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BUSINESS WEEK July 14, 2014 #62

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July 14, 2014, Issue 62

BE INFORMED, DO BUSINESS

GEORGIA GEORGIA, RUSSIA TO RESTORE REGULAR FLIGHT

INTEREST EXPRESSION FOR ANAKLIA SEAPORT CONSTRUCTION ANNOUNCED

‘MASTERINDEX STUDY’ IN GEORGIA DISCOVERED HIGH USAGE OF PAYMENT CARDS BY GEORGIANS

CIS WESTERN DONORS URGE MORE MONEY TO HELP UKRAINE RECOVERY

kraine’s international donors including the EU, the US, Canada, Japan, and some international organizations have agreed further assistance to Kiev is crucial. Pg. 10

AZERBAIJAN WORLD BANK TO FINANCE NEW PROJECTS IN AZERBAIJAN

WORLD NEWS PLAN OF $40BN NICARAGUA CANAL OFFICIALLY APPROVED

icaragua has approved a route for a new ship canal to link the Atlantic and Pacific Oceans costing $40 billion. Pg. 13

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believe that Anaklya Port will be one of the major business cards for Georgia and the project will gain historical importance”, - Prime Minsiter of Georgia stated on the presentation of the Anaklya deepwater port presentation. Garibashvill mentioned that Anaklya Port will be the shortest way connected Europe and Asia. Considering growing trade turnovers, it will bring great benefit to all. “It’s important that Anaklya Port will be able to receive large-sized - so called Panamax and PostPanamax ships. The port will be able to process

about 100 million tons of mixed cargo. It’s really large scales and gives bases that Anaklya will become key place of international importance, natural logistic junction of the Caucasus and Central Asia”, - Prime Minsiter said. Government of Georgia already announced expression of interests for the construction f the fund and hopes that the project will become example of the largest investment in Georgia. Garibashvili stated that he’s aware about the interest of American, Chinese and other large foreign companies.

PRIVILEGES CHINESE HUALING ENJOYS IN GEORGIA Pg. 5

Eduard Shevardnadze Dies at 86 George Kvirikashvili: Full Liberalization of the Land Market is an Irresponsible Move Pg. 4 Temur Murgulia: We are not Focused on Costs Pg. 4

Gigla Agulashvili: Whether Sales of Agriculture Land Plots to Foreigners is Banned Philip Dimitrov: Georgian Business will not be Given Breakfast in Bed, but Georgia will be Provided with Modern Resources

Pg. 4

Pg. 5

MAIN EVENTS July 14, 2014 #62

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KAZAKHSTAN EXPRESSES INTEREST IN BTK RAILWAY PROJECT

EDUARD SHEVARDNADZE DIES AT 86

eorgia’s second president and former foreign minister of the Soviet Union died on July 7 at the age of 86. After stepping down from president following the 2003 Rose Revolution, Shevardnadze had spent most of his time at the Krtsanisi residence; there have been reports about his deteriorating health in recent months. Shevardnadze, who became Georgia’s head of state in 1992 after Georgia’s first president Zviad Gamsakhurdia was ousted, was elected as country’s second president in 1995. He held the office before November 23, 2003,

when he was forced to resign as a result of street protest rallies, which became known as the Rose Revolution. Shevardnadze was interior minister in the Soviet Georgia for five years before becoming in 1972 head of the Communist Party in Georgia, the top post in the Soviet Republic of Georgia. In 1985 he was promoted to the post of the Soviet Union’s Foreign Minister. In 1995 and 1998 Shevardnadze survived in two attacks on his motorcade in Tbilisi. His wife Nanuli Shevardnadze-Tsagareishvili died in October, 2004 at the age of 75. Shevardnadze is survived by a daughter, Manana, and a son, Paata.

GEORGIAN, RUSSIAN DIPLOMATS MEET IN PRAGUE

bilisi and Moscow have welcomed “constructive” and “useful” technical expert-level consultations held in Prague on July 9 on potential effects of Georgia’s deep and comprehensive free trade agreement (DCFTA) with the EU on bilateral Georgian-Russian trade. The meeting between representatives of the economy and foreign ministries of the two countries preceded talks between Georgian PM’s special representative for relations with Moscow, Zurab Abashidze, and Russian Deputy Foreign Minister, Grigory Karasin, who met in Prague on July 9 for a seventh time since the launch of this format of “informal dialogue” in December, 2012. “Interlocutors [Karasin and Abashidze] have welcomed start of contacts between the Russian and Georgian experts for the purpose of analyzing new factors that emerged in bilateral tradeeconomic relations” after Georgia signed DCFTA with the EU, the Russian Foreign Ministry said. “The first round of consultations between the experts was held in Prague on July 7 in a constructive atmosphere.” Speaking with journalists after meeting with Abashidze, Russian Deputy Foreign Minister Karasin said that Georgia’s DCFTA with the EU will definitely have an impact on trade between Georgia and Russia, but the issue needs a thorough examination, including in the context of customs duties, in order to avoid “negative surprises.” “Consultations were held between our experts about what kind of impact the Association Agreement [which includes DCFTA] will have. I think that our preliminary impressions concur. It is very important that these consultations [between experts] took place. Concrete and open dialogue is needed about how it will impact our bilateral trade,” Karasin said. “I think that there is no need to threaten neither ourselves nor partners in advance with measures and sanctions; what is needed is to sit down calmly in mutual respect and thoroughly calculate in which areas and to what extent changes may occur in trade and economic ties between

