Caucasian Business Week #46 by Caucasian Business Week

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BUSINESS WEEK March 17, 2014 #46

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March 17, 2014, Issue 46

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BE INFORMED, DO BUSINESS

GEORGIA ISRAEL VISA-FREE TRAVEL DETAILS ANNOUNCED

EUROPEAN SUPERMARKET CHAIN SPAR ENTERS THE GEORGIAN MARKET

Kakha Kaladze: Those promoting negative public opinion against significant projects are saboteurs! Pg. 10

LONDON HOUSE GEORGIA LOST 0.5 MILLION USD INVESTMENT AFTER PROCREDIT BANK THWARTED CONTRACT AGREEMENT

Kadagidze remains against removal of Financial Monitoring Service to the Ministry of Finance

ommersant” has learnt what international retailer will replace “Foodmart” in the Georgian market. According to our source, we are talking about the European network SPAR. Pg. 4

AZERBAIJAN WAS #1 INVESTOR IN THE Q4

he Supreme Court of Georgia has passed a decision and obliged JSC ProCredit Bank to pay 1005.74 GEL to London House Georgia as part of the appeal for abolishing the November 7, 2012 decision of the chamber of civil cases of Tbilisi Court of Appeals.

WINE EXPORTS ANNUAL GROWTH MADE UP 296%

n January to February 2014 Georgia’s wine exports tripled (up by 296%) compared to the same period of 2013. Pg. 6

TBC STARTED SPECIAL OFFER FOR THE DEPOSITS OF INTERNET BANK’S USERS

pening of deposit is possible without coming to the banks, with the interest rate of 0,5%. 4 kinds of deposits are involved in the action: fixed-term deposit, Term plus, My Aim, Mu Safe.

ProCredit Bank Loses New Trial with LLC London House Georgia WISSOL RANKS THE LAST IN CONFIDENCE INDEX, ROMPETROL AND GULF ARE LEADERS

Pg. 9

SWITZERLAND INVESTS $97 MILLION TO ASSIST TRANSITIONS IN AZERBAIJAN’S ECONOMY

witzerland has invested over 85 million Swiss francs (1 CHF= $1.1388) for transition processes in Azerbaijan’s economy, including reforms in the country’s finance sector. Pg. 11

CIS WHY IS UKRAINE’S ECONOMY IN SUCH A MESS?

WORLD NEWS CHINA TO BECOME WORLD’S BIGGEST ‘BILLIONAIRE CLUB’ BY 2023

sia is set to overtake Europe as the home of the biggest number of billionaires within the next decade, according to a new survey. Pg. 13

Pg. 9

BW publishes results of the research on fuel quality and consumer confidence. The research was conducted in Tbilisi and drivers of 146 various automobiles were questioned to clarify whether drivers are content

“WE OUSTED GAMSAKHURDIA, SHEVARDNADZE, REELECTED SAAKASHVILI, BUT “BANK OF GEORGIA “REMAINS UNSHAKEN

“If it continues like that, it will appoint a Prime Minister and will enact laws” Pg. 6

with fuel quality, the filling stations they use and trust. The confidence index includes fuel quality, refueling accuracy and services issues. The research has showed a major part of the drivers (72%) is discontent with the fuel quality. 65% trust the refueling is accurate, while 43% believe the service quality at filling stations must be improved. As to the brands, the lowest level of confidence was recorded for Wissol network of filling stations. Only 8% of the questioned drivers have showed their trust to the company. The highest level was recorded for Rompetrol. 38% of the questioned drivers named Rompetrol as the most reliable filling stations network. As to other companies in the retail trade sector, the confidence index is as follows: Gulf – 22%, Lukoil – 19%, SOCAR – 8%. CBW conducted the research from March 1 to March 10.

Ministry of Economy Completed Work on Amendments to “Free Trade and Competition Law” Pg. 4 Zurab Lalazashvili: Laws are Made without Consultation with the Business Pg. 4 Georgia - Israel Business Chamber Asks for Georgian Government Guarantees for Investors Pg. 4 Rakia changes Poti Free Industrial Zone management model Pg. 6

Kakha Bendukidze Protects Genetically Modified Products Pg. 4

Pg. 9

MAIN EVENTS caucasian business week

March 17, 2014 #46

PM COMMENTS ON UKRAINE

ommenting on developments in Ukraine, Georgia’s PM Irakli Garibashvili said on March 13 that Tbilisi “condemns infringement of state sovereignty” and added that his government pursues “pragmatic” and “firm” policies and he has no intention to “compete with anyone in making radical statements.” “This is really regrettable and we are really concerned about what is happening today in Ukraine,” PM Garibashvili said during a meeting with students in the Tbilisi State University. “Ukraine is our friendly country; Ukrainian people are our friends and personally I am worried about what is happening in Ukraine. We support the Ukrainian people’s decision and respect their choice to build European, democratic and civilized country; and we condemn any infringement of state sovereignty,” he said. “This is our firm position – a position of a friendly country and I am not going to compete with anyone in making radical statements. We should have pragmatic, reasonable and at the same time firm attitude towards any issue,” Garibashvili said.

He also said that “even against the background of developments in Ukraine”, Georgia’s western partners hail “constructive policy” pursued by Georgia in respect to Russia. In an interview with Agence France-Presse (AFP) this week, Georgian President Giorgi Margvelashvili said that the failure of the international community to “stand up” to Russia’s invasion of Georgia in 2008 let Moscow think it can get away with seizing Crimea. “The fact that the 2008 scenario used by Russia in Georgia -- when a sovereign state’s territories were seized with military force -- is now being employed again in 2014 against another country proves that in the last six years both we and our partners have failed to stand up to Russia,” Margvelashvili told AFP. “Today we can state with regret that we and the international community have failed to use these six years to force Russia to realise that actions like these are wrong and ineffective,” he said. “A strong and unequivocal response must be formulated that means such scenarios can never be repeated and that the idea of a sphere of influence is dropped,” Margvelashvili said.

PM IRAKLI GHARIBASHVILI: “I WANT THE POPULATION TO REALIZE THE FULL IMPORTANCE OF OBAMA TO MEET GEORGIAN PM AT HAGUE SUMMIT KHUDONI HPP”

eorgia’s PM Irakli Garibashvili was asked a series of questions regarding the Khudoni HPP project during his meeting with students. The questions revolved around the threat similar projects pose to cultural landmarks, as well as potential negative effects they may have on local climate. The planned project, which will be a major forward step in the energy business for Georgia, faces certain controversy since it will cause a Svanetian village to be flooded and its population relocated. “We should not confuse the population about the gigantic dam destroying Svanetian culture. No one is planning on destroying it – Svaneti is not facing this type of danger,” stated Garibashvili when asked about the project’s influence on the region’s environment. “I’ll be the first defender of Svaneti’s culture, I’ll be one of the first to defend diversity – but you have incorrect information. We must take every citizen’s stance and

opinion into account, never will the government make decisions against the will of our residents. Opinionated parties have to be correlated, we must adequately explain what the project’s construction will mean to the country, to its development and energy independence. And if after all this they still oppose the plant construction and are backed with strong arguments, I will absolutely take it into account.” The PM noted that current arguments regarding the project’s negative effects on the environment were loose and aimed at misinforming the listeners, and that researches and facts from people competent in these matters hold priority. “The investor company, the Ministry of Energy, they’re also bound to address these questions along with us, the government. I’m personally motivated and not at all disinterested in this issue, it’s quite the opposite. I never do and have never done anything against our population,” concluded Garibashvili.

resident Barack Obama writes in a letter that he hopes to meet Georgian Prime Minister Irakli Gharibashvili at the third Nuclear Security Summit in the Hague 23-25 March. The US president’s letter to Gharibashvili, published on Monday, deals with the upcoming summit and cooperation with Georgia ‘to strengthen nuclear security globally.’ “I would also like to work with you to ensure that other international actors, such as the International Atomic Energy Agency, are strengthened to carry forward the nuclear security mission as it growth,” the letter says. “We especially appreciate Georgia’s partnership in efforts to thwart nuclear smuggling in your region.” Representatives from 53 states will attend the summit with more than 5000 delegates. President of the US, Chancellor of Germany, PM of the UK, President of France are among them, as well as Georgian PM.

ISRAEL VISA-FREE TRAVEL DETAILS GEORGIA WELCOMES ROMANIAN ANNOUNCED PRIME MINISTER

eorgian citizens can now travel to Israel without a visa for tourism or other private reasons. Today Georgian authorities released details about the visa-free regime, which was adopted yesterday by Georgia’s Ministry of Foreign Affairs based on information from Israel’s Ministry of Interior Affairs. The new rules state Georgian citizens who travel to Israel as a tourist or private visitor and stay in the country for 90 days or less during a six month period will be granted entry to Israel without a visa. Travellers are obliged to have a return ticket and valid passport, which must be valid for at least

six months from the date they enter Israel. Furthermore, the tourists may be required to provide information about health insurance, hotel reservation and whether they have enough finances to fund their stay in Israel. By gaining visa-free entry into Israel did not mean travelers had the right to work in the country, the Ministry of Foreign Affairs stated. However, Foreign Minister Maia Panjikidze said the Israeli Foreign Minister was currently on strike so the country could not officially provide the Georgian Ministry with all necessary information. In an interview with Georgian journalists, the Ambassador of Israel in Georgia, Yuval Fuchs, said the agreement had been ratified and local citizens could now travel to Israel without a visa. “It is very regrettable that at the moment I cannot speak with authority, only unofficial, because the Israeli Foreign Ministry officials are on strike in demand of better conditions,” the Ambassador added. Meanwhile, the two countries signed the visa free agreement in November last year but Israeli legislative bodies still needed to ratify it. With Israel, Georgia had already unilaterally abolished a visa regime.

