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BUSINESS WEEK October 21, 2013 #26

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October 21, 2013, Issue 26

caucasian1 Lithuania’s prime minister– The Russian Embargo Who will Be the Next? Georgian Government to Launch New Pensions Saving System Pg. 2

BE INFORMED, DO BUSINESS

GEORGIA

9 MONTHS’ IMPORT OF OILPRODUCTS DECREASED BY 2.8% Y-O-Y

nion of Oil-Products Importers reported that Georgia’s import of fuel (petrol and diesel) amounted in 9 months of this year to 596.7 million kg. Pg. 5

MONEY TRANSFERS INCREASED IN SEPTEMBER

n September 2013 transfers of $132 million were made to Georgia, which is 3 million more in comparison with previous month. Pg. 8

CREATING A REGIONAL ENERGY MARKET: LEARNING FROM THE NORDIC EXPERIENCE

rofessor Einar Hope from the Norwegian School of Economics (NHH) is a leading Nordic authority on energy market design and regulation. Pg. 9

LEADING GDP INDICATOR FOR GEORGIA - OCTOBER 2013

ARMENIA FITCH RATINGS AFFIRMS AZERBAIJAN’S LONG-TERM FOREIGN AND LOCAL CURRENCY IDRS

itch Ratings affirmed Azerbaijan’s longterm foreign and local currency IDRs and its senior unsecured bonds at ‘BBB-’ on October 17. Pg. 10

ARMENIA ARMENIA’S ECONOMY MORE LIBERAL THAN EU COUNTRIES’ ECONOMIES

KAZAKH SIDE TO SELL STAKE IN BTA BANK

ilk Road Financial Group issued a statement yesterday, according to which shareholders of Georgian BTA Bank “are in process of commercial negotiations”, aiming resolve existing dispute. Until 2010, shares in Georgian bank, which was founded in 2005 with participation of Kazakh BTA Bank, were distributed as follow: 49% was owned by Kazakh side and 23.987% – by Silk Road Financial Group. In 2010, Silk Road Financial Group bought out shares of two minority shareholders – ZRL Beteiligungs AG and Interfunding Facilities Limited, increasing own share up to 50.988%. The mentioned deal caused discontent of Kazakh side, however, as Silk Road Financial Group stated, the transaction was carried out “in full compliance with the law”. Georgian legislation allows shareholder to sign agreement on shares’

COCA-COLA AND CASTEL TO RENEW PRODUCTS SUPPLY TO GOODWILL

Pg. 11

CIS KYRGYZSTAN SAYS A SPECIAL FUND NEEDED TO HELP COUNTRIES WISHING TO JOIN CUSTOMS UNION

Pg. 7

A T

Michael Batiashvili: Develop Your Own Business in 72 Days Pg. 4

Irakli Kirtava: Capital Market development Concept & Law changes “Wissol Group” Discusses Projects with Co-investment Fund Pg. 7

Incorrectly constructed organizational structure can make most performing employees incapable and useless.

Pg. 7

Pg. 6

usinessman Temur Chkonia plans to render assistance to Goodwill. Chkonia told BPI news portal he will try to negotiate with Goodwill creditors on restructuring the debts so as neither Goodwill nor the creditors bear losses. To this end, Temur Chkonia will act as a mediator between Goodwill and the creditors and he plans to do his best to help the trade network. The businessman does not rule out to put his own finances and real estate as a guarantee.

rmenia’s economy is more liberal than EU countries’ economies, Beatriz Paglieri, the head of the Argentine Economy Ministry’s Foreign Trade Secretariat.

WORLD NEWS FAMA, HANSEN AND SHILLER WIN NOBEL PRIZE FOR ECONOMICS

buy-out without notification of other shareholders, the statement said. JSC BTA Bank (Georgia) completed JanuaryAugust 2013 with 2,9 million GEL loss (01/08/13 -1,9 million GEL). By September 1, deposits (without banks’ deposits) equals to 43,2 million GEL (01/08/13 - 41,4 million GEL), credit portfolio - 66,3 million GEL (01/08/13 -69,4 million GEL), overall obligations -105,8 million GEL (01/08/13 - 102,1 million GEL). Bank’s actives equal to 129,4 million GEL (01/08/13 - 127 million GEL). BTA Bank operates on Georgian market since 2001. 49% of its stocks belong to JSC BTA BANK, 51% - to Silk Road Financial Group. Large beneficiaries are Fun Samruk Kazina (39,9%) and George Ramishvili (31,6%). Bank’s stock capital is 23,6 million GEL (01/08/13 - 24,8 million GEL).

George Tabuashvili: In 2014, the Budget of the Regions will be Higher than in 2013

MARNEULI TEA HOUSE WINS INTERNATIONAL ARCHITECTURAL CONTEST NOMINATION

he European Property Awards Architecture 2013-2014, an international architecture contest, was held in London, the United Kingdom, at the end of September, 2013. Pg. 3

PERFECTLY PRESERVED 1.8 MILLION-YEAR-OLD SKULL ‘COULD RE-WRITE HISTORY OF HUMAN EVOLUTION’ Palaeontologists believe finds could rewrite early history of human evolution

Pg. 2

Do not create organizational structure on your own!

Pg. 2

MAIN EVENTS caucasian business week

GEORGIAN GOV’T TO LAUNCH NEW PENSIONS SAVING SYSTEM

he government in Georgia plans to introduce a system for retirement savings that will include every citizen in the country. Giorgi Tabuashvili, Deputy Finance Minister, on Thursday met with the parliamentary opposition to discuss the 2014 budget, which includes starting a reform about retirement savings. Gigi Tsereteli, MP from the National Movement, asked him whether this is a real government desire or a joke. The MP explained that against a background of

low economic growth, reduced job places and deficit it is really a mistake to introduce retirement services. “If it is a desire, then why it is in the draft of the budget? If it is not a mistake, are you establishing any additional fee or what will be the mechanisms for the retirement services,” he asked. The deputy minister responded that the reform will start soon and the ministry is working on the mechanisms for doing this in cooperation with the World Bank. “If we don’t start the reform, we will never be able to go over to this system. This may start on a limited scale at first. The idea is very good,” Tabuashvili added. Health Minister Davit Sergeenko Friday told journalists that the essence of retirement saving is that ‘the rich assist the poor and the strong assist the weak.’ He said this will concern every citizen and the government started working on this issue in late 2012. Currently, the government is looking at two alternatives for implementing the reform. “Any citizen who works, allocates authorized money for a retirement fund in order to have guaranteed high pension,” he said. dfwatch.net

PERFECTLY PRESERVED 1.8 MILLION-YEAR-OLD SKULL ‘COULD RE-WRITE HISTORY OF HUMAN EVOLUTION’ Palaeontologists believe finds could re-write early history of human evolution

cientists have revealed one of the most dramatic discoveries in human origins with a perfectly preserved fossilised skull of an ape-like man who lived about 1.8 million years ago. The discovery, along with the remains of four other individuals who lived at the same time, in the same place, has generated intense excitement among palaeontologists who believe the finds could re-write the early history of human evolution. The skull and its lower jawbone were found at a palaeontology site near the medieval town of Dmansi in the foothills of the Caucuses in Georgia, which has become one of the most important centres for understanding human origins outside Africa. A team of researchers has spent the past eight years studying the fossil skull, which was first excavated in 2005, and its jawbone, discovered in 2000 but only now re-united with its “owner”. The first scientific description of “skull 5”, published in the journal Science, indicates that the adult male had a large, long face, heavy features, large jaw and teeth but an exceptionally small brain case, less than half of the size of a typical human today and not much bigger than a gorilla’s brain. The four other skulls are thought to have belonged to an elderly, toothless male, another adult male, a young female and an adolescent of unknown sex. The scientists do not know whether they were part of the same family group or had lived at precisely the same time. Dating technology based on argon isotopes found that they lived between 1.77m and 1.85m years ago. The site was next to a river where big game and fierce predators made frequent encounters - bones of large saber-toothed cats and an extinct giant cheetah have also been found alongside those of large herbivores. All five skulls were unearthed from what were probably underground dens where the large carnivores had dragged their prey. These had collapsed soon afterwards, which had helped to preserve the animal and human remains in good condition. “Dmansi is a unique snapshot of time - maybe a time capsule that preserves things from 1.8 million years ago,” said Professor David Lordkipanidze of the Georgia National Museum in Tblisi, the lead author of the study. “This was a place where was big competition between carnivores and hominins [ancient humans]. It seems that they were fighting for the carcasses, and unfor-

tunately for the hominins, but fortunately for us, they were not always successful,” Professor Lordkipanidze said. What has surprised the scientists is the range of physical variation between the five individuals. This has led them to suggest that several other early human species living at about the same period in Africa may in fact all belong to the same species. “Had the braincase and the face of skull 5 been found as separate fossils at different sites in Africa, they might have been attributed to different species,” said Christoph Zollikofer, a neurobiologist at the Anthropological Institute and Museum in Zurich. “The [five skulls from Dmanisi] look quite different from one another, so it’s tempting to publish them as different species. Yet we know that these individuals came from the same location and the same geological time, so they could, in principle, represent a single population of a single species,” Professor Zollikofer said. Despite their anatomical differences, 3-D modelling of the five skulls shows that they would only have been as physically varied as any five individuals chosen at random from a population of either modern humans or chimpanzees. “Thanks to the relatively large Dmanisi sample, we see a lot of variation. But the amount of variation does not exceed that found in modern populations of our own species, nor in chimps and bonobos,” Professor Zollikofer said. “Furthermore, since we see a similar pattern and range of variation in the African fossil record, it is sensible to assume that there was a single Homo species at that time in Africa,” he said. “And since the Dmanisi hominids are so similar to the African ones, we further assume that they both represent the same species,” he added. The scientists suggest that the Dmanisi individuals probably belonged to Homo erectus, the first human species to emerge from Africa, and that certain African species such as Homo habilis, which had lived earlier than H. erectus, may actually be the same species as Dmanisi man. Ian Tattersall of the American Museum of Natural History in New York told Science that the latest, fifth skull from Dmanisi is “undoubtedly one of the most important ever discovered”, while Tim White of the University of California, Berkeley, described it simply as “an iconic fossil”. Independent

BUSINESS WEEK

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October 21, 2013 #26

PRIME MINISTER: KHUDONI HPP WILL NOT DAMAGE NATURE

eorgia’s Prime Minister Bidzina Ivanishvili assures that construction of KhudonHES is not dangerous for nature. “Khudon should be done, while local residents will be provided with respective compensation”, Prime Minister said at today’s meeting with the media. While commenting on local residents’ protest regarding the construction, Ivanishvili declared:

“We respect Svans’ bravery and will give each of them respective explanations”. “It is also possible to build better houses and to move churches as well”, he noted. Prime Minister said that “we should convince population that this is required for the country”. “I would sacrifice even Chorvila (Ivanishvili’s home village in Imereti region) for my country’s good living”, he noted.

THE RUSSIAN EMBARGO - WHO WILL BE THE NEXT?

ithuania’s prime minister is pointing to a Russian ban on dairy products from his country as evidence that Moscow fears losing influence over Ukraine and other former Soviet states. And he’s wondering how far Russia will go in punishing countries it thinks are wooing those nations away. In an interview with The Associated Press on Thursday, Prime Minister Algirdas Butkevicius said the Kremlin is growing worried about the EU’s intentions. “It is a key question to Russia whether Ukraine would choose a path to the West and integrate into the European Union market or whether it joins the Customs Union,” Butkevicius said, referring to an alternative trade zone created by Russia that now includes Kazakhstan and Belarus. For both Brussels and Moscow, the real prize is Ukraine, a nation of 46 million with relatively strong industrial and agricultural sectors. Russia has imposed tremendous pressure on Ukraine not to sign a strategic partnership deal with the EU, saying Moscow would retaliate with trade restrictions that could push the ex-Soviet republic toward default. In August, Russia began a series of rigorous bor-

der control checks that caused crossing delays and millions of dollars of losses for Ukrainian businessmen. Moscow, meanwhile, denies the dairy ban has anything to do with Ukraine and the upcoming EU summit. “This topic has absolutely nothing to do with politics. It’s an old topic having to do with the fact that a number of Lithuanian companies make dairy products that don’t meet Russia’s standards,” Sergei Glazyev, a Kremlin insider, told the Ekho Moskvy radio station Thursday.