our countries following the recent signature by Georgia of the Association Agreement with the EU,” RIA Novosti reported quoting Karasin, who added that further decisions should be based on these calculations. He said that all these issues are especially important against the background of increasing trade turnover between the two countries. Georgia’s bilateral trade with Russia increased 35.4% in the first five months of 2014, compared to the same period of last year, mostly due to 3.5fold increase in Georgian exports to Russia Zurab Abashidze told journalists that the expertlevel meeting in Prague was “really useful and important” in terms of exchange of information. “No dramatic changes are expected in our trade relations,” the Georgian PM’s special envoy said. “But, of course, the Russian side tries to clarify whether this new reality – signing of the Association Agreements by Ukraine, Moldova and Georgia – will pose any threat to Russia’s economy and its market. Our position is clear. We do not think that Georgia’s Association Agreement with the EU comes in conflict with normal, mutually beneficial trade relations with Russia or with any other neighbor.” The two diplomats have also discussed possibility of resumption of regular flights between Tbilisi and Moscow starting from September 15, 2014. Currently charter flights operate between the two countries. The Russian Foreign Ministry said that Karasin and Abashidze hailedcooperation between the Russian Ministry of Emergency Situations and the Georgian Interior Ministry’s department for emergency situations in addressing consequences of a landslide in Dariali gorge, which blocked traffic via border-crossing point between the two countries for almost a month. “It was noted with satisfaction that it was possible to resume in the shortest period traffic via important trade route in the South Caucasus,” the Russian Foreign Ministry said. The next meeting between Abashidze and Karasin has been scheduled for October, the Russian Foreign Ministry and Georgian PM’s office said.

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nce commissioned, the BakuTbilisi-Kars railway will give impetus to the development of trade relations in the region, Deputy Director of Kazakh Foreign Ministry’s Department on CIS, Kadyr Kasabulatov said in his interview with Azerbaijani reporters. The Baku-Tbilisi-Kars railway is a regional project that connects Azerbaijan, Georgia, and Turkey together. The construction of the BTK railway is expected to be accomplished in late 2015. Kasabulatov underscored that Kazakh business sectors are very interested in this project, adding that the trade turnover between Kazakhstan and Azerbaijan is growing year by year. “The volume of bilateral trade turnover between the two countries totaled $434.3 million in 2013, which was 11.2 percent more than in 2012. The volume of Kazakh export stood at $361.2 million, while its import totaled $73.1 million,” he said. He added that the trade turnover between Azerbaijan and Kazakhstan hit $150 million (the export from Kazakhstan stood at $131 million, while the import amounted to $19 million). Kasabulatov stressed that the traditional commodities exported from Kazakhstan to Azerbaijan, were mineral resources, chemical raw materials, corn, barley, tobacco products, carbon steel and electrical equipment. Kazakhstan, for its part, imports petroleum products, polymers and construction structures from Azerbaijan. He went on to add that Azerbaijan and Kazakhstan have great capacities for the development of

trade and economic cooperation, however, the current trade turnover doesn’t match these capacities. Kasabulatov emphasized the importance of increasing the activities in this sphere. Meanwhile, he stressed that the intergovernmental commission on trade and economic cooperation makes significant contribution to the development of this sphere. In 2013, Baku hosted the 10th meeting of the commission that was focused on the issues of energy, transit and transport potential, agriculture, education, tourism and culture. “The next meeting of the intergovernmental commission is to be held in Astana in 2014,” Kasabulatov said. He underscored that Kazakhstan’s western regions have expanded their relations with Azerbaijan, adding that government and business representatives of Kazakh regions have begun to hold regular meetings with their Azerbaijani counterparts.

GEORGIA TO CONSTRUCT NEW HPP

he construction of Nenskra hydroelectric power plant will be started in Georgia from next spring. The decision was made by the economic council under Prime Minister Irakli Garibashvili’s guidance on July 10. Large Korean state company is interested in the project. Its investment accounts to $570 million, and capacity - 210 MW, the prime minister’s press service reported. The economic council meeting noted that the aim of the construction of the new HPP is to reduce the current deficiency in Georgian internal market in the period of autumn-spring. The construction of the plant will be completed in 2020, and construction works of the roads to the hydro electric power plant will be renewed by “partner fund” till the end of the year.

GEORGIA, RUSSIA TO RESTORE REGULAR FLIGHT

regular flight between Georgia and Russia which was interrupted in 2006 will be restored in coming months. The news was announced by Georgian Deputy Economy Minister Natia Mikeladze. “We received a note from the Russian Federation through the embassy of Switzerland and our Foreign Ministry to restore the regular flight,” she said. “The note says that the flight between Moscow and Tbilisi will be restored with no limitation.” Mikeladze went on to say that the note also included certain conditions of the restoration. “The regular flight will be restored from September 15, as the competent authorities of both countries should carry out preparatory works. Un-

til September 1, we must exchange a list of specific airlines, which will launch the flight,” she noted. The direct air traffic between Russia and Georgia was cancelled after the deterioration of relations between the two countries in 2006. The air traffic was restored for some time in 2008 but got interrupted again after the 2008 war. Georgia and its giant northern neighbor have maintained no diplomatic relations since a brief war in 2008. Tbilisi broke off relations with Moscow after Russia crushed a Georgian assault to reassert control over two rebel regions -South Ossetia and Abkhazia. Russia later recognized the regions. Georgia announced the two unrecognized republics as occupied territories in September 2008.

