Caucasian Business Week #60 by Caucasian Business Week

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BUSINESS WEEK June 30, 2014 #60

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June 30, 2014, Issue 60

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Georgian Patriarch Addresses Nation over EU Associated Membership

GEORGIA U.S. HAILS EU’S ASSOCIATION AGREEMENTS WITH GEORGIA, MOLDOVA, UKRAINE

.S. Secretary of State, John Kerry, congratulated Georgia, Moldova and Ukraine on signing Association Agreements with the EU on June 27 and said in a statement that the U.S. Pg. 2

Mikheil Janelidze Benefits Georgia will Receive from EU’s Associated Membership

GOODWILL MAY BE TRANSFORMED INTO A JSC

he court did not confirm suit of PKF and respectively previous verdict on its avoidance remains valid. Pg. 5

EBRD: GEORGIAN BANKS EMERGE AS REGIONAL LEADERS IN TRADE SECTOR CREDITING

BC Bank has hosted a one-day conference as part of the trade support program of the European Bank for Reconstruction and Development (EBRD). Pg. 9

CIS US BUSINESS TO RUN ADS AGAINST RUSSIAN SANCTIONS

wo top US business lobbies plan to run newspaper adverts warning that more Russian sanctions risk harming US workers and businesses. Pg. 10

AZERBAIJAN SOCAR COMMISSIONS NEW FILLING STATION IN UKRAINE

zerbaijan’s state energy company SOCAR has commissioned a new filling station in Ukrainian Rivne region. Pg. 11

WORLD NEWS BULGARIA: SOUTH STREAM DOESN’T BREACH EU LAWS

ulgarian officials say the construction of the Russian-led South Stream gas pipeline does not breach EU legislation. Pg. 13

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Pg. 4

GEORGIA AND EU SIGN ASSOCIATION AND FREE TRADE AGREEMENTS

eorgia and the European Union signed Association Agreement, including deep and comprehensive free trade area (DCFTA), on June 27 in the margins of the European Council meeting in Brussels. The agreement was signed by Georgian Prime Minister Irakli Garibashvili, President of the European Council Herman van Rompuy, President

of the European Commission José Manuel Barroso and heads of the states and governments of the EU-member states present at the ceremony. Association Agreements, also including DCFTA, was signed with Moldova at the same ceremony and the signature process with Ukraine on economic parts of the agreement, which were left after the political ones were signed in March, was completed. Pg. 2

GEORGIA RANKS 7TH IN 2014 A.T. KEARNEY GLOBAL RETAIL DEVELOPMENT INDEX RANKING

.T. Kearney’s company puiblished the Global Retail Development Index™ (GRDI). The company notes that global retailers have become more strategic in their expansion and in avoiding the operational pitfalls

George Pertaia French, Turkish and Qatari Businessmen Show Interest in Georgia’s Energy Sector Pg. 4 Roman Gotsiridze: Russian will not Impose Higher Customs Tariffs Pg. 6

of entries into developing markets. Using e-commerce, they are pressure-testing demand in new markets to reduce risk, and they are taking advantage of financial vehicles such as credit cards and cash-on-delivery to help increase demand. Pg. 5

Vasadze Leaves Co-Investment Fund’s Managing Company Pg. 5

MAIN EVENTS caucasian business week

GEORGIA AND EU SIGN ASSOCIATION AND FREE TRADE AGREEMENTS

oday Georgia is taking a big step towards free Europe,” Garibashvili said in his speech at the signing ceremony. “June 27 will be remembered as a historic and special day. There are dates in the history of each nation, which they are proud of. Today a new big date is being written in the history of my homeland, which gives hope and which our future generations will be proud of. Many generations have spent their lives thinking about this day. And I am happy that it was honor of my generation to turn this dream of our ancestors into reality. “It is very difficult to express in words feelings I am experiencing now,” Garibashvili said. “I am sure that everyone has this emotion in my country. Today Georgia is given a historic chance to return to its natural environment, Europe, its political, economic, social and cultural space.” Georgian President Giorgi Margvelashvili told journalists in Batumi on June 27, that the Association Agreement will help Georgia to get closer to the EU and will “deepen further our declared foreign policy course towards EU membership.” The agreement, which is designed for gradual approximation of signatory countries to EU standards and regulations in broad range of areas among them trade, customs procedures and quality controls, does not give a pledge to eventual membership in the EU; but the reforms and approximation process, envisaged by the agreement, are viewed as preparation for potential membership sometime in the future. When asked at a news conference after the signing ceremony when Georgia would officially apply for membership, PM Garibashvili responded: “Unofficially we applied for membership today; officially – it depends on progress that we will make, but I can guarantee you that we will do our best to meet all the requirements of the European Union.” “It depends on us,” Garibashvili said responding a question about how long it might take for Georgia to become EU member. “In five years, maybe in ten years – we never know. It depends on progress Georgia will make.” In his speech at the signing ceremony, President of Ukraine Petro Poroshenko called on the EU to make a clear declaration that Ukraine will join the bloc once it is ready for membership. President of the European Commission, José Manuel Barroso, said at the signing ceremony that these agreements “do not constitute the end point of the European Union’s cooperation with its partners.” Barroso said signing of these agreements “should not be seen as the end of the road, but as the beginning of the journey on which the European Union and these three partner countries are embarking together today.” He stressed that “task ahead is substantial” as the three countries are embarking on the path of significant reforms requirement from their governments to show strong political will, coordination, engagement with parliaments, opposition and civil society “in order to build the national consensus in favor of the measures required to guarantee sustainable transformation.” Speaking at the signing ceremony President of the European Council, Herman Van Rompuy, said: “These are not just any other agreements, but milestones in history of our relations and for the Europe as a whole. In Kiev and elsewhere people gave their lives for this closer link to the European Union.” Later in the evening on June 27 the signature of the Association Agreement will be celebrated with an outdoor concert in downtown Tbilisi; President Giorgi Margvelashvili and PM Garibashvili plan to make an address at the event, according to PM’s office. The United National Movement opposition party is holding a reception at its Tbilisi headquarters to mark the event; large part of the Association Agreement was negotiated while UNM was in government. The Georgian Parliament is expected to ratify the agreement in second half of July. Although it may take several years before all EUmember states ratify the agreement, the treaty en-

visages provisional application parts of the agreement even before EU members and the European Parliament complete ratification process. Following Georgian ratification of the Association Agreement, provisional application could start tentatively by October, 2014. Before its provisional application, an institutional framework should be established, which includes setting up of the Association Council (to replace the existing Cooperation Council), as well as various committees, subcommittees and trade-related working groups; the process will also be accompanied by engagement with civil society and parliamentary cooperation to provide for the monitoring mechanisms. The voluminous agreement is accompanied by about three dozen of annexes, which list hundreds of relevant EU legislation to be taken by Georgia by a specific date with timeframes ranging from two to ten years. Parliament speaker Davit Usupashvili said in Tbilisi on June 27 that a “laborious work” lies ahead of the Georgian lawmakers to “reflect all the provisions envisaged by the Association Agreement in the Georgian legislation.” “We are embarking on a lengthy process of implementation of reforms, which cover almost all the areas of political, economic and social life of Georgia,” PM Garibashvili said in Brussels after the agreement was signed and added that Georgia is “not alone in this complex process” as EU stands ready to provide its assistance. In July the EU plans to adopt new assistance programs for Georgia worth EUR 101 million to support reforms in the justice sector and implementation of the DCFTA, as well as to fund programs for small and medium enterprises. Meanwhile in Moscow, Russian President’s spokesperson, Dmitry Peskov, said that signing of the Association Agreements by Georgia, Moldova and Ukraine with the EU is their sovereign right, but Russia will have to take measures if it negatively affects on its economy. In his speech at the signing ceremony in Brussels, President of the European Commission José Manuel Barroso said that these agreements are “not against anyone.” In his speech PM Garibashvili also addressed, as he put it, “my brothers and sisters – Abkhazians and South Ossetians.” “My dears, we are all children of one country… You have the unique opportunity to enjoy benefits provided by the association with Europe,” Garibashvili said. Georgia and the EU launched talks on the Association Agreement in July, 2010. Talks on economic part of the agreement, DCFTA, were launched later and finalized within seventeen months in July, 2013. The Association Agreement, including DCFTA, was initialled at EU’s Eastern Partnership summit in Vilnius in November, 2013. Although initially signature of the agreement was planned for later this year, developments in Ukraine promoted EU to move the date forward. Trade Sustainability Impact Assessment, 2012 report commissioned by the EU, estimated that the DCFTA will increase Georgia’s exports to the EU by 12% and imports from the EU by 7.5%. Full implementation of trade-related reforms, according to this report, could increase Georgia’s longterm GDP by 4.3%. According to the EU estimations, Georgian agricultural products will become more attractive on the EU market after the removal of EU import duties worth EUR 5.7 million on basic agricultural products and EUR 0.5 million on processed agricultural products. Georgian exports to the EU stood at USD 253 million in January-May 2014, a 58% year-on-year increase, according to the Georgian state statistics office, Geostat. Georgian exports to CIS-member countries in January-May 2014 stood at USD 627.6 million of which Azerbaijan, Armenia and Russia were Georgia’s largest exporting markets with USD 240.4 million, USD 129.7 million and USD 108.3 million, respectively.

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June 30, 2014 #60

GEORGIAN PATRIARCH ADDRESSES NATION OVER EU ASSOCIATED MEMBERSHIP

ead of the Georgian Orthodox Church, Patriarch Ilia II, addressed crowd gathered in downtown Tbilisi for an outdoor concern celebrating signing of the Association Agreement with the EU on June 27. “Today is a happy day,” Patriarch Ilia II said in his brief address from the stage on Europe Square. “The entire Georgia, all Georgians and

residents of Georgia are celebrating this day. We are getting closer to the European culture as never before.” “But we should remember that this is not only a huge honor for Georgia, but also a huge responsibility. Georgia should show Europe and the entire world our ancient culture, our [religious] hymns, our past, our values. God bless every person who has worked for this happy day,” he added.

