2.5-3%.

GOODS’ IMPORT TO GEORGIA DECREASED BY 5% IN Q2

ccording to preliminary data of Sakstat, goods’ import in the 2nd quarter made up 82.8% (i.e. 3.03 billion lari). This volume has declined year-on-year by 5%. In its turn, import of services, accounting for 17.2% of total import, amounted to 630 million lari (year-on-year growth – 1.8%). Total import of goods and services made up 3.66 billion lari (decline – 4%). On the other hand, Sakstat reported that total export of goods and services made up 2.83 billion lari (year-on-year growth – 15.3%). At that, goods’ export accounted for 57.7% (i.e. 1.63 billion lari, growth – 11.5%), while export of services – 42.3% (i.e. 1.2 billion lari, growth – 21%). Adjusted data should be published on November 15.

ENTERPRISES’ TURNOVER INCREASED LAST YEAR BY 14.5%, OUTPUT – BY 20%

PROCEEDS OF STATE BUDGET2014 ARE DEFINED AS 8.66B LARI, PAYMENTS – 9B LARI

ccording to the draft budget-2014, proceeds of the state budget are defined as 8.66 billion lari, while payments – as 9 billion lari. Budgetary revenues are defined as 7.4 billion lari, including tax revenues of 6.95 billion lari (30% of GDP). Projected volume of grants makes up 129.8 million lari, including budgetary grants of 19.8 million lari and investment grants (attached to expenditure) of 110 million lari. Volume of other revenues is defined as 300 million lari. Revenues from decrease of non-financial assets (i.e. from privatization) are defined as 80 million lari, while revenues from decrease of financial assets (being totally represented by return of loans, issued from state budget in the previous years)

– 70 million lari. Revenues from liabilities’ growth are defined as 1.13 billion lari. As for payments of the state budget, their volume is defined as 9 billion lari, including budgetary funds of 8.27 billion lari, grants of 110 million lari and loans of 630 million lari. Free balance of 347.2 million lari, existing on united account of State Treasury, will be used for budget deficit’s payment. Assignments of 667.7 million lari are envisaged for growth of non-financial assets, while of 274.8 million lari – for growth of financial ones. Decrease of liabilities is defined as 584.3 million lari, of which 508.2 million lari will be directed for payment of foreign liabilities, while 76.1 million lari – for payment of domestic liabilities.

NEGATIVE BALANCE OF FOREIGN PAYMENTS DECLINED BY 61.4% Y-O-Y

ational Bank of Georgia (NBG) reported that the country’s negative balance of foreign payments made up $225.1 million in the 2nd quarter. If compared with the same period of 2012, decline made up 61.4%. Export of goods increased by $106.9 million year-on-year, while import declined by $127.3 million. As a result, negative balance of trade with goods declined by 21.6%, making up $848.7 million in the reporting period. Balance of trade with service was positive as usual – $344 million. At that, export amounted to $725.7 million (year-on-year growth – 21.6%), while import – to 381.7 million (growth – 6.6%). NBG noted that current transfers remained big-

gest positive part of the total balance, amounting to $372.8 million (year-on-year growth – 20.3%). At that, received transfers amounted to $397.7 million, while sent ones – to $24.9 million. In the reporting quarter, net transfers of public sector decreased by 30.6%, if compared with the same period of 2012, while transfers of other sectors increased by 25.2%. Net inflow of capital transfers amounted to $39.3 million. Foreign direct investments amounted to $232.6 million (year-on-year growth – 6.9%). Out of total sum, investments in share capital accounted for 57.7%, reinvestment – for 33.2%. Balance of portfolio investments made up negative $91.1 million. Assets of portfolio investments increased by $1 million, while liabilities declined by $90.1 million.

STATE COMPANIES PURCHSE 16% OF GRAPES

akstat reported today that the total turnover of enterprises is increased last year by 14.5%, amounting to 42.05 billion lari (officially declared data). Total output increased by 20%, up to 23.1 billion lari. Out of total turnover, large business accounted for 83%, small business – for 9.3%, while medium business – for 7.7%. The same way, While large enterprises accounted for 82.3% of total output, small companies – for 10.2%, while middle-sized ones – for 7.5%. Investments in fixed assets totaled to 3.25 billion lari, increasing by 23% year-on-year. At that, large business accounted for 81.8% of total volume, medium – for 11.3%, while small business – for 6.9%. Number of employed persons totaled to 534,397, increasing by 6.2% in a year.

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caucasian business week

griculture Ministry reported that state companies have purchased and processed 12,480 t of grapes (i.e. 15.6% of total harvested volume of 80,098 t). The Ministry pointed that last year, share of the state companies in total processed grapes (52,000

t) made up 65% (i.e. 33,800 t). Out of 81 companies, involved in grape purchases this year, 79 are private companies, while 2 are state-owned ones – LLC Gruzvinpromi and LLC Akura. The Ministry pointed that due to cheap credits to private sector and subsidized prices, demand on Saperavi (red variety) was very high, conditioning total consumption of Saperavi harvest by private companies. In their turn, the state has to purchase only surplus harvest of white varieties. In particular, Gruzvinpromi purchased only 190 t of damaged Saperavi grape, while remaining purchases accounted for white grapes, the Ministry noted. Besides, Agriculture Ministry pointed that due to less interest of private sector towards white grapes of Signagi and Lagodekhi, the harvest in these districts has to be purchased by the state enterprises.

ccording to survey, conducted by the World Bank regarding entrepreneurship in Georgia, there are 4.5 newly-registered firms per 1,000 able-bodied persons (15-64) in the country. This rate is significantly higher than ones of Azerbaijan, Armenia, Eastern Europe and Central Asia, the report pointed. At the same time, Georgia’s rate of business ownership (4%) lags behind the average rate of the mentioned region (6%). To note, the report is based on data of 2010. Authors of the report consider that contradiction between high rate of business engagement and low rate of business ownership is result of consideration of primary data of firms, operating in different sectors. Share of persons, who are not entrepreneurs, but have a desire to be the such, makes up 12% of labor force in Georgia and 10% of paid workers, which also lags behind the showing of Eastern Europe and Central Asia. Approximately one-fifth of labor force and paid workers tried to start a business, while success was achieved by half of them.