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

PUBLICITY July 14, 2014 #62

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INTERVIEW caucasian business week

July 14, 2014 #62

MINISTRY OF ECONOMY: WHETHER SALES OF AGRICULTURE FULL LIBERALIZATION OF THE LAND LAND PLOTS TO FOREIGNERS IS MARKET IS AN IRRESPONSIBLE BANNED AN INTERVIEW WITH CHAIRMAN OF THE AGRICULTURAL COMMITTEE OF MOVE PARLIAMENT GIGLA AGULASHVILI AN INTERVIEW WITH GEORGIAN ECONOMY MINISTER GEORGE KVIRIKASHVILI

- What will be the regulations regarding the rights of foreigners to purchase agricultural land? - Certain limitations operate in many countries, suchas Poland, the Czech Republic, the Baltic states, as well as Austria, Canada and many other countries,which already passed the point at which is nowGeorgia. There are regulations, under which foreign citizens have the opportunity to buy land for agricultural needs. We are not against the ownership of land, but we are in favor of its regulation. This issue is related

not only to the land, but also to the issues such as migration, the liberalization of the migration regime, the right of foreigners to own property, etc. The Government intends to establish a balance people have to move from one country to another, and we are not against migration, but we should take into account the fact that Georgia has a complex history and is located in a difficult region. And this story does not end, it is developing. I am Minister of Economy, but at the same time I’m a citizen of the country. And we do not forget that Georgia is a country with little land, and our task is primarily to give our citizens the opportunity to own land and cultivate it, regardless of nationality, they all should be able to invest in land. - What system do you plan to create? - The government can go in two directions. A simple and irresponsible way is to allow the full liberalization of the market for agricultural land. Of course, such a move would bring some benefits, in particular, the rapid growth of the economy, but in the end will leave serious problems for future generations. We do not want that future generations would have to pay for our mistakes. Hence, we went the other way - we take responsibility for making the right decision. It should also be borne in mind that in spite of the Moratorium, in 2013 the share of agriculture in total GDP increased by GEL 234 million, while the turnover of the agricultural sector grew by GEL 374 million. This is statistical data. A turnover of the agricultural sector grew by 13.3%. Moreover, in the firstquarter of 2014 turnover of agricultural products increased by 52% compared to the same period in2013. So we can say that a Moratorium on the purchase of agricultural land does not worsen the condition of the agricultural sector. And by the way, foreign investment in the agricultural sector in 2013 increased by 100% in comparisonwith 2012 and amounted to USD 32 million.

TEMUR MURGULIA: WE ARE NOT FOCUSED ON COSTS AN INTERVIEW WITH DEPUTY MINISTER OF INFRASTRUCTURE OF GEORGIA TEMUR MURGULIA

- At what stage is the current activities of the Ministry of Infrastructure which is criticized over its passivity? It was also noted that recently the Ministry has become more active. What is the reason? - We planned the Ministry’s spending optimistically - that is we set the maximum task, and try to perform it on amaximum. Our goal was to make the most of the first quarter, but sometimes it succeeded, sometimes not, though of course, in a case of the optimistic budget planning, any delay in the first quarter is also reflected in the

second and third. - In general, we are focused on the end result and not on expenses. Why does the state carry out infrastructure projects? In order to reduce mandatory spending for the population and for business - for example, the better the road, the faster you can take goods somewhere, respectively, the revenues and economy will grow. - Our task is to make the maximum possible with minimum expenses - as far as possible. Naturally, we cannot control the weather. Our backlog in the 1st quarter was due to weather conditions, which we overcome in the 2nd and 3rd quarters. And in general, to spend some money is not important, it is not an end in itself. They should bring some benefit and focus on useful projects. A billion can be also wasted. We do not intend to make quick and irresponsible decisions. - It is obvious that the activation of your department has affected the economy as a whole, as a result, GDP increased almost threefold in May. That is, when the Ministry of Infrastructure spends money - it’s good for the economy? - We must look at specific cases. Sometimes GEL 100 spent by the government can bring 1 GEL, sometimes less, it all depends on a component of the import costs. Our activation led to an increase, for example, in construction by 28% compared with the same period in 2013. A turnover in transport has also increased. We also tried to plan the costs in order the implementation of the projects to have a maximum impact both in terms of business development and in the long term.

- What is your attitude to the question of the right of foreign nationals to purchase agricultural land? The theme is very sensitive .. - My approach is based on national interests, and I believe that the land should be owned by those who produce products. There are a lot of different opinions about it. Approaches to this issue are different everywhere, including in European countries. Restrictions are normal, and there is nothing ultra-radical in our demands. In general, there are three approaches - the ultraliberal – to completely remove all restrictions; ultraconservative – to completely ban the sale of agricultural land to foreigners, and the third - moderate, which prevails in our government. I just agree with this third approach. It’s the golden mean that allows foreign citizens buy land under certain conditions, in a case of a real investment, jobs creation, introduction of new technologies, etc.. Previous government looked at agriculture as something superfluous, considering it unnecessary, as the share of agriculture in the total economy is nearly 5%. As a result, agriculture developed only on the level of the individual farmer, and the state did not help. We changed our approach and agriculture became one of the priorities for us. Any self-respecting country has an obligation to think about food safety and take care of agriculture. - How unanimous is the parliamentary majority on the issue of privatization of agricultural land? - In general, we have a common opinion on this issue, and I think we will reach a consensus. Of course, our opinions differ on specific issues, but in general we will be able to come to a consensus. As you know, a special commission, which includes representatives of the government, parliament, NGOs, etc, is working on this issue. Not only regulations are necessarily but clear and stable rules of the game, so that investors know exactly their rights and opportunities. We intend to contribute to all who will decide to invest real investment in agriculture. But, I repeat - real. For example, there are many cases when foreigners bought land, but so far it is not treated. This is unacceptable. I intend to defend my viewpoint and will try to convince the opposition in its correctness, althoughthere is a bit of hope. Nevertheless, I will try, as chairman of the parliamentary committee, and willhold all the necessary consultations with them.

- In general, what efforts are being made in order Georgian agricultural products to meetinternational standards? - Primarily we are actively working on legislation. 700 regulations and 300 laws aimed at bringing to the European standard are being prepared. The Food Safety Service has an action plan for the period up to 2020, which provides for the phased implementation of a number of measures for the approximation to European standards. Many of our opponents who do not want to continue the process of European integration constantly say that “Europe makes us do this and that.” No one makes us. Everything we do, first of all, we do for Georgia. We should work on a high quality of not only export commodity but also local, for our families, our children and future generations. We need to start from the local market, and then think about the international. - After your coalition came to power, agriculture was seen as a locomotive of the economy in which significant funds were invested. What are the results so far? - First results are already visible in the ratio of the share of agriculture in GDP, which rose to 10%. But in order the results to become measurable for a large number of the population, it is necessary to make the agricultural sector more profitable. Infrastructure projects are needed as well as antihail net installations for the protection of crops. We work hard to make incomes higher, and each farmer and pheasant to feel better. For this purpose - investment, knowledge, technique, technologies, should be attracted.