U.S. HAILS EU’S ASSOCIATION AGREEMENTS WITH GEORGIA, MOLDOVA, UKRAINE

.S. Secretary of State, John Kerry, congratulated Georgia, Moldova and Ukraine on signing Association Agreements with the EU on June 27 and said in a statement that the U.S. “will continue to stand with them as they work to implement key reforms.” “The agreements signed today mark a major step toward integrating these Eastern Partnership countries more closely with the European Union and realizing a Europe whole, free, and at peace,” the U.S. Secretary of State said in the statement. “It is not just that these agreements link the EU’s eastern neighbors into its single market and unlock new opportunities for trade and assistance. Today, Moldova, Georgia, and Ukraine have signaled their readiness to undertake important economic and legal reforms that will make them stronger, more vibrant democracies.” “We continue to support the territorial integrity of Georgia, Moldova, and Ukraine. The decision on the best path to security, prosperity, and a better future for their citizens is one that can and should be made by these sovereign nations, and by them alone. We applaud the hard work and determination that has brought them to this point, and we will continue to stand with them as they work to implement key reforms and build more prosperous, stable, and democratic societies,” Kerry said in the statement. According to Daniel Rosenblum, coordinator of U.S. assistance to Europe and Eurasia in the State Department’s Bureau of European and Eurasian Affairs, Georgia, Moldova and Ukraine represent just over one third of the entire fiscal year 2015 budget request for the assistance programs in Europe and Eurasia.

According to his prepared testimony before the House subcommittee on Europe and Eurasia on June 25, the State Department has re-focused many of its assistance programs to support these countries as they prepare to implement the Association Agreement, including the deep and comprehensive free trade area (DCFTA). “The majority of our assistance to Georgia and Moldova is aimed at promoting democratic, economic, rule of law, and other reforms that are consistent with the EaP’s [EU’s Eastern Partnership] objectives,” according to his prepared testimony. “Many programs, directly and indirectly, support EU integration: promoting standards and capacitybuilding that enabled Moldova to attain visa liberalization on April 28 and supporting Georgia’s efforts towards this same goal; assisting Georgian and Moldovan businesses to meet EU safety standards and increase international competitiveness; convening high level dialogues on trade and investment; and exploring ways to use assistance to further enhance both countries’ energy security through diversification and greater efficiency.” NATO Secretary General, Anders Fogh Rasmussen, has also welcomed signing of EU’s Association Agreements with Georgia, Moldova and Ukraine and said in a statement on June 27, that it will “contribute to the consolidation of freedom, stability and prosperity in Europe.” “They [Agreements] will allow close cooperation on strengthening the rule of law, advancing judicial reforms, fighting corruption, ensuring respect for fundamental rights and freedoms and strengthening democratic institutions. These are goals that NATO shares and supports through its own partnership with these countries and other partners,” Rasmussen said.

PM WELCOMES RUSSIA’S ‘RECIPROCAL CONSTRUCTIVE STEPS’

eorgia’s PM Irakli Garibashvili said that Russia has “kept its promise” not to interfere with signing of Georgia’s Association Agreement with the EU and added that he wants to “welcome” Moscow’s “constructive policy.” Speaking in an interview with the Georgian Public Broadcaster in Brussels on June 27 after signing of the Association Agreement, including deep and comprehensive free trade area, Garibashvili said: “The fact that we freely signed today the Association Agreement is a result of constructive policy of our government.” “Result of our constructive policy is that the Russian market was reopened for our products and we have seen reciprocal constructive steps more than once from the Russian side, which can only be welcomed,” he said. “I want to welcome their constructive policy. The promise, which they publicly voiced, that they would not interfere in Georgia’s Association Agreement process has been kept and I want to welcome it.” “Of course we remain on our principle [position]

on the major issue related to our occupied territories and we continue working on this, but it does not hinder [efforts] to intensify and improve our trade relations with Russia and to start confidence-building process,” Garibashvili said. He reiterated the same position in an interview with CNBC in Brussels also on June 27 and said that his government has been pursuing a constructive policy towards Russia in order to “deescalate tension” with Moscow. “And also Russia showed a constructive policy towards us and I think it worked well,” Garibashvili said. “Russia promised that they would not interfere with Georgia’s Association Agreement process and I think they did it; therefore, so far we see no signs of complication of this process.” “We are conducting a very constructive policy towards all the neighboring countries, including Russia. I have to make clear that Georgia’s European integration process became irreversible, but it does not conflict with our aspiration to have normal relations with our neighbors, including Russia,” the Georgian PM said.

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PUBLICITY June 30, 2014 #60

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 Gogichaishvili, Nini Badurashvili, Misha Mshvildadze and Special guest “Rubilnik”

INTERVIEW caucasian business week

BENEFITS GEORGIA WILL RECEIVE FROM EU’S ASSOCIATED MEMBERSHIP An interview with Deputy Minister of Economy Mikheil Janelidze

- What benefits will the signing of the agreement bring to Georgian business? - We are trying as much as possible to inform all entrepreneurs about the benefits this document will bring to them. Of course, they can count on serious trade and export preferences. It provides a variety of benefits, but the main is the abolition of customs duties. This is the first tangible result a local business will receive. As you know, today Georgia enjoys preferential treatment in the EU for certain goods, but not for such important products as wine, fruit, juices, etc. After the agreement comes into effect, customs duties will be abolished for all Georgian goods without exception. This is the most that the European Union can do for its trading partners. We travel a lot in the regions and explain to people all the advantages of an agreement with the EU, we are very glad that entrepreneurs look forward to it. Everyone wants to maximally use the benefits of an agreement with the EU. We also explain to them what reforms will be

carried out, what regulations will be introduced for private companies who want to export their products to Europe. - However, the desire to be ready is one thing, but a real willingness - is quite another. We have a very negative statistics - for example, our entrepreneurs do not even use the opportunities they have now. How will it be this time? - I cannot agree with this assessment, as we have quite significant exports to Europe - wine, mineral water, nuts, juices, canned goods, etc. This means that their manufacturers fully comply with European quality standards. As a result of the agreement with the EU, these products will continue to be exported to Europe, but now without paying customs duties. Other products, such as honey, which today we cannot export to the EU because of customs duties, will be exported as well. State will provide laboratory testing, implement control system of the European level, and it will give the Georgian product the opportunity to gain a foothold in the European market. - Whether or not the agreement with the EU will lead to an influx of European imports? In addition, many Georgian businessmen say they need 20 years to reach the European level of product quality. Do they really need this period? - A significant import growth shouldn’t be expected, as Georgia has unilaterally opened the market for products from the EU, respectively, there are no obstacles and products shipped from Europe freely, respectively, there will not be any changes in this regard. As for 20 years, we should not generalize too much. I repeat that today Georgian goods are exported to the EU and comply with European quality standards. Of course, there are some areas where the implementation of standards will take some time. Of course, it will not take one day. All European quality regulations will be introduced by stages. Furthermore, we should not forget that there are technical and marketing barriers to exports. One thing is to freely export goods, and quite another - to sell them. To do this, our businesses should approach this issue from the perspective of modern marketing.In turn, the state is obliged to help businesses find their place in the European market.

June 30, 2014 #60

BUSINESSMAN LEVAN VASADZE AGAINST “EXCESSIVE DOOROPENING” - As you know, the Constitutional Court invalidated the Moratorium on land sales to foreign nationals. How legitimate was the decision? - Under current law, the Constitutional Court had the right to take such a decision. Moratorium itself was more like trying to patch holes in the ship, which had sprung a leak. It was an inflexible and wrong step, since before the Moratorium a previous government had abolished all restrictions on privatization of land plots. All this was done under the banner of a liberal economy, which in theory is acceptable in many areas, but is absolutely unacceptable with regard to agricultural land. This can be seen in many European countries, for example, in Austria foreigners need a special permit to purchase land, which indicates that the privatization of a particular land plot is not contrary to the public interest. For a non-citizen of the European Union this procedure is even more complicated- to buy agricultural land in Austria, he must live in the country for 10 years. Moreover, a special permit is required even on a long lease. In most countries, including developed countries, agricultural land is under the control of the state. - Does Moratorium create difficulties for investment in which our agriculture is in dire need? - I believe in that situation the Moratorium was the only right step, because you cannot keep the doorcompletely open. In Georgia, there are only about 700 000 hectares of arable land, and 20folddifference with prices in Europe. I’m not talking about the difference in incomes in agriculture. In this situation, if the doors are wide open, foreign citizens will buy all the land, and our citizens will bein the best case salaried workers. With regard to investment, we are talking about maximum 9 million GEL that have reduced up to 2million since Moratorium came into effect . It is not such a great investment given a fact that last year 400 000 hectares of land were cultivated in Georgia, of which 100 000 at public expenses. During 25 years of independence there was no businessman who really invested in agriculture. Look at the neighboring countries – the sale of land to foreigners is forbidden in Armenia and Azerbaijan, in Turkey you can buy no more than 2, 5 hectares. Everywhere in the world there are restrictions. NGOs funded from abroad spread information about great investments that were allegedly

stopped due to the Moratorium, and are lobbying for the abolition of restrictions. We should not open the door until the territorial integrity is restored, economic and political stability is achieved. I would advise the government not to listen to amateurs and entrust the solution of this issue to professionals and scientists. Amendments to the land use law , in particular in terms of the rights of foreigners to purchase land, is under consideration. I would advise the government not to make any regulations, as regulations are always a source of corruption. The public should discuss this issue and take more or less acceptable solution. The problem with overly open doors concerns not only this issue, but also many others. For example, the idea of subsidizing agriculture is criticized a lot. Maybe in liberal economic theorysubsidizing is really wrong, but there is a reality in which it is necessary. Measures to protect the manufacturer do not operate in the country- we have zero import duty, but in partner countries restrictive tariffs are set on goods exported from Georgia. All doors open in order to destroy a local manufacturer. In this situation, it is at least necessary to subsidies agriculture and conduct adequate customs policy.