WB SURVEY: OVER 90% OF SURVEYED GEORGIAN ENTREPRENEURS HAD NO R&D EXPENDITURE DURING THE LAST 5 YEARS

urvey, conducted by the World Bank regarding entrepreneurship in Georgia, involved 373 firms of the country, vast majority of which (over 90%) had declared that they did not spend money for research&development during the last 5 years. The survey says that the companies do not plan any changes in this regard for the next 2 years as well. The main sources of knowledge on business opportunities were named customers and monitoring of sales on domestic market. At that, universities, R&D firms, technical institutes were named least important source of knowledge, being explained by the survey’s authors as consequence of lack of innovative activity in Georgian enterprises. Only 7% of surveyed said that they have introduced new or improved product or service during last 3 years. None of these products and serviced was globally innovative. Average number of employees in the surveyed companies made up 12, while the largest surveyed enterprise had 200 employees. 62% of companies had only one founder, while women accounted for approximately 20% of the founders (the survey is based on data of 2010). Entrepreneurs named two main reasons for start of businesses: possibility to earn more money and desire to see themselves as bosses. More than half of surveyed said that important role was played by losing the job. The respondents named 3 main hampering factors for starting business – risk/uncertainty of the market, technological risk/uncertainty and difficulty to hire highly skilled staff. Constantly changing tax legislation and high rates of taxation were named as important obstacles as well.

PUBLICITY October 07, 2013 #24

caucasian business week

10 IFC READY TO APPROVE $300 MILLION FINANCING FOR CONSTRUCTION OF SOCAR REFINERY IN TURKEY

he International Finance Corporation (IFC) is ready to provide substantial funding for the construction of the State Oil Company of Azerbaijan’s (SOCAR) Aegean refinery in the Turkish port of Aliaga. The IFC informs that now it is awaiting the approval of the loan for the construction of this refinery. “Investment Review RDS-IR has been already presented that allows planning the approval of financing,” the Corporation said. At the same time, the IFC does not disclose the exact date of the approval, being apparently mindful of the fact that its optimistic outlook on the funding approval on 12 August did not come to fruition. With a total construction cost of $5.3 bn, the IFC is ready to give a loan of $150 million and organize commercial banks’ financing for another $150 million. With the organization of financing of $300 million, the IFC can become a leader among project financing development agencies. Moreover, its positive decision can improve the situation with the organization of commercial financing of the project. SOCAR’s hopes to raise about $3-4 bn from Turkish banks did not prove true: only 5 out of 15 supposedly interested Turkish banks declared their readiness to mobilize for financing for the oil refinery Star $2.5 bn in total. The rest refused because of the events around Istanbul square Gezi and the response of the U.S. Federal Reserve to them. As a result, SOCAR is now seeking to cover the deficit of commercial financing at the expense of loans of state banks. Refinery’s capacity will reach 214,000 barrels of oil per day. It is expected that it will be able to replace import of diesel by Turkey (45% of plant’s capacity) and air fuel (15%). Another 15-20% of the production will be designed for Petkim Holding. STAR is now 81.5% owned by SOCAR Turkey Enerji A.S. (100% subsidiary of State Oil Company of Azerbaijan Republic (SOCAR) and 18.5% owned by TURCAS Rafineri Yatirimlari A.S (99.6% subsidiary of Turcas Petrol A.S. (Turcas). On 22 June in Baku the Board of Directors of Black Sea Trade and Development Bank approved allocation of a $58 million loan for this project which may be granted for a period of 18 years. The BSTDB became the first international financial institution, which opened financing for this project. The European Bank for Reconstruction and Development (EBRD), which the first announced the financing of the project, has postponed recently the consideration of the matter of a $150 million loan for it for 29 October 2013.

MOODY’S: AZERBAIJAN NOT TO AVOID OIL DEPENDENCE IN MEDIUM-TERM PROSPECT

n a Global Credit Research report published on 30 September Moody’s Investors Service assessed Azerbaijan’s creditworthiness. The rating agency says that Azerbaijan’s Baa3 foreign and local-currency bond ratings with a stable outlook reflects the government’s low government debt; its sustained fiscal surpluses over the past couple of years; and strong net creditor position due to sizable foreign assets that it has accumulated. “These strengths will help to shield the economy from internal and external shocks,” Moody’s thinks. The Agency points out that hydrocarbonrich Azerbaijan has been one of the fastest growing economies over the past decade because of the strong expansion in its oil and gas extraction industry, and surging oil and gas prices. Moreover, the rise in oil-related revenue has enabled the government to generate fiscal surpluses and to significantly invest in the country’s infrastructure, thereby transmitting the positive effects from the oil sector to the broader economy. As a result, Azerbaijan’s poverty levels have dropped significantly, limiting the likelihood of domestic political and social unrest. Despite this diversification, Moody’s notes that the overall economy continues to rely heavily on the oil sector despite (1) falling oil output (at an accumulated rate of almost 15% over the past two years); and (2) the brisk economic expansion in non-oil GDP. The rating agency believes that this is unlikely to change in the short to medium term as it offers the resources to further develop the country’s non-oil sectors and to promote self-sustaining employment in the broader economy. Also supportive of the rating is Azerbaijan’s accumulation of sizeable foreign assets over the past few years, both within the sovereign wealth fund, the State Oil Fund of the Republic of Azerbaijan (SOFAZ) and the Central Bank of Azerbaijan (CBA), the central bank. Moody’s believes that Azerbaijan’s high level of foreign assets worth $45 billion (or 66% of GDP) as of end-2012 will help to shield the economy from internal and external shocks. Moody’s says that constraints on the rating include the very low institutional strength, limited credibility and effectiveness of government policies, sustained geopolitical tensions with neighbouring Armenia over the disputed territory of Nagorno-Karabakh, as well as rising risks from strong credit growth in the context of a generally weak banking system. According to Moody’s, significant improvements in the country’s institutional strength, as indicated by improvements in the World Bank’s World Governance Indicators, and continued and sustained economic diversification could exert upward pressure on Azerbaijan’s ratings. Conversely, downward pressure could develop in the event of significant deterioration in the domestic or regional political environment that could result in severe disruptions to oil production or foreign investment in the economy. A prolonged period of fiscal deterioration would also result in downward pressure on the ratings.