ADB RESEARCH: GEORGIA TO BECOME MIDDLE-INCOME ECONOMY BY 2035

esearch, ordered by Asian Development Bank (ADB), says that GDP per capita in Georgia to reach $4,071 by 2035, exceeding almost 3.1 times respective showing of 2010 (i.e. $1,295). As a result, Georgia to become a middle-income economy, the document notes. Experts forecast that with current economic policy and existing level of technology, Georgian real GDP will reach $14.6 billion by 2035. In 2010, the country’s GDP made up $5.6 billion (in prices of 2000).

Population size is expected to reduce from 4.4 million as of 2010 to 3.6 million as of 2035. According to ADB forecast, demand on energy will increase annually by 1.5% from 2010 to 2035. In 2010, largest demand was from “other sectors” (civil, commercial, agriculture) – 48.8%, being followed by transport (28.9%) and industry (16.6%). In this respect, no changes are expected for 2035. Research was conducted by Asia-Pacific Energy Research Center of Japan Institute of Energy Economics within ADB regional technical assistance project.

AVERAGE CONSUMER’S MINIMUM WAGE IN SEPTEMBER MADE UP 130.8 LARI

akstat informed that average consumer’s living wage amounted in September to 130.8 lari. The same rate for average family made up 247.8 lari. In the same period of previous year,

average consumer’s living wage made up 132 lari, while average family’s one – 250 lari. In August, average consumer’s minimum wage amounted to 129.4 lari, while average family’s one – to 245.2 lari.

KUTAISI AIRPORT TO SERVE NEW FLIGHT DESTINATIONS

light directions from Kutaisi Airport increased. Flights to Lvov will be added from April, to Vilnius direction – from May. WIZZ air will serve the flights. Tickets are already available on the air company’s website. Low budget Hungarian Air Company has been on Georgian market since fall 2012. Fly LAL (Lithuanian Airlines) provided Vilnius-Tbilisi regular flights during 2008/05

–2009/01 period. Wizz Air performs flights to Warsaw, Katovitsa, Kiev, Donetsk and Kharkov from Kutaisi. From Kutaisi David Agmashenebeli Airport flights are performed to Moscow, Tel-Aviv, Minsk and Tbilisi directions. Georgian Airways, Wizz Air, Ural Airlines, Siberia (S7) and Belavia serve to the flights. Airport served to 126 000 passengers during January-September.

3 MARNEULI TEA HOUSE WINS INTERNATIONAL ARCHITECTURAL CONTEST NOMINATION BUSINESS

October 21, 2013 #26

caucasian business week

he European Property Awards Architecture 20132014, an international architecture contest, was held in London, the United Kingdom (UK), at the end of September, 2013. Nearly all Western and Eastern European counties were represented at the contest. The competition jury was staffed by famous architects, journalists, exterior and interior designers. The jury was led by Lord Bates. Georgia was represented by Marneuli based culture center of Tea House. The center has won the nomination of Best Architecture of Public Office. The social and culture center of Tea House was built by MStudio, an architecture and design company. The project was initiated and ordered by the state oil company of Azerbaijan (SOCAR). The aim of the foundation of Tea House was to develop education, culture and sports in the Region. Various groups for Georgian dance and songs, chess, painting, carpets knitting, foreign languages attract many young people in the Region and they foster the youth development. The harmonized synthesis of tradition and modern architectural elements creates the main value of the building. The three-floor building stands on a 530 square meter territory and each floor space is 430 square meters. The building façade is adorned with Azerbaijani national ornaments and colors. The hand-

made over mosaic columns create the impression of an eastern carpet. The bas-relief of a garden on 1000 square meters in front of the building reflects the historical script of Azerbaijan. A fountain is located in the center of the

garden and it consists of national pitchers and mosaic carpets that are based on natural boulders. The parking place behind the Tea Houser holds 20 automobiles. The building façade is beautifully

merged with sparkling marble floor at the entrance and traditional ornaments. Besides various education and cognitive halls, the Tea House also includes an elegant restaurant with an in dependent entrance.

,,THE GEORGIAN TIMES” HOSTING INDUSTRIAL FORUM

edia holding ,,The Georgian Times” is holding the first industrial forum of leading manufacturer companies in Georgian economy. Forum is going on in Courtyard Marriot. As the president of The Georgian Times Makhaz Gulashvili noted, holding such forum by media is unusual. He said The Georgian Times has been holding the ceremony of awarding Georgian business since 1995. ,,We and businessmen, politicians and media reckon that The Georgian Times has played a great role to form Georgian business. Based on the nine-year tradition, our economy happened to be in a bad situation. Import exceeds export, there is unemployment in the country and no cheap money,” - stated Malkhaz Gulashvili. He stated the state should support industrial direction to create the export production and employment possibility. Gulashvili remarks debates and discussions are

necessary in order not to live in such a way as we lived during National Movement’s governing. The forum aims to make the Georgian government, legislative authority, media, businessmen and investors to concentrate on the problems of Georgian entrepreneurship. In the framework of the forum ,,The Georgian Times” will emphasize all concrete problems representing obstacles for fast and dynamic development of entrepreneurship. Legislative regulations, custom and tax regimes, transparency quality, investment climate, labor code, system of allowance and preferences are among them. The forum partners are: the Ministry of Economy, the Ministry of Finance, the Ministry of Energy, the Ministry of Infrastructure and Regional Development, Energy Development Fund, Revenue Service, Supervisory board of legislative committees, Partnership Fund, Investment Agency, Georgian Co-investment Fund, GCCI and Business companies. GeoSteel is the general sponsor.

INTERVIEW caucasian business week

October 21, 2013 #26

DEVELOP YOUR OWN BUSINESS IN 72 DAYS Joint Innovation of Ilia State University Business School and Sakpatenti for Georgian Business

You have got an idea… but you do not know how to implement this idea… You seek the place and people who will listen you, help you in developing a business plan, in resolving financial and legal issues. Many interesting and important ideas are lost and fail in the search process. For the first time in Georgia, to optimize business ideas, Ilia State University Business School and Sakpatenti, the Georgian national intellectual property center, have created a special business space, that are known as a Business Incubator in many countries. The project aims at providing joint support by the academic, business and state sectors for initiating and implementing business projects. We have taken an interview from Professor Mikheil Batiashvili, an Iliauni business school dean: -Mr. Mikheil, what was the reason for creating a special space for implementing business ideas and how relevant it is for the Georgian business environment today? - The business development in Georgia lacks for innovative approaches. In Most cases, business is more based on unskillful attempts than on knowledge and experience. The business based on presumed attempts results in losses of considerable resources and this does not made positive affect on general economic development. According to our research (as part of ILIAUNI Business Review), in the business inauguration process, only 15% of the beginners has got even a simple business plan in writing, that is over 80% launch business without a concrete long-term strategy. An important component for successful business is related to knowledge and experience in the target sector. According to the same research, the situation is not desirable in this respect ei-

ther. Over 80% of the beginners launch business without knowledge and experience in the target sectors. As a result, we have many inaugurated and shortly closed businesses that had been created by only verbal plans: “Let’s start and we will see”; “We will see it in the working process”, “Let’s start and we will find someone”, “The reality is different than the paper”, - these are widespread business terminologies in Georgia. People pretend to do business, but they have no relation with the business. To launch business, you should search resources. Commercial banks do not finance Startup businesses. The company must have at least a six month history so as commercial banks even discuss business proposals. Besides banks, how can we draw the resources? 1. private investments funds that do not exist in Georgia, in practice. 2. private investors that do not exist. Conclusion: Today we have an idea, a good business idea that

could become a serious business tomorrow, but there are no resources for its implementation. Serious research works should be provided for developing the idea, a business plan should be developed, a long-term strategy should be formed. Prior to checking the potential of the idea, we should pack it in acceptable forms and this requires expenditures, while the idea author may not have these resources. According to our analysis, packing the idea, search of experience and finances represent an invincible chain in Georgia to launch a new business. Our initiative implies attempts to make breakthrough in this chain. This attempt has many aspects. First of all, this is a certain message to Georgian business circles – to announce permanent support to innovative ideas. As to the practical side, this is a place, where new Georgian businesses will be really born. - What is the core of a business incubator according to the world practice and what results should we except in the Georgian reality? -The first incubator was created in 1959. Today there are about 10 000 business incubators in the world and over 100 000 projects are being implemented by them. These incubators have crated over 20 000 companies with 250 000 job places in the USA and this is a considerable figure for the country. Business incubators help authors of business ideas, inventors to resolve various problems, including the problems with developing business proposals, search of office spaces and research laboratories, developing products or services, search of potential partners and clients. The incubator ensures the works related to the project administration, while the idea authors care for only developing their ideas or products to a final market conditions. Business incubator takes up all the work that exceeds the authors’ competence and real potential. The statistics also show the importance of a business incubator. The failure index in small sized companies that were launched independently ranges from 60% to 80%, while the figure is only 10% among the companies supported by business incubators (in a three year period). At the current stage of Georgia’s business sector development, a business incubator will play an important role for generating new ideas, developing small and medium business companies and consequently, creating new job places. - Iliauni Business School and Sakpatenti are the first that have established the world’s experience in Georgia. What will the business incubator offer to the Georgian society? - According to our research, the main priority of the business school is to stimulate business ideas and provide assistance in their implementation. The university has created a special space equipped with modern 3D technologies to ensure

due working environment for implementing business ideas. This space implies the integration of business, science and state potential and their target use for concrete business projects. At the initial stage of the project development, the focus is made on students. Pioneers of the business incubator will be Iliauni students with interesting ideas and motivation. To get practical skills, first of all, trainings will be held on the following issues: how to generate innovative ideas; how to conduct research works; how to develop a business plan; how to form a team and manage the project, develop a grant proposal, use intellectual property, use procedures for patenting business ideas. Training and consultation materials will be represented in 3D format. This is a new innovation from us. We will try to efficiently use entirely new abilities of 3D technologies, but after intense practical trainings the Business Incubator participants will start working on concrete business projects. The business incubator will also hold weekly meetings with the idea authors and the project managers to assess the project implementation process and make timely correction. The project participants will have periodical meetings with heads of foreign and Georgian companies. Invited guests will acquaint the project participants with operation of their companies and samples of managing innovative projects, jointly initiate new projects. The contact of business and academic circles may generate interesting business ideas that will bring bilateral benefit. To receive information on the working process and to get involved in the concrete project, at the first stage of the project inauguration, potential donors and international organizations will be invited. If the projects are found interesting and adaptable with international markets, foreign partners will also join them. Prepared projects will be introduced by the end of 2013 and a special board staffed with representatives of Iliauni and Sakpatenti will select the winner projects. As a conclusion, I would say our business space gives the chance to students to have their own businesses in 72 days. - In practice, you are establishing an innovation in Georgia’s business space. As the author, what are your expectations from the project and what are the perspectives for development? - The business incubator is the theme that will bring concrete results in terms of business knowledge and experience and optimization of new ideas. The project will be enhanced in the future. We hope Georgian business circles will be interested in our initiative. Implementation of similar projects is of crucial importance for moving to a new stage of the Georgian business development.

