Caucasian Business Week #57 by Caucasian Business Week

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BUSINESS WEEK June 9, 2014 #57

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June 9, 2014, Issue 57

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BE INFORMED, DO BUSINESS

GEORGIA GERMAN BRAND “FOODPANDA” NOW IN GEORGIA

Bruno Balvanera: Joining LSE will Considerably Increase TBC Capitalization

GEORGIAN CO-INVESTMENT FUND INVESTS IN VIRTUAL CURRENCY

eorgian Co-investment Fund invests in company BitFury, which is engaged in the popularization of the so-called “ Bitcoins” - a virtual currency. Pg. 9

CIS UKRAINE READY TO SIGN EU TRADE DEAL ‘IMMEDIATELY’ POROSHENKO

kraine’s President-elect Petro Poroshenko is ready to sign a deal establishing free trade between the EU and Ukraine, right after his inauguration on June 7. Pg. 10

AZERBAIJAN TURKISH-SPEAKING COUNTRIES COMMITTED TO EXPANDING TIES

urkish resort city of Bodrum hosted the Fourth Summit of the Cooperation Council of Turkicspeaking States (CCTS) on June 5. Pg. 11

WORLD NEWS SWITZERLAND FREEZING $1BN IN ASSETS OF FORMER UKRAINIAN AND EGYPTIAN PRESIDENTS

David Iakobashvili: Doing Business in Georgia has Become more Difficult Pg. 4

Pg. 5

GEORGIA’S TBC BANK PRICES $240 MILLION IPO

eorgia’s TBC Bank has set the price for an initial public offering (IPO) of global depositary receipts to be traded in London at $13, valuing the company at around $640 million. In a statement on Friday the bank said the total size of the transaction was $238.7 million excluding shares offered as part of an over-allotment option. The final price came in at the bottom of $13 to $16 price range set in May.

The bulk of the deal proceeds goes to a group of selling shareholders which includes the World Bank’s International Finance Corporation, the European Bank for Reconstruction and Development, Germany’s DEG investment corporation, JPMorgan and investment manager Ashmore. Proceeds for the bank from the sale of new shares amount to around $96 million which it will put towards growing its business. Barclays and UBS acted as joint global coordinators on the sale.

IN WARSAW SPEECH, OBAMA REITERATES Pg. 2 SUPPORT TO GEORGIA, MOLDOVA, UKRAINE

David Mirtskhulava: The State shall ensure security issues related with hydrotechnical structures China Considered as an Alternative to Russian and Ukrainian Markets for Georgian Wine Pg. 4

CAUCASIAN BUSINESS WEEK – MEDIA PARTNER FOR THE GEORGIAN FAN CLUB OF TURIN JUVENTUS AND ITALIAN NATIONAL FOOTBALL TEAM FANS

AF Advertising Company – A Full Package of Indoor and vices Outdoor AD Services Pg. 4

Pg. 8

MAIN EVENTS caucasian business week

GERMAN CHANCELLOR MEETS GEORGIAN PM IN BERLIN

fter meeting with Georgian PM Irakli Garibashvili in Berlin on June 2, German Chancellor Angela Merkel hailed Tbilisi for pursuing EU integration path while at the same time trying to normalize ties with Russia through “pragmatic” policy and welcomed the Georgian authorities’ efforts to improve investment conditions in the country. Merkel, however, also said that she does not think a Membership Action Plan (MAP) for Georgia will be on the agenda of NATO summit in Wales in September. Merkel Sees No MAP for Georgia at NATO Summit in Wales It was the second meeting between the German Chancellor and the Georgian PM in less than a week. Garibashvili met Merkel in Berlin together with his Moldovan and Ukrainian counterparts, Iurie Leanca and Arseniy Yatsenyuk, respectively, on May 28. “Today we talked extensively about the bilateral relations,” Merkel said at a joint news conference with the Georgian PM on June 2. “Our countries have a very good, friendly relationship, and we are glad that Georgia is moving closer to the European Union, which will be demonstrated by signing of the Association Agreement [on June 27],” the German Chancellor said. “On the other hand we also see that Georgia has invested a lot of effort to step-by-step develop relations with Russia,” Merkel added. She said that Georgia’s example of following EU integration and at the same time trying to seek better relations with Russia was showing that it’s not about “either/or” choice. Merkel also said: “I support Georgia’s very pragmatic approach in its ties with Russia.” On bilateral relations she said that more should be done to develop economic ties and added that Germany will encourage its companies to seek investment opportunities in Georgia. “Georgia has very good conditions for it,” Merkel said, adding that there was a sense of “instability” over Georgia due to conflicts in Abkhazia and South Ossetia, which, she said, were deterring factors for investments. “We should note it clearly that the present Georgian government is improving country’s credibility, including its legal framework,” the German Chancellor said. PM Garibashvili hailed the meeting with Chancellor Merkel as a “milestone” in the GeorgianGerman relations.

“I am glad that we were able to discuss very important issues for Georgia,” he said. “We especially appreciate Germany’s firm support towards Georgia’s territorial integrity.” He said that the Association Agreement, which Tbilisi plans to sign with the EU on June 27, will help Georgia “in becoming a full-fledged member of the European family.” PM said that Georgia’s internal reforms, including judiciary, human rights and rule of law, were also discussed. On ties with Russia, PM Garibashvili said that he informed the German Chancellor about Georgian government’s “efforts to improve relations with Russia.” “After coming into government we have undertaken many constructive steps, which yielded concrete results and this constructive policy has demonstrated that Georgia has constructive, predictable and stable government, which is willing to normalize relations with Russia,” Garibashvili said. “Our government is motivated, consistent and predictable; we take with responsibility our commitments.” Asked about situation in Ukraine and what he would recommend to the Ukrainian leadership in dealing with Russia, the Georgian PM responded that he hopes Ukraine’s newly elected President Petro Poroshenko “will spare no effort to restore peace and stability in Ukraine.” “We of course support Ukraine’s territorial integrity,” Garibashvili said. He said that “constructive dialogue is the only and the best way out of any crisis.” “We have managed it. We have proved that we want constructive, normal relations with Russia and that we want to solve all the problems persisting between two countries through this approach,” he said. “We are also setting an example that Georgia can be a country, which wants to join the EU and at the same time to continue constructive policy towards Russia – and this is adequately assessed by the both sides. So I think Georgia is setting an interesting example in the region,” he said. “As far as advice to Ukraine is concerned, my advice would be to launch a constructive dialogue with Russia very soon; solution should be found only through negotiations with the involvement of the international community, including Germany,” Garibashvili said. Also on June 2, the Georgian PM handed over to German Foreign Minister Frank-Walter Steinmeier two 18-century books at a ceremony in the Bode Museum. The books, which were discovered among thousands of others in the Tbilisi University Library, were removed from Germany during the Second World War. The Georgian PM was accompanied in Germany by Foreign Minister Maia Panjikidze; Economy Minister Giorgi Kvirikashvili; State Minister for European and Euro-Atlantic Integration Alex Petriashvili; Minister for Infrastructure and Regional Development Elguja Khokrishvili; Agriculture Minister Shalva Pipia, as well as vice-speaker of Parliament, GD MP Manana Kobakhidze.

GEORGE KVIRIKASHVILI: THERE IS NO THREAT TO 5% ECONOMIC GROWTH

inister of Economy and Sustainable Development George Kvirikashvili commented on the budget and economic growth indicator before the Friday session of the government. He talked about social-economic strategy of the country Georgia-2020. He said that the program includes increase of private sector capacity, development of human capital and accessibility on the finances. “One is increase of private sector capacity, the second - development of human capital, which is very important, as we have a serious misbalance in the

supply of the working force and demand of the job market. The third one is accessibility on the finance”, - Kvirikashvili state. The Minister of Economy also explained reasons for slow GDP in Aril. “As a rule, it happens that after the Q1 economic activities slightly drop, although it can also be said that comparatively higher growth was mentioned last April and it cause lower rate, considering comparability principle. Meanwhile, I want to say that activities are very high in number of directions and there is no threat to 5% economic growth. It may be higher”, - Kvirikashvili stated to the journalists.

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June 9, 2014 #57

GEORGIAN PRESIDENT IN UKRAINE FOR POROSHENKO INAUGURATION

eorgian President, Giorgi Margvelashvili, arrived in Kiev on Friday to attend inauguration ceremony of the Ukrainian president-elect Petro Poroshenko on June 7. President Margvelashvili met on Friday Ukrainian PM Arseniy Yatsenyuk and discussed “the need to deepen cooperation,” according to the Georgian president’s administration. It also said that the Georgian President noted importance of demo-

cratically held presidential election in Ukraine, which “demonstrated the Ukrainian people’s strong will to build strong, free, democratic and united European country.” In Kiev the Georgian President is accompanied by secretary of National Security Council Irine Imerlishvili; his foreign policy advisor Vano Matchavariani, as well as lawmakers from ruling GD coalition, vice-speaker Zviad Dzidziguri and Tedo Japaridze, chairman of parliamentary committee of foreign affairs.

GOVERNMENT ADOPTS GEORGIA’S 2020 STRATEGY

overnment of Georgia adopted social-economic development strategy of Georgia – Georgia 2020. Public discussions of the strategy started in October last year and economic experts, representatives of the National Bank, business sectors, international donor organizations participated in it. For the pubic discussion the strategy project was published on the official websites of Ministries of Finance, Economy and Sustainable Development. “I want to express gratitude to the donors” World Bank, Asian Development Bank European Bank for Reconstruction and activities, International Monetary Fund, also representatives of our friend countries. During the discussion hot disputes took place. We did not publish it until we elabo-

rated the strategy with experts. I thin it’s a very interesting document and what’s more, it identifies problems correctly, to which Georgia faces”, - Minsiter of Finance Nodar Khaduri stated. Implementation of the strategy already started. Members of government were assigned to submit action plan during 1,5 months – the activities which should be implemented. Georgia 2020 strategy reflects the mechanisms and indicators, which should provide universal economic growth in the country, among them: promotion of private sector competitiveness and increased access on finances, development of human capital, also maintenance of the prerequisites necessary for this aim, such as: macroeconomic stability, effectiveness of budget expenses, effective public administration.

MAY FIXES ANNUAL INFLATION AT 2.4%

nnual inflation was 2.4% in May, down from 3.4% in April, according to the state statistics office, Geostat. On monthly basis there was 0.3% deflation in May.

Prices on food rose by 2.6% year-on-year and prices on alcoholic beverages and cigarettes increased by 6.4% y/y in May. There was 5.8% y/y increase of prices in healthcare services. Prices on clothing and footwear dipped by 5.1% y/y in May, according to Geostat.