AZERBAIJAN October 07, 2013 #24

caucasian business week

SOCAR TURKEY ENERJI’S REVENUES TO TOP $15 BLN

otal revenues of SOCAR Turkey Enerji, the Turkish division of the Azerbaijani state energy company SOCAR, and its subsidiaries, will exceed $15 billion. Kenan Yavuz, the head of SOCAR Turkey Enerji and a board member of Petkim Petrochemical Holding, said that taking into account the total income, SOCAR Turkey Enerji is the third company operating in this sector in Turkey after Koc and Sabancı Holding. SOCAR is one of the world’s most well-established oil companies, active in Turkey since May 30, 2008. SOCAR Turkey Enerji aims to reduce the dependence on foreign goods and exports in Turkey by providing high value-added products made inside the country. Yavuz went on to say that Azerbaijan is Turkey’s biggest investor for the volume of investments that SOCAR will make in the projects which are being implemented in Turkey, along with the Trans-Anatolian gas pipeline project (TANAP). The company’s total investments will hit $17 billion. Yavuz noted that SOCAR Turkey Enerji holds the second position in the industrial production sector in Turkey, and is ahead of Sabancı Holding. Currently, SOCAR owns the petrochemical complex Petkim Petrokimya Holding in Turkey, a container terminal, and is building an oil refinery with capacity of 10 million tons a year. The company plans to begin distribution of gas and oil products in the domestic market of the neighboring country, as well as build a new gas pipeline, TANAP, jointly with Turkish partners. Referring to the construction of a container port with the capacity of 1.5 million TEU, Yavuz said this is one of the rapidly implemented projects

in Turkey. He said that the first phase of the port’s construction will be completed in 2015 and the second phase in 2016. Some $400 million will be invested in the construction of the port. The investment process is expected to be completed in 2014. In February, Petkim and Dutch company APM Terminals -- one of the world’s leading port operators -- agreed on the management of the container port construction. Petkim will invest in the construction of the port and its infrastructure, while APM Terminals will invest in vehicles and equipment. The capacity will exceed that of the new Alsancak port in Izmir by about 50 percent during APM Terminals’ management of the port. APM Terminals will have the right to manage the port for 28 years. Yavuz said further that another project being rapidly realized is the construction of the Star refinery. The construction of the refinery, worth $5.5 billion, is to be completed in late 2017. He said that currently four refineries operate in Turkey and all of them were constructed by the state. “The difference between our refineries is that investments have been made in one point in the region,” Yavuz said. The total capacity of the Star refinery will be 10 million tons and petroleum product output will be aimed at meeting the needs of Petkim and the Turkish market. “Of this volume, 3 million tons will be directed to the consumption of Petkim and the rest will be sold to other countries,” he said. He noted that the project on the construction of a power plant also runs smootly. The Star refinery will be capable of refining such

oil grades as Azeri Light, Kirkuk and Urals. Annual production at the refinery will equal 1.6 million tons of naphtha. The facility is scheduled for commissioning in 2015. Along with naphtha, the Star refinery will produce 5.9 million tons of diesel fuel with ultralow sulphur, 500 tons of aviation fuel, 630,000 tons of petroleum coke, 240,000 tons of liquefied petroleum gas, 415,000 tons of mixed xylene, 75,000 tons of olefin liquefied petroleum gas and 145,000 tons of sulphur. Azerbaijan’s total investments in Turkey in the coming years are estimated at $21 billion. The number of companies with Azerbaijani capital in Turkey reached 1,100 by the end of 2012. According to the 2012 results, trade turnover between the two countries amounted to $2.12 billion. Turkey was the biggest foreign trade partner of Azerbaijan for the volume of imports ($1.520 billion) with a share of 15.75 percent in Azerbaijani imports.

SOCAR UKRAINE OPENS NEW FUEL STATIONS

OCAR Ukraine, which follows the interests of Azerbaijan’s state energy company SOCAR in Ukraine, commissioned two new gas-filling stations under its own brand in Ukraine`s Cherkassy and Uman regions. The company reports that customers are offered high quality gasoline and diesel fuel of the Euro 4 and Euro 5 standards produced by oil refineries of Lithuania, Poland and Belarus. The variety of oil products includes A-92 and A-95 gasoline as well as Nano-95 and Nano die-

sel. Thus, the number of gas-filling stations operating under the SOCAR brand in Ukraine has risen to 35. The new fueling station will provide additional services to cars and trucks as it is located on a circular road with intensive traffic. Customers will also be able to use free online services there. Earlier, Head of SOCAR office in Ukraine Elchin Mammadov said that the company plans to bring the number of its refueling stations in this country up to 100 by late 2013. SOCAR is involved in exploring oil and gas

fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in the domestic and international markets, and supplying natural gas to industry and the public in Azerbaijan. The company owns gas stations in Azerbaijan, Switzerland, Georgia and Ukraine. It has representative offices in Georgia, Turkey, Romania, Austria, Switzerland, Kazakhstan, Great Britain, Iran, Germany and Ukraine and trading companies in Switzerland, Singapore, Vietnam, Nigeria, and other countries.

AZERBAIJANI GAS TO BE CHEAPER THAN IRANIAN OR RUSSIAN -OFFICIAL

ead of SOCAR Turkey Enerji, a board member of Petkim Petrochemical Holding Kenan Yavuz said Azerbaijani gas to be transported to Turkey will be cheaper than Iranian or Russian, Haberturk newspaper reported. According to him, the Azerbaijani state energy company SOCAR is to launch TANAP in 2018.