TBILISI ENGANGES EUROPE, EUROPE ENGAGES AN EASTERN NEIGHBOR

n the recent International Parliamentary Conference that took place under the aegis of the Parliament of Georgia and the United Nations Development programme in Tbilisi on October 7, 2013, the focus was on the Vilnius Summit. Suitably, the Georgian delegates, including Davit Usupashvili and Alex Petriashvili, focused on Georgia’s unwavering commitment to a Euro-Atlantic trajectory and Tbilisi’s resolve to be present in Vilnius in November. The consensus was that this was an event of historic significance, a fact that resonates with its branding as Eastern Partnership’s “Delivery Summit”. The event was interesting, both in terms of context and in terms of substance. A noteworthy contextual observation is that none of the participants referred

to the forthcoming Vilnius Summit as the end of a road. All interventions begun with the assumption that Vilnius was a stop, not a destination. This implicit consensus referred to a process of alignment with EU norms, which should lead to democratic consolidation, modernization, regionalization or, in a word, “Europeanization”. Georgian participants echoed this hope. In this respect, the origin of the delegates to the conference was telling: the Baltic States, Croatia, and Poland, one of the two pillars, along with Sweden, of the Eastern Partnership framework. The implicit and untold message was that “if we made it, so can you.” The road is uphill, but perseverance pays off. Another contextual variable was the Russian Federation. Perhaps inevitably, the long standing occupation of Georgia, the recent step up of the so-called “borderization policy” in the breakaway republics of Georgia, and sustained efforts to derail Tbilisi’s Euro-Atlantic trajectory, could not be ignored. And this was all relevant once again, because a number of states in the region have been under pressure to miss the Vilnius appointment. Most interventions focused on how formidable the challenge before Georgia is. Models of par-

liamentary consultation that different countries have followed were presented, facilitating the adaptation, incorporation and implementation of a sizable body of legislation, whilst engaging the opposition and public opinion. Retaining this process of Europeanization on track is a process that retrospectively, once everything is said and done, tends to be underestimated. But, for polities that underwent this process so recently, it is easier to empathize with countries like Georgia. It was clear that often mentorship pays off in this “Europeanization” process. The Latvian Member of Parliament, Zanda Kalnina Lukasevica, specifically referred to “the Nordic Model” of consultation in the normative alignment process with the EU. First, it was tacitly and, at times, explicitly acknowledged that this mentorship, which goes hand in hand with notions of European “regionalism”, is not as explicit in the current context of EU engagement in the Eastern Partnership region. First, there has not been a commitment to membership for states in the Eastern Partnership region. Secondly, the emergence of a regional identity between the polities in the region is haunted by “frozen conflicts”. The closest the region comes to an acknowledged mentor, in the sense

of a country that has committed resources, political and diplomatic capital, is Poland. For Georgia, it is clear that the European trajectory is consensually accepted as the only trajectory. It is also clear that Georgia, as well as the Eastern Neighbourhood at large, is seeking a type of multilateral and regional identity that would resonate with previous experiences of Europeanization. From former Warsaw Pact members to the Visegrad four, from the Western Balkans to South-eastern Europe, it is clear that the process of Europeanization is transformative both for the polities that aspire to “join Europe” as well as for the EU as such. In sum, the project of Europeanization is in many ways mutually constituting. It is in New Europe that Georgia looks for support. As these “newcomers” are now becoming older, with polities that have now been completely transformed without losing the memory of being on the fringes of Europe, Georgia looks for support to entrench the idea that the “return to Europe” vision is not considered final and complete. Dr Ilia Roubanis is a lectuerer at the National School of Publiic Administration in Athens, Greece.

BUSINESS October 21, 2013 #26

caucasian business week

COCA-COLA AND CASTEL TO RENEW PRODUCTS SUPPLY TO GOODWILL From Pg. 1

irst of all, Goodwill is a Georgian brand. The support of a Georgian brand is the issue of honor for all of us. Secondly, Goodwill launched operation as Georgia’s first organized hypermarket. This company has managed to grow the consumer culture from unorganized fair to an arranged and ordered trade network. I respect this theme very much. Thirdly, Gogi Shevardnadze is a very creative person. I think a number of external circumstances have led the company to the current problem. I believe the company has got the potential for recovery. Goodwill, as a brand, has got a very high value on the market. Moreover, the bankruptcy of such a serious trade network and 2500 unemployed citizens, when we are able to save the company and develop it - why should not we do this? At least 3 member families are presumed behind 2500 unemployed persons and they will be left without monthly wages?! Georgia is a small country and we should support each other. I ask you and I will start working to help the company set up reliable and reasonable communications with consumers, suppliers and banks. I dare to try to see whether it is possible to deal with the problem”, Temur Chkonia noted. “I will meet with everyone and explain the shortest way to save suppliers is to save Goodwill and they will not lose the money lent to Goodwill. In long-term period the company will repay the debts. And I have announced full confidence to Goodwill and I have resumed products supply to Goodwill at full scales”, Temur Chkonia added. As reported, Goodwill and Marshe have applied to the court for announcing them insolvent and the court have satisfied the appeal. The companies keep operating in a rehabilitation

regime, a Goodwill statement reads. “Many successful and the world’s leading companies have passed rehabilitation regimes and this format is an acceptable format on international markets. At this stage, Goodwill and Marshe will pass multiply approbated way and continue operation along with restructuring debts. A lot of external factors have led us to take a necessary decision and move to a rehabilitation regime. Naturally, Goodwill and its centralized production Marshe continue to serve liabilities to suppliers and the bank in an usual regime without problems, but, our main problem was that at this stage the companies could not serve the debts before the suppliers because of current financial conditions. Therefore, to get rid of the existing situation, the management has decided to announce companies insolvent and move to a rehabilitation regime”, the company says. Goodwill also comments on reasons behind the collected debts and says starting 2004, after appearance on the market, the company had to take unplanned expenditures many times. These expenditures were absolutely illogical for the company’s business interests and the development strategy. In whole, these expenditures exceeded 30 million GEL. At various stages, we had to take similar heavy decisions. In other case we would be able to develop the business and even to maintain it, ensure freedom and security of business owners and top managers. Only in this way, we have maintained the life to the companies. It should be also noted the Marshe project that is a centralized production of Goodwill, is a special plant in the South Caucasus due to ultramodern technological infrastructure and it fits all world standards and norms today. The above-mentioned factors have made negative affect on the development of Marshe too and worsened the company condition”, a Goodwill statement reads.

REPRESENTATIVES OF EUROPEAN BRAND – MINICREDIT OFFER NEW INITIATIVE

iniCredit, an online credit company, opened its fall season by offering clients very interesting initiative, new brand - Minifund. Presentation was held in hotel Tbilisi Marriot. Among the attendants were European MiniCredit directors, supervisory board members, founders and company partners. Together with other interesting stuff, MiniCredit represented its initiative, new brand - MiniFund. MiniFund is a social project, which is implemented by MiniCredit support. Project is oriented on the financial support of Georgian citizens’ ideas. These ideas should be directed to participants’ private or professional development in the following spheres: Education, culture, science, art, sport and environment protection. Project will be held seasonally.

Web page www.minifund.ge has been created for this project, which reflects all the rules and regulations for the users. Each quarter will have its budget for the winners. Autumn season budget equals 10 000 GEL. One project will be financed by maximum 2 500 GEL. It means that financing will be given to minimum 4 participants. Our aim is to make the voting process transparent, that’s why Georgian citizens will take part in the voting process. Process of sending projects has already been started and will last until the 30th of October. On the 1st of November all the projects will be placed on the site www.minifund.ge and voting process will take start. Winners will be revealed on the 15th of November, who will receive MiniFund financing. It’s interesting to mention that no similar project has been implemented in Georgia before.

9 MONTHS’ IMPORT OF OILPRODUCTS DECREASED BY 2.8% Y-O-Y TURKEY ACCOUNTED FOR ALMOST ONE-THIRD OF INTERNATIONAL TRAVELERS IN GEORGIA DURING 9 MONTHS

eorgia’s National Tourism Administration reported that largest share of international travelers, incoming to Georgia during 9 months of this year, came from Turkey – 30.5%. In total, 1.2 million Turks have visited the country in the reporting period, increasing in number by 11.6% year-on-year. Next come Armenia – 22.9% (934,205 travelers, growth – 42%), Azerbaijan – 19.3% (786,344, growth – 15%), Russia – 14.6% (595,793, growth – 52%), Ukraine – 2.3% (93,488, growth – 68%).

To note, travelers from Iraq, visiting Georgia during 9 months, have increased 9.4 times in number year-on-year. Iraqis (32,331 persons) accounted for 0.8% of total visitors’ number. Number of travelers from Iran has declined by 15%, making up 64,384 persons in the reporting period (1.6% of total). Decline of 8% was fixed also for visitors from the US, whose number made up 21,065 (0.5% of total). In total, 4.08 million international travelers have entered Georgia in the reporting period (year-onyear growth – 24.9%).

BTC PIPELINE TRANSPORTED 22.55M T OF CRUDE OIL IN 9 MONTHS

zerbaijan’s state company SOCAR informed that Baku-TbilisiCeyhan pipeline (BTC) has transported 22.55 million t of crude oil in 9 months. In total, the pipeline has transported 228 million

t of oil from its launching date until October 1 of this year. Regarding operation of Baku-Supsa pipeline, Energy Efficiency Center – Georgia (EEC Georgia) informed that this pipeline has transported in the reporting period of this year 2.079 million t of oil.

nion of Oil-Products Importers reported that Georgia’s import of fuel (petrol and diesel) amounted in 9 months of this year to 596.7 million kg. If compared with the same period of 2012 (614.1 million kg), the volume decreased by 2.8%. According to fuel categories, January-September import of petrol was distributed as follow: A-92 grade petrol (Regular) – 70%, A-95 grade (Premium) – 27%, A-98 (Super) – 3%. Import of diesel fuel was distributed between L-62 diesel (71%) and Euro Diesel (29%). In the reporting period, import of 37.2 million kg of oil bitumen (road asphalt component) was implemented as well, from which the largest share was made from Iran – 98.9%.

Aviation fuel import amounted to 61.9 million kg, of which the largest share was implemented from Azerbaijan – 74%. Next come Turkmenistan – 15%, Israel – 8.6% and Greece – 2.4%. Lubricants import totaled to 10.8 million kg. Turkey was a major supplier – 29%, while 19.4% was imported from Iran, 15.7% – from Germany, etc. According to countries, the biggest volume of petrol and diesel was imported from Romania – 33%, i.e. 197.1 million kg (including 147.4 million kg of petrol and 49.7 million kg of diesel). Next were Azerbaijan – 26%, i.e. 155.4 million kg (20.1 million kg of petrol and 135,300 t of diesel), Bulgaria – 17%, i.e. 101.8 million kg (72.7 million kg of petrol and 29.1 million kg of diesel), Russia – 14.3%, or 85.3 million kg (diesel only).

1H13 FOREIGN TRADE TURNOVER DROPS BY 0.1% Y-O-Y

ccording to the preliminary data of Sakstat, Georgia’s foreign trade (excluding non-organized one) totaled to $7.585 billion in January-September of this year. If compared with the same period of 2012, the volume decreased by 0.1%. At that, export volume made up $2.019 billion (growth – 14%), while import – $5.566 billion (decline – 4%). Accordingly, Georgia’s negative trade balance in the first half of the year amounted to $3.548 billion (47% of turnover). Sakstat will publish adjusted data on October 24.

FINANCIAL MARKET caucasian business week

October 21, 2013 #26

CAPITAL MARKET DEVELOPMENT CONCEPT & LAW CHANGES sus on the initiated changes, on which many of the leading financial market specialists and business community representatives did not agree with. Unfortunately, the following principle issues have not been resolved:

IRAKLI KIRTAVA Director General, BG CAPITAL

he main reason of the under-developed stock market in Georgia is the lack of understanding the significance of capital markets for the economic development of the country. Consequently, conceptual tasks have not yet been set, which should be the subject to being implemented in the near future and/or on a long-term horizon, for the development of the stock industry. At the beginning of the year, a team of professionals (Irakli Kirtava, Mamuka Lordkipanidze, Giorgi Simongulashvili, Eka Katamadze) drafted concept of development of Georgian capital market, which contains an overview of the local market (including specific issues and the infrastructure), the analysis of international best practices and global trends, including problem solving and alternative possibilities. Since January 2013 the concept is reviewed together with experts, representatives of various business groups, financial circles and lawyers for the purpose of its improvement and development. The concept already has a number of supporters and we, co-authors of the concept, welcome critical comments and views from interested parties. Business Association of Georgia (BAG) - the leader business association in Georgia, showed interest in the draft and invited the authors, to make a presentation for business representatives to promote the process of the formation of general principle and long-term view of the capital market development. CHANGES IN THE LAW ON SECURITIES MARKET The initiation of the bill took place in March of this year and it provided significant changes in the law “on securities market”. In the process of analysis of the proposed legislative changes it became necessary to carry out a number of works, to determine its compliance with the international practice, preparation and discussion of comments on initiated changes. The fundamental issues, which are still the most problematic subjects of the bill, according to many experts and business representatives, not only will not contribute to the development of the stock market, but might even discredit the idea of having one, as they do not comply with the international practice of financial markets development, the requirements of the participants in the financial markets and the principles of free competition. BAG and the team working on the concept of capital market development, reviewed the proposed legislation (amendments in the Law “On the Securities Market”) thoroughly. The Association has set up a group that is working on comments on the business sector in connection with the bill. The Finance Committee of BAG has also organized a special meeting with senior officials of the Stock Exchange in order to reach a consen-