FRENCH, TURKISH AND QATARI BUSINESSMEN SHOW INTEREST IN GEORGIA’S ENERGY SECTOR An interview with Head of the National Investment Agency George Pertaia - Recently, a lot of business forums with the participation of foreign entrepreneurs have been conducted in Georgia. What are their results? - Activity is indeed very high and an interest in Georgia has increased, particularly in energy and agriculture. Unfortunately, it does not bring immediate results, it is a long process. One thing is to express their interest and quite another - to study all the details, to understand how profitable is to invest in the country etc. It all takes time. Our business forums have brought some results. The businessmen from Qatar are interested in real estate, hotel business, construction of entertainment centers. French businessmen are interested in hydropower and retailing. Turkish businessmen came together with the President of Turkey. They are also interested in hydropower - largely due to electricity exported from Georgia to Turkey. A business forum was also held in Anaklia. It was a very good idea. Most potential investors are interested in Anaklia. Therefore, in the future we intend to continue to hold business forums associated with certain regions. This is important because, as a rule, forums are held in Tbilisi, and foreign businessmen have little opportunity to explore the possibilities of regions other than on the slides.

Foreign businessmen are interested in Anaklia’s potential. For example, a U.S. company is considering the construction of a city there like Las Vegas. But all these are ideas, and before the adoption of specific decisions, issues will be explored. I can also say that CEO of “Royal Philips” ,who a year ago met with the then Prime Minister Bidzina Ivanishvili, has recently visited Georgia. The company is considering the construction of a regional center in Georgia, where the products will be distributed throughout the region, including Central Asia. This is a very promising idea, especially taking into account that Georgia is positioning itself as a regional center. These are the investments that we need. - What investors do you expect in Georgia in the near future? - I think this trend shows a growing interest in relation to Georgia, and it will continue. Unfortunately, July and August are not the months when business is active, there will probably be some pause, but since the fall the number of investors will increase. The country’s stable political situation and the fact

that the presidential and municipal elections were held peacefully show investors that the rules do not change, and their investments are not in danger. - Whether these conditions are sufficient to dramatically improve business climate and attract more investment? And how will an Association Agreement with the EU contribute to this? - A fact that Georgia is a very small market with limited export opportunities has always been a big problem for us. Agreement with the EU puts us in a privileged position, as it will allow us to export duty-free products to the 500- milliont market. Investment interest from Europe, South Korea, India, Taiwan and other companies, looking for an opportunity to enter the European market, has already increased. Georgia has two advantages in this regard- free trade with the EU and low labor costs. - Based on all the abovementioned - how realistic is the government’s plan to attract investments to the tune of 1 billion USD in 2014? - This is quite a realistic forecast. Moreover, it is even more pessimistic, as in 2013 about 900 million USD were attracted, so on this backdrop 1 billion is an achievable goal.

BUSINESS June 30, 2014 #60

caucasian business week

FRONTERA LAUNCHES GAS EXTRACTION IN GEORGIA

as extraction and realization process started from the Mtsarekhevi ore, Sagarejo municipality. American company Frontera implements the project. US ambassador in Georgia Richard Norland participated in the ceremony devoted to the start of the extraction. Realization project of Mtsarekhevi ore started in 2011. $400 million has been invested in the project. “It is a historical affair. We have worked in Georgia since 1997; mainly provide researches in the oil and gas sphere. In the future the ore will become guarantee for energy independence of Georgia”, - Executive director of the company Steve Nicadros stated. According to existing information, geological reserve of the natural gas equals to 42 million cubic meters. Expert-geologist of the contracts department, Oil and Gas Corporation, Soso Gudushauri states that according to the documents submitted by Frontera to the corporation, the ore has proven reserve of 23 million cubic meters. It’s noteworthy that annual consumption of Geor-

gia equals to 1,8 billion cubic meter of gas. - Gas extraction and realization process started from the Mtsarekhevi ore, Sagarejo municipality. American company Frontera implements the project. US ambassador in Georgia Richard Norland participated in the ceremony devoted to the start of the extraction. Realization project of Mtsarekhevi ore started in 2011. $400 million has been invested in the project. “It is a historical affair. We have worked in Georgia since 1997; mainly provide researches in the oil and gas sphere. In the future the ore will become guarantee for energy independence of Georgia”, - Executive director of the company Steve Nicadros stated. According to existing information, geological reserve of the natural gas equals to 42 million cubic meters. Expert-geologist of the contracts department, Oil and Gas Corporation, Soso Gudushauri states that according to the documents submitted by Frontera to the corporation, the ore has proven reserve of 23 million cubic meters. It’s noteworthy that annual consumption of Georgia equals to 1,8 billion cubic meter of gas.

GEORGIA’S FIRST SPAR SUPERMARKET TO OPEN IN JULY

epresentatives of the retail trade brand SPAR International visit Georgia for 2 days. During the visit representatives of SPAR will see markets of Foodmart and Ioli network and get introduced to the working process. Foodmart informs that they have also signed contract with SPAR International and complete rebranding of Ioli and Foodmart has been planned. Along with SPAR entrance on the market, Foodmart and Ioli markets will be gradually replaced till the end of the year. First

market will open in July. “The largest European brand SPAR expressed interest to Georgia, which means establishment of the new standards on Georgian consumer market. Products of SPAR brand will be sold exclusively in our network”, - operational director of Foodmart Natia Cholokashvili states. It’s noteworthy that on Wednesday representatives of SPAR International and Foodmart organize a joint press conference devoted to the signed contract. SPAR is a Dutch network represented by over 12 000 objects in 35 countries of the world.

WINEMAKING WASTE COULD BECOME FUEL STARTER IN GEORGIA

n Georgia, winemaking waste could serve as a good starting point for environmentally friendly fuel production. Swedish company “Scania”, one of the world’s leading manufacturers of heavy trucks and buses, is developing a new direction of business, which includes environmentally clean fuel production. According to the Ministry of Economy, “Scania”

plans to open a sales and service center in Georgia in the near future. The company has expressed interest to develop production of non-polluting fuel derived from winemaking waste. George Kvirikashvili, Minister of Economy and Sustainable Development, visited “Scania” production during his visit to Sweden. According to the Minister, technology of fuel from organic waste decreases carbon dioxide emissions by 90%.

GEORGIA RANKS 7TH IN 2014 A.T. KEARNEY GLOBAL RETAIL DEVELOPMENT INDEX RANKING

hile ranks first for the first time. Years of economic and political stability have helped the country build one of South America’s most sophisticated retail environments. The past year brought several major investments in malls, new entries by international retailers, and expansions by local leaders. As for Georgia, political uncertainty posed challenges to the economic outlook and consumer spending in 2013, but recovering GDP and investment levels are expected along with stabilizing consumer spending growth. Georgia’s GDP is growing steadily, and per-capita spending has risen over the past five years. These factors, combined with a still underpenetrated retail market, help Georgia move up one place to 7th and is ahead of the countries such as Kazakhstan, Turkey and Russia. Modern apparel retail in Georgia dates only to 2011, when Retail Group Georgia brought in Inditex brands. Barely two years later, 40 brands have entered, including Zara, Massimo Dutti, Marks & Spencer, Gap, Banana Republic, Aldo, Bershka, Stradivarius, Pull & Bear, Promod,

Wallis, Miss Selfridge, Topshop, Topman, Debenhams, and Motivi. With growing disposable income, an underpenetrated market, and an improving business environment, Azerbaijan (30th) is attracting many international brands, particularly in high-end segments. Azerbaijan’s non-grocery retail market is forecast to grow 13.5 percent from 2014 to 2018. Last year, Italian luxury brand Ermanno Scervino opened a branded store in the capital Baku, with plans to open more stores in Baku and elsewhere, and British brand Next opened its second store in Baku. The new MD Outlet store in Baku’s Azure mall offers brands such as Versace, Dolce & Gabbana, Nike, and United Colors of Benetton, among many others. Other new entrants in Azerbaijan include Nine West, Monsoon, Accessorize, Adidas, Puma, and Reebok. While Armenia’s GDP is growing fast (8.3 percent), its retail market is unsaturated, and its location makes it a strong regional entry point. A planned customs union with Russia, Kazakhstan, and Belarus could improve its prospects. Armenia climbs into 6 place in the 2014 GRDI.

GOODWILL MAY BE TRANSFORMED INTO A JSC

he court did not confirm suit of PKF and respectively previous verdict on its avoidance remains valid. Company director and 6 creditors, among them was not secured creditor TBC Bank, required removal of PKF from the rehabilitation management. The management informs that rehabilitation will be provided in accordance to the plan elaborated by them and approved by the creditor bank. Currently replacement of PKF is not known, it may be an individual. Goodwill takes unconditional obligation to continue business relations with the creditor normally and pay debt according to schedule. Its transformation into JSC has been planned. Creditors consider it as guarantee for the success. Currently legal-organizational form of Goodwill is LTD and 100% share of it belongs to George Shevardnadze. Lawyer of Goodwill informs that the company has about 40 million GEL debt to 490 creditors and among them 16 million is to TBC.

First of all creditors of I, II, III and IV order should be satisfied. I - is Bureau of Enforcement, to which Goodwill has debt of 3 million. The company does not have creditors of II and III (liabilities started from the beginning of rehabilitation) order and then follows secured creditor - TBC Bank. After it is satisfied, turn of others come. The amount will be distributed to them simultaneously, with the rule of ration, proportionally to their debt.

VASADZE LEAVES CO-INVESTMENT FUND’S MANAGING COMPANY

usinessman Levan Vasadze left manager company of Co-Investment Fund. The change about Vasadze in the fund’s manager company GCF Partners was registered on June 26. According to the change, Levan Vasadze left the company; his 16% share was equally distributed to the other shareholders - George Bachiashvili and Ucha Mamatsashvili. Respectively, each of them owns 50%-50% of the company. It’s noteworthy that Vasadze’s contribution in the company equaled to only 16 GEL. He will get

it back. Levan Vasadze had to provide consultations to Co-Investment Fund. As Vasadze stated to Radio Commersant, at that time he was asked to be an advisor. He agreed on this because of the respect of Bidzina Ivanishvili. However now he asked to cancel his 16% share, although he as not explained the reason. “I respect George Bachiashvili. I consider him as a perspective, clever young man and investment specialist. I will help as much as I can to provide investment of this money in our country and develop as many sectors as possible”, - Levan Vasadze mentioned.