He went on to say that SOCAR is not in words but in reality, an investor which invests in a variety of areas, including risky ones. The TANAP project envisages transporting gas from the Azerbaijani Shah Deniz field to Europe through Turkey. The initial capacity of the pipeline is expected to reach 16 billion cubic meters per year. About six billion cubic meters of gas will

be supplied to Turkey and the rest to Europe. SOCAR partners on the Shah Deniz gas field development project presented their preliminary intentions to acquire a stake in the TANAP project. According to the preliminary data, the partners intend to distribute a 29 per cent share in TANAP as follows: Statoil and BP are to receive 12 per cent each and Total would get five per cent.

AZERBAIJANI BANKS REDUCE BY 34% A NET GROWTH IN CREDITING FOR ECONOMY

zerbaijani banks lowered a net growth of lending to the economy by 33.5% over Jan-Aug 2013, although last year the net growth of economy lending was 2.25fold. The Central Bank of Azerbaijan informs that giving of cash loans to individuals and legal entities by banks for Jan-Aug 2013 totaled AZN 1.92 bn which was by 48.84% more than in the same term of 2012 (AZN 1.29 bn). At the same time, repayment on the previously granted loans for Jan-Aug 2013 amounted to AZN 2.133 bn which was by 32.43% more against the 2012 relevant period (AZN 1.611 bn). As a result, a net increase of cash lending for individuals and legal entities for Jan-Aug 2013 to-

taled AZN 213.555 million versus AZN 321.188 million a year earlier. As of 1 September 2013 the total loan portfolio amounted to AZN 14.455 bn. Giving of cash loans to individuals and legal entities by banks in 2012 totaled AZN 2.626 bn which was by 42.69% more than in 2011 (AZN 1.8 bn). At the same time, repayment on the previously granted loans in 2012 amounted to AZN 2.02 bn which was by 28.62% more against 2011 (AZN 1.57 bn). As a result, a net increase of cash lending for individuals and legal entities last year totaled AZN 603.01 million versus AZN 267.4 million a year earlier. For comparison, as of 1 January 2013 the total loan portfolio amounted to AZN 12.7 bn against AZN 9.95 bn by 1 January 2012.

ARMENIA October 07, 2013 #24

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PRODUCTION OF SOUR CREAM AND CURD INCREASED IN ARMENIA

uring the months of January-August 2013 the volumes of the production of milk, yogurt and sour cream in the Republic of Armenia have increased by 4,6%,

14,8 and 17,9% correspondingly in comparison with the same period of the previous year. According to the data provided by the National Statistical Service of the Republic of Armenia, during the months of January-August 2013 265,1 million liters of milk, 2 thousand 444,4 tons of yogurt and 2,499 tons of sour cream were produced in Armenia. As reported by Armenpress, during the months of January-August 2013 the production volumes of curd in Armenia have increased by 23,1% and made 649,9 tons and the volumes of yogurt have grown by 10,5% making 276,5 tons in comparison with the same period of the previous year.

YEREVAN-BATUMI TRAIN WRAPS UP THIS SUMMER SEASON AS YEREVAN-TBILISI TRAIN RESUMES RUNNING

n October 1, the South Caucasus Railway’s train, called Armenia, ceased running until the next summer season, the Sounth Caucasus Railway CJSC’s press office re-

ported today. According to preliminary data, the train has carried 46,700 passengers over the 2013 season against 51,000 in 2012. The decline was due to bad weather and floods in some resorts in Georgia in late July and early August. Instead, the Yerevan-Tbilisi-Yerevan train resumed running on October 2.

PRODUCTION OF WINE AND BEER INCREASED IN ARMENIA

uring the months of January-August 2013 the volumes of the production of ethyl alcohol and wine in the Republic of Armenia have increased by 51% and 32,8% correspondingly in comparison with the same period of the previous year. According to the data provided by the National Statistical Service of the Republic of Armenia, during the months of January-August 2013 3 million 377 thousand 900 liters of ethyl alcohol and 3 million 449 thousand 600 liters of wine were produced in Armenia. The volumes of the production of

vodka during the months of January-August 2013 have decreased by 15% in comparison with the same period of the previous year and made 5 million 498 thousand 700 liters and the volumes of beer have increased by 31,3% and made 12 million 772 thousand liters. The volumes of the cognac production have increased by 3,6% making 11 million 151 thousand 200 liters. As reported by Armenpress, during the first eight months of 2013 the production volumes of champagne have increased by 86,8% and made 172,400 liters and the volumes of liquor have increased by 88,9% making 3,400 liters.

AGRICULTURAL GROSS OUTPUT WILL INCREASE BY MORE THAN 7 PERCENT IN ARMENIA: DEPUTY AGRICULTURAL MINISTER

he volume of gross agricultural output in the Republic of Armenia will reach 900 - 905 billion AMD. The same result of the previous year was 840 billion AMD (7.1 – 7.7 percent growth). Such prediction made Deputy agricultural minister of the Republic of Armenia Samvel Galstyan during press conference on September 30. In the words of deputy minister from the 448.4

thousands hectares of arable in the Republic in 2010 was used 283.6 thousands hectares, in 2011 286.7 thousands, previous year 304.2 thousand hectares and this year 318.8 thousand hectares. “For 2014 is predicted that used arable territory will increase with around 12 000 hectares and their area will reach 330.0 thousand hectares,” he informed. This year in the Republic of Armenia will be produced gross harvest of grain and legume of 535 – 537 thousands tons.

ARMENIA’S EXPORT EXCEEDS IMPORT VOLUME FOR 10 TIMES

he total export volume from the Republic of Armenia at the course of January-August of the current year was increased by 8,9 percent in comparison with the same period of the previous year and reached USD 952 million 202 thousand 800. The import volume was increased by 0.8 percents and reached USD 2 billion 704 million 252 thousand 300. As reports “Armenpress” in accordance with the data of the National Statistic Service of the Republic of Armenia during August of the current year our country exported products with total cost of USD 126,8 million and imported products with total cost of USD 339,8 million.