GOVERNMENT STOPS SUBSIDIZING WHITE GRAPES AN INTERVIEW WITH DIRECTOR OF THE NATIONAL WINE AGENCY LEVAN DAVITASHVILI - Why was it decided to cease subsidizing red grapes? - Subsidizing is necessary only when market mechanisms are not enough to make a profit. Now the situation is different and therefore the subsidy from the government is no longer needed. According to our forecast, even without subsidizing, the price of red grapes is high enough - it was recorded last year, and now the demand for red grapes exceeds last year’s nearly 1.5 times. Therefore, there is no need for subsidies. This is, of course, a very positive fact. - As for white grapes, whether a similar decision will be made or subsidies will continue? - Subsidies for white grapes will continue, as a big crop is expected, but the major demand is just for red wine, not white. Accordingly, the government will continue to support white grapes for some time. It is assumed that in the future, the amount of subsidies will be reduced and then completely canceled. This must be done so that the winegrowers were able to keep calm and carry out harvesting campaign in the fall without excitement. - What harvest is expected this year? - This year’s grape harvest will be 20-30% more than last year. We also expect that the industrial processing would increase by 20-30%. In 2013, the plants processed 92 000 tons - 2 times

2012. In addition addition, plants processed an anmore than in 2012 other 20 000 tons, so it turns out that in general it is about 100 000 tons. This year we expect not less, but perhaps more. Furthermore, due to the increase in exports of wine, the demand for grapes has grown so much that it does not need help from the state. The private sector can do this itself. - After Georgia signed an Association Agreement with the EU, statements were made about the possible risks from Russia. What problems can Georgian winemakers face? - If there is a harsh response, naturally, it will be a serious blow. Probably, we are not talking about the embargo, as Georgia and Russia are the WTO members, and we’re trying to establish civilized economic relations with each other. Most likely, the maximum that we can expect is the introduction of tariffs that will not have much impact on the market condition. However, we are ready for any complications, and our strategy not to depend on one market, in particular, on Russian. We are looking for alternative markets, including in the countries in which we have never worked. Because of this, a large increase in exports was recorded - we are talking about China, Poland, Kazakhstan, the Baltic countries. In the medium term, the markets of China and the United States could become an alternative to Russia.

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PRIVILEGES CHINESE HUALING ENJOYS IN GEORGIA

he Chinese Corporation “Hualing” responds to accusations of Georgian Association of Developers over the fact that the company had granted unjustified benefits. According to President of the Association ofDevelopers of Georgia Irakli Rostomashvili, we are talking about repeated cases of almost gratuitous transfer of land to some development companies, in particular the Chinese “Hualing.” “It creates great difficulties for the majority of companies that do not have access to such benefits. When some companies have to buy land at market price, and others get the land free of charge by the President’s initiative - there can be no question about competition. We have already appealed to the Ministry of Finance with the requirement to support the initiative of developers over the fact that everyone should have the same conditions for the acquisition of land. All companies should be on an equal footing,”- he notes. According to President of the Association Irakli Rostomashvili, the Chinese “Hualing”, which builds an apartment complex on the outskirts of Tbilisi, is among such companies. “They were freed from taxes, the government gave them land and conducted all communications for which other companies pay millions. This question needs to be revised, “- he says. According to “Hualing”, the territory where the construction is underway, didn’t represent any interest to anyone, as it was completely devoid of any infrastructure, moreover, it was not attractive for investors from a commercial standpoint.

“Due to large financial capacity of the company, we’ve managed to carry out simultaneously large investments in infrastructure, and government benefits were just due to this fact. The contract signed with the government, involves the construction of the Olympic village meeting the European standards with a total area of 350 000 sq m by 2015 (in a very limited period of time). 3 and 5-star accommodations, a 5-star hotel, spas, a restaurant for 2 000 people, a recreational area, auto parking, shopping center on the area of 110 000 square meters. The company will invest USD 150 million in these projects , in 2015 the facilities will be to be passed the state for 3 months to conduct the Youth Olympics. Roads and communications will be built there,”- “ Hualing” states. The corporation also denies allegations that infrastructure for the projects was prepared by the State at its own expense. “ Tbilisi Water Ltd “ will provide the Olympic village only with communications for its own account, and even only to the territory of the complex, and on the territory of the village this issue is in the responsibility of “ Hualing. “The same can be said about gas, electricity supply, etc. All this will be done at the expense of investors “- the company notes. The Chinese development company “Hualing” enjoys tax benefits, in particular, it is exempt from VAT and import tax for 10 years, as well as from tax on property and land- for 5 years. In return for this, the company makes major investments in the construction of a sports complex and the Olympic village where the Youth Olympics will be held in 2015.

CO-INVESTMENT FUND DENIES RELATION TO CARREFOUR CONSTRUCTION

o-investment Fund founded by former Prime Minister Bidzina Ivanishvili denies connection of the fund and Bidzina Ivanishvili with the construction of another Carrefour branch in Tbilisi. The fund released the following statement: “Last week media released information about cutting the trees in Baghdati Street, Isani-Samgori district, at the construction of Carrefour hypermarket. It was related with Bidzina Ivanishvili and Co-Investment Fund of Georgia.