eorgia hosted an impressive ceremony to welcome Romania’s Prime Minister to the country. Georgian Prime Minister Irakli Garibashvili hosted his Romanian counterpart Victor Ponta at the State Chancellery today. Ponta was greeted with an official ceremony, which included red carpets and live music. It was the first visit of the Romanian Prime Minister to Georgia. Official sources said Garibashvili and Ponta held a meeting where the Georgian leader thanked his counterpart for his country’s “active involvement” in the EU monitoring mission within Georgian conflict regions of Abkhazia and South Ossetia. Romania was the highest contributor to the mission among the European countries, with 38 monitors deployed in the field observing the territory that borders with Georgia’s breakaway regions. Garibashvili said Georgia was grateful to Romania for its support of the country’s Euro-Atlantic aspirations. Speaking at the press-conference after the meeting, Garibashvili noted security issues in the region were on the agenda of the meeting. Garibashvili expressed hope that the countries would tighten their economic relations. During

the meeting Garibashvili and Ponta discussed the possibility of reestablishing direct marine connection between Georgian and Romanian ports. From his side, Ponta said Romania also looked forward to strengthening cooperation with Georgia and assist the country in its integration to Europe. “Romania thinks it must help Georgia and be an ally in the European Union. We must assist Georgia to join the EU,” Ponta said after meeting. Ponta led the Romanian government delegation, which consisted of Romanian Ministers of Economy, Foreign Affairs, Sports and Youth Issues as well as Government counselors and MPs. The wider group also held meetings with their Georgian counterparts today. Later this afternoon, Ponta met Georgia’s President Giorgi Margvelashvili, who said he discussed the possible signing of the Association Agreement with the EU. “After the document is signed, Parliament of European countries should ratify it. Georgia wants to speed up this process,” Margvelashvili stated. The Romanian delegation will spend a second day in Georgia tomorrow. As well as official meetings, Garibashvili and Ponta are expected to watch a rugby game between the Georgian and Romanian national teams in Tbilisi.

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PUBLICITY March 17, 2014 #46

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INTERVIEW caucasian business week

“WE OUSTED GAMSAKHURDIA, SHEVARDNADZE, RE-ELECTED SAAKASHVILI, BUT “BANK OF GEORGIA “REMAINS UNSHAKEN “If it continues like that, it will appoint a Prime Minister and will enact laws”

e ousted Gamsakhurdia, Shevardnadze, re-elected Saakashvili but “Bank of Georgia “ remains unshaken this loud statement was made by an economic expert Emzar Jgerenaia. Speaking about the Georgia-based monopolies, the expert notes that monopolies run the country. “We ousted Gamsakhurdia, Shevardnadze, re-elected Saakashvili , but we can do nothing with “Bank of Georgia”. On the contrary, if this continues, it will appoint a Prime Minister, will enact laws. It has serious finances and the state should take a principled stand in the relationship with the bank. Don’t they see what’s going on ? “Bank of Georgia” has laid its hands on the construction business, insurance, hospitals... Such a dangerous phenomenon does not exist in Georgia, the country goes through the creation of several monopolies today. I’m not opposed to a strong bank , but if it takes away freedom , takes away construction business from developers , hospitals from hospital business, robs the people- I am against this ,” - Jgerenaia notes.

MINISTRY OF ECONOMY COMPLETED WORK ON AMENDMENTS TO “FREE TRADE AND COMPETITION LAW”

inistry of Economy has finished work on the amendments to “Free Trade and Competition Law”. According to the Ministry, after being discussed on the government session, the bill will be sent to the Parliament where the interested parties will have an opportunity to express their views about the project on the Committee hearings. Deputy Minister of Economy Natia Mikeladez says that the bill aims to promote the development of free competition and competitive market. According to the Ministry of Economy, after the 2012 election the further reform of state policy has become necessary in order to ensure effective supervision aimed at protection of free competition rules and principles in the market and to increase compatibility between Georgia and the European Union markets.

GEORGIA - ISRAEL BUSINESS CHAMBER ASKS FOR GEORGIAN GOVERNMENT GUARANTEES FOR INVESTORS President of the Chamber: The format needs to be changed and the banks , the government and the investor must unite

eorgia - Israel Business Chamber asks for the Georgian Government guarantees for investors. President of the Chamber Itzik Moshe says that there has long been a prac-

tice in Israel when projects receive government grants while the government of Georgia can replace grants by offering guarantees to investors. In his words, the government did not prevent Israeli companies to do business in Georgia but the format should be changed and the banks, the government and the investor must unite. According to Itzik Moshe, the current government supports investors and several business delegations have already visited Georgia. Moshe notes that the peak of the Israeli investments in Georgia was observed until 2007 but the activity is very low in recent years . President of Georgia - Israel Business Chamber hopes that the Chamber will play a significant role in the relations between the two countries and from the current year the Israeli investment boom is going to be in Georgia.

March 17, 2014 #46

BUSINESS ASSOCIATION: LAWS ARE MADE WITHOUT CONSULTATION WITH THE BUSINESS

ntrepreneurs have a feeling that bills affecting businesses are taken without consultation with them - said the head of the Tax and Customs Committee of the Business Association of Georgia Zurab Lalazashvili. According to him, this is not always, but there are similar precedents, and the situation is complicated by the fact that there is no structure that would facilitate the consideration of bills together with businessmen. Recently Parliament Speaker Davit Usupashvili met with members of the Business Association of Georgia. He noted that the relationship between business and Parliament had to move to a new stage , and such meetings should not be formal. Zurab Lalazashvili says that a number of topics were discussed at the meeting, including those that concern business . In particular, it is a Memorandum consisted of four items, which was signed by various business associations of Georgia – reformation of litigation council under the Ministry of Finance, the reformation of the financial police , the definition of “ tax crime” term and partial decriminalization of tax violations , as well as the

change of principle of tax audits. “For us it is important that parliamentarians knew business attitude to a particular topic . In the future, we plan to cooperate with them - in particular, Parliament will pass a bill to us so we’ll be able to make our conclusion about how they act on the business “ - said the representative of the Association.

KAKHA BENDUKIDZE PROTECTS GENETICALLY MODIFIED PRODUCTS

ll vaccines, which are used for treatment of hepatitis and viral infections , are achieved through genetically modification method – Kakha Bendukidze says in response to hot debate in society regarding GM food. According to him, in the USA people pay much attention to their health , accordingly, the food security is maximally protected there and just in this country an important part of agricultural products are developed through the genetic modification. Everything that they say is an absolute lie. These are tales which we are listening to. Insulin is obtained from genetic organisms as well as hormones,” – Bendukidze notes . He adds that 1% of agricultural areas in Europe are allocated for growing GM organisms. Note: In early February Georgia was declared a

closed area for living genetically modified organisms. Its introduction into the environment is prohibited in the territory of the country. This means that the seeds bred from genetically modified organisms will not enter Georgia freely.

EUROPEAN SUPERMARKET CHAIN SPAR ENTERS THE GEORGIAN MARKET

ommersant” has learnt what international retailer will replace “Foodmart” in the Georgian market. According to our source, we are talking about the European net-

work SPAR. Note: “Commersant” exclusively learnt that the owner of “Populi “ “Foodmart” company will bring in Georgia a well-known European brand. “Foodmart “ becomes the owner of the brand’s franchisees . The company does not specify the name of the well-known retailer at this point. “Foodmart “ representative states “Commersant “ that after “Populi”, “Foodmart” will presumably disappear from the market as well , as the world-class brand received their application, became interested and decided to enter. According to Otar Shamugia, it will not be just

a re-branding and we are talking about a full adaptation - introduction of standards of one of the leading European retailers that envisages the implementation of world -class retail practices, the growth of service quality and control, a pricing policy perfectly adjusted to the market and internal marketing activities. Recall that “Foodmart “ bought a chain of supermarkets “ Populi “ late last year . As for the SPAR, a Dutc Spar is an international retail chain and franchise with approximately 12 500 stores in 35 countries worldwide whose headquarters is located in Amsterdam . The brand owns several sub- brands : InterSpar hypermarkets , which compete with “Carrefour “, “Tesco”, a medium-sized supermarkets EuroSpar and SuperSpar, Spar Express which are the smallest shops and are located in small cities.

BUSINESS March 17, 2014 #46

FIRST “ GREEN LIST” OF PRODUCTS SOLD ON THE GEORGIAN MARKET Commersant.ge will reveal the “ Black list “ of genetically modified products

The so-called “green list” will be published every Monday. Director of the Quality Laboratory Irakli Chkadua states commersant.ge that the companies expressed a desire of testing their own products and at this stage the quality of the following products were checked: Bread Products: Bread (white sliced ) – LLC “Nugeshi bakery”; Bread ( Grey ) - LLC “ Nugeshi bakery Ltd “; Confectionery products: Cheese cake - “Tkbili Qvekana” Oatmeal cookies - “ Tkbili Qvekana” Cake with orange jam– “Tkbili Qvekana” Wafers with cocoa – “ Tkbili Qvekana” Children’s meals: Rice porridge Baby Rice - LLC” Baby Food” (HIPP); HiPP 2 organic HiPP 2 ORGANIC - LLC “ Baby Food “ (HIPP); Plum dessert HiPP Plums - LLC “ Baby Food “ (HIPP); Plum juice HiPP Plum Nectar - LLC “ Baby Food “ (HIPP); HiPP 1 Combiotic - LLC “ Baby Food “ (HIPP); HiPP 1 ORGANIC - LLC “ Baby Food “ (HIPP); HiPP PRE - LLC “ Baby Food “ (HIPP). Fruits and Vegetables: Georgian mushroom – LLC “White hat”; Wood mushrooms - LLC “White hat “. As we were told by Director of the Lab Irakli Chkhadua, these products had been checked in February and their number would increase by stages . The public interest with regard to detection of GMOs in food products is too high, that’s why the so- called “Green List” will be updated periodically with reference to the manufacturer and a product that does not contain GMOs,”Chkadua notes. In his words, it takes 7-8 hours to inspect a sample , however, the laboratory is able to test more than 10 samples simultaneously.