According to the press release, the South Caucasus Railway continues improving its services creating comfortable conditions for passengers. The company is constantly renewing its rolling stock, expanding the range of its services and increasing speed of trains. South Caucasus Railway, a subsidiary of Russian Railways, runs Armenian Railway, which was handed over to the South Caucasus Railway on February 13, 2008 for 30-year concession management with a right to prolong the management term for other 10 years. ARKA

ARMENIAN EURO BONDS PURCHASED BY WORLD INVESTORS

he Euro bonds, issued by the Republic of Armenia with the volume of $700 million, have been purchased by 152 investors from all the financial centers of the world. As reported by Armenpress, at the session of the Government of Armenia the Minister of Finance of the Republic of Armenia David Sargsyan stated that among the investors are US companies with 42%, Great Britain investors with 23%, the European investors got 17% and the rest are from different countries. The demand for the Armenia’s Euro bonds made $2,700,000,000 and even crossed the border of $3 billion. On September 19 Armenia distributed the first Euro bonds in the international capital market. The main distributors – Deutsche Bank AG,

HSBC Bank and J.P.Morgan Securities – have successfully completed the first distribution. The conditions for the issuing: volume – $700 million, repayment period – 7 years, percentage – 6%. Armenia’s rating was evaluated by Moody’s as Ba2 stable and by Fitch as BB stable.

ARMENIA EXPORTS DOLPHINS AND SEALS TO QATAR

uring the first half of 2013 two Black Sea dolphins and two Pacific Ocean dolphins and two South American seals were exported from the Republic of Armenia to Qatar. This was reported to Armenpress

by the State Revenue Committee of the Government of the Republic of Armenia. The total customs value of the abovementioned animals, exported from Armenia to Qatar, is $49,7 thousand. No other goods were exported from Armenia to Qatar during the first half of the year of 2013.

DIAMOND PRODUCTION DEVELOPS IN ARMENIA

uring the months of January-August 2013 the volumes of the production of diamonds in the Republic of Armenia have increased by 49,2% in comparison with the same period of the previous year and made 58,927 carats. The gold production volume has increased by 7,8% and reached 759,1 kilograms. According to the data provided by the National Statistical Service of the Republic of Armenia, during the first six months of 2013 138,800 carats of diamonds have been exported from Armenia, the more than a half of which (78,200 carats) goes to Belgium, as reported by Armenpress.

In 2008 the financial and economic crisis had a serious impact on the diamond production in Armenia. Though in 2011 the field not only came out from the crisis but even increased its export volumes. armenpress

CIS caucasian business week

October 07, 2013 #24

EU TELLS YANUKOVYCH TO IMPROVE BUSINESS CLIMATE

he European Union’s trade commissioner has urged Ukraine to improve its business climate and carry out other economic reforms in time for landmark agreements with the bloc in November. The former Soviet republic, which expects to sign political association and free trade agreements with the EU, has been repeatedly criticized by the West for rampant corruption among officials. This, plus heavy tax legislation and tortuous bureaucracy, has chased away foreign investors in their droves. The EU has already told Ukraine to reform its judiciary, law enforcement bodies and electoral process to improve its eligibility for the Association Agreement with the 28-member bloc. “The [EU] Council of Ministers has also mentioned the number of economic benchmarks and my message here was: ‘Look, you should not only comply with the political conditions but also with the economic conditions,’” EU commissioner Karel De Gucht said Wednesday after meeting President Viktor Yanukovych and other members of the Kiev leadership. “We will have to reach an agreement on them before Vilnius,” he added, referring to the November summit in the Lithuanian capital where the

agreements are to be signed. Yanukovych last month re-affirmed Kiev’s commitment to signing the agreements with the EU, marking a pivotal shift away from Ukraine’s former Soviet master Russia towards integration with Europe. But he has refused to say whether he would free his imprisoned political rival, former prime minister Yulia Tymoshenko, who the EU says is a victim of ‘’selective justice.’’ De Gucht said the Ukrainian government had to find a solution on several issues, including safeguards for car imports. But improving the business climate was a priority. “That is certainly more important than all of the rest is … to make your business climate better with actual action,” De Gucht said. The business climate is worsening and becoming more unpredictable, he said. Asked if he thought the business climate was improving in Ukraine, he replied: “My answer is ‘no’”. Net inflow of direct foreign investment into the economy fell by about 90 percent to $224 million in the first half of this year compared with the same period in 2012, state statistics revealed. Themoscowtimes

De Gucht, left, meeting Prime Minister Mykola Azarov in Kiev this week

GAZPROM FACES $15BLN ANTITRUST CHARGES FROM EU

U regulators are preparing to charge Russian gas export monopoly Gazprom with abusing its dominant position in Central and Eastern Europe, the EU’s antitrust chief said Thursday, in a move that could lead to a fine of up to $15 billion. The European Commission’s action against Gazprom is likely to ratchet up the tension between Europe and Russia, which has criticized European Union attempts to boost energy market competition and end its over-reliance on Russian supplies. The comments by EU Competition Commissioner Joaquin Almunia come after a year-long investigation and raids of several Gazprom units and its clients in Central and Eastern Europe. Gazprom supplies a quarter of Europe’s gas consumption needs. The EU antitrust regulator said at the time that Gazprom may have hindered the free flow of gas across the EU and imposed unfair prices on its customers by linking the price of its gas to oil prices.

The EU’s executive was preparing a charge sheet against Gazprom, known as a statement of objections, Alumnia said at a conference in Vilnius. “It would be premature to anticipate when the next steps will be taken in this investigation, but we have now moved to the phase of preparing a statement of objections,” he told an event organized by the Lithuanian Competition Authority. He said the investigation covered Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary and Bulgaria. Asked when he would charge Gazprom, Almunia said: “We never pre-commit to deadlines.” A source familiar with the matter said the commission planned to take action by the end of the year. Gazprom, which generated 4.76 trillion rubles ($148 billion) in revenues last year, could stave off a potential fine by offering concessions to settle the case. Following previous EU investigations, the company agreed to scrap a clause preventing Austrian energy group OMV and Italy’s Eni from reselling gas bought from Gazprom in other markets. Companies can be penalized up to 10 percent of their annual revenues for breaching EU antitrust rules. Lithuania, which has complained to the commission about Gazprom, is claiming almost $2 billion compensation from the company at an international arbitration in Stockholm for allegedly “unfair” gas prices. It pays more for gas than any other EU state, according to the commission. Gazprom was not immediately available for comment. Themoscowtimes