NEGATIVE ASPECTS OF THE BILL The introduced bill contained certain threats that may hinder the growth of the investment potential of the country. I will try to briefly summarize the four major issues of the bill, as well as the arguments and comments of the specialists. 1. One of the main changes is that current Stock Exchange (SE) and Central Depository (CD) are given exclusive rights to organize public trades, including: - If these changes are implemented, other SE may have difficulties to obtain the license and the status of a self-regulating organization. - Activities of the developed countries SEs and CDs without a local license would be blocked in Georgia. - Any attempt from anyone else trying to establish an organized trading (e.g. in case of OTC public offering ) would be blocked, as, such activities would need the license of the SE. - listing securities of local companies on foreign SEs would not be allowed unless they are listed on the local SE, which actually means that, attracting foreign capital would also be limited. 2. According to the bill, there would be mixing of transactions in the primary offering of securities and SE trading on the secondary market, caused by the removal of the term “secondary” (market) from the articles of the law. The Issuer would be entitled to carry out an IPO outside the SE, however if the securities are admitted to the SE the issuer would be obliged to fix the price and volume of transactions on the SE. (Currently the fee for fixing is 0.1% with no upper limit). - Why is this change unacceptable? Primary placement Transactions of the reporting companies are subject to publishing (including, in the form of a preliminary prospectus for public offering and subsequent report on the placement) and the existence of additional obligations in connection with the fixing of these transactions on the SE is unacceptable, which would entail an unjustified excessive regulation. - One shouldn’t impose a legal obligation on the issuers who raise capital and attract investments, to pay any additional fees for these transactions to any of the subjects of the market infrastructure (except for cases where the issuer and/or deal agent places new shares through the SE). 3. In accordance with the bill project , the risk of such an interpretation of the law could increase so that, under the fixing on the exchange there may get deals that by their content are not exchange trades. Precedents for such an interpretation existed in the past, so it needs clear language for avoiding such occasions, in particular: - In the law there definitely needs to be mentioned that on the SE should be booked and fixed only purchase-sell transactions. - There should also be given a list of the types of transactions which are not subject to theobligation to booking and/or fixing on the SE ( including mortgage, inheritance, exchange of securities into global depository receipts and other transactions where beneficial owner remains the same, off the market transaction for primary placement of new securities, as well as transactions related to compulsory sale or tender offer , which is pre-installed on a fair price at which the buyback is held and appropriate document is a public document). 4. According to the initi-

ated bill, there would be an obligation to book the transactions on the securities which are admitted to the SE trading system, only on the exchange. This means, that there is an attempt to prohibit OTC transactions by law. - It would be more logical if such a requirement only apply to the A & B listing securities, as these companies have a contractual relationship with the SE. All other companies admitted on the stock exchange (non-listed) do not have such agreements and admission of their majority to the SE was without decision of the issuer. A & B Listing companies have an obligation with respect to the liquidity of the securities, which is in accordance with certain requirements for transactions on the exchange. In the international practice, we often see that the securities that are listed on the premium segment are subject to certain motivators (including tax incentives), which would have balanced the existence of large requirements for these companies and contribute to their liquidity. - According the present laws, OTC trades on all the securities admitted to the SE are subject to the requirements of publicity - fixing on the SE (which, under the current rules of the exchange, entails the obligation to pay the same fees as in case of transactions in its trading system). The additional obligations with respect to any transaction on illiquid security permitted on the SE, which hasn’t traded for months, would surely to be concluded in the trading system of the Exchange, is thought to be unfounded. - According to the study of the practice of developed countries and the European Union can be said that in these countries, and in most developing countries, there is no obligation to make all transactions on securities which are admitted on the Exchange only through the exchange trading system. The ban/restriction on OTC transactions take place only in a few countries, for example, such regulation exists in Iraq, Uzbekistan and Belarus. If we approach to the issue professionally, we can not say that the transactions of securities are in a competitive environment, if the parties of the transaction in the trading system of the Exchange are clients of the same brokerage company and the brokerage company only records transactions in the trading system of the SE. Such changes are in no way providing incentives to activity and actual interest in respect to the securities and the growth of their liquidity. It is necessary that any professional who prepares a draft of changes of such importance, should discuss it with members of the SE, stock market participants and interested parties who are directly related to these changes. At a hearing in the Finance and Budget Committee of the Parliament of Georgia it has been given special attention to this principal issue, and it was decided that these issues should be analyzed under the consideration of the expert community, and changes in the legislation should be implemented by taking into account the best international practices. So far the Georgian securities law remains unchanged and it is unknown when would be the

revision of the presented bill or introduction the new law, and market participants are waiting for the changes to be done. THE IMPORTANCE OF DISCUSSING THE CONCEPT At this stage, the most important thing is that- all the participants of the securities market, the representatives of the SE, CD, registrars, brokers, banks, pension schemes, investment funds, issuers admitted to the SE, leading companies, major business associations would join in the process of reviewing and improving project of capital market development of Georgia and jointly get the best results. The legislation of the securities market should be modified by taking into account the long-term view with regard to the conceptual development of the capital market, which should be based on international best practice and analysis of global trends. Attention should be paid to the increase of transparency and financial reporting quality; the establishment of proper criteria for the accountability of companies; the creation of incentives so that the leading companies have the desire to get in the SE Listing and securities become more attractive for the investors; the creation of standards for the submission (upload) of reports and public information in electronic form, the creation and distribution of electronic information; to the improvement of relations with international institutions and institutional investors; the involvement of local financial institutions in the stock market activity; the instructing of public in the securities market and the creation of the small investors class. It is preferable if the representatives and members of the relevant group who are working on the economic strategy of the country would be interested to look through the concept of Georgian capital market development project. Such interest and discussions regarding the raised conceptual issues in the circle of specialists (or formation of the working group on initiative of above mentioned circle), expert evaluations, including critical remarks and new ideas, will contribute to the development of the main ideas of the project, so that to form conceptual visions in the broad circles of specialists and to make first steps towards the process of recognition of the main principles for the market development. Formation of the conceptual vision, recognition of the certain main principles, formation of the measures of nearest and long-term plan are needed to form the securities market legislation and supporting regulations of investment environment in Georgia according to the advance made conceptual vision, and not based on the interests of small group of individuals. Abovementioned will enable us to have distinct priorities in Georgia showing what principles capital market development is based on and what systematic works or changes are expected to be carried out in order that Georgia have the status of attractive investment environment country in the region.

INTERVIEW October 21, 2013 #26

caucasian business week

DEPUTY MINISTER OF FINANCE: IN 2014, THE BUDGET OF THE REGIONS WILL BE HIGHER THAN IN 2013 An interview with Deputy Finance Minister GEORGE TABUASHVILI - Representatives of the parliamentary minority state that the draft budget 2014 is not prepared enough, the government recognizes that in 2014 the crisis would even deepen that will lead to the 600 millionth sequestration. How prepared is the document submitted to Parliament? - The 2014 budget is based entirely on the government’s program “A united, strong, democratic Georgia “ and is aimed at improving the social status of citizens and economic development. Accordingly, in 2014 a 5 % economic growth is planned, and there will be no crisis. We have clearly socially-oriented budget, based on the fact that the funding of the Ministry of Health increases by 355 million and will be 2.7 billion GEL. This means that all commitments taken by us in 2013 will be fulfilled. - Opposition members say that the budget for 2014 is not socially oriented, as in any point of social obligations funding is not increased in comparison with 2013 year. For example, why

pension increase is not planned? - During the year, the pension has grown in two stages, and in 2014 1.3 billion will be spent on pensions, 600 million GEL will be spent on social benefits , 300 million for general insurance, 280 million for various medical programs. About 30 % of the total budget will be spent on financing the health ministry. So the budget is socially oriented, and the numbers clearly prove this. - Whether revenue growth is scheduled in 2014? - It is scheduled – consolidated appropriations will make 9.9 billion GEL, it’s a significant increase in comparison with 2013 year. - What will be the budget deficit and how does the planned level meet international standards? - The deficit will be within a framework that will not create problems for fiscal stability, and at this stage the planned size of the budget is fully consistent with international norms, respectively, there are no risks. - A situation with the local budgets is also actively dis-

cussed. Are there plans to reduce them and whether it will affect regional infrastructure projects? - In 2014, the budgets of regions will be more than in 2013. So these alarms are false. - In connection with the 2014 budget, the opposition has expectations that after the elections, the government necessarily will be forced to go on the budget sequestration. What can you say about this based on statistics? - No danger exists. All obligations will be met in full, and no sequestration will be required. - The International Monetary Fund expects that in 2013 and 2014 respectively unemployment will rise to 17.3 % while economic growth will not exceed 2.5 %. Is it real? - We hold regular consultations with the IMF regarding macroeconomic parameters. On this basis, this data is not clear to us. Based on the fact that in 2014 economic growth is projected, it automatically means that employment will not decrease. On the contrary, it will grow. This ten-

dency was evident in the second quarter of 2013 and we are confident that it will continue. - Do you plan to stimulate employment and whether a program is being prepared in this regard? - All that the current government is doing ensures that the business was free from pressure and madeinvestments which in itself will increase GDP and jobs.

“WISSOL GROUP” DISCUSSES PROJECTS WITH CO-INVESTMENT FUND An interview with “Wissol Group” founder SOSO PHAKADZE

- Recently, several meetings between government and business were held, including a recent meeting with Speaker of Parliament. If they are formal in nature and whether there is the opportunity to discuss real problems at a meeting? - Meetings are held regularly and we always try to make them maximally effective and focused on specific issues. A meeting with the Chairperson of the Parliament was very interesting, businessmen had the opportunity to discuss a number of specific problems,

and Speaker suggested us a form of cooperation - to hold such meetings at least once a quarter. - What worries the Georgian business the most today? - We basically talked about employment, touched on the subject of the labor code, the tax code which was often changed and improved. This is an ongoing process and the tax law requires regular improvement. Before that, we met with the Minister of Finance where specific issues were considered. Ultimately, the purpose of such meetings is to strengthen the business, and they have helped many entrepreneurs to solve some issues. - Institute of Business Ombudsman just exists to solve problems between government and business. What is a reason to have regular meetings with the government? Or Business Ombudsman’s Office doesn’t work actively enough? - Institute of Business Ombudsman has been working for a long time, but the more commu-

nication there will be between government and business the better. The Speaker of Parliament also voiced a very good initiative - to bring details of all bills relating to the economy to the attention of businessmen. According to him, the laws relating to businessmen should be adopted in consultation with them. - Can the current labor code have an impact on unemployment? For example, the International Monetary Fund forecasts a rise in unemployment in 2013 and in 2014. - In general, the labor code is a document around which there are always lively discussions. My personal opinion is that in such a country as Georgia labor laws should be as flexible as possible. Some of our initiatives have been taken into account by developers of the law, otherwise it would have been even tougher. The main problem of the country is unemployment and the labor code should not interfere with its solution.

- A few weeks ago, a presentation of the Co-investment Fund was held. Its creation was appreciated by all. Are you going to cooperate with it and implement any projects together? - The creation of this fund is a very positive development. I already had a meeting with representatives of the Fund. It will run on completely commercial principles, it is a private business fund. We intend to cooperate with them. At this stage, we are considering projects that will be jointlyimplemented. - Whether the steps were taken after the change of government to facilitate the activities of big business? - There are some positive trends, although we expected more. After the presidential election, probably,there will be more positive trends, and in 2014 implementation of the projects which will be selected bythe Co-investment fund will be launched.