caucasian business week

RETURN ELITELECTRONICS. THE COMPANY RECOVERY IS STILL AVAILABLE

our years ago, on March 11, 2010, in this hall I held a special briefing to unveil TBC Bank machinations. I said: TBC Bank has illegally penetrated the ElitElectronics management. I founded the company in 1996. I started with one store and for 15 years, by 2009, I and my friends made the company a leader of the market of home appliances, the major and valuables network with 59 stores and 2000 workers. I also said that having illegally obtained the rights for management, TBC Bank had fired my managing team and appointed TBC Bank worker David Kenchadze as a director. I noted TBC Bank needed my resignation to violate the credit payment terms and appropriate my stake in ElitElectronics in this way. TBC Bank was refusing this scenario before media agencies, but in five days after my briefing my supposition turned out true. David Kenchadze, a New Director of ElitElectronics, violated the credit payment terms and on this ground TBC Bank appropriated the company (see the TBC Bank letter). We continued divulging their illegal activities. They had to arrest us to make us get silent. Today’s special briefing, after four years since those events, is dedicated to the statement of Mamuka Khazaradze. Their new machination astonished me. A new financial fine has been imposed on ElitElectronics for the 2007 activities under my management. The company is under threat, Khazaradze’s statement reads. I know this story very well. I realize what they plan to do. In 2009 TBC Bank also started with statements, then the bank carried out machinations and with the support of prosecutor’s office, the finance police and the court system, the bank appropriated ElitElectronics, reregistered the company to ElitFline owned by David Kezerashvili and today ElitElectronics is managed by David Kezerashvili’s team. They know ElitElectronics’ bankruptcy is inevitable, as the network stores are closed state by stage, they fail to fulfill the rehabilitation plan , creditors demand for their credits and no way out is discerned. I am sure they deliberately concealed documents to ElitElectronics tax departments, because they do not need these transfers to mask illegal steps in stakes and the current condition in the company and hide failure through marketing PR. Today the new government has ceased pressure

Businessman ANZOR KOKOLADZE

on the business sector and businessmen are able to do free business, but TBC Bank is trying to misinform the society and shift the responsibility for their failure to me. I urge TBC Bank founders Mamuka Khazaradze and Badri Japaridze to cease spreading demagogic statements and conducting news conference with the aim to justify their illegal steps taken jointly with the old government. If they genuinely want to rehabilitate their name, instead of misinformation of the society, they should return illegally appropriated assets and in this case we will make sure TBC Bank was made forcibly take part in these processes and not with enthusiasm. I also urge the prosecutor’s office to accelerate investigation of the appeal we submitted to the prosecutor’s office in December 2012. We demand for investigating illegal activities by the old government and TBC Bank! We demand to cast light on illegal schemes for business appropriation so as high-ranking officials of the old

government and Mamuka Khazaradze and Badri Japaridze, who are in collusion with them, have no desire to repeat the same schemes, to prevent their demagogic statements and illegal steps. The current tendencies show ElitElectronics may be bankrupt in the near future and Mamuka Khazaradze and his representatives will state it was unable to rescue the company because of Anzor Kokoladze’s activities. To prevent this situation we stretch out the hand of friendship and declare before the society in advance: Return ElitElectronics, the company recovery is still available. I state with full responsibility we will actively develop the company. In two years the company will fully pay off all credit liabilities to all creditors, including to TBC Bank. In other case TBC Bank and Mamuka Khazaradze will have to fully remunerate financial losses and they will be called to account jointly with highranking officials of the old government. Anzor Kokoladze

THE EXPERTS’ GROUP OF FOUR RESPONDS TO THE GHURTA INCIDENT IN ADJARA

upporting investments in the contemporary political reality is a significant challenge in the face of the law and the Rule of law. Two factors, which, in turn, define the attractiveness of the investment environment and investor activity. The government acts not only as the investor’s partner and a guarantee, but also as protector of the country’s interests and the most powerful and trustworthy intermediary between the populace and the investor. Publicly organizing the population or rallying protests in order to garner the government’s attention to its problems is a crucial mechanism of democracy, assisting which is a function of the government itself. If we look over the recent period in the capital city and the various regions, including Kazbegi, Mestia and Khulo, the population was gathering in order to discuss their current or future problems with the Paravani HPP construction or the planned Namakhvani dam cascade project. This is normal, but blocking the road, resisting law officers or government officials and interfering with their duties is a violation of the law. This is not a standard of democracy. We have basis to consider and beware of leaving these facts without a response, as it may facilitate dangerous precedents and cause massive law violations. Interested parties’ attempts at similar acts will be taken during the execution of important hydro energetic, infrastructural or various other projects for Georgia, which will

significantly lessen the investment environment in the country and negatively affect investment attraction. A dangerous tendency in the making exists in the form of political or other types of groups being formed in order to gain popularity or political dividends on the expense of investment projects, and, what’s even more unfortunate, improve their own material wealth by playing on the emotions of a misinformed population. There are various examples throughout the world, and we can refer to Ukraine as one of the clearer ones for our population, of a misdirected country using all of its resources, beyond even financial ones, in order to disallow itself to lessen energy dependence on another state by increasing its own. Considering the role energy development plays in any country’s independence, economic improvement and general well-being, Georgia lacks the luxury to turn away from wise and active steps in this direction, with the government’s special services needing to actively work on them day and night. Democracy is aware of the unfortunate reality as well, but the function of a public government is to stand guard for the law, to inform the population readily, ensure their cooperation in decision-making and remain bound to principles while defending the state’s crucial interests. It seems we were not wrong when we noted that the Khudoni HPP project is the government’s first serious challenge in not just financial, investing and economic mat-

ters, but also in regards to the rule of law, the equality in light of law and commitment to human rights, and what’s most important in maintaining the economic security of the country. For your consideration, according to information spread by the media, the protest – or, to be more real, the process containing points of active sabotage – was organized precisely on the precedent of the Khudoni HPP. Considering the aforementioned, (a) Every decision geared towards the equality in light of law, the rule of law, the consideration and protection of populace rights, the consideration and protection of government interests in economic security, and the ensuring of optimal ap-

proaches to public interests should be supported; (b) We request improvements in matters of actual government activity and communication with investors and the population; (c) We call to the society, the local population first of all, to make their decisions after recognizing their own part and responsibility in the development of the country’s interests, or in stagnating this development; for them to demand more information from the government, the investor, or the “supporters” of the population before considering their interests.” This statement was signed by Giorgi Abashishvili, Irakli Lekvinadze, Levan Alapishvili, and Levan Kalandadze.

BUSINESS & ECONOMY caucasian business week

DEVELOPER INVESTS $80 MILLION IN BATUMI’S LARGEST TOWER

atumi, Georgia-based developer Tam Geo is investing $80 million in Babillon Tower Batumi, the highest residential tower in the country of Georgia. Babillon Tower is a mixed-use development currently under the construction. It will rise to reach 172 meters high, taking the number one spot for a residential building. The only building

taller than Babillon is the 200-metertall Batumi Technological University Tower, according to the Council on Tall Buildings and Urban Habitat. The project will feature 421 residences, including penthouses and lofts. It will also include a two-story shopping mall, casino and adjoining luxury hotel, according to a company announcement. Sales for residences in the project officially started this week. Prices range from approximately

$90,000 to a little more than $280,000. The project’s shopping mall and hotel are expected to open at the end of 2014. The rest is due for delivery in 2015. The city of Batumi is an administrative center of Ajara Autonomous Republic, situated by the Black Sea. With a population of 180 000, the city is the land and marine gateway to Georgia with its largest sea port and railway, according to the city’s website.

195 MILLION OF DIRECT INVESTMENT MADE IN ADJARA LAST YEAR

inistry of Economy of Adjara talks about the growth of investments in the region. According to the Ministry, 195 million USD of direct investments were made during 2013, which is 28 % more than last year.

The Ministry states that most investments are carried out in the construction and tourism sectors. Specifically, in 2013 92 million were invested in the construction sector, while the amount of investments in the tourism sector exceeded 78 million. Along with that, 73 % of investments made in the region in 2013 fall on Batumi.

RAKIA CHANGES POTI FREE INDUSTRIAL ZONE MANAGEMENT MODEL

akia Georgia works on the change of Poti Free Industrial Zone (FIZ) management model. Executive director of Rakia Georgia Guga Tsanava states that entering of several large clients into the FIZ is planned, which will become locomotives for the development of the zone. FIZ investor company states

WINE EXPORTS ANNUAL GROWTH MADE UP 296%

n January to February 2014 Georgia’s wine exports tripled (up by 296%) compared to the same period of 2013. In the reporting period 50 companies have exported 9 990 397 bottles to 18 countries, the Georgian Agricul-

that 2015 will be more active period for the free zone than 2014. It’s noteworthy that currently construction of several enterprises is going in the Poti Free Industrial Zone. Company Intermetal Georgia opens metal roofs producer factory in FIZ. Also, construction of spirits processing plant is going. GeoSpirtProm is constructing the enterprise. ture Ministry says. The Russian Federation is a leader among Georgia’s five top wine exports markets, while Ukraine is leader in Georgia’s brandy exports markets. The exports are carried out by 9 companies.

March 17, 2014 #46

STATISTICS March 17, 2014 #46

caucasian business week

REAL ESTATE MARKET INCREASED IN FEBRUARY

ccording to official data of Pubic Registry National Agency, in February 2014 number of registration transactions on the real estate market equaled to 38 751 units throughout the country. February of the current year, compared to the same month of 2010-2014) is distinguished with growth: compared with February 2010 (25 432 units of registration transactions) - growth is 25.7%, compared to February 2011 (31 251 units of registration transactions) - growth is 0,9%; compared to February 2012 (32 251 units of registration transactions) growth is 5,4% and compared to February 2013 transactions (33 987 units of registration transactions) growth is 14,0%.

In comparison with previous month number of registration transactions increased by 7,8%: growth was mentioned number of both in primary (4,9%) and secondary (8,4%) registration transactions. In February 2014 number of primary registration transactions equaled to 6 730, number of secondary registration transactions - 32 012 units. As for ration of primary and secondary transactions, in comparison with the same month of previous year share of primary registrations transactions reduced: 82,6% of the registration transactions made in February of the current year are secondary, 17,4% - primary registration transactions (In February 2013 - respectively 81.0% and 19.0%).