GEORGIAN RAILWAY TO BECOME EUROPE-ASIA ROUTE’S MAJOR PLAYER

eorgian Railway has been firming as a main player in the shipments from Europe to Asia, - director of the Georgian Railway’s subsidiary company - Trans Caucasus Terminal Levan Jgarkava states. As he says, it’s important that China is also interested in the cargo shipments through Georgian corridor. “They have a great desire to provide shipments of Chinese freight by the shortest way from the Eastern China to South East. There is no alternative because shipments through Georgia shortest, fastest and cheapest way”, - Jgarkava states. Besides, Jgarkava declares that the company

should continue marketing activities and participate in as many exhibitions and events as possible. Due to it will remain in the focus and remain active on the market. Besides, he says that opening representations of Georgia in the strategic countries should be next state. It will simplify communication with the carriers.

CHIRINA TO DOUBLE OUTPUT IN 2014

ompany Chirina, which owns the largest poultry plant in the South Caucasus, is going to double productivity by the end of the year. Management of Chirina stated about it on Tuesday, during the visit of Minister of Agriculture of Israel in the company. Minister of Agriculture of Israel Yair Shamir and members of Israeli governmental delegation visited Chirina’s poultry plant along with deputy Minsiter of Agriculture David Galegashvili, state governor in Kvemo Kartli George Mgebrishvili and representatives of Israeli embassy in Georgia. The company operates since 2013 and overall has invested about 100 million for creation of one of the modern industrial complex with international standards. Currently Chirina produces 6 000 tons of meat and this data will have doubled by the

end of the year. According to their report, currently 250 persons have been employed in the plant. It’s noteworthy that Chirina has also involved in the preferential agro credit project of Ministry of Agriculture. Besides, in May of the current year the government directly sold 6 plots of land with the total area of 349 303 square meters (located on Sartichala territory) to Chirina, which produces chicken products with Bio-Bio trademark. The company took obligation to construct a poultry farm on the delivered or other lands in no more than 2 years and will invest at least 800 000 in them Reminding that Chirina already owns the largest poultry complex in the South Caucasus, grows grain on the own lands, has a dryer for raw material, plants for combined food and industrial lines for the procession of meat and waste.

BUSINESS caucasian business week

June 30, 2014 #60

ROMAN GOTSIRIDZE: RUSSIAN WILL RUSSIAN FM ON EU’S FREE NOT IMPOSE HIGHER CUSTOMS TRADE TREATIES WITH GEORGIA, TARIFFS MOLDOVA, UKRAINE

igning of Association Agreement means not only large market, but also introduction of European culture in the industry”, - economic expert Roman Gotsiridze considers, - it’s important that European standard also deals to the local market and “We’ll learn appreciation of the own consumer”. The expert mentions that after the signing agreement, preparation of important legal changes and implementation may take some years; however it’s the period necessary for the country’s development and it will not be as long as in the Europe, because path as already been made. Besides, despite threat of Russia, Gotsiridze does not expect important barriers due to weakening its influence. They have the only leverage - imposing customs tariffs, although they can’t establish higher fees than considered by agreement signed with World Trade Organization. Considering European perspectives, burden of 30-40 million

customs tax on the Russian market will not imped good Georgian export. “Association Agreement is end of post soviet era. It’s especially obvious in light of current developments in Ukraine. It has double power. Not only because that Ukraine is a large European state but because annexation of the part of Ukraine by Russia finally ended Russian claims to the post-soviet countries. Georgia appeared the country, which managed to leave the situation. After the integration of the Baltic countries to Europe it’s the second large wave”, Roman Gotsiridze stated. The expert is categorically against “obligatory” relationships after Georgia’s return in the progressive world. It diminishes Georgia’s aspiration to voluntarily become member of European family. The relationship should not be based only pragmatic financial benefit. “Money for Reforms” is unacceptable. It’s humiliating. Although programs of International Monetary Fund and other international intuitions are formed in this way.

SWEDISH FM TO VISIT MOLDOVA, GEORGIA, UKRAINE

oreign Minister of Sweden, Carl Bildt, will visit Moldova, Georgia and Ukraine on June 29-July 1, according to the Swedish Foreign Ministry. Visit will follow signature of the Association Agreements, including deep and comprehensive free trade area, between the EU and these three countries in Brussels on June 27. Bildt, who will hold talks in Tbilisi on June 30, said that after start of provisional application of the Association Agreement, “new possibilities”

will open up for Georgia. “It opens up possibilities that wise policies pursued by Georgia can utilize and anchor Georgia even more firmly in the structures of the European integration and cooperation,” Bildt said. “Sweden has been one of the countries trying to drive this particular process,” he added. Foreign ministers of Sweden and Poland, Carl Bildt and Radosław Sikorski, respectively, were behind initiating EU’s Eastern Partnership program, which was launched in 2009.

GEORGIA ATTRACTS 10 000 VISITORS FROM IRAN PER YEAR

rade and economic cooperation between Iran and Georgia enters the active phase. Georgian-Iranian Chamber of Commerce was established on January 31, and its main purpose is to support long-term and mutually beneficial cooperation between the two countries. The Chamber brings together more than 100 Georgian and Iranian companies that are active in various sectors of the economy and play an important role in the cooperation between the two countries. The Chamber includes 6 branch committees -

trade, transport, tourism, oil products, engineering and technical cooperation,and agriculture. The Chamber also consists of experts and specialists. In 2013, the trade turnover between Georgia and Iran totaled $ 180 million. Georgia is annually visited by about 10 000 Iranian citizens who left about $ 100 million in the country. The cooperation between Iran and Georgia is the most active in areas such as infrastructure construction (98% of bitumen used in Georgia in road construction is imported from Iran), tourism, trade, construction, agriculture.

GEORGIAN INDUSTRY GROUP STARTS CONSTRUCTION OF A NEW THERMAL POWER STATION

he Georgian Industry Group (GIG) plans to make large investments in a new energy project. According to the Industrial Group, the project will contribute to energy security, economic growth and will create new jobs. A relevant agreement was signed a few days ago by the Ministry of Economy and Sustainable De-

velopment, Ministry of Energy and the Georgian International Energy Corporation Ltd. According to the agreement, the Corporation starts the construction of a new 100-150 MW coal power station in Tkibuli municipality. The agreement also provides for the construction of a new high-efficiency natural gas-fired power plant in Gardabani municipality, in accordance with the parameters set by the government of Georgia.

ussia will resort to “protective measures” if EU’s deep and comprehensive free trade agreements (DCFTA) with Moldova, Georgia and Ukraine negatively affect on free trade regime within the Commonwealth of Independent States (CIS), Russian Foreign Minister, Sergei Lavrov, said on June 25. Russian news agencies reported quoting Lavrov that Moscow is not only ready, but also calls for consultations to clarify potential effects of these treaties on Russia’s trade with the countries concerned. “As soon as these agreements, which our partners within CIS free trade zone are going to sign with the EU, take effect and we understand that it is reflected negatively on functioning of CIS free trade zone on the conditions based on which we join WTO, of course we will be taking protective measures in complete accordance to the WTO rules,” Lavrov said. Georgia’s Trade with Russia in Jan.-May’14 Tbilisi, Moscow Plan Consultations on Georgia’s DCFTA with EU Russian MFA on EU-Georgia Association Agreement EU will sign Association Agreements, also including DCFTA, with Georgia and Moldova on June 27 in Brussels. On the same day the EU will complete the signature process with Ukraine on those economic parts of the agreement, which were left after the political ones were signed in March. “These Agreements are for something, not against anyone,” President of the European Commission, José Manuel Barroso, said on June 25. Barroso said that when he spoke by phone with

Russia’s President Vladimir Putin on June 13, he reiterated EU’s offer to engage in trilateral consultations on the political level about the implementation of DCFTA with Ukraine. He said that such consultations are expected to take place on July 11 in Brussels at the ministerial level. It was announced this week that Georgian and Russian experts plan technical level consultations to exchange views about possible effect of Georgia’s DCFTA with the EU on its trade with Russia. Georgian PM’s special representative for relations with Russia, Zurab Abashidze, said on June 26, that his next meeting with Russian Deputy Foreign Minister Grigory Karasin in Prague is scheduled in the first half of July and that meeting will be preceded by talks between experts on the trade issues. After the agreement is signed on June 27, the Georgian Parliament is then expected to ratify it in July, according to parliament speaker Davit Usupashvili. Although it may take several years before all EUmember states ratify the agreement, the treaty envisages provisional application and, according to the EU, its impact may be expected to a large extent even before EU members complete ratification process. Speaking in Brussels on June 25, President of the European Commission said that Association Agreements with Georgia, Moldova and Ukraine have “huge strategic importance.” “I do not hesitate to call these agreements historic. Historic for those countries, that’s their historic objective, but also historic for Europe, what this can mean for the whole of Europe,” Barroso said.

COMPETITION AGENCY SEES NO THREAT OF MONOPOLIES IN GEORGIA An interview with the Head of the Competition Agency George Barabadze - Almost two months have passed since the Competition Agency was established. When will the development of legal acts be completed and when the Agency will begin to take real decisions? - The mere fact of the creation of the agency is not sufficient - it must have a legal basis on which it will work. We are now at the stage of its development, actively cooperating with local and foreign experts. Three normative acts have already been prepared, which will be considered in July. In addition, we have established a group of experts and representatives of ministries, which will work on two and other documents that we’ll have to adopt. In general, the regulatory framework will be ready before October 1, 2014. - Many businessmen speak about the presence of monopolies in their sectors, for example in the grain milling business. Do you have specific plans for any of the sectors where you think there is a suspicion about the existence of monopolies? - A market research should determine the existence of monopolies in any sector. Accordingly, the Agency has no right to accuse anyone of using monopoly without proper evidence. Moreover, any unchecked and reckless statement made by Agency can do far more harm than good for the company and the country’s economy and image. The state must protect the interests of the business and promote investment, so we should refrain from impulsive and untested allegations. We have certain approaches to the study of the state of the market, but to talk about them openly is early. In addition, it should be noted that the procedure of the study of the possible existence of monopolies is quite complicated, and it can take up to 10 months. - How will the Competition Agency act? On what basis inspections will be carried out - the agency itself will choose the companies and sectors, or research will be conducted on the basis of an appeal?