IN WARSAW SPEECH, OBAMA REITERATES SUPPORT TO GEORGIA, MOLDOVA, UKRAINE

.S. President Barack Obama reiterated on June 4 that his new initiative to boost the security of allies and partners in Europe will also include supporting Ukraine, Moldova and Georgia to help them “provide for their own defense.” In his speech delivered in Warsaw’s Castle Square at a ceremony marking the 25th anniversary of elections in Poland that led to the end of Communist rule in Poland, President Obama condemned “Russia’s aggression in Ukraine” and said that free nations should “stand with those who seek freedom.” After reaffirming the U.S. commitment to NATO’s principle of collective defense, Obama said: “Yesterday, I announced a new initiative to bolster the security of our NATO allies and increase America’s military presence in Europe. With the support of Congress, this will mean more prepositioned equipment to respond quickly in a crisis, and exercises and training to keep our forces ready; additional U.S. forces – in the air, and sea,

and on land, including here in Poland.” “And it will mean increased support to help friends like Ukraine, and Moldova and Georgia provide for their own defense,” the U.S. President said. President Obama urged the Congress on June 3 to support USD 1 billion “European Reassurance Initiative” plan to increase U.S. military deployments in Eastern European allies and to support partners, including Ukraine, Moldova and Georgia. The White House said that the European Reassurance Initiative will enable the United States in the next year to undertake series of measure, which, among others, will also include building of “partner capacity of close friends such as Georgia, Moldova, and Ukraine so they can better work alongside the United States and NATO, as well as provide for their own defense.” In his keynote speech in Warsaw on June 4, President Obama also said: “Wherever people are willing to do the hard work of building democracy – from Tbilisi to Tunis, from Rangoon to Freetown – they will have a partner in our nations.”

The weekly is distributed to top companies, banks, embassies, state sector, Tbilisi and Batumi hotels, Tbilisi, Batumi and Kutaisi Airports, as well as in the town of Marneuli. The newspaper will also penetrate Azerbaijan in the near future

PUBLICITY June 9, 2014 #57

caucasian business week

APARTMENT

Every Wednesday At 21:00 On GDS TV Full of humor

Anchors – Kotiko Toloraia, Levan Gogoreliani will offier refined humor, provide good mood and invite interesting guests for the program audience. The program consists of three parts: the first block offers humor and apolitical monologue with funny video clips, pictures and so on. The second and third blocks are dedicated to famous public figures that will be invited as guests. The show will start Wednesdays at 21 o’clock and it will cover all interesting issues excluding politics to guarantee good mood for the audience.

Guests: Nanuka Zhorzholiani, Rosto, Khatia Shamugia, Tako Dolaberidze, Anuki Qorqia and Lika Qorqia

Dear Caucasian Business Week Readers,

e are pleased to inform you that we are now at an advanced stage of preparing the Caucasus Healthcare Infrastructure & Pharmaceutical Summit, set to take place in Tbilisi on 18 and 19 June 2014. Euroconvention Global is delighted to invite you and your colleagues to take actively part into this conference and exhibition. An opportunity to get first hand information from policy makers and other private sector decision makers on recent development and opportunities in the sector. Networking time to enable one-to-one business to be initiated or contracted has been built into the program as well. Your peers and other key players in the healthcare infrastructure, medical technology and pharmaceutical industries will be attending, along with investors, banks, consultants, legal advisers, designers and constructors. A 2-day unique update on the Caucasus healthcare industry Healthcare policy makers, European professional associations, pharmaceutical regulators, International Financial Institutions and a select number of private sector speakers will participate in the various panel sessions, covering topics such as: 1. Overview of the healthcare sector in the Caucasus - reforming, innovating, investing 2. Pharmaceutical market - further growth, export, R&D, capital investment 3. Legal and regulatory environment for the pharma industry - status and best practices 4. Hospital build & sustainable healthcare delivery services - project finance & growing role of PPP 5. Advanced medical technology, innovative equipment and e-health solutions 6. Financing of the healthcare in the Caucasus and sustainability of health program 7. New opportunities for the insurance sector 8. Long term opportunities for investors in the new health projects Early Bird discount for registrations currently available! The detailed agenda and registration form are available upon your written inquiry to: administration@euroconventionglobal.com As CBW Readers, please note that you are benefitting from a 20% discount on all registrations and corporate packages. Simply quote ‘CBW-CHS’ to apply the discount. Sponsorship, speaking opportunities and exhibiting at the Summit The Georgia, Azerbaijan and Armenia healthcare markets are offering significant business development opportunities. If you consider having a pro-active participation in the Summit, this unique industry gathering for the Caucasus will provide your company with an excellent occasion to raise your profile, to highlight your expertise or to showcase your product/service. Please ask for sponsorship/corporate packages available and I will be at your attention for any further clarification or to tailor together a package in line with your budget. We can speak at your earliest convenience to discuss the best format of presence for your company, whether you are interested in delegate registration(s), a speaking slot in the program, logo branding, a display stand space in the Summit foyer, etc. I look forward to hearing from you. Kind regards, Francis Smith Event Director Euroconvention Global; Avenue du Perou 84; 1000 Brussels - Belgium; Tel.: +32 2 662 16 12

INTERVIEW caucasian business week

June 9, 2014 #57

DAVID IAKOBASHVILI: DOING CHINA CONSIDERED AS AN BUSINESS IN GEORGIA HAS BECOME ALTERNATIVE TO RUSSIAN MORE DIFFICULT AND UKRAINIAN MARKETS FOR Georgia , - says David Iakobashvili. “Unfortunately, there is too much third-party inGEORGIAN WINE tervention in business processes.

ll my Georgian companies make pretty good money. But it becomes more difficult to do business there, “- says the native of Georgia and a Swedish citizen David Iakobashvili. In Georgia, he owns an oil terminal in Poti and a network of 140 gas stations. He began to invest in Georgian assets in the spring of 2011 when he bought a minority stake in the company Petrocas Energy Group: « I was offered a 20% per annum on my investments, and I thought it was a good suggestion - money should bring income, or they will quickly disappear. The company delivered on their promises and I liked it”. Oil trader Petrocas Energy Group belonged to David Kezerashvili , served as Minister of Defense of Georgia in 2006-2008, who was an ally of President Mikheil Saakashvili. A few months before the defeat of Saakashvili’s party in the parliamentary elections in October 2012, Kezerashvili preferred to sell all of his assets to Iakobashvili . Apart from 70 % in Petrocas Energy Group, he sold shares in the advertising agency Outdoor.ge, a sugar plant, etc. A separate purchase of the businessman is casino “Adjara” . According to the businessman , the total investment amounted to about $ 470 million “Now I earn about 20% from the invested money – Iakobashvili notes. During the last reporting period Petrocas Group paid 60 million USD in taxes. Although, in my opinion, the company and the treasury could get twice as much with our resources”. What prevents? Despite the reforms and the image of one of the freest economies, rules clearly defined and identical for everyone don’t exist in

“Not many businesses bring good money, so each such company attracts much attention. Officials do not intervene in gambling business, but the tax regulation is superrigid”,- Iakobashvili notes. He has with what to compare: in the early 1990s he along with Gavril Yushvaev (№ 63 in the list of Forbes) opened the casino “Metelitsa” on the Novy Arbat in Moscow . Georgian casino should pay tax for the whole calendar year in March, and it’s difficult to predict a future income. Thus, in the businessman’s words, in 2013 the casino “Adjara” paid into the treasury about $ 8 million of taxes but earned only 3 million. It is visited by about 1 500 people a day, and it is considered the biggest in Tbilisi. However, the “ purchasing power “ of the population , Iakobashvili says, is “very low”: at best, people come up with $ 100 . “This is a long-term investment, but I initially understood what was going on , and do not complain . There are difficulties in any business and any country. I am sorry that due to the lack of common sense and the rules of the game, not only business, but also the budget of Georgia bears substantial losses, “- the businessman adds. According to David Iakobashvili, it is much easier to work with the neighboring countries (Petrocas is engaged in oil trading in Armenia, Azerbaijan , Turkmenistan and Kazakhstan ). “We established relationships with partners in these countries during the previous owner, we try to develop them. Each of these countries has its own peculiarities, and we always consider them. In Azerbaijan and Armenia the spheres of influence are divided between powerful and influential families and the number of businesses for a foreign investor can enter is limited. But the rules of the game are followed by everyone, even if they are unwritten, so when there is mutual benefit you can work there. “ One of the best countries for investment in postSoviet space is Kazakhstan: “The law works there, legal rules are clearly defined, and the total tax burden on business is significantly lower than in Russia. Authorities are open to investors, in general, there are prospects, and money can be invested. “

An interview with Director of the National Wine Agency LEVAN DAVITASHVILI

ussia is the leader of the top five exporting countries, but the market is considered risky due to political factors. Russia naturally is geographic and historical market for Georgian wine, so its leadership is not surprising. The increased exports percentage is reflected in a number of factors. Last year, the figure was approximately 50% in Russia, and this rank is closer to our plan. However, an increased rate was due to a number of delays in the Ukrainian market because of political factors. You know that the Ukraine is the main alternative and the second export market for Georgian wine. The problems in this country led to an increase in the share of Russia. There were also technical problems on the Belarusian market. Georgian government solved this issue, we visited Belarus along with the representatives of the Ministry of Agriculture, resolved all problems and now the country’s doors are open for Georgian wine. This figure is over the past five months and it will be adjusted. Belarus and Ukraine have always been in the top five. However, they have lost their position. If we do not develop the markets in the other direction , on alternative markets, we will be dependent on a single market. One or two markets do not mean diversification. - Whether or not other alternative large markets are considered, such as China’s market? - We consider China as the main alternative to Russian and Ukrainian markets. It will be a very large insurance for Georgian wine. China has great potential, not only because it is the most populated country but in the coming years it will become the world’s number one economy, as predicted. In terms of wine, it is becoming a leader. 3 billion bottles of wine are consumed in China and 1% of the total consumption will be an important result for the Georgian wine that is actually achievable. It will be a good result if we hold 1% of the mar-

ket in 3-4 years but it will be possible only in the case of effective marketing and approach as well as correct trade policy. However, in the long run we should stably hold 2% of the Chinese market within 5-10 years. More growth is unrealistic because China is already among the top five wine producing countries. Nevertheless, there is some potential for imported wine, Georgia has a lot of marketing pluses, which is why we can achieve the results we planned. I’ve been in China, where I held high-level meetings at the Ministry of Trade. - What are the signals coming from the Chinese side? - The mood of goodwill and cooperation is felt. Our more activity is required. A number of issues, including tariff policy, should be resolved. China has a high cost. Georgian wine is taxed by 50% in the Chinese market. We need to create awareness. Awareness is the main factor for success, marketing plan is very important to create awareness. - Is there any danger of presence of genetically modified organisms in Georgian wine? - This is a difficult scientific question, because it is not easy to discover GMO. There are several ways of getting genetically modified organisms into wine. However, such facts don’t happen in Georgia. There is no theoretical chance to discover GMO in wine. - Three locations were considered for a Museum of Wine initiated by Premier. Has the place been chosen and in a few words tell us about the 7th Wine and Spirits Festival. - It is important to have a Museum of Wine; we have most of the archaeological material that needs exposure. In the near future we’ll chose a place and working on the project will start soon. Wine festival is held for the seventh time. It is important to prove that we really are a wine-producing country. We should have our place on the map. Each such country has a professional exhibition once a year anyway.