AZERBAIJAN WAS #1 INVESTOR IN THE Q4

N the Q4 2013 highest amount of the investments entered from Azerbaijan to Georgia. Geostat reports that in October-December of last year direct investments of $72 million has been made, which is maximum of the last 12 quarters. Netherlands rank second with $48 million, which is 22% of the total investments made in Q4. UK ranks third with $22 million. Besides, in OctoberDecember highest amount of the direct foreign investments has been made in the energy sector r and equaled to $56 million, which is 26% of the total direct foreign investments. Financial sector ranks second with $44 million, processing industry ranks third with $36 million.

Reminding that according to preliminary data, amount of the direct foreign investments made in Georgia in the Q4 2013 equaled to $217 million, which exceeds to preliminary data by 20%. Adjusted data of this period is 7% less

PUBLICITY caucasian business week

March 17, 2014 #46

BANKING NEWS March 17, 2014 #46

caucasian business week

KADAGIDZE REMAINS AGAINST REMOVAL OF FINANCIAL MONITORING SERVICE TO THE MINISTRY OF FINANCE

resident of National Bank of Georgia (NBG) Georgia Kadagidze considers that removal of Financial Monitoring Service from the National Bank to Ministry of Finance is a sensitive topic and the state should carefully regulate this issue. On Tuesday George Kadagidze stated to journalists that he will try to assure authors and parliament in unreasonableness of this bill. Author of parliamentary initiative is a chairman of financial-budget committee of the parliament David Onoprishvili. According to evaluation of George Kadagidze, banking sector of Georgia is a locomotive for the country’s economy and its sustainable devel-

opment determines many things. Therefore, the government should be carefully with this issue. NBG president made similar statements last week. Minsiter of Finance commented on this issue last week as well, who says, “They should discuss initiative well”. “Even to day Financial Monitoring Service is an independent structure and accountable to Government of Georgia, but National Bank of Georgia has very significant functions of monetary policy; government of Georgia also has important obligations, among them struggle against money laundering. I think that we should discuss this proposal of Mr. David well”, - Khaduri mentioned.

TBC BANK RESPONDS TO ANZOR KOKOLADZE’S STATEMENT

BC Bank responds to Anzor Kokoladze’s statement. The bank considers that Kokoladze tries to cover his crime with misinformation. TBC informs that Elit Electronics is steadily developing with the leadership of the new management; it smoothly expands the network and serves to banking liabilities. The company perfectlyu fulfils all the terms fo rehabilitaton regime and the only problem is tax violations made by Kokoladze’s management in

2007 and financial sanctions recently imposted to the company dor them. “Kokiladze’s misinformation and indecent PR campaigns is likely to serve 2 main aims: 1) to cover crimes; 2) supposingly to conver financial porbles of TechnoBOOm, which is inavitable because of its manamgement style. Violations and fraud made by Mr. Kokoladze are officially approved by tax and respective services. In this situation Kokoladze has no way but PR based on lie”.

INTERNATIONAL AUDIT COMPANY KPMG PRESENTED THE REPORT ON THE BANKING PRODUCTS ORDERED BY NBG

n the “Courtyard Marriot” the international audit company KPMG presented the research report ”A Comparative Analysis of Effective Interest Rates. KPMG, a Dutch company and member of “Big Four” of international audit companies, carried out this research by NBG order, and its main purpose was comparison of interest rates on Georgian commercial banks’ credit products and respective indicators of East European, Balkan, Caucasus and Central Asia countries. “By request from the NBG, KPMG carried out research, the main purpose of which was to compare interest rates on the credit products among different countries. The research covered East European, Balkan, Caucasus and Central Asia countries. The result shows that in Georgia the interest rates on many products are lower than in Kazakhstan, Serbia, our neighbors Azerbaijan and Armenia and are higher than in Poland and in more developed East European countries, which wasn’t surprising to us. It’s no surprise that Georgian banking sector is a real champion both in attracting FDI and as an employer. It is the locomotive for the economic development of Georgia. Finally, I would like to express my hope, that this research breaks the absurd stereotypes that in Georgia interest rates are one of the highest, which, of course is not true. Interest rates reflect

the real situation in the Georgian economy”- said Giorgi Kadagidze. The research presentation at “Courtyard Marriot” was attended by the governors of Georgian commercial banks, the representatives of international financial organizations, banking and microfinance associations and experts. KPMG selected 5 countries for this research: Azerbaijan, Poland, Serbia, Armenia, and Kazakhstan and at least 2 leading banks in the financial market from these countries. For research purpose KPMG selected different credit products most often in the Georgian banking market, and real and effective interest rates for these products were compared to those in the aforementioned countries. The research focused on the following credit products: Fixed and floating interest mortgages, secured and unsecured consumer credit, credit cards, corporate credit - for financing the working capital and capital expenditures, credit for small and medium size businesses - for financing the working capital and capital expenditures. The comparative research on the nominal and effective interest rates showed that, in most cases the interest rates on the credits are higher in Kazakhstan, Azerbaijan, Serbia and Armenia than in Georgia. As for Poland, indicators here are lower than in Georgia.

LONDON HOUSE GEORGIA LOST 0.5 MILLION USD INVESTMENT AFTER PROCREDIT BANK THWARTED CONTRACT AGREEMENT

ProCredit Bank Loses New Trial with LLC London House Georgia

BW introduces the statement of London House Georgia that was published by IPN news portal: “In 2010 the court partly satisfied the appeal of LLC London House Georgia against JSC ProCredit Bank. The court found ProCredit Bank guilty of inflicting damage, but LLC London House Georgia has not received about 0.5 million USD after JSC ProCredit Bank thwarted a contract agreement with a foreign investor. Besides the losses, the court decision also makes accent on honesty issues. Namely, taking into account the status and character of activities, the court decision indicates that JSC ProCredit Bank was responsible for paying special attention and showing honesty towards the client, especially, in the situation, “when the bank was to take into account the circumstance the issue was of a business body that had been a very successful client for a long period”. Later, under the court decision, JSC ProCredit Bank was obliged by Tbilisi Bureau of Enforcement to transfer the sum for the damage remuneration to the company account. Our appeal for remunerating the losses was satisfied partly by ProCredit Bank, because of the existing court practice that time. Therefore, our “partner” bank submitted a new appeal for imposing 32 124.8 GEL on our company out of 41 617.78 GEL that had been paid to an expensive defense lawyer services. The sum was to be psaid proportionally to the unsatisfied part of our appeal (we have won the second case against ProCredit Bank (N 2/148909 judges Nona Zarkua, Tinatin Etsadashvili, Goderdzi Giorgishvili and others). Consequently, it seems “a personal advisor” did not dare to fully or partly demand the honorarium paid to expensive defense lawyer services. It is worth noting the case contained only linguistic explanations of an indefinite pronoun from the contract agreement made out by the “transparent” bank. The personal advisor without knowledge of Georgian language was using this fraud “grammatical” factor for illegal enforcement and blackmails so as to make us refuse our legal demand for remunerating losses for thwarted contract agreement with

a foreign investor. The last (third) case we have won against ProCredit Bank. According to the April 25, 2012 decision of Tbilisi Civil Cases Board (judge Nata Tedeshvili), the appeal of JSC ProCredit Bank with 12 defense lawyers for covering costs for assistance of the representative was partly satisfied and our company was imposed to pay 17 643. 70 GEL to the bank. The Appellate Court (judges Nazgaidze, Meskhishvili, Gujabidze) passed a new decision over the case and obliged us to pay 4015 GEL and 120.45 GEL to the bank. The Supreme Court of Georgia abolished this decision of Tbilisi Court of Appeals and passed a final decision, under which the appeal of ProCredit Bank was not satisfied and JSC ProCredit Bank was imposed to pay 1005.7 4 GEL to us. We remind our society that we have won the third trial against ProCredit Bank. It seems the bank will remain a leader in the Georgian bank sector for a long time in terms of number of trial lost against the same client, the bank that has violated the contract agreement and deliberately inflicted damages to the client and a financial body selfadvertised as a personal advisor (Unfortunately, we have no information about the statistics of markets in Nicaragua, Congo, Mozambique or Honduras, where the bank, unknown in western Europe, operates successfully, according to their statement). After the lost trials, the ”refreshed” management of ProCredit Bank in summer 2012 will have to think much about the qualification of high-paid defense lawyers, besides transparency, reliability and invincibility so as not to spend excessive profits from Georgian citizens on unproductive defense lawyers, especially in the case of clients that do not enjoy defense lawyer services. Consequently, after the third lost trial ProCredit Bank failed defense lawyers can calm down: they will not be requested to cover defense lawyer costs after the lost trial. LLC London House Georgia will direct the won sum to charity activities. Namely, the sum will be handed over to unsheltered families of the Makhachashvili, Korashvili and Mekarishvili in the village of Dvani, the Tskhinvali Region conflict zone.

TBC STARTED SPECIAL OFFER FOR THE DEPOSITS OF INTERNET BANK’S USERS

pening of deposit is possible without coming to the banks, with the interest rate of 0,5%. 4 kinds of deposits are involved in the action: fixed-term deposit, Term plus, My Aim, Mu Safe. On the opening of 2-year Term Deposit, the client will get rate of 8,75%+0,5% in GEL, 5,25%+0,5%=6,25% in USD. Athos, Portos and Aramis represent the promo. Along with musketeers, the largest inter-

national marketing advertisement agency DDB prepared the new platform. The bank informs that the characters are selected according the major values, to which the bank serves for 21 years. Each of them is a symbol of friendship, loyalty, trust and stability. By February 1 deposit portfolio of TBC Bank is 2,6 billion GEL, among them 1,5 comes on retail deposits, according to which the bank is a market leader. Internet banking is free for individuals.

BANK OF GEORGIA CONTINUES SUPPORT AND FUNDING OF CONSTRUCTION SECTOR

epresentatives of the bank visited residential complex building on #70 Abashidze Street. The bank assigned over $7 million loan to the construction company GDG. There are 176 flats and 206 auto parking, trade and office area of 2 052 square meters. The total area of the complex is 27 003 square meters. There is a swimming pool and fitness club in the complex.