With full responsibility we state that neither Bidzina Ivanishvili nor Co-Investment Fund of Georgia are related with the activities of the company Carrefour, among them construction of the new hypermarket. Respectively, released information is not truth”, - the fund states. It’s noteworthy that during his office term, at the end of 2012 Bidzina Ivanishvili’s property declaration indicated, that he owned 30 thousand stocks of Carrefour of 19,18 Euro nominal. Although at the end of 2013 securities of French retailer did not appear in the portfolio of the former Prime Minsiter.

AZERBAIJANI OIL EXPORTS FROM SUPSA GROW BY 6.4%

ccording to results of the first half of the current year, State Oil Company of Azerbaijan Republic (SOCAR) exported 1,452 million tons of Azerbaijani oil from Supsa port. It was transported by Baku-Supsa pipeline. Compared to the data of the same period of last year,

oil export has increased by 6,4% from Supsa. SOCAR releases the information. In June 2013 SOCAR has loaded 242,39 thousand tons of Azerbaijani oil from Supsa port. In 2013 the data equaled to 2,7 million. Reminding that supply of the oil obtained on Chiragi deposit is provided through Supsa port.

IPM RESEARCH: 82% OF RESPONDENTS POSITIVELY APPRAISE GEORGIA-EU ASSOCIATION AGREEMENT

ompany IPM Research interviewed 400 respondents (18+ age group_ in Tbilisi at the end of June about Association agreement with EU, expected changes and expectations. According to the research results, 92% of the respondents had information about signing of Association Agreement. Majority of the respondents - 82% completely positively or positively evaluates the fact, 5% is difficult to answer. Despite sharply expressed positive evaluation, 63% do not know that implies Association Agreement. 11% considers that after t he signing of the Agreement trade will improve; 9% considers that Georgia will become EU member as a result of the agreement. To the opinion of 4,5% respondents, the agreement will solve economic

issues. Majority of the respondents can’t specify what will change for themselves after the signing of the agreement. Meanwhile, majority expects positive changes (30%), about 10% expects simplified visa regime, 9% - simplification f the trade relations. It’s interesting to know opinions of the respondents who had to sign Association Agreement. Only 17.5% of the respondents consider that the person who signed the agreement - Irakli Garibashvili had to sign Association Agreement on behalf of Georgia. 41.9% of the respondents consider that President of Georgia was entitled to sign Association Agreement on behalf of Georgia. For 19,3% of the respondents did not matter who would have signed Association Agreement, for 19,9% it was difficult to answer the question.

PHILIP DIMITROV: GEORGIAN BUSINESS WILL NOT BE GIVEN BREAKFAST IN BED, BUT GEORGIA WILL BE PROVIDED WITH MODERN RESOURCES

eorgia has made a historic step by means of signing the Association Agreement, but it does not mean that Georgia has fully gone the distance, but new opportunities emerged for your country. The Ambassador of the EU Philip Dimitrov told reporters at the Batumi 11th International Conference. According to Dimitrov, Georgia has to fulfill the Association agenda, and there are many issues to be implemented through the process. ‘’As for recommendations, you have to fulfill the Association agenda. Naturally, the Association Agreement considers that the Georgian market will enter the joint European market. On the other hand, there are many issues to be implemented through the process by the end of the next year and some of them – a bit later. This process will have its stages, but Georgia will receive the main advantage immediately. Of course, I do not mean that Georgia will be given breakfast in bed but the country will be provided with modern resources. Though, your effort should be great for it,’’ – Dimitrov said.

REAL ESTATE PRICES RISE BY 5% YEAR ON YEAR

arge Georgian developers are talking about the rising cost of real estate. According to Director General of “Axis’’, prices for real estate rose by about 5% compared to last year. According to George Kapanadze, there is a stableenvironment for doing business in Georgia, so thedemand for real estate as well as price is

expected to continue increasing next year. He explains thatsupply is much lower than demand on the real estatemarket. In addition, an increase in demand for real estate is related to an interest rate on mortgage loans. As for cooperation with banks, in Kapanadze’s words, they are actively cooperating with a commercial bank which funded a number of the company’s projects.

GEORGIA TO SIGN COOPERATION MEMORANDUM WITH MONTENEGRO

ooperation memorandum will be signed with Montenegro. The sides made the agreement during the visit of Minster of Agriculture in Montenegro. Shalva Pipia mentioned in the dialogue with his colleague Petar Ivanovich that main directions of the cooperation will be livestock breeding, pro-

duction of wine and nuts cultures. “In terms of integration with EU, our countries are on one way, they face similar challenges. Sharing your experience in the process of introduction of European Standards and legislation is very important”, - Shalva Pipia mentioned. Representatives of Montenegro confirmed that they are interested in cooperation with Georgia.

RUSSIA ADMITS GEORGIAN WATERMELON AND VEGETABLES

n addition to peach, vegetables, melons and watermelon are allowed in Russia. RosSelKhodNadzor informs that from July 9 Russian consumer will purchase Georgian onion, carrot and sweet pepper. Reminding that on May 26 vegetable products with high phytosanitary risk have been added to the allowed list of the export products from Geor-

gia to Russia. These are: fresh potato (washed, with consumer package), tomato, cucumber, cabbage, eggplant, cherry, peach, apricot, plums, persimmon, kiwi and berries. Low risk products (tea, bay, dry food) have been allowed on the Russian market since June 28 2013. In autumn the list will grow.

FOREIGNERS FIND BAKU AND YEREVAN MORE EXPENSIVE THAN TBILISI

n the rating made up by company Mercer - Mercer’s 2014 Cost of Living, capital of Georgia Tbilisi ranks 194 among the world’s 211 cities, which is 1 place ahead than last year. The rating arranges 211 cities of the world according to living expenses for the foreigners. The rating includes costs of over 200 products and services, among them: costs for living, transportation, food, clothes, household appliances and entertainment. Mercer states that their rating helps to transnational companies and governments to define cooperation expenses in the cities.