- After relevant regulations are adopted, the Agency will begin to study the sectors that are of great public interest. The competence of the Agency also includes the study of complaints. The final decision will be submitted for consideration to the executive and legislative branches. We’ll also develop specific recommendations to prevent the creation of artificial barriers for some companies and illegal preferences for others. - Are there any penalties, in which case the company will be considered a monopoly? - According to the competition law, the refusal to provide the information to the Agency shall be punished by a fine of 1 000 – 3 000 GEL. If it is proved that the company is abusing a dominant position on the market, the company will be fined in the amount of 5% of annual turnover - but this is only for the first time. If a monopoly position is proved for the second time, the penalty will increase to 10%. Today many speak of a monopoly position in some sectors of the economy in Georgia, but the presence of monopolists in the market in its current state in the country is unlikely if the meaning of the word “monopoly” is properly understood. Of course, this does not apply to any specific markets, we are speaking about the whole situation. Monopolies appear at moments when competition is artificially limited and state grants exclusive rights to individual players. At the same time monopolistic companies exist worldwide, and Georgia is not an exception, most importantly that the monopoly was not the result of artificial incentives. - Do you plan to meet with businessmen? - Cooperation with the business sector is the main duty of the Competition Agency. In August, we are going to hold a meeting with businessmen and familiarize them with the draft regulations on which we are working now. Also, we want to hear their opinions on the future of the Competition Agency.

STATISTICS June 30, 2014 #60

caucasian business week

BUSINESS caucasian business week

June 30, 2014 #60

FOR FRIENDS SIMPLY HEUSER Beer that makes you feel German taste

There is a Herenheuser District in the city of Hannover (Central Germany), famous for its nice bars and wealthy men with special taste. They historically have been distinguished riders and warriors. One could always taste a special classic beer in their houses. It was in this area where Herenheuser Beer was created and named, which has retained the best German traditions.

BANKING NEWS June 30, 2014 #60

caucasian business week

TBC BANK REMAINS INDIVIDUAL DEPOSIT MARKET’S LEADER

SC TBC Bank remains a leader of the individuals’ deposit market. By June 1 its market share equals t 32% (2013 - 32%, 2012 -35,2%). Individuals Deposit Portfolio of TBC equals to 1,648 billion GEL, overall portfolio (excluding banks’ deposits) - 2,7 billion GEL.

PROCREDIT BANK COMPLETES JANUARY TO MAY PERIOD WITH 7.26 MILLION GEL PROFITS

SC Procredit Bank (Georgia) completed January-May with 7,26 million GEL profit (01/06/13 -6,39 million). In May profit equals to 2,2 million GEL. By June 1 deposit equals to 541 million GEL (01/06/13 - 495,4 million), credit portfolio 742 million GEL (01/06/13 -701 million), overall obligations - 896,4 million GEL (01/06/13-839,4 million). Annual growth of the deposits is 9,2%,

loan portfolio has increased by 5,8% since the same period of last year, actives - by 4%, to 1,018 billion GEL, market share is 5,7% (01/06/13979,4 million 6,6%). The bank is member of the international banking group. It operates since 1999 and is oriented to the lending of small and medium-sized business. Stock capital of the bank equals to 122,06 million GEL (01/06/13 -140,2 million).

PRIVEE - BANK REPUBLIC’S PERSONAL BANK SERVICE

ank Republic offered clients a personal banking service of premium class - Privee. According to the press release of the bank, in 2013 the bank transformed to the new platform of the brand with the slogan - Each of Us Is Important. “This special philosophy expresses aim of the ban to promote long-term and trust-base relations with the clients. In parallel with the adjustment to the consumer needs, it will make them feel as family members. To support the new philosophy based on the relationships, the bank offered clients prime personal banking service Privee, which is currently unique service on the market and it’s focused on the consumer relation, stability, financial peace and privilege. All these are united in the slogan - “accent on you”, - the bank stated. Aim of the Privee private bankers is to offer maximally quality and perfect banking service to the clients. For this aim, they get to know financial capabilities, needs, lifestyle of the client and his/

her families. Based on these, they offer various banking products and services; additionally provide consulting on the issues they are interested it and provide their peaceful future. To make Privee service consumers feel more privileged, Privee Club was established, which will offer many privileged and exclusive services adjusted to the lifestyle and interests of the consumers. It will make more comfortable and pleasant their cooperation wit the Bank Republic. About 70 trade and service centers of premium class are partners of Privee Club, such as: jewelry network Zarapxana, optic shops network Safilo, clinic Caraps Medline; educational agencies: UK Bridge and E.L.L.; restaurants: Piano, Loft, Buffet, Bohema, The Dining Room; shops: Pierot Le fou, Prive, Little, Breathless; beauty saloons: Dessange Paris, Frank Provo; perfume networks: Lutecia, Voulez Vou; hotel Royal Batoni in Kvareli and many others. All these objects are ready to offer exclusive conditions and proposals to Privee Club members, provide the best and special services.

BANK SECTOR’S CREDIT PORTFOLIO RISES TO 10.8 BILLION GEL

n May amount of credit investment of the commercial banks (including loans for non-residents) increased by 45,7 million GEL (1,1%) compared to previous months, to 10,8 billion GEL. IN May of last year 127-milion (1,5%) growth was mentioned. National bank informs that in the period amount of the loans issued in the national currency increased by 47.3 million GEL (1,1%), in the foreign currency - by 7,4 million GEL (0,1%) (05/13 -1,1%, 1,6%). By June 1 loan portfolio for the legal entities

equals to 5,32 billion GEL (01/06/13 - 4,71 billion). In the national currency it’s 1,2 billion GEL (05/14 - growth by 4.6 million, 0,4%), in the foreign currency - 4.2 billion GEL (05/14 reduction by 62.2 million (1,5%). In May 2013, compared to the previous month was mentioned respectively reduction of 23,5 million (2,8%) and 35,1 million growth (0,9%). Retail loans portfolio has increased by 103,8 million (2,1%), to 5,1 billion GEL. In May of last year lending of the resident individuals increased by 73,7 million GEL (1,9%).

BANK SECTOR COMPLETES JANUARY TO MAY PERIOD WITH 137.6 MILLION GEL PROFITS

anking sector completed JanuaryMay with 137,6 million GEL profit (01/06/13 - 132,6 million). In May profit equaled to 17,7 million GEL (05/13 - 30,9 million GEL). 15 banks out of 21 are profitable. According to statistic of National Bank of Georgia (NBG), in 5 months revenue of the sector equaled to 988,4 million GEL, expenditures - 825,4 mil-

lion GEL (01/06/13 - 769,2 million). For the reporting period own capital of the banking sector (stock capital) equals to 2,986 billion GEL (01/06/13- 2,609 million). In May it slightly reduced (01/05/14 - 3,06 billion). Supervision capital is 3,006 billion GEL. Similarly to previous 2 months, slight reduction was mentioned (01/05/14 - 3,09 billion 01/06/13 - 2,7 billion). Supervision capital adequacy coefficient equals to 17,1% (01/05/14 -17,6%,1/06/1317,8%). ROA and ROE have also reduced. For the reporting period Return on Equity (ROE) is 11%, Return on Actives (ROA) - 1,9% (01/06/2013- respectively 12,6%; 2,2%).

EBRD: GEORGIAN BANKS EMERGE AS REGIONAL LEADERS IN TRADE SECTOR CREDITING

BC Bank has hosted a one-day conference as part of the trade support program of the European Bank for Reconstruction and Development (EBRD). The conference made focus on trade sector crediting on international and regional markets. The meeting also discussed the bank sector challenges with leading specialists, regulators and lawyers. The Georgian bank sector is developed very well and the trade sector crediting ratio in the bank sector’s portfolio is impressive, EBRD representative Kamela Mahmudova said. “We want to continue our relations with Georgian banks and to supervise how the trade sector crediting product is developed. EBRD wants to have partnership relations with Georgian banks. You have quite developed bank sector and the Georgian banks know how to work on the market. The main thing is that the clients get information what is the trade sector financing and what is the importance of this product for the economy development. Another issue is related to the current tendencies on the market. Unfortunately, the trade sector financing limits are closed. Problems are met in Azerbaijan, Armenia. The US banks have the same problems. Limits are closed, because, the risks have not been appraised valuably”. The conference aims at assembling Caucasian banks, Kamola Mahmudova noted: “We have discussed the most relevant issues on the trade sector financing issues. The most active foreign banks were represented at the Tbilisi Conference. EBRD has been cooperating with Georgia’s two major commercial banks that are considered as strategic partners. Georgian commercial banks have made a big step forward from the standpoint of staff qualification in trade financing sector. To increase turnover, they should develop clients in corporate and retails sectors”. Nana Khurtsidze, a TBC Bank Trade Financ-

ing Department Head, noted the conference was very important: “TBC Bank has hosted an EBRD conference. Representatives of regional and international banks were invited. The conference collected information on perspectives for trade sector financing. This is very important because we are able to share and apply their experience. The support of foreign financial institutions is very significant for Georgian banks to financing trade operations. Their experience should be also applied”. The credit portfolio of commercial banks in May 2014 marked 10.944 billion GEL, the National Bank of Georgia (NBG) says. The figure is up by 39 million GEL compared to April 2014. The overdue loans portfolio has shrunk to 283.994 million GEL from 291.53 million GEL in May compared to April 2014. The trade sector crediting portfolio’s ratio in total corporate loans portfolio is over 44.5%. The trade sector crediting portfolio in May declined by 1.1% compared to April (-27.5 million GEL) and marked 2.4 billion GEL as of April 1, 2014. The ratio of industry sector in total corporate term loans portfolio made up 17.1% that is 918.2 million GEL as of June 1, 2014, down 0.9% that is 8.3 million GEL less compared to May 1. 2014. Housing sector’s ratio marked 8% (430 million GEL), down 0.2% month on month (-1 million GEL). Thus, 69.6% of the corporate loans portfolio is recorded for three main sectors - trade, industry and housing. The crediting volume of resident individuals rose by 103.8 million GEL in May, up by 2.1% compared to April 2014 and marked over 5.1 billion GEL. The TBC Bank conference was attended by representatives of CITI BANK N.A, COMMERZBANK AG, BNP PARIBAS, SUMITOMO MITSUI BANKING CORPORATION, ABN AMRO Bank...), as well as commercial banks of Armenia and Azerbaijan, NBG and the Georgian Chamber of Commerce and Industry.