Currently 6 floors have already been built. 905 of the works will be completed this year. It’s he 3rd project of GDG implemented with support of the bank. The bank issued loan of over $10 million for 2 projects on Ingorokva Street. The bank is a leader of corporate banking activities. At the end of 2013 portfolio equaled to 1,8 billion GEL. About 122 million GEL issued for the construction sector.

INVEST BANK COMPETED JANUARYFEBRUARY WITH 704 THOUSAND LOSS

SC Invest bank completed January-February with 703 786 GEL loss (01/02/14 -303 865 GEL). Deposit portfolio (non-banking) equals to 10,318 million GEL (01/02/14 -9 million), loans - 8,8 million GEL (01/02/14 -9,4 mil-

lion, overall obligations - 13,3 million GEL. Bank’s actives are 24,6 million GEL (01/02/14 -25,08 million), stock capital - 11,3 million GEL. Temporary administration of National Bank still manages the bank.

HPP caucasian business week

March 17, 2014 #46

“THOSE PROMOTING NEGATIVE PUBLIC OPINION AGAINST SIGNIFICANT PROJECTS ARE SABOTEURS!”

r. Irakli Gharibashvili and I discussed partnership perspectives between Georgia and EBRD. We have been good partners. Last year we implemented 13 projects within approximately $100 million and hope to double this figure next year. Therefore, there is much to do. In my opinion, activities in the hydro power sector are welcomed. Georgia does not have oil but has water, so it can export electricity to regional markets and we are willing to support this. Therefore, we are aiming at one or two projects in this field specifically” – said Suma Chakrabarti, President of European Bank for Reconstruction and Development (EBRD), after the meeting with Georgia’s Prime Minister. Regardless statements made by experts and the industry specialists that the most attractive field

in Georgia in terms of investments is the energy sector, construction of hydro power stations is being conducted in the light of public protests. Irakli Leqvinadze, economic expert: “It is very important that the Georgian public knows about Russia’s new energy doctrine, which clearly emphasizes that in the coming years the size of developed market is to decrease and in this light dependence of emerging countries on Russian energy carriers should increase, which will allow Russia to enforce its policy and strengthen its influence. Russia’s desire that Georgia does not become energy independent is great and respectively it is interested that our country does not use its hydro potential.” What are we facing, fear of the population that its life, health or property might be endangered, or protests organized by a group of people? What is the government’s policy and how does the government intend to settle these problems? Kakha Kaladze, Minister of Energy answered the Guria News questions: - The recent events related with implementation of large energy projects raise many questions, as evidenced by incident in Ghurta. Despite the disseminated information that population was informed about commencement of HPP construction (you and Mr. Ivanishvili also were there) people organized protests and blocked the road (the events developed in Khaishi followed the same scenario when attempting to conduct measurements). There is an opinion that some people (or group) are sabotaging. In addition, at one of the meetings organized with the EBRD representatives at the hotel a certain group organized a protest demanding from EBRD not to invest in hydro energy sector… What comment will you make? - Developments going on in relation with large

energy projects are similar at some extent. All cases are specific though the scenario seems the same. In each of these cases, the population uses such terms and phrases that presence of a “tutor” behind is obvious, who tells them how to act. People have the constitutional right to express the protest within the boundaries permitted by the Law on any issue. Respectively, the state has the right to eliminate any illegal action within the law framework. After so many fearful years and lawlessness, I do not exclude that someone may be using the fear overcoming process in its own interests. Unfortunately, there are some people among politicians and non-governmental organizations guided by personal interests or perhaps they lack qualification. They have only one goal – stop the project and they regard it as their success, as the means for attracting the attention. There are cases when representatives of NGOs or notorious politicians make scandalous statements to stay in the spotlight. Currently the government cooperates with the people more than ever. Interests of each citizen are protected in accordance with the international norms. The state got more civilized, the forceful illegal methods were left in the past. The population has to act respectively and realize new beneficial and productive reality. - The Ombudsman’s Office made a statement about events in Ghurta which reads: “ According to population, the tunnel passing through territory of Ghurta Village will damage infrastructure and contribute to land sliding processes. Locals say that they did not know about tunnel construction, since nobody told them. People fear that in case of the tunnel construction 5 villages will be affected and they will not be able to live in a safe environment.” Does this

statement correspond to reality? - There is a construction permit for the project and it has positive environmental assessment. Population posed questions to the government. The government, for the purpose of satisfying the interest, engaged independent experts in the process and shared their recommendation on exercising active monitoring at the construction. Recommendation was taken into account and we are conducting observation. In addition, of course, the investor is obliged to take care of security of people residing within the project implementation area. No one is going to leave people in the area, where their lives, health or property may be endangered. It is important that people know the closer they are to the project implementation area, the higher are benefits they are going to receive. For example, locals will get employed at the construction site, which is a precondition for stopping the migration. Investor brings jobs next to their homes, family bread winners will not have to search for employment far from their households. When implementing a project of state significance, the related infrastructure and social conditions are developing as well. This is so in the whole world and those promoting negative public opinion against significant projects are saboteurs. - As regards the large infrastructural project Khudoni HPP, as surveys showed and experts certify the project does not have a problem from the geological, seismic, economic, cultural heritage perspective. The main problem identified is a resettlement and communication with the local population. How is the Ministry going to resolve this issue? - Investor is obliged to organize resettlement in accordance with 4X12 standard, which represents the World Bank’s highest standard.

PAATA TSINTSADZE: „IMPACT OF KHUDONI RESERVOIR ON MICRO CLIMATE IS EXCLUDED” Utilization of energy resources and electricity export represent one of the priorities included in the economic strategy of the Georgian Government. However, respective projects are being actively opposed by the public. Population periodically organizes meetings against HPP construction in Mestia, Kazbegi or Khulo. They have various demands, though one of the main issues raised by them is environmental impact. How realistic is the fear of the public about environmental hazards and what damages can be inflicted by hydro power plants? PAATA TSINTSADZE, Hydro Energy Expert, a Member of the Energy Academy, answered these questions.

- Georgia’s energy resources are limited only to hydro resources. If we want to meet the energy consumption demand with only our resources, the hydro power stations need to be constructed. As you know, Georgia has neither oil nor gas. We are facing the major problem in winter. The water level in rivers increases during summer months. For being able to use the summer water, it is necessary to build reservoir power stations where the water gets accumulated in summer and used in winter. Enguri and Rioni are the most valuable rivers in Georgia in terms of energy. Reservoir hydro power stations need to be constructed on these rivers. There is no other alternative for Georgia to satisfy its demand for energy. - Let’s talk about Khudoni HPP in particular, which is currently the largest energy project. One part of the public opposes construction just be-

cause it creates environmental disaster for Svaneti in their opinion. How realistic is such fear? - Khudoi Project is not new and it started in 70s of the previous century. It got suspended in 1988. Therefore the project itself has been existing for 40 years and was studied during communist period and Georgia’s independent years by local, as well as foreign experts. Modern construction technologies provide the guarantee that any threat of accident is minimized – I mean accidents related with the dam and reservoir themselves. So the environmental disaster risk because of the accident, which may be faced by Svaneti and Georgia at large, as some people state, is minimized by modern construction technologies. One more issue is important. Such projects, as a rule, are being funded by large international financial institutions such as EBRD, World Bank and development banks of various countries. These banks, more than ourselves, are interested to exclude hazards from projects they are funding. These organizations are supporting countries’ development and naturally the projects causing environmental disasters are not on their agenda. Their standards provide for higher environmental requirements than those of many countries including Georgia. This factor also encourages me to state that environmental risks, in fact, are not rpesent in this project. - Could you name the countries where similar projects (i.e. high dams) are implemented and how these projects are operating in practice? - Construction of high hydro dams started long time ago, though it reached higher level of development in Japan, Italy, Norway and the other leading countries. They elaborated projects and

construction at maximum extent. Therefore, Khudoni is not “know how”, we are not building something extraordinary, which cannot be found on the earth. On the contrary, I would state that such reservoir stations are very few in Georgia, their number in Switzerland reaches 250 while in Japan more 2500. As you know, Japan is a seismic country and underground quakes are felt almost every day. - Climate change is regarded as a problem issue as well. It is interesting what would be Khudoni’s impact on Svaneti climate. - Climate change on the planet is determined by many factors. There is a dispute going on what is the cause - evolution of the earth or human intervention. So called Reservoir Mirror of Khudoni is just 5 square kilometers this is very low volume in terms of evaporation or impacting the climate. It is absolutely excluded that Khudoni reservoir affects the micro climate. There is no reservoir today in Svaneti but the climate is altered there anyway, as it is in Tbilisi, Zugdidi and in the whole Georgia. Khudoni reservoir, in fact, is breathing it gets filled, discharges and this is repeated. The water level is not constant and the water does not evaporate during 24 hours at all seasons. There are periods when the reservoir mirror supply reduces to 2 square kilometers. Therefore, I do not think that the project will create any special environmental problem. - Batono Paata, based on what you say, Khudoni Project in fact excludes all environmental hazards. Then what are the arguments of opponents when they talk about environmental catastrophe? - Nowadays many people call themselves environmentalists even those who do not have any relation with Ecology. Therefore, their statements, in my opinion, represent populism rather than expert considerations. Those who are interested in these issues can see what happens in Japan, Italy, Switzerland. So does it mean that in those countries people love the nature less? Or maybe someone thinks that in Switzerland HPPs changed the

climate so much that humans have to leave? The campaign started at the end of 80s was needed by the national movement to gather people around an idea. Current processes also include the signs of political fight rather than professional criticism and fear for environmental disaster. Any human activity influences the environment, even phone conversation between people, since high frequency waves are generated in the course of this process. We make impact when driving on the highways or in the city, when eating… human life already impacts the environment to leave alone the progress. The most important thing is to minimize such impact. Those who criticize have to substantiate what type of threat can be expected and what needs to be done to avoid it. Only stating that “We shall not construct it!” and “We do not want it!” - are not reasonable answers. The feasibility of Khudoni construction has been proved by examples of specific countries. If anyone sees a problem then he should say it so that we focus on these problems and take actions for its avoidance. I never have seen such approach, they are just shouting that they do not want this project implemented. Shall we cease energy consumption? Do you know that 50 millions annually flow to Russia from our pockets as a price for electricity? Would not it be better to invest these 50 millions into the Georgian energy system? People in Tbilisi and in whole Georgia during 90s were equipped with candles and oil heaters. We cannot allow ourselves to go back to that period. Therefore, we should either have our own electricity or import it. Energy import from our neighbors is related with many political problems. Sweden and Norway have ideal relations with each other. Norway supplies electricity to Sweden, however at the end of 70s Swedes constructed Nuclear Power Station to acquire energy independence. Can you imagine what the other countries are thinking of, and we are trying to be entirely dependent on Russia or Turkey, Armenia and Azerbaijan while having 30 billion kwh energy resources in our own country.