KAZAKHSTAN NEEDS TO ATTRACT $80 BLN INVESTMENT FOR GDP GROWTH - EXPERT

azakhstan needs to attract additional investments worth $80 billion over the next seven years to achieve a seven-percent growth of GDP, Director of McKinsey Global Institute Richard Dobbs believes. “To achieve GDP growth by seven percent, Kazakhstan needs to attract additional investments worth 80 percent from 2013 to 2020, which is equivalent to $10 billion a year,” Dobbs said at the second meeting of the steering committee on “Improving the funding model of the industrialization program of Kazakhstan”, which was held by National Management Holding Baiterek Joint Stock Company on October 1. According to him, these investments should come from the domestic and private sector and inflow of foreign direct investments. “The experts do not envisage a substantial increase in government involvement in the economy, because effective functioning of the private sector and small and medium-sized businesses is necessary to ensure long-term growth,” Dobbs said. According to him, the development of financial sector is an important condition for attracting investments in Kazakhstan’s economy. “Therefore, it is necessary to solve one of the major problems of the banking system of Kazakhstan - the extremely high level of non-performing loans (NPL),” he added. Baiterek National Managing Holding was es-

tablished in accordance with the decree of the Kazakh President, dated May 22, 2013. The purpose of establishing the holding is to promote the development and diversification of the economy, to attract investments, and to improve the corporate governance system in its subsidiaries. The holding’s trust management includes such state financial institutions as Development Bank of Kazakhstan, DAMU Entrepreneurship Development Fund, Investment Fund of Kazakhstan, Kazyna Capital Management, as well as Kazakhstan Mortgage Company. MINING SECTOR NEEDS $100 BLN INVESTMENT Chairman of the Board of the Baiterek National Managing Holding Kuandik Bishimbayev believes that Kazakhstan’s mining sector requires about $100 billion of investment. “The whole mining sector, including ore mining, requires about $100 billion of investment by 2020,” Bishimbayev said. According to him, Kazakhstan needs to rehabilitate the banking system to provide for such financial inflows. “However, not only the banking system, but also private investment, both domestic and foreign, and budget funds partially, can be a funding source,” Bishimbayev said. “So, the sources are clear, now it is necessary to create conditions for these investments to enter the economy.” azernews.az

BEER MARKET ON COURSE TO SHRINK BY 25-30% BY 2014

truggling with a flat economy and escalating government regulation, Russia’s beer market is on course to shrink by 25 to 30 percent from its 2008 size by the end of 2014, said Isaac Sheps, chairman the Union of Russian Brewers. By this estimate, beer production will decrease to between 7.7 billion and 8.2 billion liters by the end of the year, down from 9 billion liters in 2012 and 8.1 billion liters in the first half of 2013, Vedomosti reported Thursday. The market’s troubles can partly be ascribed to a series of government actions aimed at combatting Russia’s endemic trouble with alcoholism. In an attempt to protect citizens from excessive alcohol consumption, advertisements for alcoholic beverages have been banned from the streets, mass media and the Internet. Street stands, formerly prime locations for beer sales, are now offlimits, and stores are only allowed to sell alcohol until 11 p.m. A hardline zero tolerance policy on drinking and driving dating from 2010 was scrapped in July. Excises on beer sales have also soared, from 2.74 rubles in 2009 to 15 rubles in 2013, and are expected to rise even further. Efes, SABMiller, and AB InBev all saw sales drop

throughout Eastern Europe in the first half of 2013, with AB InBev losing 13.1 percent of its previous sales volume. Beverage giants Carlsberg and Heineken both reported revenue decreases in the region, of 1 percent and 3.8 percent respectively, despite Carlsberg having managed to increase sales volume by 3 percent. “It is very difficult to deal with the excises and the restrictions that have already been adopted,” Efes’s director of external communications said. Spokesmen from two major brands, Heineken and Ochakovo, said their companies had decided to focus on the release and promotion of premium products, which are less susceptible to market contraction. Themoscowtimes

WORLD NEWS October 07, 2013 #24

caucasian business week

INVESTOR SCRUTINY: MICROSOFT, RUSSIA’S FACEBOOK FOUNDERS UNDER FIRE

Investors in Microsoft and Vkontakte, Russia’s Facebook, are insisting the companies’ founders should step down, worried the two men will interfere with the key challenges the firms are now facing. The search for a successor to head the world’s largest software maker Microsoft has caused shareholders to re-think the role of founder and Chairman Bill Gates. Investors are worried he will have too much say in who will replace CEO Steve Ballmer. Three of the top 20 investors in Microsoft Corp have lobbied for Gates to step down as chairman, Reuters reported. Shareholders started to be disenchanted with Gates when he moved away from his daily operations role in 2008 to focus more of his attention on his charity the Bill & Miranda Gates Foundation. Gates, who founded the Redmond, Washington-based company 38 years ago, owns roughly 4.5 percent of the company, making him the largest individual shareholder, valued at $277 billion. The three ‘attackers’ collectively hold 5 percent of company stock. An undisputed leader in the tech industry, it is the first time major stakeholders have gone after Gates personally. Gates supported Ballmer in his role of CEO, even when shareholders voiced their concern over his management tactics. RUSSIA’S FACEBOOK SHAREHOLDER SCANDAL Pavel Durov, the founder and owner of ‘Russia’s Facebook’ VKontakte, is facing similar unrest with shareholders, and may be forced out of the country’s largest social network he founded. Durov has a 12 percent controlling interest in the most popular social network for Russian-speaking internet users.