EFSE ALLOCATES 18.5 MILLION EUR LOAN TO BANK OF GEORGIA

ank of Georgia announced about receipt of the loan of 18,5 million EURO from European Fund for South East (EFSE). The loan will be used for the expansion of the lending of micro and small enterprises. “ Loans for micro, small and medium-sized business takes over 20% in the corporate portfolio of Bank of Georgia. The bank owns one of the larg-

est networks in the country to include borrowers of this category. Bank of Georgia plays important role in the micro-financing sector, respectively, it is the best partner for EFSE”, - chairman of the fund’s board Monica Beck stated. Executive director of Bank of Georgia Irakli Gilauri stated that he’s glad to unite efforts with EFSE in funding of small and micro enterprises, which is important contributor for the jobs and economic growth.

PROGRESS BANK COMPLETES JANUARY TO MAY PERIOD WITH 172 000 GEL LOSSES

SC Progress bank completed January-May 2014 with 172 000 GEL loss (01/06/13 profit of 107 569 GEL, 01/06/12 - loss of 352 366 GEL). In May profit equals to 11 375 GEL. By June 1 deposits (nonbanking) portfolio equals to 40,7 million GEL (01/06/13- 11,9 million), loans - 42,5 million GEL (01/06/13 -22,5 million), overall obligations - 50,1 million GEL (01/06/13- 14,9 million). Deposit portfolio has increased by 3,4 times during a year, loans almost doubled.

By June 1 actives equal to 65,2 million GEL, market share - 0,4% (01/06/13 -30,1 million, 0,2%). 78% of the bank’s stocks belong to Mike Zoy; Kakha Kaladze sold control package of the banks to WEBION INVESTMENTS at the end of 2013; 22% share still remains to Bidzina Ivanishvili. Ilia Kechakmadze also remained in the management of Progress Bank, which is also director of Kala Capital, which belongs to the former 78% shareholder of the bank. Stock capital of the bank is 15,1 million GEL (01/06/13 -15,3 million GEL).

RATIO OF BANK SECTOR’S ASSETS IN GDP MARK 64.3% BY APRIL 1

ccording to statistic of National Bank of Georgia (NBG), ratio of the actives of commercial banks to Gross Domestic Product (GDP) equaled to 64,3% by the end of the Q1 of this year (04/13- 53,7%). Deposits/GDP equal to 28,6%, loans/GDP -

38,3% (04/13 -24,9%; 32,3%). NBG considered data of Q1 during the determination of these indicators. By Q1 2014, GDP equals to 6,319 bullion GEL; Compared to the Q1 2013 growth is 9,3%; in the same period of last year growth equaled to 1,9% (Q1/2013 -5,781 billion, Q1/2012 -5,670 billion).

CIS caucasian business week

June 30, 2014 #60

AUSTRIA AND RUSSIA SIGN SOUTH US BUSINESS TO RUN ADS AGAINST STREAM GAS PIPELINE TREATY RUSSIAN SANCTIONS ussia and Austria have agreed on a ergy lobbying groups are campaigning against the

joint company to construct the Austrian arm of the $45 billion South Stream gas pipeline project, which is expected to deliver 32 billion cubic meters of Russian gas to the country, bypassing Ukraine. At Tuesday’s meeting in Vienna, the creation of South Stream Austria was announced. The company will be 50 percent owned by Gazprom, Russia’s largest gas producer, and 50 percent by Austria’s OMV Group, the country’s largest oil and gas company. Construction on the Austrian section is expected to begin in 2015 and that the first deliveries will start in 2017, reaching full capacity in January 2018. OMV spokesman Robert Lechner was more optimistic, and said the first South Stream deliveries could come as early as 2016. In April, Gazprom and the OMV Group signed a memorandum to implement the South Stream project in Austria. At Tuesday’s meeting in Vienna, OMV CEO Gerhard Roiss said that South Stream fully complies with EU legislation. “This project- investment in European energy security- will fully comply with EU legislation,” Roiss said, as quoted by ITAR-ITASS. There has been controversy over South Stream, as is it needs EU approval so that it doesn’t violate Europe’s ‘Third Energy Package’, which says a company cannot both own and operate pipelines within the European Union. Bulgaria and Serbia, countries nearly 100 percent dependent on Russian gas, have faced pressure from the EU to halt construction. Ahead of Putin’s visit to Vienna, Austrian ministers said they remained committed to Russia’s South Stream project and that they plan to speed it up. The geopolitical conflict in Ukraine has also complicated the South Stream project, as EU en-

project, to lessen Europe’s dependence on Russia. “So far [Austria, Ed,] takes a very clear position, avoiding pressure from the European Commission and in general, public opinion in Europe that wants to halt or even stop the project. At the same time it [Austria, Ed] has enough political clout to promote this project. It’s not Bulgaria, which on its own cannot defend itself,” Fyodor Lukyanov, Chairman of Russia’s Council on Foreign and Defense Policy, said on Monday. South Stream will deliver gas to Europe bypassing Ukraine, which is seen as an unreliable transit state. After switching Ukraine to a prepayment system, Russia and Gazprom fear Ukraine will start to siphon gas supplies headed towards Europe, as the country did in 2006 and 2009. Miller worries Ukraine may resort to this tactic in winter, once it runs out of its underground storage supplies of natural gas.“If Ukraine begins to siphon off gas, we will increase supplies via North Stream, and maximize the load through YamalEurope,” Aleksey Miller, CEO of Gazprom, said Tuesday in Vienna.The 2,446 km pipeline will stretch across southern and central Europe and will transport over 64 billion cubic meters of natural gas to Europe per year. Gazprom has said the project, estimated to cost $45 billion, can be completed without any funding from international partners. Gazprom is Russia’s largest producer of natural gas and provides roughly one third of Europe’s gas needs. The head of the Russian Duma’s International Affairs Committee, Aleksey Puskhov, wrote on Twitter on Tuesday that “Ukraine is in a longterm phase of unpredictability. Thus, South Stream is the only guarantee of uninterrupted gas supply to Europe.”

wo top US business lobbies plan to run newspaper adverts warning that more Russian sanctions risk harming US workers and businesses. The trade associations warn that economic sanctions will translate into huge damages from lost trade with Russia. The adverts will be published in the New York Times, Wall Street Journal and Washington Post by the US Chamber of Commerce and National Association of Manufacturers on June 26, Bloomberg cites a person familiar with the plans, who asked not to be identified. US trade associations fear even temporary sanctions would inflict long-lasting damage on exports to Russia. Besides spoiling relations with Russia sanctions will force a reassessment of the political risk associated with exports and raise the cost of future financing. Even a limited group of large Russian banks impacted by the sanctions would slow the national economy and make US imports more expensive as the ruble declines. According to industry executives US energy companies would be required to apply for licenses for exporting technology to Russia if sanctions were

agreed. Moreover, those companies exporting products with more than 10 percent of US technology content won’t be granted licenses at all. If restrictions on technology transfer applied, exports to Russia will become more complicated. That will lead to additional expenses for US companies, especially in the energy sector which is full of high technology. The only effect of imposing additional sanctions will be “to bar US companies from foreign markets and cede business opportunities to firms from other countries,” Bloomberg cites a copy provided by the person familiar with the plans.

UKRAINE ASKS FOR ‘BIG GAS REVERSE’ FROM SLOVAKIA

kraine Energy Minister Yury Prodan says the EU has been asked to start pumping 30 billion cubic meters of gas using reverse flow from Slovakia. Russia has cut supplies to Ukraine until it pays its gas bill; meanwhile Kiev is seeing alternate supplies. “We have signed a memorandum which stipulates that the maximum amount of small reverse supplies stands at 22 million cubic meters daily. There is another option, large reverse supplies, which may provide us with up to 30 billion cubic meters of gas annually,” Yuri Prodan said during a meeting with EU Energy Commissioner Gunther Oettinger in Brussels. Ukraine has already struck a deal to import 3.2 billion cubic meters of gas from Slovakia through reverse flow, as well as from neighboring Hungary and Poland. The two countries signed a memorandum of intent in April.

Kiev is highly dependent on Russia’s Gazprom to keep the heat on in the winter, but has fallen out with the gas producer over pricing and its huge debt. At the beginning of June, Gazprom switched Ukraine to a prepayment system. Gazprom doubts the legality of reverse flow gas into Ukraine, since under the contract countries cannot redistribute Russian gas. Deliveries from Slovakia could satisfy up to 20 percent of Ukraine’s natural gas demand, which in 2013 was 55 billion cubic meters.

EBRD, KYRGYZSTAN TO MULL BANK’S UPCOMING STRATEGY FOR COUNTRY

T KAZAKHSTAN ADOPTS STRATEGY ON FORMATION OF NATIONAL CHAMBER OF ENTREPRENEURS

azakhstan has adopted a new strategy on formation and development of National Chamber of Entrepreneurs (NCE) by 2017. The strategy was adopted at the chamber’s first congress in Astana on June 25. The main long-term goal of the NCE is to increase the share of small and medium-sized businesses to at least 40 percent by 2030. The medium-term goal of the NCE is to insure the growth of the entrepreneurial initiative. In his remarks, Chairman of the NCE Presidium Timur Kulibayev said the chamber should adopt decisions jointly with the government bodies on the issues related to the vital activities of the society, economy and entrepreneurship.