THE CENTER FOR PUBLIC INITIATIVES ASSOCIATION WELCOMES FUND’S ESTABLISHMENT

ndeed, there are attempts in Georgia to improve economical situation, but there are still many issues, which are not that easy to solve, as some may think. Our organization, from the day of its formation, is trying to give the government recommendations in different fields,among them economics and investment environment. We are eager of establishment of co-investment fund in Georgia in sum of 6 billion US dollar, which will promote the stimulation of already made foreign investments and will encourage the process of bringing the new investments. Although I consider in respect of investments it is necessary to collaborate special plan of economical security, which will determine what amount of foreign investments are acceptable, as according to economical security theory it is less desirable for a country to be dependent only on the foreign investments. Optimal growth of GDP is desirable and support and assistance of local investors should be priority of the government. I remember an example of our friend-country - Israel, when 30 years ago it was considered as a poor country and from USA it received an aid as a grant for $15 billion. This Grant was doubled through the thoughtful management and today Israel is one of the successful country in the field of banking involvement. Today and for the first time we have an unique chance to let Georgia become a country with successful economics. It is important to distribute 6 billion US Dollar in a way to let the several most important field start developing, such as tourism, agriculture, small business, energy and local business. I am

categorically against if the fund assigns finances to the projects, authors of which have no capability to be successful businessmen. That’s why I consider desirable to create special training centers. To develop tourism indsutry, it will be profitable if Georgia uses models of Israel and Turkey. To revive the sphere, 4 sides should be involved: government, investor, managing company and c0-investment fund. I want to give a recommendation to the government by the following initiative to charge each ambassador and other official representatives, who are operating abroad, with an important mission to invite at least 2 investors per month in our country and get involved in every possible way in developing and strengthening of the investment sphere in Georgia. I think that ministries and agencies are wasting money in business trips, when in that particular country Georgia has high officials and such officials should invest more time to provide ambassadors with useful information and present interesting business offers and desirable investment environment to the potential investors. The relations with European union in respect of Deep and Comprehensive Free Trade Area Agreement (DCFTA) is significant as much as creating the trade zone between Georgia and Europe will encourage investors, starting business in our country will be more attractive as every investor will be counting to sell the product not only on local market but also on European market. In addition to above mentioned, DCFTA is important for the choice of our people is integration in European an

north-Atlantic structures. Although government is obligated to tell the truth to the people, that joining to the agreement doesn’t automatically mean that desirable result will be achieved. That means, that realization of the products , which do not meed market standards, is not possible. It is necessary to start creating infrastructure, warehousing and cold storage in Georgia in time. It is also required to attract and train employees in agricultural sector. Georgia should be able to execute anti-monopoly activities and the same time launching all the tools, which will support quality management, certification and standardization the of product. The activity of recent chambers of commerce is significant. I would like to emphasize the unique project of Israel-Georgian Chamber of Business, which assists the businessmen of these two countries to communicate without any mediator. This is an unprecedented project in Georgia and there is no doubt in its success. The reason of such belief is that unfortunately in most cases as a consequence of unreasonable and unfair compensation received by mediators, investors lose interest to start or continue business in Georgia. Georgia should be able to eliminate the fact of existence of corrupt - a clan-based systems. The role of banking sector is also important in respect of economical situation of our country. As a representative on civil sector, according to public interests, I am observing a dispute between European company «Schirnhofer», which is operating in Georgia and «VTB» Bank, on basis of what the company had to

IRAKLI GHLONTI Chairman Non-governmental organization The Center for Public Initiative Integrity fire tens of Georgian citizens. The company has logical and fair claims against the Bank. I have witnessed the unprecedented actions by the Bank during the trail. I hope the government will provide whole care to improve banking sector in Georgia, because it’s directly relate to business development, employment and state budget. Besides, it’s desirable the sector should be motivated in order along with government to take care on clients as partners and to prevent unfair attitudes towards them.

8 BASIS BANK CONTINUES INTEREST RATE REDUCTION

asis Bank continues interest rate reduction. The bank informs that in USD mortgage loan rate gas reduced by 0,9% and it’s issued from 11%. Besides, mortgage loan denominated in Euro was added to credit products. Loan in GEL was reduced with the same rate and is issued from 13%. Annual start rate of the consumer loan has reduced from 14,9% to 13,9%. Currently loan portfolio of the bank exceeds to 166 GEL and has increased by 70% from the beginning of the year (01/01/13 -97,6 million GEL).

BANKING NEWS MONEY TRANSFERS INCREASED IN SEPTEMBER

n September 2013 transfers of $132 million were made to Georgia, which is 3 million more in comparison with previous month. According to National Bank’s statistic, in the analogic period last year, amount of the money transfers equaled to $116 million (09/11 -114 million GEL).

BASIS BANK COMPLETED 3 QUARTERS WITH 6,5 MILLION GEL PROFIT

SC Basis Bank completed January-September with 6,5 million GEL profit (II quarter - 4,34 million GEL, I quarter 3,348 million GEL). By October 1, Basis Bank’s deposit portfolio (without banks’ deposits) equals to 179,2 million GEL (II quarter - 183 million GEL, I quarter - 117 million GEL), loans - 166 million GEL (II quarter - 141,4 million GEL, I quarter - 114 million GEL), overall obligations - 240 million GEL (II quarter - 237 million GEL, I quarter - 162 million GEL). Bank’s actives equal to 348 million GEL (01/01/13 -199,9 million GEL). Main stockholder of Basis Bank (95,6%) is Chinese Hualing Group, which made injection of $30 million in the supervision capital in June. They also increased stock capital, which equals to 108,2 million GEL by October 1 (II quarter 106 million, I quarter - 56 million). EBRD owns 1,9% share, founder of the bank and chairman of the supervision board Zurab Tsikhistavi - 2,6%. Owner beneficiary of 95,4% is Enhva Mi.

LIBERTY BANK INTRODUCES CHEAP BUSINESS LOAN

iberty Bank introduced Cheap Business Loan on the market. New product of the bank is issued in GEL. Minimal amount of the loan is 30 000 GEL, maximal 0 1 million GEL. Loan term is from 6 months to 10 years. Its rate starts from annual 9%. David Verulashvili, co-chairman of the corporate banking department of Liberty Bank states that any legal entity, which is resident of Georgia and has at least 1-year experience in business can get cheap business loan. The loan is issued for the following aims: to finance current assets, purchase equipment, fund investments in the real estate, fund redemption of the company, investment loan and also consolidate/refinance loans issued by one or several banks. “Rate of the Cheap Business Loan is changeable and depends on the monetary policy rate, established by Monetary Policy Committee of the National Bank of Georgia. Credit Committee of the bank makes a decision about issue of the loan, considering financial conditions of the debtor”, The bank explains.

Source: National Bank

Over 90% of themonet transfers made from the abroad to Georgia comes on the 13 alrgest donor countreis, from where transfers exceeded to $1 million. In September of the current year, $13,8 million or 22,9 million GEL was transferred from Georgia to abroad. National Bank informs that this data has increased in comparison with analogical period last year - Last September $9 million or 14,9 million GEL was transferred from Georgia abroad. Insignificant growth is mentioned in comparison with August - Last month transfers from Georgia equaled to $13,459 million. Leaders of September transfers are Russia ($4,526 million), Ukraine ($2,045 million) and Greece ($1,445 million). Transfers to other countries are less than $1 million.

TBC PAY REMOVES SERVICE FREE IN REGIONS

BC Pay cancelled service fee for regional consumers. 4% commissioning of mobile balance filling was established in April 1, after cellular operators refused to pay fee for the services made by their subscribers. Then only ExpressPay of the Bank of Georgia was distinguished from the market players and established zero-rate regime.

6 months after TBC Pay management also made this decision, although zero-rate is valid only in the regions, where 1 115 machines are located. In total 2 100 machines are involved in the selfservice network of TBC Pay. Average monthly turnover is 40 million GEL. Growth equals to 18% in 6 months. Management explains it with high quality service, wide range of providers and variety of the services.

BANK CONSTANTA PROFITS GROW BY NEARLY 63% Y-O-Y

ank Constanta reported profit of 10.3 million lari as of September 30. This volume is increased by 63.3% year-on-year. The bank’s total assets amounted to 321.4 million lari (year-on-year growth – 47%). Net loans made up 245.8 million lari (growth – 53%) while loan loss reserves – 9.4 million lari (growth – 76.5%). Ratio of idle loans to total loans made up 3.56% instead of 3.36% a year ago. Total liabilities amounted to 273.3 million lari (year-on-year growth – 46.3%).

At that, sum on clients’ current accounts made up 10.55 million lari (growth – 2.2 times), demand deposits – 6.7 million lari (decline – 49.3%), while fixed deposits – 53.9 million lari (growth – 1.9%). Return on assets (ROA) made up 4.73% instead of 4.33% a year ago, while return on equity (ROE) – 32.99% instead of 29.7%. In the reporting period, major shareholders of Constanta were TBC Bank – 86.29%, OikoCredit – 9.39%, Tamar Lebanidze – 1.59%, Levan Lebanidze – 1.1%.

NATIONAL BANK ISSUED 300 MILLION GEL LOANS

N October 17, on the 7-day refinancing loans auction of the National Bank, loan of 300 million nominal value was issued. NBG informs that loan applications 3 commercial banks have been approved. Minimal interest rate equaled to 3,75%, maximal - 3,78%, average weighted - 3,75%.

VTB CONTINUES NETWORK EXPANSION

TB opened a new branch on Lilo Mall territory. VTB Bank Georgia informs that the branch of the modern standards will provide full banking services to the individuals and legal entities. Getting of business, consumer and mortgage loans, international and local money transfers, payment of communal taxes, pawn and other baking services are available in the service center. In the new branches bank’s clients are provided by maximal comfort and high quality service. VTB Bank is represented by 25 points in Georgia. VTB Group member banks operate in over 20 countries. Universal group model includes corporate, retail and investment businesses. VTB Bank Georgia possesses highest - BB credit rating among Georgian Banks.

HALYK BANK OPENS TBILISI BRANCH

alyk Bank expended branch network. The bank informs that the customers can get banking services in Didube branch, Tbilisi from October 15. The branch is located on the territory of the trade center near Station Square, at #8 Tsabadze Street. It’s noteworthy that in the current year Halyk Bank has opened 4th branch in Georgia, out of them one is located in Batumi, 3 - in Tbilisi. Bank actively provides credits to retail, also small and medium-size business, cooperates with corporate segment and is involved in the preferential agrocredit program. Nikoloz Geguchadze, director general of the bank states hat population and business sector can get wide range of banking products of the Halyk Bank in all its branches. Halyk Bank Georgia operates on Georgian market since 2008. 100% of its share belongs to Kazakh Halyk Bank. Halyk Bank is one of the largest financial institutes of the Kazakh financial market. According to second quarter 2013 data, bank’s actives equal to ^16,3 billion, capital - $2,23 billion.

PROCREDIT BANK GEORGIA ENDS JANUARY TO SEPTEMBER PERIOD IN 12.32 MILLION GEL PROFITS

BANK OF GEORGIA EXPANDS EXPRESS NETWORK ank of Georgia announced about opening of the new Express service center. Customers can benefit form banking services in the Express service center located on#41 Gorgasali Street, Tbilisi. Currently there are already 42 service centers in the Express network of the bank, which are divided nto 2 zones: self-service where internet-banking, self-service terminal PayBox and ATMs are available and second, operators’ service zone, which works from 9:00 to 21:0, from 10:00 to 18:00 on the weekends. 6 persons were employed in the new Express center.

October 21, 2013 #26

caucasian business week

SEPTEMBER RECORDS GROWTH IN PLASTIC CARD TRANSACTIONS

eptember transactions made by plastic cards emitted by resident banks equaled to 761,2 million GEL. According to National Bank Of Georgia’s (NBG) statistic, amount has increased by 21 million in comparison with previous month (37 million decline was mentioned in August). ATM transactions have increased by 10 million, to 581 million GEL.

Transactions though trade center POS terminals have increased by 1,2 million, to 82 million GEL, through banks’ terminals - by 5 million, to 40 million GEL. By October 1, 2013 there are 4 516 957 units of debit and 1 213 024 units of credit cards in the circulation. Over 90% of the cards come on Visa, others on EC/MC and other system cards.

SC Pro Credit Bank (Georgia) completed January-September 2013 with 12,32 million GEL profit (01/09/2013 - 10,8 million GEL). By the end of the third quarter, deposit portfolio of the bank equaled to 529,23 GEL (01/09 -524,4 million GEL), credit portfolio 673,2 million GEL (01/09 - 681,2 million GEL), overall obligations - 870 million GEL (01/09864,5 million GEL). By October 1, bank’s actives exceeded to 1 billion GEL (01/10 -1,002 billion GEL; 01/09 - 995 million GEL). JSC Pro Credit Bank is a member of the international baking group, operates since 1999 in Georgia and is mainly oriented on the lending of small and medium-size business. 100% of the bank’s stocks belong to ProCredit Holding AG &Co. KGaA. Among 9 beneficiaries 10 over 1-% belongs to: IPC (17,88%), KFW (13,74%), DOEN Foundation (13,44%), IFC (10,39%). Stock capital of the bank equals to 132 million GEL (01/09 -130,1 million GEL).