AF ADVERTISING COMPANY – A FULL PACKAGE OF INDOOR AND OUTDOOR AD SERVICES

Mariam Arevadze: Our Business Makes Focus on not only Making Profits. We Try to Adjust Tariffs and Quality to the Clients Requirements

Interview with MARIAM AREVADZE, a marketing manager for AF advertising company - The Time and goal for creating the company. - Advertising company AF was founded two years ago. Before, the company founders had worked in this field for six years. They had cooperated with various AD companies and we used to import their AD materials to Georgia. - How was the business idea generated? - Initially, we used to import AD materials to Georgia. Therefore, we took decision to not only import AD materials, but also to provide valuable AD services to potential clients. After our decision to set up an AD company, we im-

ported printing machines from China (basic parts of the machinery of EPCON company were imported from Japan), as well as printing materials (European-standard) and we launched our business. - What time did it take to increase the company perception and would you remember your first client and what was the ordered service? - Only two years have passed since the AF foundation. We are taking new steps. We have not completed the investment process and we are being developed. GEOFEED was our first companion that is located in Gardabani, the Kvemo Kartli Region. The company is a forage technology plant and we have made an outdoor AD for the client. The letters’ size was about one meter in height. The work was completed successfully. - Who has selected the company name and what does it mean? The name was selected by the founders and it consists of initial letters of their first names. - What difficulties arose at the initial stage or various stages of the business development? You know there is tight competition on the AD market. It is difficult to enter the market. Despite all problems and obstacles we are content with the achieved results. - How competitive the market segment was? Where did you start the business? - The competition was impressive, because there is a great number of advertising companies on the market and this number grows on daily basis. - How many persons were united in your team at the beginning and how many person do you

employ at this stage? - Initially, our team consisted of four persons. Today we employ 13 persons. Moreover, we have got a cutting group. We plan to employ new individuals in the future. - Would you tell us about your products and services? First of all, our service includes a full package of indoor and outdoor advertising: banners, stickers, big letters, light-boxes, constructions on roofs, standers, AD materials, PVC, CNC router. We also provide additional service that is polygraph services, printing, flyers, booklets, notebooks and so on. - How do you manage to maintain competitive capacity in today’s marketing situation? - The competition is very high. Therefore, we try to be in the developing process, bring various materials, new products to maintain the competition capacity. At the same time, we are importers of these materials to Georgia and this factor helps us easier compete with others thanks to difference in prices, as well as thanks to quality, because we import European standard materials. - Do you make accents on other values for clients, besides the services? - Indeed, we appreciate all companions. We appreciate the relations with them. Therefore, we try to adjust quality and tariffs to their interests. - Do you provide some preferences, bonus system and other promo activities for your clients? - We provide preferences to all clients. If the client comes with a big order, the price is minimized. We also provide minimized tariffs to VIP clients. The company offers free of charge design

work for big orders and so on. - Why citizens should apply to you? What are your main advantages compared to the competitors? - Our real advantage consists in having a base and we have not to make orders to other companions and all materials and machines are ours. We have got two big plotters. Third one will be imported in about a week. This signifies the quality and quantity of printing will increase and meet the client requirements. - Business and marketing. What do you think the business is without advertising? - Business and marketing are inseparable in reality. We believe the business should not make focus on only gaining profits. The main goal should be the business development, so as to hand it over to the future generations. Therefore, our main goal is not only to make profits. Our main goal is to do the business that will be handed over to the future generations. - How do you deliver the information on your services, innovations and other issues to the clients? - Time to time we hold promo campaigns. Today, our agents are handing over flyers in the streets. The clients who will bring these flyers will enjoy 10% discount rates on any services. We also email the information to corporate clients every week. We also use our Facebook Like Page. - Finally, what would be your company’s main message? - We offer any indoor and outdoor advertising services. We are ready to cooperate with any companion. Visit our office if you value time and quality. Because this is AF if the time and quality is important for you.

BUSINESS & ECONOMY June 9, 2014 #57

caucasian business week

BRUNO BALVANERA: JOINING LSE WILL CONSIDERABLY INCREASE TBC CAPITALIZATION

xport of TBC stocks to London Stock Exchange, considering uncertainties in the region, is a very good mark and beneficial for the bank and country’s economy”, - Bruno Bal-

vanera, EBRD president in the South Caucasus, Moldova and Belorussia stated. He mentioned that IPO confirms that TBC Bank has a strong basis, has professional management and offers high quality service to the clients. “Like in the case of its predecessor Bank of Georgia, export of the stocks to the stock market determines capitalization growth of the bank in the long-term and will make great contribution in the country’s economy”, - Bruno Balvanera stated. Paata Ghaghadze, vice president of TBC informs that by the placement of the stocks bank’s capitalization increased by $100 million. Demand exceeded to supply several times. The bank informs that total size of the placement is about $239 million, nominal price $13. 2 large players of Georgian banking sector is already represented on the London Stock Market. Total share of 2 banks according to actives equals to 52%. GDRs of Bank of Georgia were placed on the London Stock Market in November 2006 (nominal price: %18,55). Stable demand was growing and stock price doubled in several months (2007/06 - $44).

RUSSIA FOOD SAFETY EXPERTS INSPECT GEORGIAN EXPORTS

ussian food safety experts are coming to Georgia to conduct on-site inspections of Georgian fruit and vegetables earmarked to be exported to the Russian market. Positive results of on-site inspections may result in Georgian fruits and vegetables reentering the Russian market for the first time since an embargo was imposed in 2006, said officials at the Georgian Service for Food Safety, Veterinary and Plant Protection Agency. The products inspected include peaches, apricots, plums, cherries, washed and packed new potatoes, tomatoes and cucumber. Russia’s Federal Service for Veterinary and Phy-

tosanitary Surveillance Rosselkhoznadzor representative will arrive in Georgia on June 15. “Laboratory analysis will be conducted immediately before the fruits and vegetables are packed for export as this list of exported commodities are the phytosanitary high risk products,” the Food Safety, Veterinary and Plant Protection Agency said. From May 26, a selection of Georgian summer fruits (peaches, apricots, plums, cherries) and vegetables will be sold throughout Russia, said Georgia’s Agriculture Minister today. Russia gradually started to lift its trade embargo on imports of Georgian products in 2012 after being banned for seven years by Moscow because of alleged food safety concerns – not to mention punitive political motivations that contributed to the decision. Initially, Russia lifted the embargo on wine, then tea, dried fruit, laurel and fruits including citrus, apple, pear and quince. The value of Georgian exports to Russia has increased dramatically since 2013 when the embargo was lifted. Last year the total volume of exports from Georgia to Russia was $190 million USD (24 percent of turnover), while the import volume was $589 million USD (76 percent of turnover). Russia was Georgia’s fourth largest export and import partner country in 2013. In total, the trade turnover expanded by 50 percent ($260 million USD) with Russia last year.

RUSSIA CREATES BUREAUCRATIC BARRIERS FOR GEORGIAN PRODUCTS

he Russian government creates bureaucratic barriers for Georgian products in the Russian market. According to Director of the natural juice processing plant “Citro” Gia Metreveli, due to these barriers, the company changed its plans regarding the export and instead of April, products will be sent to the Russian market this month , but in the reduced quantities. Metreveli explains, the Russian Duma passed a law according to which the juices, which are not natural by 98 %, should include on the label that they are “restored”, which means that the product is made from concentrates. He says that because of this, their partners in Russia faces problems and had to change the label. The Georgian businessman is confident that Russia is lobbying restored juices such as “Moya Semya “, “ Sandora “ and similar products and

the adoption of this law can be explained just by this fact. Despite the artificial barriers, Metreveli notes that demand for “Citro” juices exists in the Russian market, however, he doesn’t exclude that prices on products will reduce due to new labels. According to the agreement, “ Citro “ should send to Russia 300 thousand bottles of LIVO juice by the end of the year. Earlier this year the company exported 30 thousand bottles, the same number will be sent in the current month. The company is also working on the expansion of export area. Metreveli adds that the samples were sent to Switzerland , from which the answer is positive, but the contract has not yet been formally concluded. “Citro “ plant located in Adjara produces 9 varieties of juice under LIVO name. Products appeared in the local market last year. Juices are sold in glass bottles and its factory price is 2.50 GEL.

BANK OF GEORGIA’S SUBSIDIARY TO ISSUE NEW BONDS

ank of Georgia Holdings informs that the development company will place new obligations on the market in the mid-June. Bank of Georgia Holdings reports that M2 has successfully placed 10year obligations of $5 million. Coupon rate is 9,5%, which should be paid upon maturity. The placement lasted for 3 weeks and left demand of $3 million unmet. “We are pleased that this mark transaction is over, which caused great interest of both international

and local investors. Proceedings will be used for funding of our housing project and we offer flats in the country, where demand on them remains robust. I want to also note that by this transaction our funding sources were successfully diversifies, As previous real estate project carried out by M2 were funded by international financial institutions. We look forward to launching the new project, which will be funded by the finances from the bonds placement”, - Head of M2 Irakli Burdiladze stated.

MAJOR IMPORTERS PREPARING FOR LOWER PROFITS

s reported, from June 1 large importers can no longer use VAT preferential treatment. One of the initiators of this decision, the MP from the ruling majority Gogi Topadze states “Commersant” that an abolition of benefits for importers with an annual turnover of more than 200 000 GEL puts in an equal situation both importers and local manufacturers who do not have such a high turnover. “Preferential treatment consisted in the fact that large importers could use the deferred payment of VAT for a few months. For example, if the Georgian company buys tobacco abroad, it has benefits, and if buys from local producers - no “- he says. The MP called importers to “calm down” and work with local entrepreneurs on equal terms. The abolition of benefits for importers was criticized by experts even before the law was adopted. According to them, the current government’s decision expresses the interests of specific individuals. The law was passed by the Parliament of Georgia on April 25 upon the initiative of the Ministry of

Finance. According to the head of the importing company “Alliance” Mamuka Tsagareli, the abolition of privileges will require additional working capital for the business, and this naturally will reduce their profits. “With this decision, the government gives us a signal that it is not well-disposed to business. The new limit will not reduce the volume of imports, but if before companies could reinvest revenues in business development, now it will be harder to do this,”- the businessman notes. According to Chairman of the Grain Growers Association Levan Silagava, VAT preferential treatment allowed to import grain at lower prices and create reserves that allowed not to raise prices in crisis situations. “Now, after the adoption of this law grain reserves will be 18-20% less, and accordingly, it will be harder to keep prices in difficult times. Georgia is 90% dependent on imported grain and if the decision is not revised, the country will face problems with grain reserves,”- Chairman of the Association adds.