“One of the most important tasks of the NCE is to ensure the qualitative growth and create conditions for the development of the entrepreneurship,” Kulibayev said. In his remarks Chairman of the Board of the NCE Ablay Myrzakhmetov said NCE calls the entrepreneurs to act responsibly while doing business in the country. During the congress, new members of the Presidium and the Board of the NCE were elected. The first congress of NCE was held with the participation of Prime Minister Karim Massimov. The congress brought together a total of 300 participants, including the representatives of regional councils and chambers of entrepreneurs, industry associations, government bodies, public associations and business communities.

he European Bank for Reconstruction and Development (EBRD) and the Kyrgyz government will discuss the upcoming EBRD strategy for the country. The discussions will be held during First Vice President of the EBRD Phil Bennett’s visit Kyrgyz capital Bishkek on June 29. During his first visit to the country Phil Bennett will meet with Kyrgyz Prime Minister, Djoomart Otorbayev, the ministers and Governor of the Kyrgyz National Bank Tolkunbek Abdygulov, EBRD said on June 26. He will also meet the mayor of Bishkek and the heads of municipal companies, staff of the international financial institutions active in the country and representatives of the business community, including EBRD clients and local partner banks. During his three-day visit, the EBRD’s first vice president will also visit several enterprises that have benefited from EBRD financing or knowhow. These include the Lina furniture maker, the

Bear Beer beverage producer, the Aselina clothes factory and the City Hotel. The EBRD’s main strategic priorities in Kyrgyzstan which will be discussed during the visit include fostering sustainable growth by strengthening regional links, enabling small and medium-sized enterprises to scale-up and bolster competitiveness, promoting sustainability of public utilities through commercialization and private sector participation, as well as helping the country to reduce regional disparities and address gaps in social inclusion. Since the beginning of its operations in the country, the EBRD has invested close to €470 million ($ 637 million) in Kyrgyz economy through 112 projects supporting various sectors and industries. The current EBRD portfolio in Kyrgyzstan is represented by 51 projects amounting to almost €230 million ($312 million) in the natural resources, financial, infrastructure and industry (agriculture, manufacturing and services, property and tourism) sectors.

AZERBAIJAN June 30, 2014 #60

caucasian business week

AZERBAIJAN GRANTS PREFERENTIAL LOANS TO IDPENTREPRENEURS

he National Fund for Entrepreneurship Support under Azerbaijan’s Economic Development Ministry has granted preferential loans worth 414,500 manats to 43 entrepreneurs from Jabrayil and Bilasuvar regions. A credit fair was held on June 19 during a business forum with the participation of about 100 entrepreneurs in the settlement No. 4 in Bilasuvar region, where temporarily displaced persons from the Jabrayil region are settled. The samples of investment projects were presented to establish bakeries, confectioner’s shop, cheese dairy, sewing workshop. It is considered appropriate to finance them through concessional loans. Speaking at the forum, Executive Director of the fund Shirzad Abdullayev said the fund issued concessional loans worth 30.8 million manats for

1,300 entrepreneurs among IDPs, as well as concessional loans worth 1.5 million manats for 244 refugees from the Jabrayil region. The implementation of these projects contributed to opening about 2,700 new working places. Some 4.9 million manats (including loans issued at the last forum) were issued for 100 entrepreneurs among IDPs in recent months. About 250 new jobs are planned to be created thanks to the implementation of these projects. The fund plans to issue loans worth 280 million manats in 2014, some 150 million manats of which will be provided by repayment, and the remaining 130 million manats from the state budget. The National Fund for Entrepreneurship Support was established in 1992. Loans are allocated to entrepreneurs through 44 authorized banks and non-bank lenders.

PALMALI LAUNCHES NEW TANKER

he Palmali Group of Companies launched the Majid Aslanov tanker on June 19. The tanker of the RST22M project with a load-carrying capacity of 7,000 tons was launched in a shipyard in Turkish Tuzla city, Trend Agency reported. The tanker was named after the grandfather of Head of the Palmali Group of Companies Mubariz Mansimov at his own initiative. The launching ceremony was attended by First Vice-President of the Palmali Group of Compa-

nies Marif Mansimov, directors and employees of the company and a number of local and foreign guests. The vessels of the RST22M project enjoy the possibility of using the full-revolving propellersteering columns as a single movement and control means, absence of longitudinal bulkhead in center plane, using of submersible pumps, complete absence of framework in the cargo tanks, and a developed trunk. The vessels correspond to the dimensions of the Volga-Don Canal and Volga-Baltic Waterway. The overall length, width, and board height of the RST22M project vessels are 139.95, 16.6, and six meters, respectively. The Palmali Group of Companies is specialized in transporting goods in the Mediterranean, Black and Caspian seas. Palmali is a general carrier for oil companies, including Azerbaijan’s state energy company SOCAR and Russian Lukoil, and has long-term contracts on oil and oil products transportation with other oil companies.

SOCAR OPENS NEW WELL IN CASPIAN SEA

zerbaijan’s state energy company has commissioned a new well at the shallow-water part of the Guneshli field. The company reported that the well, located on the “Gunashli-13” platform was included in the operational fund with daily debit of 85 tonnes of oil.

“Guneshli” plays an important role in the oil and gas industry of Azerbaijan. The shallow part of the deposit is developed by SOCAR independently and the deep part - in the part of the “Azeri-Chirag-Guneshli” block - together with foreign partners. SOCAR has planned the drilling of some 20 new wells, within the framework of increasing of oil and gas production in the shallow part of “Guneshli” field. Along with the drilling of new wells, repair work on the old wells is being carried out in the field. SOCAR produced over 8.31 million tonnes of oil from Azerbaijan’s onshore and offshore fields in 2013, versus 8.24 million tonnes in 2012. In total, some 43.48 million tonnes of oil was produced in Azerbaijan in 2013, versus 43 million tonnes in 2012, according to the company.

AZERBAIJAN KEEPS POSITION IN GEORGIA’S TRADE SECTOR

zerbaijan remains the second largest foreign trade partner of Georgia, as the trade turnover between the two countries was $489 million in January-May, 2014, Georgia’s National Statistics Office reported. Azerbaijan is the largest export market for Georgia and accounts for 20.5 percent of Georgia’s total export volume.

Georgia exported some $240.4 million worth of goods and services to Azerbaijan during the reporting period. Also, Georgia imported some $249 million worth of goods and services from Azerbaijan, which accounts for 7.5 percent of its total import. Turkey is the major trade partner of Georgia; the trade turnover between the two countries stood at $776 million. China ranked third among the country’s foreign trade partners for the first time ($309 million). Georgia’s foreign trade turnover made $4.498 billion in January-May, 2014, which is by 16 percent more than in the same period of 2013. The country’s export totaled $1.175 billion (an increase by 17 percent), while its import amounted to $3.322 billion (an increase by 15 percent).

SOCAR COMMISSIONS NEW FILLING STATION IN UKRAINE

zerbaijan’s state energy company SOCAR has commissioned a new filling station in Ukrainian Rivne region. This is the second premium class station in the Rivne region and the eleventh in the Western Ukraine, SOCAR reported on June 20. The petroleum products produced at the advanced refineries in Poland and Lithuania, and complying with Euro-5 environmental standard are sold there. The variety of oil products includes A-92 and A-95 gasoline, as well as Nano-95 and Nano diesel. The new fuel station will provide additional services to cars and trucks as it is located on a circular road with intensive traffic. Customers will also be able to use free online services there. Also, all conditions for rest and lodging for the night have been created for drivers of heavy duty trucks. SOCAR Ukraine, which represents SOCAR in Ukraine, owns over 60 refueling stations in the country. Azerbaijan’s energy giant SOCAR continues to steadily develop its filling stations network both

in the capital of Ukraine and other regions. It provides the Ukrainians with quality European oil products in order to strengthen its position in Ukraine’s fuel market. SOCAR invested over $160 million in the development of business in Ukraine from 2009 to 2013. The company’s investments in social and charitable initiatives in this country amounted to over $5 billion in the mentioned period. Currently, the company owns gas stations in Azerbaijan, Switzerland, Georgia and Ukraine. It has representative offices in Georgia, Turkey, Romania, Austria, Switzerland, Kazakhstan, Britain, Iran, Germany and Ukraine, and trading companies in Switzerland, Singapore, Vietnam, Nigeria, and other countries.

RUSSIA INVITES AZERBAIJANI BANKS TO ITS MARKET

ussia invites Azerbaijani banks to operate on its territory, Deputy Chairman of the State Duma’s Financial Markets Committee Dmitry Saveliev said at a roundtable during the 5th Azerbaijani-Russian interregional forum held in Gabala on June 23-24. “We are ready to provide full support for Azerbaijani banks’ entering the Russian market,” he said. “At the same time, we are interested in expanding the work of Russian banks in Azerbaijan.” Saveliev said currently a considerable number of banks are losing their licenses in Russia. “This year will become a record-breaking year in terms of the number of license revocation. But this applies only to those operating improperly,” he said, noting that it will not affect Azerbaijani banks in case of entering the Russian market. Saying that these negative moments should not affect decision of Azerbaijani banks and branches in any way, he added that as practice shows, foreign banks’ operation in the Russian Federation has a neat order.

“As the leader of the Azerbaijan-Russia friendship group in the State Duma, I would like to contribute to Azerbaijan’s banking sector in terms of opening and operating in Russia,” Saveliev said, adding that interbank cooperation is one of the main directions of development of bilateral relations. Currently, there are two banks with the Russian capital in Azerbaijan - VTB Bank and Nikoil Bank, as well as a representative of the Rosselkhozbank. Meanwhile, the International Bank of Azerbaijan and representation of the Mugan Bank are operating in Russia.