ECONOMY October 21, 2013 #26

caucasian business week

CREATING A REGIONAL ENERGY MARKET: LEARNING FROM THE NORDIC EXPERIENCE

rofessor Einar Hope from the Norwegian School of Economics (NHH) is a leading Nordic authority on energy market design and regulation. In 19951999, he took a break from academic activities and served as director of the Norwegian Competition Authority. This year’s visit to Georgia (and ISET) was the second one for Professor Hope in as many years. In addition to advising

ISET students, Professor Hope used his ten-day stay in Tbilisi in order to deliver a public seminar “THE POTENTIAL OF GEORGIA’S ELECTRICITY SECTOR IN AN INTEGRATED REGIONAL POWER MARKET”. In his presentation, Professor Hope emphasized the potential for renewable energy, from sources such as hydro and wind, to play an important role in increasing the overall energy capacity and security of electricity supply in any given region. Essentially, regional integration could be seen as a means of pooling energy resources that are available to each individual country in order to create a green, cost efficient and reliable system of electricity supply. The Nordic energy markets, according to Professor Hope, are an excellent example of achieving full integration and making optimal use of e.g. Norway’s hydropower and Danish wind energy. Professor Hope went on

to suggest that greater energy market integration in the South Caucasus could be extremely beneficial for Georgia and its neighbors. In particular, Georgia’s hydro resources could become a backup source and “swing producer” in an integrated regional (South Caucasus) power market. One drawback of most renewables is intermittency. For example, wind and solar power production is highly variable both in the short term (during the day) and long term (seasonally). Thus, the main challenge facing the renewable energy markets is to balance supply and demand on a continuous basis and ensure optimal capacity investment in the long run (resource adequacy). The possibility to regulate hydropower generation (i.e. to have more or less of it), makes it a good complement for other renewables. According to Professor Hope, the integrated Nordic market is exemplary in terms of achieving an excellent mix of wind and hydro energy. Norway’s electricity system is based almost 100% on hydro power, yet it is fully integrated into the larger Nordic power market, with transmission cables going further to Germany, the Netherlands, and (potentially) the UK. With the share of highly intermittent wind power growing in the European markets, Norway’s ample hydro resources allow it serve “the battery of Europe” function - providing an excel-

lent back-up source that ensures stable electricity supply for the entire regional market. While the potential is there, creating a similarly integrated market in the South Caucasus would require major efforts to open up existing technical bottlenecks (interconnection capacity), and introduce market mechanisms and regulations to facilitate international trade in energy resources. Professor Hope’s visit to ISET was arranged with the generous support of the Norwegian Ministry of Foreign Affairs, which also funds ISET’s Energy Economics Concentration. The main goal of this initiative is to educate a new generation of analysts and decision-makers for the fast developing energy field. Coordinated by the Professor Norberto Pignatti, the program of study in the concentration includes topics in renewable and non-renewable energy, energy markets, and international trade in energy resources. As part of this initiative, ISET hosts international scholars who share their knowledge and practical experience with ISET’s students and contribute to the energy policy debate in the South Caucasus. Students in the concentration conduct site visits to, and intern with, private sector companies, NGOs and government agencies concerned with energy policy development. iset.ge

LEADING GDP INDICATOR FOR GEORGIA - OCTOBER 2013 Georgian economy: time to awake the “sleeping beauty”?

ISET PI has updated the forecasts for Georgia’s real GDP growth rates using the August 2013 releases of predictor indices. The updated (fifth) growth forecast for the 3rd quarter of 2013 was revised upward from 1.4% to 2.3% and the second forecast for the 4th quarter growth rate is 5.2%. Meanwhile, Geostat officially announced 1.5% to be the growth rate for the 2nd quarter of 2013. Considering the official estimates for the first two quarters and the forecasts for the last two, ISET PI forecast for the annual growth rate of 2013 is 2.9%, which is in line with the 2.5% forecast that IMF announced for Georgia most recently in their October 2013 report. After the negative (-0.6%) growth of the Georgian economy in June 2013, the situation started to improve in July, when Georgian economy grew by 0.8% and the trend continued in August with 1.1% y/y growth rate for that month. Clearly, these preliminary official growth rates are not impressive, but they hint towards a small acceleration of economic growth before the elections. Though the complicated political situation still heavily affects the economy of the country, the economy could be on course to wake up from its one-year “sleep”.

The good news came mostly from the external trade sector - exports jumped by solid 42% compared to August 2012 and, importantly, the imports kept positive y/y growth (1.1%), hinting at the slight pick up of the aggregate demand. Money inflows increased by 11.2% and the electricity consumption increased by 6%. Yet, several indicators still do not show signs of improvement. In particular the Consumer Price Index, where the year-on-year change has stagnated near zero for several months. The CPI y/y change for August, was -0.4%. Moreover, the -1.3% y/y change of September suggests that CPI is again heading toward deflation. As for the indices not included in our forecasts, the y/y growth rate for the VAT payers’ turnover remains negative, even though the -2% from August is slightly better than the -2.9% from July. Consumer Confidence Index in August dropped down to its lowest ever -13.3, translating into the y/y drop by 2.7 percentage points. However, in September, CCI jumped up to -7.9%, which is 4 percentage points higher compared to the September 2013. Finally, we should note that while the positive developments in the economy did contribute to the upward revision of the q3 and the q4 forecasts,

we should not forget that there are other reasons (discussed in previous publication) behind the

significantly higher forecast for the q4 growth. iset-pi.ge

AZERBAIJAN caucasian business week

October 21, 2013 #26

FITCH RATINGS AFFIRMS STATE INVESTMENT EXPECTED TO AZERBAIJAN’S LONG-TERM FOREIGN EXCEED $9.3 BLN IN 2014 zerbaijan expects the state investAND LOCAL CURRENCY IDRS ments to hit 7.37 billion manats

itch Ratings affirmed Azerbaijan’s long-term foreign and local currency IDRs and its senior unsecured bonds at ‘BBB-’ on October 17. According to Fitch, the Outlook on the IDRs is Stable. The Country Ceiling is affirmed at ‘BBB-’, and the Short-term foreign currency IDR at ‘F3’. Oil output is stabilizing after a 20 percent decline since 2010, improving the short-term outlook for growth and public finances. Fitch expects oil production will increase slightly by 2015. Longerterm, oil output will fall, given natural decline rates in the main oilfield. Fitch expects overall real GDP growth of 5 percent in 2013, up from 2.2 percent in 2012. Government spending will drive growth of 10 percent in the non-oil economy in 2013, but provide less impetus in 2014 and 2015. Growth prospects outside the oil sector are also hampered by a poor business climate, although the government is piloting improvements. Public finances recorded several years of large surpluses prior to 2013, making Azerbaijan’s sovereign balance sheet one of the strongest among rated sovereigns and mitigating the budget’s high dependence on oil revenues. Sovereign assets held in Azerbaijani State Oil Fund (SOFAZ) reached US $34.7bn (49 percent of GDP) at end-June 2013, having grown US $600m since end-2012. Public spending has grown rapidly in recent years and rose 19 percent in 7M13 to reach 40 percent of GDP. The recent draft 2014 budget calls for a slowdown in spending growth and a lower transfer from SOFAZ to the budget of AZN9.34bn (2013: AZN11.35bn). However, Fitch still expects the consolidated budget deficit to widen to 5 percent of GDP by 2015 from 1 percent of GDP in 2013. The 2014 state budget assumes a wider deficit of AZN1.7bn, 2.9 percent of forecast GDP, based on an oil price assumption of US $100 per barrel, implying higher borrowing. Government debt will rise from a low starting

point of 14 percent of GDP (including guaranteed debt) at end-2012. But the lower projected drawdown from SOFAZ points to SOFAZ assets stabilizing through 2015 rather than falling as Fitch had forecast in April. Fitch expects Azerbaijan to run a current account surplus of 17 percent of GDP in 2013, down 4pp of GDP from 2012 but still one of the strongest surpluses of any Fitch-rated sovereign. The surplus will narrow further but remain comfortable, barring an oil price shock, leading the external balance sheet to strengthen. The banking system is a weakness relative to ‘BBB’-rated peers. International Bank of Azerbaijan, partly state-owned and the largest bank in the system, now meets minimum standards for regulatory capital after receiving capital injections from the government totaling 0.5 percent of GDP. However, Fitch believes it may require more capital to help clean up its balance sheet, which would be manageable for the government. The Stable Outlook reflects Fitch’s view that upside and downside risks to the rating are balanced. Positive including sustained action to reduce risks to the public finances from oil price shocks via a credible medium-term fiscal strategy would increase confidence in the sustainability of the public finances. Fitch assumes that the price of oil, Azerbaijan’s main export and source of budget revenue, will average US $105 per barrel in 2013, and US $100 per barrel in 2014 and 2015. Growth and fiscal projections are sensitive to oil production assumptions. Fitch assumes that oil production stabilizes in 2014 and increases 3 percent in 2015, before resuming a mild decline. Fitch assumes that Azerbaijan avoids domestic or regional political shocks, such as no escalation in hostilities with Armenia over Nagorno Karabakh, and domestic political stability is preserved following the presidential election in October 2013. Fitch assumes that the government broadly adheres to the draft 2014 budget submitted to parliament in October.

AZERBAIJAN’S NON-OIL SECTOR GROWS

he Azerbaijani GDP amounted to 42.7 billion manat in January-September 2013, which exceeds the figure in the same period of 2012 by 5.4 percent. The State Statistics Committee reported that GDP per capita increased by 4.1 per cent to 4,606 manat ($5871.4) in a year. During the reporting period, some 63.6 per cent of the Azerbaijani GDP was formed in production, about 46.5 per cent in industry, 11.3 per cent in construction, 5.8 per cent in agriculture, forestry and fishing. About 29.9 per cent of the gross product was created in the service sector.

Net taxes on production and imports amounted to 6.5 per cent of the Azerbaijani GDP. Some 23.9 per cent of GDP produced in the service sector fell to the trade and repair of vehicles, 18.8 per cent to transport and warehousing, 7.1 percent to placement of tourists and catering, 5.7 per cent to information and communication services, 44.5 percent to social and other service spheres. The non-oil sector grew by 10.4 percent compared to the same period of 2012 and its share in the country’s GDP amounted to 55.9 per cent. The volume of production of value added in the sphere of oil and gas production and processing didn’t change compared to the same period of 2012 and amounted to 44.1 per cent of GDP. The volume of production of value added in the sphere of construction in Azerbaijan increased by 30 percent from January-September 2013 compared to the same period of 2012, placement of tourists and catering 18.8 per cent, trade and repair of vehicles 9.6 per cent, information and communication services 7.1 per cent, forestry and fishery 4.9 per cent, transport and warehousing 4.9 per cent, social and other services 3.9 per cent.

($9.39 billion) in 2014, according to the draft state and consolidated budget for 2014 and the next three years, published by the Ministry of Finance. The government plans to allocate 6.26 billion manats from the state budget, 1.11 billion manats more will be delivered through external borrowing and 1.92 billion from Azerbaijan’s state oil fund SOFAZ. Around 4.74 billion manats of these funds are to be spent on infrastructure projects and 1.86 billion manats on social projects. Another 775 million manats will be spent on the reconstruction of areas, the elimination of the consequences of emergencies, as well as institutional and other projects. According to the priorities of the country’s socioeconomic development, in 2014 public investments will primarily focus on the completion of current projects in the industry, transport, energy and agriculture sectors, construction and restoration of art and cultural facilities, defense, protection of national security and of Azerbaijan’s borders, as well as projects envisaged by various programs. Also, the construction, repair and renovation of sports facilities required in connection with holding the first European Olympics in the country is to be carried out. According to forecasts, the investment volume is expected to go down in the coming years. For example, the state investment program amount is projected at 5.24 billion manats in 2015 and 4.66 billion and 4.18 billion manats in 2016 and 2017. According to the State Statistics Committee, around 10.4 billion manats were invested from all sources in the development of the economic and social areas of Azerbaijan in January-August

2013, which is 22.7 percent more than in the same period of last year. This indicates sustainable investment activity in the country. In particular, around 1.6 billion manats were invested in the Azerbaijani economy in August 2013. Until 2015, we will observe a steady increase in investment in capital construction because of the growth of building, rehabilitation and reconstruction work in preparation for the first European Games due in Azerbaijan in 2015. The main sources of investments in January-August 2013 include funds of enterprises and organizations, worth over 4.309 billion manats, budgetary funds, worth over 4.864 billion manats, as well as non-budget funds (370.7 million manats), bank loans (552.7 million manats), and funds of the population (255.3 million manats). From 2003 to 2013, some 109.8 billion manats ($131.9 billion) were invested in Azerbaijan’s economic development and the implementation of various social and infrastructure projects. The volume of investments in the country’s economy has increased more than five-fold and those in the non-oil sector surged 14-fold as compared to 2003. The official exchange rate for October 17 is 0.7843 manats (AZN) per USD.