GEORGIAN FANS FOR TURIN JUVENTUS FC AND ITALIAN FOOTBALL NATIONAL TEAM TO GATHER AT BARAKONI RESTAURANT

he organization of football fan clubs is very popular in Georgia. The 2014 World Cup Championship would not be exception. The Georgian football national team failed to get through the selection stage and Georgian fans have to back national teams of other countries. Therefore, Georgian citizens are actively organizing fan clubs. The Italian national team fan club is of them. The club members will assemble at the restaurant of Barakoni. The Fan club has got many sponsors and organizers, as well as fan members. Sponsors have made the following comments around the Italian national football team fan clubs. Soso Gagnidze (Zedazeni brewery): “Zedazeni company has decided to make a present to the Italian national team fans. Namely, they will be able to buy one glass of Zedazeni bear at the restaurant of Barakoni at 1.5 GEL and this will be an exclusive offer. Moreover, if the Italian national team wins the tournament, Georgian fans will receive two boxes of Golden Eagle bear”. Ketevan Chincharauli (Roniko, a network of optical products stores): “Our support is expressed in the fact we are Italian national team fans. We will set promo gifts time to time. If the Italian national team gets through the group and reaches success, the number of our gifts will increase”. Mariam Arevadze (AF advertising company): “The company will help the Ital-

ian national team fan club with banners. We will make the big banners and the company, indeed, we will do it free of charge”. Giorgi Tsiklauri (Las Vegas bookmakers’): “We will provide advertising component and popularize the fan club”. Salome Shengelidze (Italian furniture house Verona): “Our company has got tight relations with Italy, from where we import products. Therefore, it is not surprising we are Italian national team fans. We will organize various campaigns for the Italian national team fan club, including prepare T-shirts, banners and other events to further popularize the fan club”. Teona Baghdavadze (Beeline cell communications company): “We back the Italian national team and we will provide free of charge T-shirts to Georgian fans”. Lasha Davitaia, a marketing manager for Khortytsa company: “Our company will raffle a prize at matches with Italian national football team, namely, wellknown Khortytsa and new spirits of Morosha. Lottery will be conducted during all matches with the participation of Italian football national team”.

BUSINESS 6 GERMAN BRAND “FOODPANDA” NOW IN GEORGIA

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oodpanda, an online food ordering platform which is active in over 40 countries, has recently entered Georgia. The German brand has begun operations under the name “foodpanda Georgia”, and in limited time, it has managed to win the interest of a large target of Tbilisi population. The service, which is a novelty on the Georgian market, has been positively received by local consumers. The German brand has ambitious plans and goals for the Georgian market. Using the webpage www. foodpanda.ge or the platform’s mobile application (available for iOS, Android, and Windows Mobile smartphones), it’s already possible to order food from over 50 different dining points and have it delivered to customers in Tbilisi, Mtskheta, and Rustavi. The goal for this service is to help customers follow the modern and active lifestyle. Almost all restaurants have a delivery service, and foodpanda combines their menus in internet space and grants users the ability to select and order food in a fast and easy way. In products that range over 50 different restaurants that includes pizza, sushi, khinkali or sandwiches, the consumer’s choice is unlimited: sorting through the options can be done via price, type of cuisine, geographical location, delivery time, or other criteria. The process of ordering is simple: first step is opening the website – www.foodpanda.ge – or launching foodpanda’s mobile application. Afterwards you select your city and district, which

June 9, 2014 #57

allows you to select a restaurant and available food. The final step is to finish the online ordering process and wait for delivery. What’s most important is that all prices on foodpanda are identical to partnered restaurant fees and the consumer does not have to pay an additional cost for foodpanda’s service. Right now the payment is made on the point of delivery with cash, but online payment via credit cards will be available in the nearest future. foodpanda is a customer-oriented company. Using contemporary technological means – like mobile applications – it makes the food ordering process easy and fun, which results in utmost user comfort. foodpanda’s local team is made up of young professionals who have successfully implemented and developed a business model tested in different countries worldwide. According to the leadership of the company, foodpanda will constantly pamper its user base with interesting news and beneficial offers, especially during the looming World Cup championship, with foodpanda urging its consumers to keep their eyes on the company’s Facebook page feed. foodpanda Georgia is a subsidiary of the German company Foodpanda GmbH. Its Headquarters is located in Berlin, where all other country branches are being coordinated from. The founder of foodpanda is the world’s leading internet incubator, Rocket Internet, which has over a 100 successful global online business ventures in its portfolio.

MUNICIPALITY June 9, 2014 #57

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PUBLICITY AND ACCOUNTABILITY ARE OUR MAIN PRINCIPLES

ublicity and accountability to our citizens is one of the main principles of me and my team. Therefore, I believe the Marneuli municipality residents should have information on the ongoing and coming projects of the local self-government. I believe similar activities foster the growth of civil society involvement in the municipality management process. In 2014 the municipality will implement projects financed by the central authorities, local budget and the village support program. Each program was planned in the interest of local population. All ongoing and coming projects are so large-scale and various, I believe I should introduce them to the Marneuli municipality residents in the form of a timetable that comprehensively describes all ongoing and coming infrastructural projects in the municipal city and villages in 2014.

KAKHETI TRADITIONAL WINERY TO CONSTRUCT NEW WINERY IN QEDA

hairman of Adjara government Archil Khabadze and head of Kakheti Traditional Winery Zurab Chkhaidze put symbolic capsule in the fundament of the object. Adjara government informs that in the case of full load of the plant, it will be able to process about 1500 tons of grapes and it will be opened in 2 years. It’s noteworthy that it’s the first plant built in Ad-

jara during last several decades. After the fundament was made, 15 winegrower farmers got 300 saplings of Chkhaveri as a gift. Adjara government considers that the wine plant will promote development of winery in Keda municipality and improve social-economic situation. The farmers will be able to sell grapes locally. It’s noteworthy that winegrowing is a leading agricultural sphere in Keda Municipality.

BATUMI-DNEPROPETROVSK FLIGHTS START 4 JUNE

n June 4 direct flights from Dnepropetrovsk city, Ukraine to Batumi started. The memorandum signed by Adjara government and Dnepropetrovsk regional council considers the flights. Main direction of the agreement is tourism. Ukrainian air company Dnepr Avia plans flights once a week.

Adjara Tourism and Resorts Department will organize a ceremonial meeting regarding the first flight of the season. After the folklore show the guests will get the best wine of Wine Cellar Teliani Valley and advertising-information brochures reflecting tourism potential of Batumi. Adjara government hopes that number of tourists will increase from Dnepropetrovsk and other Ukrainian cities during 2014 season.

Marneuli Municipality Head MERAB TOPCHISHVILI

TWO PROJECTS FUNDED UNDER PRODUCE IN GEORGIA PROGRAM

inistry of Economy states that 2 enterprises located in Rustavi and Kaspi have been funded. In particular, clothes with Georgian trademark will be produced in Rustavi; enterprise for the pharmaceutical waste storage containers will be arranged in Kaspi. The program was discussed on the Friday session of the government. “It’s pleasant that one week hardly passed from the start of Produce in Georgia and currently we already have 3 projects”, - George Kvirikashvili stated. He said that they will present several other projects on the session of Ministry of Economy and

Sustainable Development, one of them considers providing housing areas to refugees. “Today we have project for refugees, for 550 families on the whole territory of Georgia, on the giving them housing areas. It’s also important that we initiate a change by Property Management Agency. As you know, agricultural lands in the regions had been sold by electronic auctions. The villages did not have information about the sales of their own lands. From now on we sign contracts with communal service companies and the information about the land sales in the rural areas will be released in advance”, - Minsiter of Economy and Sustainable Development George Kvirikashvili stated.

EGYPTIAN COMPANIES INTERESTED IN GEORGIA’S WATER INDUSTRY

gyptian companies expressed interest to the pouring water industry in Georgia. Representatives of the companies Ruslan Group and Acwatab visited United Water Supply Company of Georgia on May 30. The company

reports that on the meeting with the management the guests talked about development of the pouring water industry in Georgia and expressed wish to strengthen cooperation with United Water Supply Company of Georgia. The companies provide water supply in Egypt and Saudi Arabia.

HPP caucasian business week

June 9, 2014 #57

DAVID MIRTSKHULAVA: THE STATE SHALL ENSURE SECURITY ISSUES RELATED WITH HYDRO-TECHNICAL STRUCTURES

n my opinion, the Parliament of Georgia has also to say a word about security of the hydro-technical structures and fill the legislative vacuum related with this matter. Immediate resolution of these issues is of the state importance, postponement of which may lead to irrecoverable outcome”- noted David Mirtskhulava, Doctor of Technical Sciences and Technical Director of Trans Electrica Georgia. - Mr David, you excluded link of Stepantsminda disaster with construction of Dariali HPP. Also you noted that the state has to ensure permanent monitoring over areas with landslide and mud stream potential and install the system of early warning signs. Are there any specific steps planned in this regard? - I do not have information to answer this question. There should be another addressee, respective state institution, however I think that this issue is very important and the state has to undertake effective and prompt steps. There is no other way to avert casualties during such catastrophes. The God forefend, but we have to remember that the likelihood of reoccurrence of such event will always exist. - You spoke about the necessity to control security and have monitoring systems on Georgian dams. Actually there exists the risk of such structures’ collapse and their number is quite big in Georgia. I have the information that in 80s of the previous century one dam collapsed and entailed casualties. What is the current situation and how safe the existing dams are? - Probably you mean collapse of a small dam in Tskneti in 1980, followed by casualties and destruction of residential houses. That is why legislative documents of developed countries regulate safety control of such structures (where the height exceeds 7m) and require installation of security control systems. Unfortunately, there is no respective legislative framework in Georgia and it needs to be created urgently. As regards the part of your question pertaining to the situation on our dams, I would like to say that we do not have many dams if we make comparison with Switzerland, Austria, Italy, Spain, Norway, Japan and etc. In these countries there