AZERBAIJAN&CENTRAL ASIA HEALTHCARE SUMMIT KICKS OFF IN BAKU

two-day Azerbaijan and Central Asia Healthcare Summit 2014 started in Baku on June 23. The summit brings together key industry professionals from Azerbaijan and the Central Asia region with the aim to discuss the latest developments in the region’s healthcare market. The governments of Azerbaijan and Central Asia countries have made clear policy decisions to invest in healthcare. The healthcare market is set for massive growth in Azerbaijan, which gave way to huge programs of healthcare investment. As the Azerbaijan government looks to develop its healthcare industry and provide universal coverage, healthcare spending is expected to rocket through 11 state programs. This creates vast op-

portunities for international healthcare investors, technology providers and pharmaceutical companies. The event will be attended by representatives from various health ministries, regulators, hospitals, clinics, medical equipment providers as well as international investors. They will share knowledge and expertise and provide potential for new networking opportunities. The summit will discuss recent developments in a wide range of healthcare sectors, considering the possibilities of new technologies and examining new government initiatives and reforms. Moreover, the summit will include extensive presentations and panel discussions that will allow engaging in debate and allow for productive networking and partnerships.

PUBLICITY caucasian business week

June 30, 2014 #60

WORLD NEWS June 30, 2014 #60

caucasian business week

ARGENTINA SOUNDS ALARM, SAYS CLOSE TO ‘TECHNICAL DEFAULT’

rgentina’s economy is on a collision course, and is headed for default following a US Supreme Court ruling that could send creditors demanding bond payments, Economic Minister Axel Kicillof warned UN diplomats. By June 30, the country needs to pay out creditors for billions of dollars of bonds that were issued before its $95 billion default in 2001. “Whichever way you look at it this ruling is forcing Argentina towards the risk of economic crisis,” Reuters quotes Kicillof talking at the UN headquarters in New York on Wednesday.

“… this is going to push us into a technical default,” he added. Argentina is asking for more time to negotiate a solution with the creditors that Kicilloff refers to as “vulture funds”. Argentina must pay $1.33 billion to NML Capital, a hedge fund and subsidiary of Elliot Capital Management. The country only has $28.5 billion in foreign currency reserves, and will not be able to meet the enormous demand. If they don’t pay, the US can revoke its privilege to pay bond holders through Argentina’s bank in the United States, the Bank of New York Mellon. Argentina’s President Cristina Fernandez de Kirchner has called this ‘extortion’.

BULGARIA: SOUTH STREAM DOESN’T BREACH EU LAWS

ulgarian officials say the construction of the Russian-led South Stream gas pipeline does not breach EU legislation. The European Commission is concerned the agreement between Russia and Bulgaria violates EU competition law. The Bulgarian government stood by its position on the legality of the pipeline in a Wednesday statement, ITAR-TASS reports. The agreement on South Stream construction signed in 2008 did not provide any exclusive rights, concessions, or tendering for the South Stream Bulgaria Company which is the owner of the pipeline, and therefore it does not violate EU law, it said. “With its position the government presents arguments and motives in support of the decisions the Bulgarian nation has taken and which were the subject of concern at the EU Commission,” Reuters quotes the official statement. Bulgaria will put these arguments at the Brussels

summit on Friday, but the decision of the commission whether to accept or reject them may end up in full infringement proceedings and possible fines against Sofia, Reuters says. According to Gunther Oettinger, the European Commissioner for Energy, the construction process should be suspended until, “it completely corresponds to the requirements of the European Union”. On Tuesday Austria, another strong defender of the pipeline, signed a deal to construct a South Stream branch on its territory, thus showing its firm commitment. The 2,446 km South Stream pipeline will stretch across southern and central Europe via the Black Sea, bypassing Ukraine and reducing the country’s importance as a gas transit route. 64 billion cubic meters of gas will be transported annually. Gazprom has said the project, estimated to cost $45 billion, can be completed without any funding from international partners.

UK BANK TO INVEST £1BN OF GREEN ENERGY IN THE OCEAN BLUE

he UK’s Green Investment Bank (GIB) will raise £1bn to invest in domestic offshore wind farms, tapping into the billion dollar industry of generating renewable energy from ocean winds. GIB has put £1.3billion into 29 green infrastructure projects since it was started 18 months ago, and is transitioning from simply raising funds for projects to fully investing, the Financial Times reports. The government-funded green energy incubator has £3.8 billion of public money to invest in ‘greening’ the British economy. In its 2014 Annual Report, the Edinburgh-based bank said it has raised £3.5 billion of private capital to invest in projects, including biomass boilers in Scottish distilleries, and digestion plants on the outskirts of London. Not all projects have been successful- two were scrapped due to the potential risks to local wildlife. “We aim to mobilize investment on a project by project basis but also, through a positive demonstration effect, to improve the attractiveness of the wider sector,” Shaun Kingsbury, the bank’s chief executive, said in the report. By 2020, the global offshore wind industry is expected to grow to €130 billion (or about £111 billion) according to a 2013 report by consultants Roland Berger.

Offshore wind farms that are popping up aren’t all that different from land turbines, except that winds in the ocean are much stronger, producing almost double the output. However, offshore stations are more risky because bad weather can restrict access to energy. Most stations are located within 70 km of the shoreline. Over 95 percent of offshore wind turbines are located in European waters, and the UK is an attractive site because of shallow waters and strong winds. The first offshore wind farm was erected in Denmark in 1991, and as of January 24, 2014, 68 offshore stations have been constructed in Europe. E.ON, one of the UK’s leading energy suppliers, predicts that by 2020, 40 Gigawatts (GW) of wind farm capacity will be installed throughout Europe. At the end of June 2013, Europe’s total combined offshore energy capacity was just over 6 GW. The UK’s dwindling fossil fuel supplies could be gone in five years, bringing urgency to developing renewables. However, across Europe renewable energy initiatives face opposition because government subsidies often drive up prices in more traditional industries, like electric and gas. According to UK industry regulator Ofgem, energy prices have risen 24 percent over the last four years. Still, UK gas and electric prices are the lowest in the EU.

‘GOOD VALUE FOR MONEY?’ UK MONARCHY INCREASES SPENDING TO £35.7MN IN 2013

axpayer funding for the British royal family reached £35.7 million last year, as the Queen’s expenses rose by £1.9 million, or nearly 6 percent , as the so-called ‘commoners’ grapple with the hardships of recovery. The figure works out to 56 pence per person, less than $1, which royal aides have said is a “good value for money.” The Queen’s accounts are kept solvent by the Sovereign Grant, a fund to pay for royal expenditure such as transportation, employee salaries, and keeping palaces in good condition. Previously, the UK royal family were funded by the Civil List, and separate grants were made for travel and property maintenance to the Queen and other royals in active state roles. In real terms, Queen Elizabeth’s finances increase by even more - £2.4 million from the previous year. One of the largest property owners in the UK the royal family increased its budget to look after its palaces by £4.2 million to £13.3 million, or a 45 percent increase to cover what they consider a ‘backlog’ of restoration projects. Included in the backlog is refurbishing crumbling and leaky royal residences, including Buckingham Palace, which has an outdated and expensive heating system that runs a near £800,000 heating bill per year. Kensington Palace had to be “completely re-ser-

viced” last April to rid it of old building materials that cause lung cancer. Over the last two years, £4.5 million has been spent on refurbishing the 20 bedroom apartment, which also houses Prince Charles and his family. The royal family footed the bill for interior design themselves. Last December, Prince Charles, the eldest son of the Queen, spent £255,000 to attend Nelson Mandela’s memorial in South Africa. Last year, the public funds allotted to the Queen’s pocketbook reached £32 million, a figure that includes the extra £1 million to put on the Diamond Jubilee celebration. Although the family is historically one of the country’s wealthiest, they claim that the reserve fund has been emptied, and that they only have £1 million left, compared to the £35 million in 2001. The family blames poor financial management on the Treasury. The estimated total annual cost of the monarchy is £299.4 million, around nine times the official figure published by the royal household as reported by anti-monarchy campaigners. Britain’s economy re-entered recession in 2012, the first double-dip recession since 1975. The economy is showing signs of healthy growth including unemployment at 6.6 percent, passing the governments’ goal of 7 percent. But darker days may lay ahead with a housing bubble on the brink of bursting and a massive trade deficit.

CHINA PLANS INVESTMENT BANK TO BREAK WORLD BANK DOMINANCE

hina is moving forward with a plan to create its own version of the World Bank, which will rival institutions that are under the sway of the US and the West. The bank will start with $100 billion in capital. The Asian Infrastructure Investment Bank (AIIB) will extend China’s financial reach and compete not only with the World Bank, but also with the Asian Development Bank, which is heavily dominated by Japan. The $100 billion in capital is double that originally proposed, the Financial Times (FT) reported. A member of the World Bank, China has less voting power than countries like the US, Japan, and the UK. It is in the ‘Category II’ voting bloc, giving it less of a voice. In the Asian Development Bank, China only holds a 5.5 percent share, compared to America’s 15.7 percent share and Japan’s 15.6 share. At the International Monetary Fund, China pays a 4 percent quota, whereas the US pays nearly 18 percent, and therefore has more influence within the organization and where loans go. “China feels it can’t get anything done in the World Bank or the IMF so it wants to set up its own World Bank that it can control itself,” the FT quoted a source close to discussions as saying. To date, 22 countries have expressed interest in the project, including oil-rich Middle Eastern nations, the US, India, Europe, and even Japan, the FT reported.

“There is a lot of interest from across Asia but China is going to go ahead with this even if nobody else joins it,” the FT source said. Funding for the Asian Infrastructure Investment Bank will mostly be sourced from the People’s Republic of China and be used to pay for infrastructure projects. The bank’s first project will be a reincarnation of the ancient Silk Road, the vast network of trade routes between China and its regional neighbors. Another proposed project is a railway from Beijing to Baghdad. The idea for the bank was first floated in October 2013, when China unveiled plans to create the bank. Then it was initially to be funded with $50 billion in capital. Separately, the BRICS nations plan to have a $100 billion development bank ready by 2015. Funds will be reserved for emerging market members who are often bypassed by institutions like the IMF and World Bank. Bank preparations will likely be finalized at the 6th annual BRICS summit on July 14-16, when the five world leaders convene in Brazil.

PUBLICITY caucasian business week

June 30, 2014 #60

TBILISI GUIDE June 30, 2014 #60

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 30, 2014 #60