AZERBAIJAN March 17, 2014 #46

caucasian business week

AZERBAIJAN’S OIL PRODUCTION TO GERMANY, AZERBAIJAN STRONG REACH 0.86 MILLION BPD IN Q2 PARTNERS: GERHARD SCHROEDER

zerbaijan’s oil production will amount to 0.86 million barrels per day (bpd) in the second quarter of 2014, compared to 0.88 million bpd in the first quarter of the year. The news was announced in the U.S. Energy Information Administration’s (EIA) Short-Term Energy Outlook. Azerbaijan’s oil production will slightly decline in the third and fourth quarters of this year, averaging 0.84 million bpd and 0.83 million bpd respectively. The EIA kept its forecasts on the country’s oil production for 2014 and 2015 unchanged - at 0.85 million bpd and 0.8 million bpd respectively, compared to 0.88 million bpd in 2013. The forecasts show that the highest level of Azerbaijan’s oil production in 2015 will be observed in the first quarter at 0.83 million bpd, while it will amount to 0.81 million bpd in the second quarter, 0.79 million bpd in the third quarter, and

0.78 million bpd in the fourth quarter. Azerbaijan’s proven oil reserves amounted to 7 billion barrels in early 2013, BP said. Oil production in the country amounted to 0.872 mbd in 2012. The main volume of oil produced in Azerbaijan falls on Azeri-Chirag-Guneshli offshore fields block. This block produces Azeri Light oil with a sulfur content of 0.15 percent (35 degrees API). The participants of the project to develop AzeriChirag-Guneshli are: BP (operator - 35.83 percent), Chevron (11.27 percent), Inpex (10.96 percent), AzACG (11.6 percent), Statoil (8.56 percent), Exxon (8 percent), TPAO (6.75 percent), Itocu (4.3 percent), and ONGC Videsh (2.72 percent). The EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.

FITCH AFFIRMS FIVE AZERBAIJANI PRIVATE BANKS’ RATINGS

nternational ratings agency ‘Fitch Ratings’ has affirmed the long-term foreign currency issuer default ratings (IDRs) of Azerbaijan-based Unibank (UB) and Demirbank (DB) at ‘B’, and Atabank (AB), AGBank (AGB) and Bank Technique (BT) at ‘B-’, the agency reported. The outlooks on UB and DB have been revised to Positive from Stable. The outlook on AGB has been revised to Stable from Negative. The outlooks on AB and BT are Stable. “The affirmations reflect the banks’ largely stable credit metrics and currently favourable broader economy, which is supported by high oil prices. The spill-over effects of high oil prices on the non-oil economy coupled with significant government spending supported the gradual resolution of post-crisis asset quality problems. Additionally, the banks’ bottom lines (particularly at UB and DB) have benefited from rapid expansion in higher margin retail and micro-lending,” Fitch said. “Liquidity across the sector has been stable, underpinned by fairly sticky funding and stable deposit growth. Wholesale funding of private banks is mainly sourced either from the government or from development institutions, remains limited in volume and reasonably diversified by maturity”. Fitch notes that all five banks face capital pressure resulting from weak profit generation (except for UB) driven by margin compression in corporate lending, small operational scale, still significant impairment charges and limited new equity injections. “Return on Average Equity (ROAE) was a moderate five percent at AGB and 10 percent at AB in 2013. However, DB and UB appear better positioned to improve capitalisation from internal sources, as both banks’ ROAE was commensurate with loan growth in 2013,” Fitch said. UB and DB reported fast retail growth of around 80 percent and 36 percent, respectively, in 2013, although both have managed credit risks fairly well so far, as reflected by low credit losses in 2013 (below 3.5 percent of average loans in 2013 at both banks). “Fitch believes that further growth of reasonable quality in retail and micro-lending is possible in the sector due to currently low consumer indebtedness and low credit penetration (retail loans/ GDP equal to 11 percent at end-2013). However, loss rates are likely to increase as loan books season and market saturation increases,” according to the message. “Credit risks relate mainly to slowly-amortising corporate loan books, which are particularly highly concentrated at AGB, AB and BT, with the

largest 20 borrowers accounting for around 30 percent - 40 percent of total loans or around 1.7x2.1x end-2013 statutory equity in each case. AB’s asset quality is currently reasonable, with nonperforming loans (NPLs; loans 90+ days overdue, reported net of accrued interest) standing at 4.4 percent in end-2013 statutory accounts, but a higher 10.5 percent and 24.2 percent, respectively at AGB and BT. BT’s unreserved NPLs were equal to a high 1.7x IFRS equity at end-1H13, but Fitch expects this to decrease gradually based on reasonable collateral against some exposures and management’s reasonable track record of impaired loan recoveries,” Fitch said. Positive Outlooks on UB and DB reflects Fitch’s base case scenario that their performance will remain reasonable as loan books season, and that their more robust business models, growth strategies and internal capital generation will therefore warrant upgrades. “The banks’ profitability benefits from higher margin retail/small business lending, the moderate (compared with peers) volatility of their impairment charges through the cycle, and the lower amount of legacy impaired and non-core assets (which are particularly high at BT and AGB),” the agency said. The revision of AGB’s outlook to Stable from Negative reflects the stabilisation of asset quality and significant improvement of operating performance. “In 2013, AGB reported positive, albeit moderate, pre-impairment profit in its statutory accounts of 3.6 million manats (eight percent of starting equity) net of non-received interest. Loan impairment charges were a moderate 1.3 percent of average loans. At the same time, Fitch continues to consider the amount of accrued, but not received, interest income as substantial relative to capital (0.6x tangible statutory equity at end-2013). Part of this relates to performing loans with grace periods on interest payments,” according to Fitch. The agency also said that UB and DB could be upgraded if they show an extended track record of reasonable asset quality and manage to defend their profitability amid more intense competition and greater market saturation in their lending segments. “Conversely, a marked weakening of profitability and/or deterioration of asset quality would likely result in the revision of the Outlooks to Stable,” Fitch said. Upside potential for the ratings of BT, AGB and AB is unlikely in the near term, as reflected by their Stable outlooks. However, gradual improvements in the operating environment, further recoveries of legacy impaired loans and the strengthening of the banks’ internal capital generation could give rise to moderate upward rating pressure over time. The ratings of all five banks could come under downward pressure if there was a large and sustained drop in oil prices, although this scenario is not expected in the near term. Sharp deterioration in asset quality and/or liquidity at any of the banks could also cause a downgrade. The official exchange rate on March 12 is 0.744 AZN/USD.

zerbaijan and Germany are strong economic partners, former German Chancellor Gerhard Schroeder said. He made the remarks at a conference of the AzerbaijaniGerman Chamber of Commerce in Baku on March 13. “Germany is one of Azerbaijan’s most important partners in Western Europe,” he said. Schroeder said annual trade turnover between Azerbaijan and Germany exceeds two billion euros, and there is potential for strengthening economic cooperation in the future. “I think the establishment of the Chamber in 2012 was a progressive step in developing economic relations. Many German companies are operating actively in Azerbaijan,” Schroeder said. Speaking about energy cooperation, Schroeder said Germany is the seventh largest oil buyer in Azerbaijan, and pointed to future gas cooperation between the two countries. He emphasized that Azerbaijan remains a reliable partner for Europe in terms of gas supplies in long term. “Southern Gas Corridor” project will allow Europe to diversify its supply of hydrocarbons resources and increase energy security, while Azerbaijan will have a new market, Schroeder believes. Noting that gas supplies from Russia are important from a geographical point, Schroeder said the gas supplies from Azerbaijan have been and will further be of significant importance to Europe. Schroeder also praised political cooperation between the two countries which is at a high level historically, as Germans were represented in the first Parliament of Azerbaijan Democratic Republic in 1918. ECONOMIC SITUATION IN EUROPE Speaking about the economic situation in Europe, he said the currency crisis is the main problem.

“The currency crisis in Europe is called a political crisis. Today, the European Union must decide whether it is ready or not for fiscal reforms.” Speaking about strengthening Germany in spit of the crisis, he added that the unemployment level has fallen by 40 percent in Germany in the past few years, while exports have increased by 50 percent. “Germany is the most competitive country in Europe,” he stressed. He also noted that Europe is in need of strong partners, one of which is Turkey, and “its accession to the EU will be an important event for the entire European continent.” UKRAINIAN PROBLEM Schroder did not avoid the subject of the complex situation in Crimea and Ukraine, where mass protests have been held since November when the government announced suspension of the preparation of an Association Agreement with the EU. The situation generally causes great concern, and it is necessary to prevent it from being aggravated in the future, he believes. “An intensive dialogue on the conflict between the international community, Russia, and Ukraine is very important,” he said. “The problem must be resolved through negotiation. It is wrong for Ukraine to choose between Russia and Europe.”