are more reservoir dams on every 1000 m2 than in Georgia. For example, in the North Italy you may find a small territory with more dams than in Georgia. When talking about security control situation at dams a modern safety control system installed at Enguri HPP needs to be mentioned. We have uninterrupted series of records since its construction period to date. Financial assistance of the Swiss Government used for installation of the modern monitoring system at the Enguri arch dam during 1995 – 1998 should be emphasized. The diagnostic indicators measured by such monitoring system for the technical condition of the structure were used as foundation for rehabilitation project of Enguri HPP (first stage 20022007), funded by EBRD under the agreement signed with the Georgian Government in 1998, which indeed played a key role in overcoming energy crisis in Georgia. Couple of years ago modern remote security monitoring system got installed at Zhinvali HPP. Systems installed only on two buildings meet the modern requirements. Unfortunately there are no such systems at the other Georgian dams. The system of Algeti irrigation dam is to be mentioned also, however it no longer meets the requirements. So the situation is not satisfactory and requires immediate attendance. All dams are potentially hazardous objects and have to be equipped with early alarm systems. Postponement of this process is equal to the crime. Pose a question to EnergoPro or any other owner of dams, whether they are going to install such systems on their structures. All of them assumed obligation to ensure exploitation of the acquired HPPs in accordance with the best

practice. Ensuring the safety in the course of operation is a primary objective and the installation of such systems should be conducted by manufacturers. We pay for electricity, water and have the right to demand spending on such systems. Moreover, I deem that the Parliament of Georgia has to say its word in this direction and fill the vacuum related with security of hydro-technical structures. Immediate resolution of these issues is of state importance and their postponement may lead to irrecoverable result. - When talking about Enguri Dam you noted that the security control process was being conducted from the very first stage of the construction process. What is the situation at the current and planned construction sites? - I cannot tell anything about the other planned constructions, but I can speak about the greatest project of the country Khudoni HPP, where installation of reliable security systems and gauges are planned from the construction stage in the foundation of the construction, in the concrete body and surface. I state with the sense of responsibility that the most state-of-the art equipment will be used that ensures safe, high quality use of the object and completely excludes the accident risk. As regards the construction quality, the highest international standards will be guaranteed. I frequently hear from my colleagues that there are cases at a smaller-scale constructions when less attention is paid to used materials and technical condition. Sometimes they are of secondary use, corroded and etc. Such attitude shall not be allowed in construction sector in general and especially in construction of high-risk hydro-technical structures. In my opinion, here state supervision is very important. - Mr David, since we are talking about HPPs, I would like to pose such question: environmentalists often speak about strategic environmental assessment of river basins and say that such assessments were not made in this country and therefore unforeseen events take place in the course of constructing HPPs. For instance likelihood of the catastrophe that occurred in Stepantsminda, should have been known to Dariali HPP builders at the stage of environmental impact assessment what can you say? - Certainly the environmental impact was fully assessed and the information on past incidents occurred on Devdoraki glacier were known to builders. Once again, I would reiterate that construction of Dariali HPP did not have relation with the occurred catastrophe. Moreover, current construction of Dariali HPP ensured reduction

of the catastrophe scale and the role the builders played in liquidation of catastrophe consequences deserves special appraisal. According to available information, the equipment and machinery from Dariali HPP construction site were used in liquidation works. As regards the question where you refer to the statement of environmentalists that there is no environmental impact assessment for Georgian river basins, this is not correct. As far as I am concerned, such strategic environmental impact assessment was made by the EBRD in 2010 for Aragvi River basin, also I am aware of similar studies conducted for Riv. Paravani and upper part of Riv. Mtkvari. In my opinion, these works are significant and necessary in optimum utilization of the hydro-energy potential, which itself has great state importance. - Could you explain in detail what you mean under optimum utilization of the river potential and state importance of this issue? - All rivers have respective technical hydropower resources. When determining the technical resources, all losses are considered that are related with hydropower generation. Given that it is impossible to use the whole discharged water due to various technical preconditions, economically effective potential is that part of technical potential, the use of which is economically reasonable. Optimum potential represents that potential in which such factors as technical, economic and environmental restrictions and etc. are considered jointly. In such scenario, the state, which issues respective permit to an investor and allocates the site for HPP construction, actually undertakes that the river’s hydro power potential will be used in an optimal manner. The state by such decision manages its major resources and a mistake shall not be allowed in this process. Such mistake may inflict great economic damage to the state and it needs to be excluded. In particular, the state shall not allow that after utilization of the river’s hydro potential only highly effective sections are used and the remaining parts left out. I think that the optimal use of hydropower potential can be reached by constructing HPP cascades and this is a fundamental approach for us, as well as for all countries, which possess hydro potential. Such approach is in full compliance with the real economic interests of the state. Decision of the Government to sign a memorandum with the investor on HPP construction shall always be based on a study performed and conclusions made by highly qualified experts, otherwise the approaches and decision making procedure need to be changed.

BANKING & INVESTMENT June 9, 2014 #57

caucasian business week

GPI HOLDING AND TBC BANK START GEORGIAN CO-INVESTMENT FUND A JOINT PROJECT INVESTS IN VIRTUAL CURRENCY

he companies inform that at first they offered customers insurance of the credit installments, which means coverage of the loan in the case of unemployment or incapacity to work of the borrower. From May 15 purchase of the vehicle owner liability to the third person is available in any branch of TBC Bank. Any client of TBC, which owns a car, GPI Holding offers insurance of the liability to the third person, which means that the vehicle owner is ensured from any damage caused by him to the environment during driving. Respectively, in the case of driver’s guilt, while

damaging of other person’s health or property, GPI Holding will reimburse the loss. It’s noteworthy that according to the terms of the policy, age of the vehicle is not limited, which means that owners of both old and new cars can purchase the policy. Harm of the health of the third person during the car accident, treatment expenses will be reimbursed. In the case of inability to work or death cumulative reasoned income of the insured will be reimbursed. “Price of the policy is affordable and gives us opportunity to avoid large financial risks. The vehicle owners over 21 can purchase it. Cost of the policy depends on the amount limits. In the case of choosing 5000-Gel limit cost of the policy is 6 GEL monthly, in the case of 7000 GEL - 9 GEL, for 10 000 limit - 14 GEL. Besides, the consumer can choose single or monthly payment schedule. Policy owners can feel secure, as the insurance company takes all financial liabilities, which maybe emerged if they cause any damage to anyone/anything during driving. Insurance of vehicle owner liability is the best way out for those who want to have guarantee of peace and security”, GPI Holding states.

NEW DIRECTOR OF PROCREDIT BANK WILL SUMMARIZE 2013

ew director of ProCredit Bank Amus Rotne will summarize 2013. Summarizing press conference will be held on June 5, at 12:00 in the head office of the bank. JSC ProCredit

Bank completed 2013 with 16,9 million GEL profit (2012 -21,6 million; 2011- 16 million GEL). At the end of the year its share equaled to 66,3% according to actives. Former director general of ProCredit Bank moved to Bank of Georgia for work.

PROCREDIT COMPLETES JANUARY TO APRIL PERIOD IN 5.02 MLN GEL PROFITS

SC Procredit Bank (Georgia) completed January-April with 5,02 million GEL profit (01/04/14 - 3,4 million). The bank reports that by May 1, 2014 deposit portfolio of the clients equaled to 547 million GEL (01/04/14 - 552 million), credit portfolio - 732 million GEL (01/04/2014-722 million), overall obligations - 882 million GEL

(01/04/14 -876 million). Bank’s actives equal to 1,019 billion GEL (01/04/14 - 0,011 million), market share - 5,7%. JSC ProCredit Bank is member of the international banking group and operates in Georgia since 1999. It’s mainly oriented on the crediting of small and medium-sized business. Stock capital of the bank is 137 million GEL.

eorgian Co-investment Fund invests in company BitFury, which is engaged in the popularization of the so-called “ Bitcoins” - a virtual currency. In particular, recently the company has received $ 20 million on the business development, and Georgian Co-Investment Fund (GCF) is among investors - ie the Georgian Co-investment Fund initiated by the former Prime Minister Bidzina Ivanishvili. According to the magazine “Tabula”, BitFury Executive Director is a native of Ukraine Valery Vavilov and the Georgian businessman George Kikvadze , who is also Executive Director of the Co-investment Fund in agriculture and logistics. A lot of people with a suspicious past, associated with various corruption scandals, are among business partners, including those related to oil production in Ukraine , money laundering in Latvia , etc. According to information posted on the website BitFury, Co-investment Fund will invest $ 10

million in the development of Bitcoins. Bitcoin is the virtual currency whose rate currently stands at 340 USD for 1 Bitcoin. In 2013, the “Wall Street Journal “ wrote that the European Banking Authority has warned consumers about the dangers associated with the virtual currency. In particular, it means that its users are not protected, because currently there is no legislation that would regulate the use ofBitcoins. Moreover, the high degree of anonymity makes it easier to use them for money laundering. The regulator also urged consumers not to buy Bitcoins for cash, and in some countries such as the Czech Republic, the turnover of virtual currency was banned. It now remains only to understand why the Georgian Co-investment Fund established to create jobs in Georgia, is putting money in a dubious project, the center of which, moreover, is not in Tbilisi, but in San Francisco and Amsterdam.

FLOATING HOTELS AND TENT CITY “KAZANTIP” IN ANAKLIA

rganizers of the electronic music festival Kazantip , which was traditionally held in the Crimea, published on its website that Kazantip 2014 will be held in a small Black Sea resort town of Anaklia on 20- 30 August. All the information for those who will decide to attend the festival is posted on the site. It is assumed that the event will be held on the beach, where mini cottages will be located and accommodation will cost $ 15 per day. Those who want will be able to book rooms in hotels in Anaklia. Negotiations are also underway on the organization of a floating hotel meant for 5 000 seats . A stadium with a fenced yard and a beautiful green lawn , a luggage storage , showers, toilets and food outlets are located on the territory of KaZantip tent city. Guests will be able to put tents previously registered on kazantipa.net site. Cost of accommodation of a tent is 2-5 USD per day. Administration of the festival also explains the reasons for its transfer: “The reasons for holding the event in the Crimea

do not depend on the organizers – these are changes of the political system and legal framework, making impossible the existence of the project, at least this year,” –website says. Director of the Georgian National Tourism Administration George Sigua was the first who announced that the festival would be held in Georgia. Later the festival organizer Nikita Marshunok told the Russian TV company “Dozhd” about this. According to him, he liked this town and decided to hold a festival similar to that which takes place in the Crimea. “It will be a new era of traditional festival, and it will be innovative and adapted to Georgian traditions. At the first stage we expect approximately 50 000 people at the festival, and I hope that over the years their number will grow. Millions of investment will be carried out in this town that will contribute to local business. We are negotiating with Director of the National Tourism Administration of Georgia George Sigua. We were offered two cities - Anaklia and Batumi. We chose Anaklia and it will be the symbol of the festival,”Marshunok notes.

GOV’T HAS NO INVESTMENT VTB COMPLETES JANUARY TO APRIL FORECAST he government of Georgia, more any prospects for inward investment, “ - says the PERIOD WITH 2.3 MLN GEL PROFITS precisely the Ministry of Economy, expert .