In April, United Capital Partners (UCP) bought 48 percent of the company. Ilya Sherbovich, a former board member of state-owned oil giant Rosneft, is therefore the social networks’ largest stakeholder. Scherbovich is reportedly ‘unhappy’ with Durov’s role as CEO and is mulling his replacement, he wrote in a letter to UCP partner Yuri Kachuro, published by Forbes Russia. UCP suspects Durov of malpractice in his new company Messenger Telegram, believing he has violated employee contracts and intellectual property rights associated with Vkontakte. Among other complaints, Kachuro said that Durov “spends most of his time on personal projects and is absent for long periods, which de-motivates colleagues.” “The company itself and the market have different talented people who would be interested in dealing with the development of Vkontake”, the letter said, Vedomosti reported. Durov has rebuffed the accusations as ‘aggressive’ and a tactic to rile shareholders. “Your aggressiveness at the shareholder level has a negative impact on team atmosphere, and now I must make an effort not to lose employees,” Durov said in correspondence with UCP representatives, reported by Vedomosti. Just before UCP bought shares in VKontakte, Durov was accused of running over a policeman with a car in St. Petersburg, Russia. Its an accusation he vehemently denies, saying he doesn’t even drive, but uses the metro. The other major shareholder is Russia’s richest man Alisher Usmanov, who owns shares through his Mail. Ru Group Ltd. Rt.com

EUROZONE UNEMPLOYMENT STALLS AT 12 % IN AUG, HINTING RECOVERY ROUND THE CORNER

he number of jobless across the 17 nation eurozone has remained unchanged in August at 19.18 million, giving another hint that the currency bloc is beginning to stabilize its longest-ever recession. There are currently the estimated 19.18 million people out of work across the eurozone, the area’s key statistics service said on Tuesday. The unemployment rate across the 28 members of the European Union stood at 10.9 percent, which means 26.59 million of people are out of a job. The labor market data comes at a time when the area is steadily sending signals it’s emerging from the toughest recession in its history. In the second quarter, it posted

quarterly economic growth following 18 months of economic contraction. GDP added 0.3 percent between April and June. Recently Ireland and Spain said their economies were shaking off the steep slowdown, as they switched to growth in the third quarter. However, both said their recovery tracks were still boggy. Labor market data isn’t the only indicator. While overall the figures look bright, they mask a huge divergence among the member states. The bloc’s powerhouse Germany has posted 5.2 percent unemployment, but Greece and Spain have over a quarter of their potential workforce out of work. The ‘sick patients’ – southern states, like Cyprus and Greece and Spain – went deeper into trouble, as in Cyprus the unemployment rate jumped the highest – to 16.9 percent year on year. In Greece the ratio went up to 27.9 percent between June 2012 and June 2013. Youth unemployment remains the key pain for the Eurozone, standing at 23.7 percent. Across the member states, the highest was in Greece, Spain and the recently added Croatia. More than half of under 25s were out of job in August. Rt.com

BUSINESS AS USUAL: WALL STREET IGNORES GOVERNMENT SHUTDOWN

he government shutdown may instil shortterm volatility in the global financial market, but so far, the markets haven’t roared in reaction to the political deadlock in the world’s biggest economy. Follow RT’s LIVE UPDATES on the US budget crisis US lawmakers failed to agree on their spending bill for the next fiscal year, as well as raising the $16.7 trillion debt ceiling, which sent the government into a shutdown effective 12:01am EST on Monday. Investors haven’t been turned off, as they are more than certain the US will reach a decision on raising the debt ceiling before the October 17 deadline for running out of money. During early US trade, the Dow Jones Industrial Average climbed 0.10 percent, the S&P index, which has fallen seven of the past eight days, added 0.30 percent, and the Nasdaq Composite index gained 0.45 percent. “The investor climate is still positive, and the US is still driving the global economy. Stability looks solid, we don’t expect any big volatility from this political dispute,” Vladimir Potapov, head of Moscow-based VTB Capital, told RT. “We’ve seen this more than 20 times in the U.S, and remember, they still have time to resolve the default issue,” said Potapov. The US shutdown has had little effect on foreign markets. European stock markets were mostly higher on Tuesday, despite the shaky political news from America. Equities could actually stand to gain following the shutdown, according to Bloomberg, who reported the S&P 500 has on average risen 11 percent the year after a government shutdown, higher than the average gain. The data is based on the 12 shutdowns that have occurred since 1976. The S&P 500 has risen 11 percent on average in the 12 months following a government shutdown, according to data compiled by Bloomberg on the 12 instances since 1976. The S&P is already at a relative peak after it gained

3 percent when the Federal Reserve decided to continue its $85 billion-per-month bond buying program. “The economy we have today can be described as an economy of sentiment, driven mostly by market expectation. All of the crisis are hand-made today,” Igor Nikolaev, director of the strategic analysis department at PKF, told RT. The current investment sentiment is much more dependent on long-term economic factors, which are still very strong in the US. Investors have confirmed preference of developed markets to emerging markets. “TV networks all over the world will talk about it. But the people who are buying and selling dollars will not pay too much attention,” said Jim Rogers, chairman of Singapore-based Rogers Holdings, adding it’s more of a political show than economic reality. “They’re not on the brink of default because they can print as much money as they want. Yes, America’s the largest debtor-nation in the entire history of the world. Nobody’s ever been this deep in debt and it’s going higher and higher,” he said. Some analysts are more optimistic about the shutdown, hoping it will help speed along the decision to raise the debt ceiling. Alec Phillips, a Goldman Sachs economist, said on Friday that a shutdown could “ease passage of a debtlimit increase” as Republicans will lose their influence in Congress as they are largely blamed for pushing the shutdown Politicians, who are fighting to gain support in the budget battle, are telling a much more dramatic doomsday tale. “We know it would have a profound destabilizing effect on the entire economy — on the world economy — because America is the bedrock of world investment,” President Obama said on Friday in a warning to Congress, adding Congress shouldn’t ‘fool’ with the world’s reserve currency and the foundation for capital markets. Rt.com