According to rating, living in the capital of Angola - Luanda is the most expensive for the foreigners. The follows Chad and its capital - Ndjamena, Hong-Kong ranks 3rd. Luanda was the most expensive city for the foreigners last year. Moscow followed it with second ranking. Now it ranks 9th. Last year Tokyo ranked third. This year capital of the country of the rising sun ranks 7th. Capital of the neighboring Azerbaijan - Baku ranks 46 according to cost, Erevan ranks 187. Last 5 list of the rating or the cheapest towns cities are: Managua, Islamabad, Bishkek, and Windhoek - capital of Namibia and capital of Pakistan - Karachi.

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July 14, 2014 #62

TBILVINO RATIO IN JANUARY TO JUNE TOTAL EXPORTS MARKS 9%

hare of Tbilvino equals to 9% in the total export of 6 months. In January-June the leading wine company exported 2 340 130 bottles (0,75 L) wine to the US, Asian, European and Russian markets. In the first half of the year total export of wine equaled to 26 872 145 bottles, with total value of $87 3 million. Founder of Tbilvino George Margvelashvili states that the largest exporter produces wine only with grapes purchased from the local farmers. They are going to plant vineyards, at first of Saperavi,

in the future - of the oldest Georgian species. Tbilvino is going to invest $3 million in the planting of the new vineyards. Semi-sweet red wine - Alaznis Veli has the highest demand on the export markets. In addition to the taste qualities, it’s determined by the acceptable price ($3.1). Tbilvino exports 95% of the products. According to 2009-2013 data, it’s leader among the exporters. Last year they exported 4 million bottles. The company used agro credit of $1 million and increased capacity of the plant in Kvareli.

BAKU-TBILISI-ISTANBUL TRAIN WAS GEORGIAN MUSHROOM WILL BE ORDERED IN SWITZERLAND EXPORTED TO RUSSIA AND DUBAI new Baku-Tbilisi-Istanbul railroad and 1 435mm lines in Europe.

opens in 2015. Azerbaijan international agency Day.az, based on the press secretary of Azerbaijani Railway Nadir Azmamedov, reports tat currently negotiations are going with the Swiss company Stadler Rail Group 30 for purchase of 30 new wagons for Baku-Tbilisi-Istanbul route. Wagons with reserved seats, coupe and SV will be relevant to European standards and they will arrive to Baku in 2015. They will be equipped with the modern conditioning, also movable-wheeled charts, exploitation of which will be possible on the railway of various area. They will be useful for both 1 520-mm railway lines in CIS countries

A train will be formed from 10 carriages. Official website of the Swiss company Stadler Rail Group includes information that the company received order for 30 wagons, amount of which is 120 million Swiss francs (over 100 million EURO). These carriages will be used on Baku-Tbilisi-Istanbul route. The contract also considers supply of 27 sleeping carriages, 3 wagon-restaurants with 28 seats and 3 carriages for the persons with disabilities. Personal trainings are also considered. It’s noteworthy that Turkey has already opened underwater railway tunnel under the Bosporus Strait, which will enable the train from Baku to continue way to Europe.

ushroom produced in Georgia will be exported to Russia and Dubai till the end of the year. Head of the company White Hat - Vano Ioseliani stated to GBC that currently negotiations are going with Dubai and transportation issues will be clarified soon. Following kinds of mushroom will be exported: field mushroom, Portobello and so called Wooden Mushroom. Supply of 600-800 tons of mushroom is supposed to the Russian market, 300-200 tons - to Dubai market. White Hat is not interested in the European market, because, as Vano Ioseliani states, there us

surpass of the local products and low prices. Till now 80% of White Hat products were sold on the local market, 20% was exported to Armenia. These indicators will be maintained in the future. Producers of Georgian mushroom intend to increase production capacities and in this way supply to Russian and Dubai markets. Price of Portobello field and wooden mushrooms on the local markets is 5-5.5 GEL. Price in Russia and Dubai is being negotiated. Currently producer of Georgian mushroom White Hat produces 180 tons of mushrooms in a month. In the future, due to scheduled export, they plan to increase industrial capacities. The company has industrial capacities near Rustavi.

KILLERS OF GEORGIAN ECONOMY – THE BOOK WITH ELEMENTS OF DETECTIVE

have witnessed the process of sales of TELASI and Tbilisi Water”, Temur Chichinadze, a member of the Energy Academy and former chairman of the TELASI Supervisory Board, says. He has recently issued a book on the history of sales of Georgia’s strategic assets at lowest prices. The July 3 presentation in the Rose Garden was attended by government officials, experts of various fields and public figures. The author describes the history of a squander of billions of GEL. This history is full of elements of a detective and these facts should raise the interest of investigating bodies. “We start d the past research because those schemes still work and the established practice continues for many years”, Temur Chichinadze says. The book is based on motives of the famous bestseller of John Perkins’ Confessions of an Economic Hit Man. The work describes criminal bargains and illegal state intervention in various businesses by distinct officials, Chichinadze said. Asked to name who are killers of the Georgian economy, Temur Chichinadze answered: “Officials of the previous government – everyone, who has taken part in destruction and squander of the Georgian energy sector”. One of the main accusations consists in cheating and ignoring the society, he added. The current