U.S. INVESTORS BUY 47 PCT OF AZERBAIJANI BONDS

zerbaijan raised $1.25bn in its first international bond sale on March 10, and investors from the U.S. purchased 47 percent of Azerbaijan’s sovereign Eurobonds. The news was announced by Azerbaijani Finance Ministry on March 12. “The demand for placement exceeded the placement’s volume by four times and drew the attention of investors from 160 countries. British investors purchased 25 percent of the bonds, investors from Germany bought 18 percent, and the remaining 10 percent were purchased by buyers from other countries, including Singapore and Israel,” the ministry said. Also, Fitch Ratings assigned Azerbaijan’s 2,024 Eurobonds worth $1.25 billion a ‘BBB-’ rating in line with the sovereign’s foreign currency Longterm Issuer Default Rating (IDR). The country’s oil output started to stabilize after a 15 percent decline since its peak in 2010, improving the short-term outlook for growth and public finances, the agency said in its report. The strong sovereign balance sheet, with sov-

ereign assets held in Azerbaijan’s state oil fund SOFAZ, reached 49 percent of GDP at the end of 2013, the report said. The 2014 budget calls for a reduction in reliance on oil revenues in the form of transfers from SOFAZ. Azerbaijan is estimated to have recorded a current account surplus of 17 percent of GDP in 2013, and Fitch has forecasted that it will continue to record surpluses. Fitch assumes that the price of oil, Azerbaijan’s main export and source of budget revenue, will be an average $105 per barrel in 2014, and $100 per barrel in 2015. Fitch also assumes that oil production will stabilize in 2014 and 2015. Azerbaijan, which has an investment grade of Moody’s and Fitch level, sold a benchmark 10year bond with a five percent yield. Investment banks Barclays, Deutsche Bank AG London, and Citigroup Global Markets Limited were selected as the government’s managers for the first Eurobond issuance. The order book had been oversubscribed at nearly $4bn, sources participating in the bond placement said.

SWITZERLAND INVESTS $97 MILLION TO ASSIST TRANSITIONS IN AZERBAIJAN’S ECONOMY

witzerland has invested over 85 million Swiss francs (1 CHF= $1.1388) for transition processes in Azerbaijan’s economy, including reforms in the country’s finance sector. This was announced by Deputy Regional Director of the State Secretariat for Economic Affairs of Switzerland (SECO) for the South Caucasus, Matthias Feldmann at the opening of a training centre for capital market participants in Baku. “We also cooperate with the World Bank and Azerbaijan’s state structures on a permanent basis under the project for the modernization of the capital market,” Feldmann said. “Switzerland has sufficient experience in this sphere and this project is an important part of our support to the development of the country’s finance sector.”

Reforming the financial sector plays an important role in ensuring the economic development, Feldmann believes. “Conduct of these reforms is not an easy task and requires time. In this regard, the opening of a training centre testifies that the government is a right way in term of implementation of reforms in the capital market,” he added. Switzerland is one of the largest investors in the non-oil sector of Azerbaijan’s fast-growing economy. More than 70 companies with Swiss capital are registered in the country. Azerbaijani companies are also interested in the Swiss economy. Azerbaijan’s state energy company SOCAR has already invested 380 million Swiss francs ($322.3 million), and the company’s representative office is operating in Switzerland.

CIS caucasian business week

WHY IS UKRAINE’S ECONOMY IN SUCH A MESS?

WORLD BANK TO LEND UKRAINE $3BN

he World Bank is ready to grant almost bankrupt Ukraine a loan of up to $3 billion this year to support reforms and infrastructure projects. The Washington-based organization already has several projects in Ukraine aimed at reducing poverty. Around $2 billion will be allocated to the ongoing projects. The other $1 billion would go directly to the government on condition it implements economic reforms to fix the financial mess, Reuters says. “We are committed to supporting the people of Ukraine in these difficult times and very much hope that the situation in the country stabilizes soon,” said World Bank President Jim Yong Kim. “We are moving forward with our pipeline of projects and aim to support the government to undertake the reforms badly needed to put the economy on a path to sustainability”, he said. The terms of the loan have not been announced, however the bank says priority is to be given “to restoring macroeconomic stability, strengthening the banking sector, reforming the energy sector, seriously tackling corruption and improving accountability, enhancing the investment climate

U and better targeting social assistance towards the poor and the vulnerable.” The $3 billion loan may become additional help to the ongoing investment and guarantee program of about $3.7 billion. In particular the World Bank supports the improvement of basic public service delivery in areas such as water supply, sanitation, power and roads, and supports the private sector. However Timur Nigmatullin, the Investcafe analyst, is sure Ukraine needs a much larger sum to get out of the crisis. “In order to solve the economic problems of Ukraine, needs not less than $15-25 billion, probably nearer to $35 billion … Without external help we will see a Ukrainian default within the next few months,” Nigmatullin said. The Vice-President of the European Commission Olli Rehn said, at a euro group meeting on Monday evening, the EU can allocate up to $2.2 billion (1.6 billion euro) of direct financial help to Ukraine, However, Rehn emphasized that at first Ukraine has to sign a contract with the International Monetary Fund (IMF) and undertake a commitment to carry out economic reforms.

2 BIG PIPELINE PROJECTS ON HOLD, AS EU-RUSSIA RELATIONS SOUR OVER UKRAINE

azprom, Russia’s largest natural gas producer, will see delays in two pipe projects, the South and Nord Stream, as the company is caught in a diplomatic crossfire

over Ukraine. Gazprom’s $45 billion South Stream project, slated to open in 2018 and deliver 64 billion cubic meters of natural gas to Europe, is a strategy for Russia to bypass politically unstable Ukraine as a transit country, and help ensure the reliability of gas supplies to Europe. The pipeline deliveries via the Black Sea are expected to provide about 15 percent of Europe’s annual gas needs in 4 years time. But to become operative, it needs crucial approval from EU legislators, as the Third Energy Package regulation has become a major stumbling block. The regulations limit pipeline ownership and require access for other gas providers. The Third Energy regulation mandates 50 percent of the pipeline can be operated by Gazprom, but the other 50 percent must be operated by a third party, a condition Russian energy ministers do not accept, as Gazprom is the only company that has the right to export gas via pipeline. Moscow broke ground on the South Stream project after securing agreements with Austria, Bulgaria, Croatia, Greece, Hungary, Slovenia and soon-to-be EU member Serbia but ignored the European “anti-monopoly” law. Guenther Oettinger, the European Commissioner for Energy, said further legal talks on South Stream had been suspended. “I won’t accelerate talks about pipelines such as South Stream for the time being; they will be delayed,”Oettinger told German newspaper Die Welt on Monday. Following the EU-Russia summit in Brussels on January 28, Russian energy ministers said the European Commission had agreed to give the South Stream project a legal ‘OK’. An energy standoff between the EU and Russia

March 17, 2014 #46

would have adverse consequences for both sides. Europe depends on Russia for one-third of its natural gas, as prices are much more competitive than US shale, and less risky than deliveries sourced from Africa. OPAL AND NORD STREAM Nord Stream is another Gazprom project to reduce dependence on Ukraine. Opened in 2011, the pipeline pumps gas under the Baltic Sea to Germany and the rest of Europe. Due to the same anti-monopoly rule, the European Commission, on March 10, did not accept a proposal to withdraw restrictions on OPAL, a transit link pipeline, Vedomosti reported, with sources citing the political strain between the EU and Russia. “The Commission aims for rapid clarification of the remaining issues and will work on this together with the relevant authorities,” an EU spokeswoman said. OPAL has the capacity to deliver 36 billion cubic meters annually, and connects Nord Stream to gas networks throughout Europe, specifically big markets like Germany and the Czech Republic. GAS DISCOUNT NO MORE On Friday, Gazprom CEO Aleksey Miller warned Russia may have to turn off deliveries through Ukraine if Kiev fails to settle an outstanding $1.9 billion gas bill. Overdue payments also forced the Russian gas major to cancel Ukraine’s discount on natural gas. The deal was reached in December 2013 with the Yanukovich-led government, and lowered prices from $400 per 1000 cubic meters to $265.50. In the winter of 2009, deliveries through Ukraine were disrupted for 3 weeks, which left customers in Europe without heat and cost Gazprom (by their estimates) around $2 billion. Gazprom also stopped deliveries in 2006. Last year, Gazprom exported 86 billion cubic meters of gas through Ukraine.

KRAINE’S problems are not just political. In recent weeks its economy has taken a hammering. Until mid-January its currency, the hryvnia, was fixed at 8:1 with the dollar; it now trades at about 10:1. The government has recently issued short-term debt at interest rates as high as 15%; this year its bonds have done about as badly as Venezuela’s. Many analysts are worried that the country will soon default on its debt. The economic turmoil reflects recent political instability. But Ukraine’s economic problems were long in the making. Dodgy economic policy, distaste for reform and endemic corruption have brought the country to its knees. In the immediate post-Soviet era Ukraine was a massively unproductive economy. Like most former Soviet republics it suffered huge output declines and soaring inflation. But Ukraine was among the hardest hit of the lot. Hyperinflation in the early 1990s resulted from lack of access to financial markets and massive monetary expansion to finance government spending, in the face of sharply declining output. The Ukrainian population was scarred by the experience of hyperinflation. In response, in 1996 the Ukrainian central bank replaced the old currency, the karbovanets, with the hryvnia and pledged to keep it stable in relation to the dollar. The currency continued to wobble through the late 1990s, however, and particularly amid the Russian rouble crisis of 1998. Both Russia and Ukraine stabilised by the early 2000s. Capital flowed back, attracted in part by relatively high interest rates (the early 2000s, when the Fed pushed its main interest rate down to 1% for an extended period, were a rehearsal of sorts for the post-crisis environment). As foreign cash flooded in the money supply grew rapidly: from 2001 to 2010 broad money increased at an annual rate of 35%. In 2006 and 2007 credit growth averaged 73%. Assets began to look extraordinarily bubbly and high inflation damaged Ukraine’s export competitiveness. After the global crisis, and as the euro crisis intensified, Ukraine suffered from a drought in capital flows (along with much of central and eastern Europe) which placed strong downward pressure on the hryvnia. Protecting the currency drained the central bank’s reserves, which tumbled from a high of $40 billion in 2011 to about $12 billion today. Last month the central bank admitted defeat and let the currency go. Currency depreciation, while necessary, will be an economic headache for Ukraine in the short term. About half of its public debt is in foreign currencies: as the hrvynia loses value, Ukraine’s debt burden rises. Debt financing has also become more difficult as a result of the Federal Reserve’s “taper”, which has wrong-footed many emerging markets