IRAN SEEKS TO BOOST TRADE TIES WITH AZERBAIJAN, GEORGIA

ran will send economic delegations to Azerbaijan and Georgia in a bid to improve ties with its neighbors, the Mehr News Agency quoted Yahya Al-e Es’haq, the chairman of Tehran chamber of commerce, as saying. Previously, economic delegations have been dispatched to Iraq and Armenia, and such delegations will be sent to Azerbaijan, Georgia, and Afghanistan, as well, said. The Tehran chamber of commerce pursues the policy of enhancing relations with the Persian Gulf states seriously, he said, adding that a number of delegations have been dispatched to the UAE, Iraq, Bahrain, Oman, and Qatar in this regard. About $274 million worth of non-oil products were exported from Iran to Azerbaijan in the first six months of 2013 (the calendar year in Iran begins on March 21), the economic adviser to the Iranian embassy in Azerbaijan Sayyid Faraj Shahidi told Trend. The main products exported from Iran to Azerbaijan during the reported period include construction materials, including cement, clinker, raw glass, ceramic tile, as well as iron ore and agricultural products, the advisor of the embassy said.

According to him, about $11 million worth of goods was exported from Azerbaijan to Iran in the first six months of 2013. The major part of the import included timber, lumber, cotton, unsaturated cyclic hydrocarbons and various kinds of rubber materials, Shahidi said. Around $2,654,000 worth of 301 cars were exported from Iran to Azerbaijan during the reported period, he added. Moreover, the abolition of the visa regime between Georgia and Iran has increased the number of tourists up to 90,000. Trade turnover between the countries has increased up to $100 million, Georgian ambassador to Iran, George Janjgava has said.

AFRICA’S BUSINESS OPPORTUNITIES TO BE PRESENTED IN BAKU

he Azerbaijan Export and Investment Promotion Fund (AZPROMO) and Azerbaijan Diplomatic Academy (ADA) will hold a presentation on the possibilities of Azerbaijani business opportunities in Africa on October 11. AZPROMO reported that the presentation on ‘Business Opportunities in Africa’ will be devoted to the continent’s four countries - Angola, Namibia, Botswana and South Africa, which are promising from an economic point of view. The profiles of these countries will be demonstrated and potential business opportunities in the field of agriculture, energy, ICT, tourism and

other spheres will be assessed. Azerbaijani entrepreneurs are invited to participate at the event. azernews.az

ARMENIA October 21, 2013 #26

caucasian business week

HIGH ARMENIAN INFLATION ‘EATS’ WAGES AND SAVINGS

igh inflation is wiping out Armenian pay rises hurting also people’s bank savings. According to the National Statistical Service, the 12-month inflation in August rose to 9.3 % from the year before and although the Central Bank raised the refinancing rate from 8 percent to 8.5 percent in a bid to curb inflation, the rise in prices continues to negatively affect the level of incomes. According to official data, the average gross salary in August 2013 increased by 5.1 % year-onyear to 149,725 drams ($368), but the inflation has actually wiped out the growth. In reality in reality the salaries decline by 4.2 %. A similar trend was observed not only in August. For example, in July the wages rose by 5.5 %, but with an inflation of 8.5 %, the median salary actually declined by 3%. The same trend was

observed in the previous months. The situation was somewhat different in April, February and January when the wage growth was a little higher than the inflation rate. According to the Central Bank, the average interest rate on deposits in August was 9.3 %. As a result, the real average rate of returns on deposits in view of the August inflation ranged from minus 0.9 % to plus 0.9 %. It is noteworthy that even in these circumstances, the banks managed to not only attract new deposits from the citizens. Thus, according to the Central Bank, deposits of residents in August this year rose by 21.6 % from the year before to 1. 054.1 trillion drams, of which 726.4 billion were household deposits (an increase of 24.9 %). The experts believe that the burden of inflationary pressures will be felt stronger in the last months of the year, and in the first quarter of 2014, driven by higher prices of natural gas and electricity, which came into force in July. At the same time, the Central Bank of Armenia Board believes that the inflation will be decreasing to approach to the projected target. In September, the 12-month inflation declined to 8.2%. The government inflation projection for this year is 4 % (± 1,5%). ( $ 1-406. 38 drams). armbanks.am

ARMENIA TO HOST EURHODIP CONFERENCE IN 2016

rmenia will host the conference of the Hospitality Business and Public Catering Association (EURHODIP) in 2016. This decision was made at the meeting of the EURHODIP management board in Yerevan Saturday. “We attach great importance to development of personnel in tourism sector. Development of tourism in general is one of our priorities and we attach great importance also to our cooperation with EURHODIP. The conference of 2016 is a very important event and, I hope, it will be come another step for us to achieve the targets we have

set”, Armenian deputy minister of economy Ara Petrosyan said in his welcoming speech. The forthcoming conference will be the 23rd one and will gather members of the Association from over 130 countries. Before that, a number of special training courses will be held for specialists in tourism sector. Chair of EURHODIP management board Cees Van Der Klip, in his turn, said Armenia has a great potential for development of tourism, especially intellectual tourism. Armenia has excellent qualities, and EURHODIP would like to improve tourism level here, Van Der Klip said adding the conference will contribute to it. Hosting the 2016 conference in Armenia was initiated by rector of Armenian Institute of tourism Robert Minasyan who is also a member of EURHODIP management board. The 2013 conference was held in Maribor, Slovenia. EURHODIP’s main activities are arrangement of exams for a European diploma in management, seminars for trainers, annual conferences for staff of hospitality business schools. ARKA

AMERIABANK TO OFFER NEW BENEFICIAL LOAN TERMS TO SME

meriabank is offering new and unique terms of lending to small and medium-sized enterprises (SME), the bank’s press office told ARKA. The earlier a SME applies to Ameriabank for a loan before the end of the year, the more advantageous the lending terms will be”, says the report.

The bank will give its new borrowers a chance not to pay interest till the end of the year, as well as some other privileges. In particular, no commission fee will be charged while giving out the loan. Apart from that, the property insurance and evaluation will be paid by the bank. VISA/MC Business and Gold international credit cards will be provided without additional security required. Loans worth from 5 to 80 million drams may be extended under these terms. The preliminary approval of the loan will take two days only; the number of documents required is brought down to minimum, according to the report. Ameriabank closed joint stock company is a universal bank offering investment, corporate and retail banking services in a complex solution package. Ameriabank has been the first investment bank in Armenia. It has been providing a wide range of innovative banking services since 2007. ARKA

ARMENIA CAN BE TRANSIT ZONE FOR ARGENTINA TO SPREAD ITS PRODUCTION FROM EUROPE TO RUSSIA

rmenia can become a transit zone for Argentina to spread its production from Europe to Russia. The Foreign Trade Secretary of Argentina Beatriz Paglieri stated this at the course of the briefing with journalists held on October 17. As reports “Armenpress” among other things the Foreign Trade Secretary of Argentina Beatriz Paglieri underscored: “There are certain limitations in Japan, the EU, and the United States for Argentina. In this respect it’s not so bad that Armenia does not join the EU. Armenia can become a transit arena for Argentina to spread its production from Europe to Russia.” In addition the Foreign Trade Secretary of Argentina Beatriz Paglieri emphasized that it’s of a certain importance for Argentina to get acquainted with Armenia’s economic capacities. Summing up the

Argentinean official noted: “We have had meetings with the Minister of Agriculture of the Republic of Armenia, the Minister of Economy of the Republic of Armenia, and the Director of the Armenian Development Agency. We shall work in accordance with the cooperation agenda.” Armenpress

ARMENIA’S ECONOMY MORE LIBERAL THAN EU COUNTRIES’ ECONOMIES

rmenia’s economy is more liberal than EU countries’ economies, Beatriz Paglieri, the head of the Argentine Economy Ministry’s Foreign Trade Secretariat, said Thursday in Yerevan at the first Armenian-Argentine Business Forum. “The Armenian economy is more liberal than the EU economies, which create obstacles for exports and cooperation with Argentina,” she said. Paglieri said that Argentina faces some difficulties in exporting its goods to EU countries, the United States and Japan because of the imposed restrictions, including customs regime. Garegin Melkonyan, Armenian deputy economy minister, on his side, said that Armenia’s tax and customs laws are flexible enough, and there is favorable environment for investment ion he country. “We have high opportunities for entering Russia’s market, and cooperation with the European Union gives us room for exports, since there are certain preferential export regimes for more than 300 varieties of Armenian goods,” he said adding that membership in the Customs Union will is very promising for Armenia. Voicing satisfaction at the developed laws, trade relations between Armenia and Argentina are quite weak because of countries locations and few business ties. The first Armenian-Argentine Business Forum was launched today and will be wrapped up on Saturday.

Representatives of pharmaceutical, textile and meat-producing companies as well as other businesses gathered in Yerevan for this forum. The event is organized by Armenian Development Agency and Argentina’s Embassy in Yerevan. The National Statistical Service of Armenia says Argentina was the biggest investor in the real sector of Armenia’s economy in the first half of this year. Its investments here totaled $76.1 million in Jan-June 2013 after growing 10.4 times, compared with the same period a year before. Argentina’s direct investments in Armenia have grown 67.2% to $8.2 million. Argentine investments are intended for development of air transport ($72.3 million) and for construction of houses ($565,000), and $3.3 million has been invested in plant-growing and cattle-breeding businesses, hunting and related services. ARKA

SPANISH BRAND HOTELS TO OPEN BRANCHES IN ARMENIA

he representatives of the hotel networks of Spain will get acquainted with the available opportunities to open branches in Armenia. The Deputy Minister of Economy of the Republic of Armenia Ara Poghosyan told Armenpress that the Spanish specialists intend to visit our country in 2014. “The representatives of the hotel business will come to Armenia with a cognitive visit, during which they will get acquainted with the necessary conditions to establish a hotel business in Armenia. The visit is organized by the State Tourism Agency of Spain. The agreement was achieved during our visit to Spain in 2012”, - said Ara Poghosyan. With the Government’s program 2012 it is intended to multiply the number of tourists coming to Armenia thus fostering the development of the substructures. Several internationally known hotel networks function in Armenia, among them

Best Western, Tufenkian and Hyatt. The number of tourists coming to Armenia has increased during the months of January-July 2013 by 14,3%. According to the data provided by the National Statistical Service of the Republic of Armenia, within the abovementioned period 321,279 people arrived in Armenia. During the months of January-June 2013 343,263 people left Armenia for tourism purposes. In comparison with the same period of the year of 2012 the indicator has increased by 13,6%. In the months of January-December of 2012 Armenia was visited by 843,330 tourists, which exceed the indicator of 2011 by 11,3%. By the results of the analyses of the World Tourism Competitiveness Report of the World Economic Forum 2013, Armenia has occupied the 79th place among 140 countries. In comparison with 2011, the position of Armenia has advanced by 11 horizontals. Armenpress

CIS

SINGAPORE’S COMPANY EXPANDS TEXTILE PRODUCTION IN UZBEKISTAN

ingapore’s Indorama Industry Pte ltd put into operation the second stage of the textile production in the Ferghana region of Uzbekistan, a source at the O’zbekyengilsanoat State Joint Stock Company (Uzbek Light Industry) told Trend. The first stage of textile production for cotton fiber processing worth about $30 million was commissioned by Indorama in September 2011. The source said that after the second phase worth $ 31 million was commissioned, the cotton fiber processing enterprise’s capacity increased by 5,000 tons to 15,000 tons of cotton fiber per year.

The project was financed through direct investments worth $25 million of the Singapore-based company and loans from foreign banks involved in the project financing. The Swiss company Rieter supplied equipment to the textile complex. The project implementation ensured increased capacity of processing cotton fiber up to 10,000 tons per year. Indorama Kokand Textail joint venture was established with a registered capital of $20 million, where Indorama has a 75 percent stake, the National Bank for Foreign Economic Activity - a 25 percent stake. The Uzbek government provided the Joint Venture with customs exemptions on imported technological equipment, tooling, spare parts, accessories and building materials until 2016. According to the industrial development program, Uzbek Light Industry Public Joint Stock Company will implement 106 investment projects worth $1.678 billion in 2011-2015. Uzbekistan is the sixth world producer and the third largest exporter of cotton fiber. An average of 3.5-3.7 million tons of raw cotton is harvested and 1-1.2 million tons of cotton fiber produced in the country annually. More than 75 percent of produced cotton fiber is exported.