BITCOIN NOSEDIVES 15% AFTER FBI BLOCKS TRAFFIC VIA ‘SILK ROAD’ CRIMINAL INTERNET PLATFORM

he dollar value of the virtual currency Bitcoin has slumped from about $145 per coin to $123 on Thursday, after the FBI seized the ‘Silk Road’ platform. An estimated $1.2bn in Bitcoin flowed through the internet marketplace for drugs and criminality. The digital currency Bitcoin has been struggling to gain recognition around the world, and is now seriously damaged after the Federal Bureau of Investigation (FBI) shut down the underground website ‘Silk Road’. “Silk Road has emerged as the most sophisticated and extensive criminal marketplace on the internet today,” FBI agent Christopher Tarbell said in a criminal complaint. The FBI arrested Ross William Ulbricht, the 29-yearold alleged founder of Silk Road, accusing him of conspiracy to traffic in narcotics, conspiracy to commit computer hacking, as well as money laundering via the ‘Silk Road’ marketplace. Operating since 2011, the “Silk Road” had more than

900,000 registered users who bought and sold drugs with Bitcoins, and generated sales of more than 9.5 million Bitcoin, roughly equivalent to $1.2 billion. In the raid, about $3.6 million worth of Bitcoin was seized by the US authorities, the amount ‘Silk Road’ clients used instead of cash or credit cards. Introduced in 2009, Bitcoin has expanded in popularity as a way of doing business on the Web that provides strong anonymity by means of heavy encryption. Rt.com

This is the global butterfly effect. The US Federal Reserve hints that it will start tapering its fiscal stimulus, causing currencies in India, Turkey and Brazil to weaken. This in turn hits the big companies that make large percentages of their sales in emerging markets - such as Unilever. We look at the turbulence ahead.

ANNIVERSARY 14 HAMLET GONASHVILI’S 85TH ANNIVERSARY CELEBRATED IN GEORGIA caucasian business week

he Georgian Chant Foundation organized an anniversary concert for famous Georgian chant singer Hamlet Gonashvili, who is also sometimes referred to as “the voice of Georgia.” AnzorErkomaishvili, the founder and art director of the Rustavi Ensemble, led the concert. At the age of 25, Gonashvili became a soloist with the State Ensemble of Song and Dance. In 1969, he joined the Rustavi Ensemble, where he was a soloist for 16 years and performed songs from each region of the country. During the event, folklorist, GiaBagashvili, poets TemurChalayashvili and JansulCharkviani told stories about the singer and dedicated verses to Gonashvili. Additionally, MakvalaGonashvili, the Head of the National Writers Union, presented the book entitled Silence, Hamlet Gonashvili is Singing, which consists of memorial excerpts from his colleagues and relatives. After being enchanted by the singing performances of the ensembles, the audience had the opportunity to purchaseGonashvili’s CD, which consists of two discs and monographs. The proceeds from the album sales were given to his family through a fund that was set up. The Georgian Chant Foundation plans to carry out several events throughout the year, including the reconstruction of the George Mtatsmindeli Church Chanting University and the program to employ its graduates, the release of an educational audio album, organization of concerts by

highly regarded bandmasters in various regions of the country, the release of Ivette Grimm expedition records and the presentation of the fund’s web. The Georgian Chant Foundation was established by businessman VanoChkhartishvili with the blessing of Patriarch Ilia II. The foundation concert was held on June 11, where musicians from different regions of Georgia were invited and received honorary awards and monetary prizes.

October 07, 2013 #24

TBILISI GUIDE October 07, 2013 #24

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 4 Odessa St., Tbilisi Tel: 224-48-58 E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: 75 21 11, Fax: 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 15 Gorgasali Exit, 0105 Tbilisi, Georgia Tel: +995 32 291 01 94; +995 32 291 01 95 Fax: +99 532 291 02 70 Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08; E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze Av., Tbilisi Tel: 225-20-72/73/74/76 E-mail: turkemb.tbilisi@mfa.gov.tr Address: 8, M. Abashidze str. Batumi, Georgia tel: (8-88-222) 7 47 90 Republic of Azerbaijan Embassy Kipshidze II-bl . N1., Tbilisi Tel: 225-26-39, 225-35-26/27/28 E-mail: tbilisi@mission.mfa.gov.az Address: Dumbadze str. 14, Batumi Tel: 222-7-67-00 Fax: 222-7-34-43 Republic of Armenia Embassy 4 Tetelashvili St. Tbilisi Tel: 95-94-43, 95-17-23, 95-44-08 E-mail: armemb@caucasus.net Web: www.armenianembassy.ge Consulate General, Batumi Address: Batumi, Gogebashvili str. 32, Apt. 16

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

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

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

Restaurants CHARDIN 12 Tbilisi , 12 Chardin St. , Tel: 92 32 38 CHINA TOWN Tbilisi , 44 Leselidze St. (ent. from Chardin St.) Tel: 43 93 08, 43 93 80, Fax: 43 93 08 BREAD HOUSE Tbilisi , 7 Gorgasali St. , Tel: 30 30 30 BUFETTI - ITALIAN RESTAURANT Tbilisi , 31 I. Abashidze St. , Tel: 22 49 61 DZVELI SAKHLI Tbilisi , 3 Right embankment , Tel: 92 34 97, 36 53 65, Fax: 98 27 81 IN THE SHADOW OF METEKHI Tbilisi , 29a Tsamebuli Ave. , Tel: 77 93 83, Fax: 77 93 83 PICASSO Tbilisi , 4 Miminoshvili St. , Tel: 98 90 86 SAKURA - JAPANESE RESTAURANT Tbilisi , 29 I. Abashidze St. , Tel: 29 31 08, Fax: 29 31 08 SIANGAN - CHINESE RESTAURANT Tbilisi , 41 Peking St , Tel: 37 96 88 VERA STEAK HOUSE Tbilisi , 37a Kostava St , Tel: 98 37 67 BELLE DE JOUR 29 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 VONG 31 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 BRASSERIE L’EXPRESS 14 Chardin str, Tbilisi Tel: (+995 32) 230 30 30 TWO SIDE PARTY CLUB 7 Bambis Rigi, Tbilisi Tel: (+995 32) 230 30 30 LOFT 11. I. Mosashvili str, Tbilisi Tel: (+995 32) 230 30 30 RESTAURANT NERO 21 Abano Street, Tbilisi Tel: (+995 32) 292 10 15

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

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

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

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

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

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

PUBLICITY October 07, 2013 #24

caucasian business week

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

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

Cottage Description

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

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