SC VTB Bank Georgia completed January-April with 2,3 million GEL profit (Q1 - 1,7 million GEL). By May 1 deposits (without banks’ deposits) equal to 570 million GEL (Q1 597 million), credit portfolio - 553 million GEL (Q1 - 554 million), overall obligations - 773 mil-

lion GEL (Q! - 814 million GEL). Overall actives equals to 863 million GEL, market share - 4,8% (Q1 - 903 million, 6%). VTB (former UGB) operates since 1995. Russian VTB is its owner. Stock capital of the bank equals to 90,2 million GEL (01/04/13 - 89 million GEL).

CARTU PROFITS IN JANUARY TO APRIL PERIOD MARKED 1.2 MLN GEL

SC Cartu completed January-April with 1,2 million GEL profit (Q1 - 657 262 GEL). By May 1, 2014 deposit portfolio equals to 265,5 million GEL (Q1 - 214,4 million), loans - 456 million GEL (Q1 0 427 million), overall obligations - 426 million GEL. Bank’s actives stand at 628 million GEL, market share - 3,5% (Q1 - 570,3 million, 3,2%). Bank Cartu was founded by Bidzina Ivanishvili.

It operates since 1998, belongs to Uta Ivanishvili. Stock capital of the bank is 202,5 million GEL. According to information released in media, Ivanishvili family sold the bank, although Cartu Group informs that negotiations with potential buyers is going and Ivanishvili will get involved in this process after Cartu leadership selects the best offer. The bank states that the procedure requires long time and there is no perspective for the nearest months.

SPANISH COMPANY ENTERS POTI FIZ

ommersant “ radio reports that the Spanish trade group will use the Poti free industrial zone (FIZ) as the regional hub. According to Director of the Poti FIZ, the company has already registered in the industrial zone and plans to take storages in the near future. He says that the construction of the alcohol plant is underway on the territory of 30 thousand square meters and the height of reservoirs will be of 9-storey building. The project is being carried out on Georgian in-

vestments and due to the large scale, several million will be spent. However, a figure is not specified. Azerbaijani roofing company has already started operating in the FIZ and plans to increase production in 3-4 months. Construction of aromatizers manufacturing plant is also underway. Another project carried out on the Afghan investment is warehousing and refrigeration production. Poti free industrial zone covers 3 hectares. At this stage about 130 companies are operating in the FIZ.

has no position regarding the expected level of investment - and this is not the first time the Ministry cannot give a concrete answer to the question - in particular, the 2013 forecast was $ 1 billion but it was not explained what this amount was based on. According to the findings of the World Bank, in 2014 foreign direct investments in Georgia will be 6. 3% of GDP, respectively , the forecast is 1,1 billion USD. However, many experts consider it doubtful and explain this by the suspension of privatization and passivity of private investment funds established at the Government. Therefore, the government’s position is of great importance - however, 5 months of 2014 have passed, but the government doesn’t provide any information about investment activity for the last period. The newspaper “Business Rezonansi” has been trying to get comment on this issue from the Ministry of Economy for a few days , but in the end it turned out that the representatives of the press service simply “forgot” to bring journalists’ question to their superiors. According to the expert Paata Sheshelidze, investments worth $ 1 billion is too optimistic forecast , and currently any signs of at least some investment inflows are not being observed in the country. “ It’s too optimistic figure. How should we get investments worth $ 1 billion, due to what ? Privatization of land, which was a major source of investments, has been suspended. For example, after the new government came to power, no object has been sold in Adjara. None of the investment funds is working. And to say that 6 billion are accumulated is nonsense. I do not see

In 2013, the government explained the failure of a 2 -billion investment forecast by the fact that the process of the formation of investment funds was underway , so the supply of real projects lagged. Accordingly, the inflow of investments was scheduled for 2014. However, the Co-investment Fund is created, but in reality it has not been launched. Recently, the fund said that projects worth more than $ 1 billion had been already approved, and later it turned out that these projects mainly exist only in the virtual space and there is no one to fund them. According to the expert Giorgi Gaganidze , after an Association Agreement with the EU is signed, the investment attractiveness of the country will increase, but this is not enough without the complex measures. “ It seems that the World Bank made a prediction based on the latest data. Since 2010, everyone is talking about investments worth $ 1 billion. Perhaps in 2014 1 billion USD will be really invested in Georgia but that it is not enough - today the country needs $ 2 billion of investment annually to make economic growth more noticeable, “- the expert notes. Chairman of the Parliamentary Committee on Sector Economy Zurab Tkemaladze states that following the Government’s economic policy, potential exists to attract 1 billion USD in a case if external factors do not interfere. “For example, such as the events in Ukraine and similar hazards against Georgia. Investors always calculate the risks. With regard to the internal situation, from this point of view all necessarily conditions for investors were created,”- the MP points out.

10 GAZPROM CUTS EXPORT FORECAST TO EUROPE TO 158.4BCM OF GAS IN 2014

CIS UKRAINE READY TO SIGN EU TRADE DEAL ‘IMMEDIATELY’ - POROSHENKO

ussia’s Gazprom plans to export 158.4 billion cubic meters of gas to Europe and Turkey this year, down from 161.5 bcm shipped in 2013, Reuters reported. The gas giant also said that average gas price it was charging its clients in Europe and Turkey, was at $387 per 1,000 cubic meters last year. 10:21

RUSSIAN SEARCH ENGINE YANDEX TO START TRADING ON MOSCOW EXCHANGE

ussia’s biggest search engine Yandex said Tuesday its shares would start trading on the Moscow Exchange, in addition to its primary listing on NASDAQ. Yandex will list on the Moscow Exchange on June 4 under the symbol YNDX, Reuters reported. The listing does not involve any sale of shares by Yandex or its existing shareholders. “We anticipate that the listing will broaden the company’s shareholder base internationally and stimulate investor interest,” Arkady Volozh, Yandex CEO, said in a statement. 08:27

RUSSIA GDP GROWTH MAY ACCELERATE TO MORE THAN 2% IN 2015 – MINISTER

ussia’s GDP growth in 2015 may accelerate to the level more than 2 percent, after 0.5 percent growth in 2014, Minister of Economic Development Aleksey Ulyukayev has said. Next year, GDP growth is expected at more than 2 percent, and from 2015 to 2017, on average, at 2.5 percent, Interfax quoted him as saying in Baku, Azerbaijan. Russia’s gas contract with China, signed late in May 2014, may add 0.3-0.4 percent to GDP growth in 2015, Ulyukayev said, as cited by ITAR-TASS. He expects the deal to attract $55 billion worth of investment.

UZBEKISTAN, EU DISCUSS CO-OP

he prospects of expanding cooperation in trade, economic and investment fields, including the establishment of joint high-tech industries based on the European practice were high on the agenda of talks between Uzbek Foreign Minister Abdulaziz Kamilov and EU Special Envoy for Central Asia Janos Herman. The EU Special Envoy is in Uzbekistan to attend the international conference titled “The most important provisions of food program implementation in Uzbekistan” which will be held in Tashkent on June 5-6. During the June 4 meeting , Kamilov and Herman also mulled the process of implementing the joint programs with the EU. The sides stressed the mutual interest in the gradual development of cooperation in various areas, as well as exchanged views on prospects for strengthening bilateral relations in the culturalhumanitarian field. Uzbekistan and the EU signed an agreement “On partnership and cooperation” in 1996. The EU representative office was opened in Tashkent in 2012. Currently, cooperation between the EU and Uzbekistan is developing in several directions. In 2013, the volume of trade between the EU and Uzbekistan amounted to about 1.65 billion euros. Experts believe this figure does not reflect the existing potential for cooperation. The EU has provided about 72 million euros to support the development of Uzbekistan in 20072013, and this amount can reach 68 million euros in 2014-2020.

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kraine’s President-elect Petro Poroshenko is ready to sign a deal establishing free trade between the EU and Ukraine, right after his inauguration on June 7. The

agreement lies at the heart of the Ukraine crisis and he hopes it will help “restore peace”. “I’m ready to sign the economic part of the Association Agreement and to enter a free trade zone with the EU immediately after the inauguration,” Poroshenko said during a meeting in Warsaw on Wednesday with Austrian President Heinz Fischer. Kiev signed the political part of the trade agreement, which will break down barriers between Ukraine’s $145 billion economy and Europe’s nearly $17 trillion economy. It had been reported that Poroshenko may be hesitant to sign the agreement, as he may need some time to address Ukraine’s desperate internal problems first, and not rush into foreign partnerships. When Ukraine’s ex - President Viktor Yanukovich didn’t sign the agreement last November; the country erupted into mass protest, which was followed by violence and near civil war. Ukraine’s President - elect said he wanted to defend “the aspiration for Euro-integration on the Maidan

[Independence Square in the center of Kiev].” “…and that is why I’m ready to sign the economic part of the association agreement and launch the free trade zone with the EU immediately after the inauguration,” Poroshenko said as quoted by TASS. “I ran for president with the slogans of peace and that is why I consider it necessary to establish peace in Ukraine,” the government press office quoted Poroshenko as saying. The crisis in Ukraine is one of the key topics at the G7 summit that kicked off Wednesday in Brussels and is being held without Russia for the first time in 17 years. Russia was suspended from the G8 over its course in Ukraine, which the West views as an effort to destabilize the former Soviet republic. Among the other topics on the agenda are European energy supplies, which currently are heavily reliant on Russia. Leaders are also expected to discuss imposing further sanctions on Russia, which would be targeted to hit the economy, and would be the third round.

ALMATY TO BECOME ASIA’S FINANCIAL HUB lmaty, Kazakhstan’s largest city will become a major financial center in Asia. To this end, a document called A Concept of Developing Almaty as a Financial Center should be adopted by the Kazakh government by December 2014. The news was announced by Chairman of the Kazakh National Bank Kairat Kelimbetov at a press conference in Astana on June 2. “The Kazakh National Bank and the government will work over the document,” he said. “Moreover, the consultants of the European Bank for Reconstruction and Development, Asian Development Bank, World Bank and the Islamic Development Bank will be involved in this work.” Kelimbetov went on to note that the National Bank proposes to build the future model of the development of the Almaty city’s regional financial center on the basis of the model of the international financial center of London. “In our opinion, the model of development of the international financial center of London’s geo-

graphically segregated area can be used as a base for development of the regional financial center of the Almaty city,” he added. Kelimbetov went on to say that Almaty will become a regional hub of the Islamic Development Bank in the Central Asian region. The Kazakh government has also concluded an agreement with the Islamic Development Bank on allocation of special grant for changing the legislation on tax and legal issues. “The Islamic Development Bank has also recommended to train about fifty world-class experts on Islamic finance at the expenses of the Kazakh Government and the National Bank”, Kelimbetov stressed. The idea of development of Almaty as a regional financial center was first announced by Kazakh President Nursultan Nazarbayev in 2004. The main goals of establishment of a financial center are to develop the securities market, to ensure its integration into international loan markets, and to attract investment in Kazakh economy through the securities market.