authorities should call the criminals to the account and cast ligt on the persons who have made benefit from losing agreements and who have been accumulating illegal millions, Chichinadze pointed out. Gogi Topadze, a member of the Georgian parliament majority, attended the Rose Garden presentation and he made focus on the importance of Temur Chichinadze’s book. The losing contracts should be investigated, Topadze noted. “The book has been issued in due time. The author has performed huge work. He has showed up real facts how the assets were sold 20 years ago. Corruption schemes are presumed behind these facts. All of us has received results of these decisions – We have to pay tenfold higher price for electricity. They have appropriated our assets. The curremt situation is the result of activities of the previous government. Unlike them, we will not start burglary. We will not appropriate property from them. The book consists of three main subtitles that provide detailed information on sales of concrete assets. The book was published by Iveria XXI company. The book raised interesting reaction among users of internet forums too. One of the users of www. FOR.ge information and analytical portal dedicated a comprehensive comment to these facts. We have found this comment worth to introduce it to our readers: “These criminal schemes continue working today. It is interesting why Milorava was appointed as an assistant to GNERC chairman Khetaguri. Later, Khetaguri appointed him as the wholesale market chairman and a member of TELASI supervisory board. The United National Movement made GNERC as a place for appointing its devoted supporters. Those, who were taking part in falsifying the election, were appointed in GNERC, including Chalaghashvili. No chairman of GNERC, including Maia Nadiradze, was an economist by profession, while the tariff identification and audit of expenditures need experienced accountants. The sold assets were imposed monopolistic high tariffs as a result of collusions and the memorandum signed with the government guaranteed not to change high tariffs for a long period. This was committed by

Khetaguri’s assistants, including one of them was his relative. Everyone thought they would have been called to account, but, surprisingly, they maintain their positions as assistants. In turn, they have received 75 000 GEL bonuses. GNERC used to perform the function of notaries and indeed, it was directly dependent on Khetaguri. Previously, Khetaguri worked at the GNERC and even today he supervises all processes there. You can see how much benefit TELASI received in 2008 when a new tariff was introduced. Net profits marked 83.6 million GEL that is 110% in relation to expenditures. Funds from excessive profits are returned in the form of investments that is an interest-free credit raised from the population. The tariffs have become a component of recollecting the investments and the population is theft in this way. This is a legalized robbery. The regulating fee is also reflected in the tariff. GNERC thinks the licensees pay the money. In reality, the population pays, this signifies GNERC has introduced high tariffs and the companies should appreciate this and in this way they collect ten

thousands of GEL. Annual revenues of GNERC members are over 0.5 million GEL. And no one has seen any analysis published by GNERC on real tariffs or any report on affects on the introduced tariffs on economic activity of licensees. For example, KazTransGas was led to bankruptcy regime. But what has happened? Tariff s were lowered to TELASI, but despite this, the company has collected considerable revenues in 2013, but this was a destructive way. Therefore, the company collected 64 million GEL by devaluating fixed assets. The company has not resorted to this decision in previous years. The company also paid 3.5 million GEL to a consulting company and noted later this project was economically inexpedient and the company had got losses of 3.5 million GEL. This operation is called a money laundering. How long GNERC will cheat the population? I think the time has come to appoint an experienced accountant and economist as GNERC chairman and the tariffs be recalculated anew”, the FOR.Ge reader noted.

STATISTICS & RESEARCH July 14, 2014 #62

caucasian business week

‘MASTERINDEX STUDY’ IN GEORGIA DISCOVERED HIGH USAGE OF PAYMENT CARDS BY GEORGIANS

asterCard announces the results of MasterIndex study in Georgia. MasterIndex surveys are regularly conducted in different countries by MasterCard, to identify payment cards usage and habits, motivations or barriers. As practice shows, the survey gives very important and reliable information about payment systems and can be used as basis for prognosis and development. First time MasterCard conducted this research in Georgia in 2012. MasterCard’s recent ‘MasterIndex study unveiled the following data and tendencies SIGNIFICANT GROWTH OF CARDS MasterIndex showed that more than half of population possesses banking cards: 46 percent have at least 1 debit card, 23 percent have at least 1 credit card. But amount of people with both types of cards is more than doubled in comparison of 2012. Only 6 percent had debit and credit cards in 2012, while the number reached 15 percent in 2013. Number of people with no credit card has changed slightly since 2012 as it dropped from 49 percent to 46 percent. In 2013 43 percent of payment card owners have at least 1 credit card. CASH PAYMENTS REDUCING PARALLEL TO INCREASED CARD PAYMENTS According to the survey Georgians mainly pay 25-250 GEL amounts by payments cards. But still cash is dominant as payment method in spite of increased rate of card payments. About 15 percent of population used to pay by debit cards in 2012 and 2 percent paid by credit cards. These numbers reached about 19 percent and 7 percent in the research. Most of respondents – 85 percent- said they pay GEL up to 20 by cash. This indicator has reduced by 10 percent as 95 percent paid by cash in 2012. These figures can be considered as proof that introduction of contactless cards in 2012 for low ticket value transactions achieved some progress and helped us to shift such payments to cards. However there is still so much way to move forward in this direction. Electronic goods store, home appliances store, furniture store remain the places where cash is still a big dominant comparing to other payment methods. Goods at all of these places cost quite high and as MasterIndex showed people still prefer to pay cash or use consumer loans to finance their purchase. With the insights the research provided, MasterCard believes there is a great value in providing consumers with installment option over credit cards, enabling them to enjoy simpler, faster and more convenient shopping experience, thence working with local banks to offer such products to the consumers and merchants” PAYMENT CARDS ARE MAINLY USED AT SHOPS AND MARKETS Most frequently debit cards are used up to 1-3 times a month and mainly for withdrawing cash in banks or on ATM, buying food at markets and buying clothes at shops. Number of people who never use debit card is significantly reduced. It amounted to 29 percent in 2012 and totals to 5 percent in the current research. Credit cards are