TURKMENISTAN UPS INT’L CARGO TRAFFICS

October 21, 2013 #26

caucasian business week

urkmenistan recorded high figures in the enterprises of car, railway and air transport during the first nine months of 2013. The Turkmen government reported that in particular, the dynamics of growth in the cargo and passenger transportation compared to the level of nine months of 2012 is as follows: the Ministry of Railway Transport - 117.1 and 102.2 per cent, Ministry of Motor Transport - 103.5 and 102.5 per cent, the Public Service of Maritime and River Transport - 100.2 and 208 per cent, Turkmenistan Airlines - 101.1 and 106 per cent. Turkmenistan borders with Kazakhstan, Iran, Russia, Uzbekistan, and Afghanistan on land and with Azerbaijan, Russian Federation, Kazakhstan and Iran in Caspian Sea. Regional transport projects have been activated in recent years; large-scale reconstruction of seaport in Turkmenbashi is being prepared, high-

ways are being modernized. In May 2013 the project for merging the railroads on Kazakh-Turkmen border was launched. The North-South project is implemented by two neighbouring countries jointly with Iran. A trilateral intergovernmental agreement was signed in 2007. The Iranian and Turkmen railway networks are expected to be connected till the end of the year. This regional project will give European and Asian countries access to Central Asia and to Persian Gulf. Similar opportunity will appear for transporting cargo from Southern and SouthEastern Asian countries and from the shores of Indian Ocean to the countries of Northern and Eastern Europe through Iran, Turkmenistan, Kazakhstan and Russia. Moreover, the construction of another transport highway - “Turkmenistan-Afghanistan-Tajikistan” - has been launched. China, Kyrgyzstan and Iran may join it at later stages.

KAZAKH NAVY STARTS EXERCISE IN CASPIAN SEA

he Kazakh Navy hold an exercise ‘Shagala 2013’ on protection of oil and gas facilities in the Caspian Sea, the Kazakh Defense Ministry reported. As a part of the exercise, the Kazakh naval forces must protect and defend strategic facilities, artificial islands and oil and gas facilities in the Kazakh sector of the Caspian Sea. They will work on strengthening of the state border, protection and defense of vessels and ships at the sea and conduct live fire drills with weapons of new Kazakh rocket-artillery ships ‘Kazakhstan’ and ‘Oral’. The exercises will last for three days.

YANUKOVYCH: SIGNING OF AGREEMENT ON ASSOCIATION WITH EU IS KEY TASK FOR UKRAINE

signing of Agreement on association with the EU is a key task for Ukraine... A signing of Agreement on association with the EU is a key task for Ukraine. According to an UNIAN correspondent, President of Ukraine Victor Yanukovych said this during proclaiming of joint statement with President of Estonia Toomas Hendrik Ilves. The President of Ukraine noted that as of today a preparation for the Eastern Partnership Summit in Vilnius is coming to an end. “I would like to stress that a signing of the Agreement on association between Ukraine and the European Union during the summit is our key task”, said the President of Ukraine. “Ukraine is about to start implementation of the provisions of the Agreement on association after signing”, - said V. Yanukovych. unian.info

KAZAKHSTAN AIMS TO CREATE SMART POWER SYSTEM BY 2030

azakhstan plans to create a smart power system by 2030, board chairman of Samruk-Energo joint stock company Almasadam Satkaliyev was quoted as saying. “Samruk-Energo considers it necessary to establish the Kazakh Smart Power System by 2030,” Satkaliyev told a conference, “Access to energy: on the path to progress”. According to him, the transition to smart power systems is one of the major development trends in today’s world electric power industry. “The characteristic features of such systems are flexibility, control, automation, minimization of the human factor and the presence of accumulating stations,” Satkaliyev said. According to him, the use of a smart power system will give Kazakhstan an opportunity to painlessly integrate renewable energy sources (RES). Satkaliyev believes that this can be done through the construction of combined power plants, for example, by using RES with hydro accumulation stations. According to the Samruk-Energo board chairman, active consumers as opposed to the conventional passive ones will become one of the key components of the smart power systems. He said that for example, electric cars not only consume energy from the power system but also provide electricity for it. When one does not use an electric car, while connected to the power system it will automatically sell electricity at rush hours, and buy it when the demand is down, thereby helping to cover rush hour loads. Besides, an electric car earns money for its owner due to the difference in prices for electricity provided during the rush hours and at regular time.

Satkaliyev said electric cars today are rare, but growth in their number is undeniable. Climate change is presently one of the acute global issues, and shifting from hydrocarbon fuels to the use of renewable energy is one of the essential solutions to the problem. Energy-rich Kazakhstan is currently looking for ways to use renewable energy sources. In late January, an action plan was adopted on the development of renewable energy sources for the period from 2013 to 2020. Renewable energy, which is commonly called alternative energy, comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are naturally replenished. Renewable energy is an alternative to fossil fuels. Experts believe that Kazakhstan has to turn to alternative energy sources by 2030, as the traditional sources are being exhausted and their prices are rising. They charge about 20-30 percent of domestically consumed energy can be saved through the use of alternative energy resources. According to a recently adopted concept for a transition to ‘green economy’, in case of high domestic prices for natural gas, the energy basket of the country will comprise 11 percent of wind and solar energy sources while the share of nuclear power will be 8 percent, hydropower 10 percent, gas 21 percent and coal 49 percent by 2030. Given Kazakhstan’s natural conditions, it is clear that the most promising alternative energy sector is wind power generation. Relevant studies conducted in the Central Asian state’s regions showed that wind power generation has vast potential. azernews.az

KYRGYZSTAN SAYS A SPECIAL FUND NEEDED TO HELP COUNTRIES WISHING TO JOIN CUSTOMS UNION

former Soviet republic of Kyrgyzstan has once again confirmed its intention to join the Russia-led Customs Union suggesting that a special fund be set up to show assistance to those countries that have expressed a similar desire, RBC reported. “I would like to confirm the intention of the government of Kyrgyzstan to follow the path of integration in the Eurasian economic space and to continue the accession negotiations,» Kyrgyz prime minister Zhantoro Satybaldyev was quoted as saying during a visit to Kazakhstan. According to him, integration processes in the Eurasian space have created broad prospects for economic development of Kyrgyzstan. “Of particular importance is the question of establishing a mechanism to support countries which intend t++o

join the Customs Union. It is no secret that per capita GDP in Kyrgyzstan is much more less than in the Customs Union. Such mechanisms exist in all integration alliances of the world “, he said. ARKA

WORLD NEWS October 21, 2013 #26

caucasian business week

‘MANUFACTURED’ CRISIS COST US $24BN -S&P

tandard & Poor’s says the shutdown in total cost the US economy $24 billion, or $1.5 billion per day, the rating agency said Wednesday. The agency also estimated the shutdown will pare fourth quarter GDP by 0.6 percent. Obama has signed legislation that will avoid a technical debt default, ending the 16-day partial shutdown of the government that has cost the world’s largest economy billions of dollars. “The bottom line is the government shutdown has hurt the US economy,” the S&P statement said. Moody’s Analytics has estimated the government shutdown could cost the US government up to $55 billion, the same amount as devastating Hurricane Katrina in 2005. The deal will reopen the government after 16 days of partial shutdown and fund spending through January 15 while extending the $16.7 trillion debt ceiling through February 7. This time frame would be longer than the 6-week extension Obama promised to veto. The next major deadline is the December 13 - target date for a budget negotiation. US Speaker Boehner did not block a vote on the legislation in the House, as the lower chamber passed the bill 285-144, putting an end to the weeks-long stalemate. The Senate passed the plan earlier Wednesday by a vote of 81-18. If the ceiling wasn’t lifted by October 17, the world’s biggest economy would not have had enough cash on hand to pay its bills. Previously, IHS Global Insight, a Massachusettsbased research firm, estimated the shutdown was costing America $1.7 billion per week in lost economic output according to a study. Shutdown.com, whose data models and averages the IHS estimate, marks the cost of the government shutdown at $4.7 billion. The financial burden of the shutdown has already surpassed the at least $2 billion in destruction brought by floods and mudslides in Colorado in September, according to Eqecat Inc., a California-based catastrophe-risk consultant.

Damage is done

In place for almost a century, first introduced in 1917, the US has never defaulted on their debt. Republicans and Democrats have used the debt ceiling as a political gambit to rehash budget wars, and every time, put investors on nerve and world markets on edge. These political games have damaged the US’ reputation, and could have a lasting effect. State-owned Chinese media lambasted the US for creating “manufactured crises”. China, which holds the lion’s share of US foreign debt in dollar reserves, nearly $1.3 trillion, would have a lot to lose if it wakes up on October 18 and the US dollar has tanked and Treasury bonds and yields fall. Fitch Ratings agency announced on Tuesday it has put the United States’ ‘AAA’ credit rating on review because of the stalled debt ceiling negotiations. The ‘political brinkmanship’ and ‘reduced financial flexibility’ of the US were cited as reasons to consider downgrading the superpower. The 26 day shutdown in 1995-1996 cost the US economy over $2.1 billion in current dollars, according to the Office of Management and Budget Data. However, the far-reach of the American economy and the dollar as a reserve currency may preserve the US’s dominant role in the world economy. “While the US economy still growing and remains the most efficient in the world, it cannot worry too much about their image,” Igor Nikolaev, director of the strategic analysis department at PKF told RT. US gross domestic product is still projected to grow 2 percent in the fourth quarter, but some economists worry the dollar, already at an 8-month low, is at more of a risk because of the default, and the more politicians play with fire and brinkmanship the markets will flinch. Last time Congress debated the debt ceiling in 2011, Standard & Poor dropped the United State’s ratings from AAA to AA+. The first shutdown in 17 years hit America at a vulnerable time, as it is still digging its heels out of recession and starting to recuperate from the 2008 financial crisis, which stemmed from America’s ‘too big to fail’ banking industry. Ft.com

FAMA, HANSEN AND SHILLER WIN NOBEL PRIZE FOR ECONOMICS

he Nobel Prize for economics has been awarded to a trio of American academics for their work on what drives asset prices, a controversial question which goes to the heart of the current macroeconomic debate over the crisis. Eugene Fama, Lars Peter Hansen and Robert Shiller have all spent their careers analysing how the value of assets, such as stocks and bonds, vary over time. However, mirroring the broad disagreements which typically characterise the economics profession, the three scholars have come to radically different conclusions. Mr Fama, from the University of Chicago, is one of the fathers of the so-called “efficient market hypothesis”. This theory – which underlies his

seminal 1965 paper “Random Walks in Stock Market Prices” – formulates that markets are “informationally efficient”, as investors immediately incorporate any new available information in the price of an asset. In contrast to Mr Fama, Mr Shiller, from Yale University, believes that any explanation of investors’ behaviour cannot be fully based on rationality and must acknowledge the role played by psychology. In the 1980s, he showed that stock prices tend to fluctuate more than corporate dividends. This should not happen if investors were fully rational, since stock prices forecast future dividends. In the 2000s, Mr Shiller applied his insights on investors’ “irrational exuberance” to the US

housing market, which he believed was overvalued. He claimed that the behaviour of house prices was driven by excessive optimism over future valuations – a finding which proved remarkably prescient when the market crashed in 2007. Mr Hansen, a co-founder of the Becker Friedman Institute also at the University of Chicago, designed methods to explore the drivers of stock market volatility. His statistical brainchild – called the “Generalized Method of Moments” – confirmed Mr Shiller’s finding that swings in asset prices could not be explained via standard models based on rationality. Subsequent work has shown that at least some of this volatility can be explained by investors’ different attitude towards risk. At different stages over the last decade, the three academics have all individually been considered as possible favourites for the $1.23m prize. However, on Monday the economics community buzzed with astonishment at the joint award. “Nobel Prize for Fama who led millions to believe financial markets are efficient and for Shiller who showed opposite. What a contradiction,” tweeted Paul De Grauwe, professor at the London School of Economics. The work of the three laureates has been highly relevant for market practitioners as much as academics. Mr Shiller contributed to build the monthly Case-Shiller housing indices that mea-

sure home prices in cities across the US. This helps investors to measure movements in house prices and to insure themselves against fluctuations. Mr Fama’s insight that markets immediately incorporate all available information in stock prices led to a careful re-examination of the merits of stock-picking and of the performance of mutual funds. The lack of predictability of stock movements has been an important driver behind the emergence of index funds, which aim to replicate the movements of an index or of a specific market rather than second-guessing where they will move. The wide recognition the scholars enjoy from investors has made them prominent voices in the debate over the future of the financial world after the crisis. Mr Fama last year warned on the issue of moral hazard among financial institutions considered too large to collapse in the wake of the financial crisis. “The worst thing to come out of that experience in my view is ‘too big to fail’,” he told the CFA Institute Annual Conference in Chicago last year. “The institutions that are too big to fail have their debt priced as if it was riskless, which gives them a low cost of capital, and creates an environment where it is easy for them to expand. Then we have an even bigger problem.” Ft.com

PUBLICITY caucasian business week

October 21, 2013 #26

TBILISI GUIDE October 21, 2013 #26

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 caucasian business week

October 21, 2013 #26