The document will facilitate the development of Almaty’s financial infrastructure, enhancement of the business climate, resumption of the Academy of the Regional Financial Center of Almaty, as well as launch of new facilities to train respective specialists.

IRANIAN AND ARMENIAN BUSINESSMEN OF DIASPORA ARE ALSO INTERESTED IN CREATION OF FREE TRADE ZONE

he project of creation of free economic zone near the Armenian-Iranian border can be effective. In a conversation with the reporters, this opinion was expressed by the Economy Minister Karen C hshmarityan. “Not only the Armenian and Iranian businessmen are interested in this project, but also the Armenian businessmen of diaspora. It is planned to establish mainly Armenian-Iranian joint industrial ventures in that economic zone” - as reports “Armenpress”, the Minister said. C hshmarityan attaches great importance to the relations with Iran. It is a constant friendly country to Armenia. The development of any eco-

nomic relation with Iran is beneficial for Armenia, especially if it’s a free economic zone, where such sectors can be represented that are of mutual interest. “Syunik” free economic zone project, aimed at the industrial infrastructure development with different countries, wholesale trade promotion, was presented on June 3 at the Armenian-Arab business conference. The project introduced to the Government is primarily aimed at the formation of industrial infrastructure with the neighboring countries, including the Islamic Republic of Iran, increase of wholesale trade volumes, as well as the infrastructures with the Customs Union countries.

UKRAINE GAS: EU ENERGY COMMISSIONER SAYS RUSSIA WILL CHARGE $350-$380

ussian gas exporter Gazprom and Ukraine’s Naftogaz will try to settle on a price between $350-$380 per 1,000 cubic meters through till next June, said EU Energy Commissioner Gunther Oettinger, who brokered talks Monday. “Real progress has been made,” Oettinger said in a statement. The Commissioner didn’t disclose the final price, but said it fell within the range Kiev currently pays ($485) and what it used to pay on discount ($268.50), ITAR-ITASS reported. “My request and my expectation is that we come up with a package that covers the period until June next year,” Oettinger said. Oettinger said the CEOs of Gazprom and Naf-

togaz need some more time to consider all the legal, financial, and economic details of the proposal, and also need to consult with their respective governments. “The two CEOs worked out a proposal, which is now to be checked by their governments and also their specialists and then they’ll come back to us,” Oettinger told reporters. STOCKHOLM CAN WAIT Another development in the gas price standoff is that neither party will pursue a court solution in the meantime, according to the Commissioner. Both companies had hinted at taking the price dispute to the Stockholm-based arbitration court. “Both sides agreed that neither one nor the other will

go to the Stockholm court,” Gazprom CEO Aleksey Miller told RIA Novosti, adding that the parties plan to resolve the gas price dispute before the next round of talks begin sometime before June 9. “If the parties settle all the issues in the negotiations, it may not be necessary to go to the Stockholm court,” he said.

AZERBAIJAN June 9, 2014 #57

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AZERBAIJAN-GEORGIA-TURKEY ENERGY BRIDGE TO STRENGTHEN ENERGY SECURITY: MINISTER

he implementation of the Azerbaijan-Georgia-Turkey Energy Bridge project will contribute to the development of the Black Sea Electricity Ring. Azerbaijani Energy Minister Natig Aliyev made the remarks during the 21st International Caspian Oil and Gas-2014 Conference in Baku on June 4. “This will allow Azerbaijan to strengthen its energy security and to ensure the export of its electricity,” he said. Aliyev said Azerbaijan has recently achieved great success in the field of power engineering. “In particular, more than 15 power plants were built and reconstructed in the country.” He stressed that the operations are intensively underway to connect Azerbaijan’s energy system to similar systems of neighboring countries. “In particular, extensive work has been carried out to ensure parallel operations of power systems of Azerbaijan, Russia and Iran,” he added. “Technical work carried out within the Azerbaijan-Georgia-Turkey Energy Bridge project will ensure electricity export to Turkey, and in the future - to Europe.” Aliyev said at present, Azerbaijan’s energy sys-

tem capacity is 7,105 MW or by 1,500 megawatts more than the country’s electricity needs. The country is able to annually produce about 22 billion kilowatt / hours of electricity. This creates the annual export capacity to the amount of two billion kilowatt / hours. Aliyev also said Azerbaijan intends to supply gas to Europe soon. “Azerbaijani gas will be supplied further Italy and reached to Central Europe in the future,” he added. He stressed that Azerbaijan produced 43.5 million tons of oil and 29.5 billion cubic meters of gas in 2013. “The various companies’ and organizations’ evaluation of Azerbaijan’s hydrocarbon reserves is pessimistic,” he said. “However, the country’s hydrocarbon reserves are much more than valued.” The “Azerbaijan-Georgia-Turkey Energy Bridge” project envisages supplying 1,200 megawatts of electricity to Turkey. Some 600 MW of this volume will fall to Azerbaijan. The project envisages annual export of up to 2,000 megawatts of electricity from Turkey to Europe. Power transmission within the Azerbaijan-Georgia-Turkey Energy Bridge can start in 2014-2015.

BAKU-BATUMI CHARTER FLIGHTS CAN BE OPENED

harter flights en route Baku-Batumi-Baku can be performed beginning from this summer. The news was announced by Head of the Georgian National Tourism Administration Giorgi Sigua. “Some tour operators are going to organize such flights and are negotiating on this issue with the airlines,” he told Azerbaijani journalists. Earlier, Azerbaijan Airlines,AZAL, performed flights en route Baku-Batumi-Baku in summer, but the flights were stopped several years ago.

Sigua noted that currently, 90 percent of Azerbaijani tourists cross the Georgian border by car. Azerbaijani tourists reach Batumi through Tbilisi. There is fast train from Tbilisi to Batumi twice a day. Travel time is 4.5 hours. Besides, Georgian Airways operates flights Tbilisi-Batumi everyday. Ticket price is 50 euro. Sigua further said over one million of Azerbaijani tourists visited Georgia in 2013. “Azerbaijani is very important tourist market for Georgia,” he concluded.

EBRD TO PROVIDE AZERBAIJAN’S DEMIRBANK WITH LOAN OF $5 MILLION

uropean Bank for Reconstruction and Development (EBRD) will provide Azerbaijan’s DemirBank with a loan of $5 million to finance energy efficiency projects. The bank will lend the allocated funds to individuals and legal entities interested in investing in energy efficiency. The EBRD Board of Directors is expected to approve the allocations on June 25. “The project will contribute to strengthening the customer base of Demirbank and allow the bank to continue to compete successfully in the local market by providing customers with new products and medium-and long-term financing,” the report said. The loan is a part of the EBRD “Caucasus Energy Efficiency Program” (CEEP) on the energy efficiency in the Caucasus region, which started in July, 2007. Demirbank is the first of the three banks in the

country, for which similar loans will be allocated, EBRD’s Baku Office head Neal McCain told Trend previously. “All of these measures are part of the new strategy of EBRD in Azerbaijan approved in late April,” McCain added. Furthermore, in March 2013, the EBRD signed its first loan on energy efficiency with Azerbaijani AccessBank” within the framework of the energy efficiency program in the Caucasus region. A loan of $4.2 million will be directed at the reconstruction of the bank’s head office on a total area of 9,840 square meters. EBRD loan will cover 30 percent of the project cost, and the remainder will be paid by the bank itself. EBRD is a shareholder of the three banks in Azerbaijan - DemirBank, AccessBank and UniBank. Since 1991, the EBRD has allocated about 1.8 billion euros for 146 projects in Azerbaijan; about half of the funds directed at the private sector.

TURKISH-SPEAKING COUNTRIES COMMITTED TO EXPANDING TIES

urkish resort city of Bodrum hosted the Fourth Summit of the Cooperation Council of Turkic-speaking States (CCTS) on June 5. The presidents of CCTS’ four founding member States - Ilham Aliyev of Azerbaijan, Nursultan Nazarbayev of Kazakhstan, Almazbek Atambayev of Kyrgyzstan, Abdullah Gul of Turkey, as well as Gurbanguly Berdymukhamedov of Turkmenistan - which is not currently an official member of council- attended the summit. Welcoming the Presidents, Turkish President Gul highlighted the importance of the organization in expansion of relations among Turkic-speaking countries. He also noted that the relations between the heads of states within the organization are effective and in turn contribute to the development of bilateral relations. President Gul said the organization has passed a great way of development since its establishment, noting this year the topic of the summit is tourism. He stressed that this progress will play an important role in the development of further cooperation among the countries. Furthermore, the presidents, who took part at the summit, addressed the meeting. Summarizing the CCTS summit, President Gul emphasized that the discussed issues will give a new impetus to further expansion of cooperation among the Turkic states. Afterwards, the Presidents signed the Joint Declaration of the Summit and documents including the decisions about the appointment of the Secretary General of the Turkish Council and his deputies, as well as the election of the President of the Turkish Academy.

Ramil Hasanov was elected as the new Secretary General of the CCTS and Darkhan Khidirali as President of the Turkish Academy. After the Summit, Azerbaijani President Aliyev, Turkish President Gul and Turkmen President Berdymukhamedov held a trilateral meeting. The sides said the meeting discussed the Fourth Summit of the CCTS contributes to further expansion of cooperation among the peoples and countries. Also, the meeting stressed the importance of holding meetings at different levels adding expanded relations among the countries will contribute to strengthening of the regional cooperation. On June 4, the presidents held some bilateral meetings and attended a dinner in Bodrum hosted by the Turkish President Gul. The presidents also attended a concert called “Türkdüyünü” in the historic Bodrum Castle. On June 4, Bodrum also hosted a meeting of foreign ministers of the member states as part of the 4th Summit of the Cooperation Council of Turkic-Speaking States. Previous summit of Turkic-speaking countries was held in Azerbaijan’s Nakhchivan city in August, 2013. The Cooperation Council of Turkic Speaking States (CCTS) was established in 2009 in Nakhchivan as an international intergovernmental organization, with the overarching aim of promoting comprehensive cooperation among Turkic Speaking States. Its four founding member States are Azerbaijan, Kazakhstan, Kyrgyzstan and Turkey. The remaining two Turkic states, Turkmenistan and Uzbekistan are not currently official members of the council due to their neutral stance.