by stanching the previously steady flow of capital in their direction. Ukraine has proven reluctant to engage in reform. For a while it felt as if it didn’t need to: high commodity prices during the 2000s supported growth. Many of Ukraine’s exports went to Russia, a country that was also doing well on the back of high oil prices. But Ukraine was badly hit by the financial crisis and plummeting steel prices. GDP fell by 15% in 2009. That made it a prime candidate for economic streamlining. In 2010 the IMF agreed to loan Ukraine $15 billion—with conditions attached. A major target for reform were Ukraine’s cushy energy subsidies. The state gas company, Naftogaz, only charges consumers a quarter of the cost of importing the gas. Cheap gas discourages investment: Ukraine is one of the most energy-intensive economies in the world and domestic production has slumped by two-thirds since the 1970s. The IMF ended up freezing the deal in 2011 after Kiev failed to touch the costly subsidies. In other areas reform has been half-hearted. The government did meet its public deficit target of 2.8% of GDP in 2011. Yet this was achieved by skimping on capital expenditures while overspending on wages and pensions: hardly the recipe for sustainable economic growth. Progressively lowering the rate of corporation tax has also weakened the state’s finances. Corruption and poor governance are other major problems. The Ukrainian shadow economy is one of the biggest in the world—at around 50% of GDP, according to IMF research. Businesses operating underground tend not to pay taxes, further depriving the government of funds. And last week Ukraine’s new prime minister estimated that $37 billion had gone missing during Viktor Yanukovych’s rule. Right now Ukraine is not too worried about improving economic management. But big bills are imminent: Ukraine needs to find about $25 billion this year to finance its large current-account deficit and to meet foreign creditors. Foreignexchange reserves are only $12 billion. Default is certainly on the cards. When the crisis does end, addressing its economic backwardness must be a major objective.

HALF OF ENTREPRENEURS IN KAZAKHSTAN’S SMALL BUSINESSES ARE WOMEN

very second entrepreneur in Kazakhstan’s small business sphere is a woman. The news was announced by chairman of Damu Entrepreneurship Development Fund Lyazzat Ibrahimova on March 11 at a briefing in Astana. “Women account for over 49 percent od individual entrepreneurs in Kazakhstan,” Lyazzat Ibrahimova said. She said the mass entrance of women into entrepreneurship in the last 10 years is called a quiet revolution. “Today, Kazakhs have more options to choose from: to work for an employer or for themselves. And women frequently choose the second option,” Ibrahimova said. She noted that women go into business in the field in which they have received education and knowledge. “There are many female dentists and doctors in Kazakhstan who had their clientele and began to create their own dental and specialized medical centers. There are many female teachers who began to create their own educational centers,” Ibrahimova said. She said every third loan guaranteed by the Damu Fund has been issued to a woman entrepreneur. “Some 38 percent of the total number of projects

got concessional loans in commercial banks and 33 percent of them got guarantee for loans. In other words, every third loan which has received Damu Fund’s guarantee has been issued to a female entrepreneur,” Ibrahimova said. She recalled that the funds for issuing loans under the program of women’s micro-crediting have been placed in commercial banks that are Damu Fund’s partners under certain conditions. “With this money, the banks can only finance businesses owned or co-owned by a woman. The amount of the loan should not exceed 30 million tenge ($ 1=182.09 tenge), and the rate on the loan should not exceed 14 percent per annum,” Ibrahimova said. The Damu Entrepreneurship Development Fund is one of the 10 development institutes transferred to Baiterek holding. The fund’s main aim is to develop small and medium-sized businesses in Kazakhstan. Baiterek National Managing Holding was established under a decree of the Kazakh president as of May 22, 2013. The purpose of its establishment was to promote the development and diversification of the economy, attract investments, and improve the corporate governance system in its subsidiaries.

WORLD NEWS March 17, 2014 #46

caucasian business week

SOROS TELLS EUROPE: IMPOSING SANCTIONS ON RUSSIA NOT THE BEST WAY FORWARD

illionaire financier George Soros says the Ukrainian turmoil is a “wake-up call” for Europe, which should remember its aim and focus on integration. The EU must aid Ukraine financially or technically, rather than cut ties with Russia. “It’s very important to respond and respond the right way which is not necessarily to impose sanctions on Russia, but to actually help Ukraine financially and also technical assistance, something like a European Marshall Plan for Ukraine, that would be the right response,” Soros said in an interview to Bloomberg. Under the post-war Marshall Plan the US provided help to Western Europe worth billions of dollars – in the form of food, fuel, machinery and investment. Europe may face 25 years of stagnation if government officials don’t make an effort to strengthen and further integrate the currency union, Soros warned. Such a prolonged economic slowdown may prove unsustainable for Europe, he added. The financial crisis in Europe which began in 2010 has almost ended. However the region is still facing a political crisis, which has split the

area into country creditors and country debtors, Soros said. “You have to go further with the integration. You have to solve the banking problem, because Europe is lagging behind the rest of the world in sorting out its banks.” At the same time banks are oriented to passing the stress tests, instead of stimulating the economy by capital injections in business, Soros believes. According to Soros, the EU gave a poor option to Ukraine which gave the advantage to Russia. “Europe, true to form, demanded a lot and offered little,” Soros said. “It was not difficult for Putin to come up with a better offer.” The crisis in Ukraine emerged last year when former President Victor Yanukovich decided not to sign an association agreement with the European Union, and instead opted for help from the Russia. The move caused mass protests in Ukraine which led to Yanukovich’s overthrow. Now the country faces an economic crisis and military pressure from Russia. George Soros, a magnate and investor is known as “The Man Who Broke the Bank of England” because of his short sale of $10 billion worth of pounds, giving him a profit of $1 billion during the 1992 Black Wednesday UK currency crisis.

US TO SELL STRATEGIC OIL RESERVES FOR FIRST TIME IN 24 YEARS

he Obama administration plans to sell 5 million barrels, or less than 1 percent of the Strategic Petroleum Reserve, calling the move a test of the petrol distribution system. The last time this happened was in August 1990 before the first Gulf War. “Due to the recent dramatic increase in domestic crude oil production, significant changes in the system have occurred -- including pipeline expansion, construction of new infrastructure, reversed flow of existing pipelines and increased use of domestic crude oil terminals,” William Gibbons, the US Energy Department spokesman said in a statement. The government rejected a connection with the turmoil in Ukraine or other geopolitical events. On Thursday the price of West Texas Intermediate (WTI) crude futures for April delivery fell by 2.3 percent on the New York Mercantile Ex-

change. It’s the biggest drop in two months. WTI crude has a high sulfur content, similar to oil exported from Russia. The large sale might be a test of the US system’s readiness for a hiccup in Russian supply, analysts suggest. “The timing of this makes it seem like a warning shot across the bow towards the Russians,” the Financial Times quotes Michael Wittner, the head of global oil research at Société Générale in New York. The US Secretary of State John Kerry has warned about tough sanctions if Moscow does not draw back from its position over Crimea, in particular support of the region’s status referendum on March 16. However former US State Department employee David Goldvin thinks the opposite. He considers that test sale is more directed at fighting volatility of supply from larger oil producers like Venezuela and Nigeria, and the long running question over Iran, and its nuclear ambitions.

CHINA TO BECOME WORLD’S BIGGEST ‘BILLIONAIRE CLUB’ BY 2023

HAPPY BIRTHDAY WORLD WIDE WEB

ociety is adopting technology at an increasingly fast pace. ON THIS date in 1989 Tim BernersLee, a British physicist working at CERN, Europe’s particle physics laboratory, wrote a memo to his boss modestly entitled “Information Management: A Proposal”. Mr Berners-Lee proposed to develop a way to share information over a computer network. “A ‘web’ of notes with links (like references) between them is far more useful than a fixed hier-

archical system,” he wrote. The rest is history. It took only seven years from the first web pages in 1991 for the web to be used by a quarter of the American population. That compares with 46 years for electricity, 35 years for the phone and 26 years for television. “Vague, but exciting”, wrote Mr Berners-Lee’s supervisor at the top of his CERN memo (a diagram from which appears under the chart). The web, just 25 years old, is still at the start of its life.

sia is set to overtake Europe as the home of the biggest number of billionaires within the next decade, according to a new survey. China’s super-rich will outnumber those in the UK, Russia, France, and Switzerland combined. The number of billionaires in China is expected to hit 322 in 2023, says the eighth annual Knight Frank Wealth Report. The increase is supported by the positive outlook for wealth creation in China as the country is expected to add an extra $1 trillion to global GDP every year from 2013 to 2023, according to Thomas Lam, the Director and Head of Research & Consultancy of Knight Frank. Over the next ten years, the Chinese Ultra HighNet-Worth Individuals (UHNWIs), those with $30 million or more in net assets, will grow by 80 percent, and in India they will almost double. There will be an expected 144 percent increase in Indonesia and a similar 166 percent rise in Vietnam. The total number of UHNWIs in Asia will rise by 43 percent, hitting 58,588 by 2023, which will be more than in North America in the same period. According to the report, among the 10 most UN-

HWI concentrated cities Asia will account for half by 2024, the biggest third after New York and present leader London. Since 2003 the number of UNHWIs has increased globally by 59 percent, more than doubling in the Middle East, Latin America, Australasia and Africa. The number of individuals with $100 million or more in net assets has risen by 62 percent, while the quantity of billionaires has climbed by 80 percent to 1,682.

PUBLICITY caucasian business week

March 17, 2014 #46

TBILISI GUIDE March 17, 2014 #46

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 16 Akhmeta Str., Avlabari, 0144 Tbilisi. 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, NIKORA AND SMART

PUBLICITY caucasian business week

March 17, 2014 #46