SOFAZ EARNS OVER $100 BLN OVER 13 YEARS

zerbaijan’s State Oil Fund (SOFAZ) has earned more than $100 billion ($1 = 0.78390 AZN) in the period of 2001-2013. This was said in fund’s last report released on June 4. About 64 percent, or $64.23 billion of SOFAZ revenue earned in the past 13 years were allocated for investment, while the remaining 36 percent ($35.88 billion) were deposited in the saving account of the fund. Meanwhile, the volume of fund’s income amounted to $17.33 billion in 2013, which is slightly lower than 2012 ($17.41 million). “The decrease can be explained by the increased volume of fund’s costs,” the report reads, adding that some 9.5 percent of revenue were saved in 2013. Assets of SOFAZ amounted to about $36.06 bil-

lion in 2013 compared to over $34.25 billion in 2012. The report said some $34.51 billion of the total assets fell to current assets, and about $1.55 billion - to long-term assets. SOFAZ received some $17.32 billion against $14.6 billion approved in fund’s budget in 2013, while the fund’s expenses exceeded $15.6 billion compared to $17.07 billion approved in the budget. SOFAZ, an entity that accumulates and manages Azerbaijan’s oil and gas revenues, was established in 1999 with a $271 million asset. The main purpose of the fund is the accumulation of funds and investment in foreign countries to minimize any negative impact on the economy, prevent the “Dutch disease”, ensure savings for future generations, and maintain the current social and economic standards in the country.

IRAN’S AMBASSADOR TO AZERBAIJAN CALLED ON AZERBAIJANI BUSINESSMEN TO INVEST IN IRAN’S MAKU FREE ECONOMIC ZONE (FEZ)

ohsen Pak Ayeen made the invitation during his visit to the Maku Free Economic Zone, located in the West Azerbaijan Province of Iran,” Iran’s Embassy in Azerbaijan told Trend news agency on May 29. The Maku Free Economic Zone is Iran’s largest and the world’s second largest free trade zone established in August, 2010.

Pak Ayeen said the Maku FEZ is located on a route leading to Europe, adding that one of the Maku FEZ’s advantages is that its territory is rich in minerals. He also stressed that the cooperation between the officials and businessmen of the region will positively affect the development of the Maku FEZ. During a meeting with Pak Ayeen, the Executive Director of the Maku FEZ, Hossein Forouzan stressed the importance of enhancing cooperation

with neighboring countries, including Azerbaijan. Forouzan said the cooperation between Iran and Azerbaijan, in particular in the Maku Free Economic Zone, should reach such a level that it becomes a model of cooperation for the entire region. Iran has recently stepped up efforts to boost political, economic, security and cultural ties and cooperation with the regional and neighboring countries including Azerbaijan.

Azerbaijan and Iran have had diplomatic relations since 1918. Iran recognized Azerbaijan’s independence in 1991, and diplomatic relations between the two countries were established in 1992. Data from the State Customs Committee of Azerbaijan shows that trade turnover between the two countries amounted to $281.03 million in 2013, which is 6.13 percent higher than 2012. The figure stood at $263.785 million in 2012.

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WORLD NEWS June 9, 2014 #57

caucasian business week

SWITZERLAND FREEZING $1BN IN ASSETS OF FORMER UKRAINIAN AND EGYPTIAN PRESIDENTS

LITHUANIA BECOMES 19TH COUNTRY TO JOIN EURO 8 YEARS AFTER KNOCK-BACK

ithuania, the last Baltic nation outside the currency union, has finally been given the green light to join the euro area, after its bid was turned down 8 years ago. The country could adopt the single euro currency on January 1, 2015. The European Commission and the European Central Bank accepted Lithuania’s application on Wednesday. “Lithuania’s readiness to adopt the euro reflects its long-standing support for prudent fiscal policies and economic reforms. That reform momentum, driven in part by Lithuania’s EU accession ten years ago, has led to a striking increase in Lithuanians’ prosperity: the country’s per capita GDP has risen from just 35% of the EU28 average in 1995 to a projected 78% in 2015,” Olli Rehn, the European Commission Vice-President responsible for Economic and Monetary Affairs and the Euro, said in the statement. The ECB looked at eight European Union countries - Bulgaria, the Czech Republic, Lithuania, Hungary, Poland, Romania, Sweden, and Croatia. Only Lithuania met all the criteria to join. Lithuania first applied for membership on January 1, 2007. It was rejected, as inflation was above the EU’s target by 0.1 percentage point, and expected to go higher. In 2008 it grew to hit 12.5 percent. The Council will make a final decision on the matter in the second half of July, after EU officials and state heads meet at the European Council from June 26-27. Then the council will also

agree on a set conversation rate for Lithuania’s currency the litas to the euro. Eighteen countries already share the currency, a requirement for all member states except for the UK and Denmark. In order for a country to adopt the euro, it needs to tie its currency to the euro for a two-year period, as well as keep debt below 60 percent of GDP and inflation within 1.5 percentage points of the three lowest rates among the euro zone. The European Commission said that inflation, the key stumbling block to Lithuania joining the eurozone previously, has been overcome. In the 12 months leading up to April 2014, Lithuania’s average inflation rate was 0.6 percent, well below the reference value of 1.7 percent, and will likely remain below this level in the coming months, the ECB report said. Overall, inflation across the euro zone has been half the ECB’s target rate of 2 percent. The commission credits Lithuania for its triumphant return to economic growth after the recession hit in 2009, including its success in keeping its budget deficit and government debt ratio below ECB rates. On Thursday, the bank is expected to announce a widely anticipated interest rate cut, venturing into negative deposit rate territory, dipping below zero. The announcement is expected at 7:45 am Eastern Time. ECB President Mario Draghi, who has hailed the euro zone as an “island of stability” has said he will “do whatever it takes” to save the euro currency, which is weakening before the rate decision.

TRACES OF ILLEGAL NORTH KOREAN GOLD DISCOVERED IN US PRODUCTS

startling ingredient has been found in IBM, Hewlett-Packard, and Ralph Lauren products: gold from North Korea, illegal under the current US sanctions against the pa-

riah state. Under the Dodd-Frank Act provision firms were required on Monday to report where they use supplies of gold, tungsten or tin sourced from the Congo region controlled by armed forces. However, they ended up with an absolutely different discovery. 68 US companies revealed that their producers found traces of gold from North Korea’s central bank in their filings with the Securities and Exchange Commission. The US began to impose sanctions against the Democratic People’s Republic of Korea (DPRK) in 1950 at the start of the Korean War. They have been extended over the years due to North Korea’s unwillingness to curb its nuclear weapon development program and its human rights record. The US, along with other allies has been blocking imports and exports from Pyongyang in order not to aid any nuclear advancement. “It’s a problem even if the raw materials are coming very indirectly through suppliers,” Market Watch quoted Alexandra Lopez-Casero, an attorney at Nixon Peabody LLP who specializes in sanctions, as saying. Gold is used in a range of products from jewelry

to electric wiring to cellphones to space equipment. IBM revealed gold from North Korea was used in their memory storage systems, and other companies like Williams Sonoma, a gourmet cookware company, and Rockwell Automation Corp, one of the world’s largest industrial automation companies said that gold processed from North Korea is mixed in with products. “In January, upon learning that the Central Bank of DPRK may be used by a small number of HP suppliers, we took immediate action to launch investigations,” HP’s spokesman Michael Thacker, said, as quoted by Bloomberg News. “To date, the information we have received indicates no minerals obtained from Central Bank of DPRK were included in HP products,” Thacker said. A lot of companies rely on information from a non-profit Conflict Free Sourcing initiative to avoid sourcing gold from places like North Korea. A spokesman for the non-profit, Julie Schindall, said an error in the template could be to blame. The smelter code, a stamp which denotes the origin of gold blocks, was accidentally listed as being located in South Korea, the WSJ reported. Up until 2006, North Korea’s central bank refined gold that were certified by the London Bullion Market Association, but there is discord among exports whether the bank is currently refining gold.

wiss authorities have frozen the assets of ousted Ukrainian President Viktor Yanukovich and intend to block those of former Egyptian President Hosni Mubarak, as part of an ongoing effort to clean the country’s coffers of corrupt money. Government officials have secured $187 million in assets belonging to Ukraine’s ousted leader Viktor Yanukovich and his inner circle, following suspicions of money laundering. The authorities are closely working on recovering around $782 million belonging by Mubarak and his entourage, says Reuters. “There are preventive measures; every ‘politically-exposed person’ goes through an extremely deep examination. In Switzerland, a bank’s board member must give the green light to open an account and it is reviewed every year,” as Reuters quotes Valentina Zellweger, head of the foreign ministry’s international law department. “We don’t act only when they lose power. There is a whole legal arsenal to avoid that money comes to the Swiss financial centre,” he added. In terms of Ukraine, the Swiss Attorney General’s office has opened seven criminal investigations and blocked $112 million, AFP says. The sum is in addition to $75 million frozen on government orders, Zellweger explained. However he considers the sum as “rather modest” according to the ex-leader’s thefts valued in billions. More than $3 billion were looted during Yanukovich’s regime according to Ukraine General Prosecutor Oleh Makhnitskyi at April’s international conference on recovering the country’s lost assets. Chronically unstable Ukraine may see a way out in restitution, considers Zellweger. On February 26 Bern decided to block Yanuk-

ovich’s assets together with Austria and Liechtenstein, and two days later the move became public. Switzerland has more than quarter-century of experience in collecting information for prosecution and for returning money to the people it was stolen from. “There is an arsenal to minimise the risk of money derived from corruption. I think that the system works pretty well. We take care of cases that fall between the cracks,” said Zellweger. It took 17 years before Switzerland managed to give back 684 million Swiss francs appropriated by Ferdinand Marcos, the former Philippines president. Since 2003 Switzerland has returned 1.8 billion Swiss francs embezzled by such persons as Marcos, Sani Abacha of Nigeria, Vladimir Montesinos of Peru, Jean-Claude Duvalier of Haiti and others. The country’s asset recovery effort is more than a quarter of the total world restitution of $4-5 billion.

TOP11: MOST VALUABLE WORLD CUP TEAM

ransfermarkt has put together the most valuable team for the upcoming World Cup. That means the players with the highest market values on Transfer-

markt. It is dominated by Spanish Primera Division and German Bundesliga players. Headed by the most valuable player in the world, Lionel Messi, the attacking trio is completed with

teammate Neymar and World footballer of the year Cristiano Ronaldo. Supported by Bayern’s Mario Götze who is in turn being secured by Barca duoIniesta and Fabregas. The back four certainly doesn´t lack leadership with players like Phillipp Lahm,Sergio Ramos, Thiago and Marcelo. The most valuable goalkeeper in the world is still Manuel Neuer.

PUBLICITY caucasian business week

June 9, 2014 #57

TBILISI GUIDE June 9, 2014 #57

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: +995 32 2 75 21 11, Fax: +995 32 2 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

June 9, 2014 #57