mainly used for buying food and clothes, paying utility bills by card is common among the interviewed respondents, as well. INCREASED CONTACTLESS PAYMENTS 8% of all cardholders has contactless cards and it is mainly used at public transportation as well as markets and shops. MasterCard claims contactless penetration rate is quite good as this is innovation for the Georgian Society. MasterCard is a pioneer introducing contactless payment to Georgia. 65 percent of interviewees claim they use contactless payment cards at shops, supermarkets and public transportation. Digital payment is frequently used at petrol stations, pharmacies and in taxis as well. Average amount for people who prefer to use a contactless card is up to 50 GEL. GEORGIANS FOCUS ON LOYALTY OFFERS 68 % of users and 63 of non-users prefer to have loyalty offers at supermarkets. This indicator hasn’t changed significantly since last year. Clothing stores are preferable places for Georgians to get discounts as well. Every 1 Georgian out of 2 expects to have loyalty offers in his/her credit card. One third of the participants’ state that they would rather use their cards to benefit from payment installments if such offer is available in home appliance, electronic goods and furniture stores. Almost half of all respondents state that they could pay 12 month installment with amount not exceeding 50 GEL a month. Hakan Acar said: “We have been conducting MasterIndex research in many parts of Europe and APMEA in order to understand what the consumer’s needs are in payments systems. This research helps us to find the best way to combine our global know how with these local needs and insights. The latest results of MasterIndex Study 2 in Georgia showed us that consumers in Georgia have increasing interest in loyalty cards. Therefore MasterCard will be focused in offering installments to meet the consumers’ expectations. I would like to mention also that Georgian market is unique for us at some point. The way how promptly the market accepted contactless payments and its dynamic of growth made Georgia a proof of concept of contactless for the rest of the world and we see the big potential that exists in Georgia. We are going to repeat MasterIndex research every year to monitor how the market is changing and the work we need to do to make payments more convenient, safe and secure for consumers”. ABOUT MASTERINDEX MasterCard’s MasterIndex Survey was implemented via face-to-face 600 interviews with local population of Tbilisi at their homes. 55% of interviews were conducted with users of plastic cards. 45% covered non-users of plastic cards. The target audience for research was females and males aged 18 – 55. Card users and non card users are equally represented to best identify the motivations or barriers against card usage. MasterIndex is an important and reliable source of information about payment systems. It has been held in numerous European and APMEA region countries for more than 10 years by MasterCard.

PRESENTATION caucasian business week

July 14, 2014 #62

BANKING NEWS July 14, 2014 #62

caucasian business week

CAPITAL BANK WILL WORK ON THE ATTRACTION OF THE CORPORATE CLIENTS

ebranding of Invest Bank considers not only name change, but also activation of the bank. Director of the bank Lasha Khoperia states that the new name Capital Bank is not initiative of only new stockholder Alexander Kurtanidze. The management considers that in this way awareness of the bank will increases. Besides, Khoperia says that old head office of the bank, despite its comfort is disadvantageous. From August the head office will remove to Leselidze Street and arrange according to a new concept. Khoperia informs that from this period the bank will introduce new deposit and loan products on the market. “We want to attract new corporate clients with a new tariffs”, - Lasha Khoperia says. Bank’s development strategy is based on 3-5 years plan, approved by National Bank of Georgia. Currently the bank can’t satisfy supervision re-

quirements. By June 1 stock capital is 5,7 million GEL (coefficient of the supervision capital is not even 11% (norm ≥12%). Meanwhile president of NBG George Kadagidze says that the bank does not need final instance credit of NBG. Invest Bank changed the majoritarian stockholder in spring. Alexander Kurtanidze became 70% shareholder. Media will be able to get to know him in August. During 11/13 - 03/14 period temporary administration of NBG managed the bank. Failure to satisfy supervision norms became reason for their entrance. It’s noteworthy that last reporting month was profitable for the bank - in May net loss of the credit institution reduced by 1,2 million GEL. Lasha Khoperia was appointed in April. He has experience in working in National Bank of Georgia, Bank Cartu and Liberty Bank. He also represented auditor company.

FINALISTS OF LITERARY AWARD SABA ANNOUNCED 47 Best books appeared on the final stage out of submitted 340 ones. Prize fund is 44 000 GEL. 12th awarding ceremony of the winners will be held in September. Best 4 finalist novels include “Shy Emerald” by Aka Morchiladze and Lucrecial 515 by Lasha Bugadze. “President Came as a Guest” by Lasha Bugadze is nominated as the best play. 5 prosaic works include City in the Snow by Beqa Kurkhuli. Love is Ballast by Batu Danelia and “Two thousand 13” by Gaga Nakhutsrishvili are nominated among the poetic collections. Ia Bersenadze for “Naive and Sentimental Novelist” by Orhan Pamuk, also David Kakabadze’s Benefice (Arthur Schnitzler) are nominated for the best translation. 7 works are nominated on the best literary debut, 3 - on the literature criticism, 9 works on the best essay and documentary prose, among them “Sunglass with Tears” by Gogi Gvakharia, Essays by David Zurabishvili, Drowned Holiday by Maka Jokhadze, My Father, Bob Dylan and a Man from the Cable TV by Malkhaz Kharbedia.

VTB STARTS NEW PROJECT WITH EBRD

TB starts funding of corporate, small and medium-sixed business, also energy sphere with EBRD. According to the contract singed by the sides on June 27, share of European Bank is $20 million. Out of this amount, VTB will fund medium-sized business with $5 million own resource, with EBRD guarantee. VTB Bank Georgia is the first commercial banks in Georgia, with which EBRD carries out such project. The resources are for the development of the en-

terprises, also for funding of the investment and export industry. Besides, VTB will allocate $3 million from EBRD in the framework of energy efficiency program. “As a result of the reached agreement, jointly emitted loans will be directed for the new enterprises and expanding of the existing ones. Also, the agreement includes investment in one of the most important sectors of Georgia - energy and implementation of energy efficiency projects”, financial director of VTB Bank Mamuka Menteshashvili stated.

INVESTBANK LOSSES SHRINK BY 1.2 MILLION GEL

SC Invest Bank completed January-May by 4,066 million GEL loss (01/06/13 605 442 GEL). In May bank’s profit equaled to 1,2 million GEL. By June 1 non-banking deposits portfolio equals to 25,8 million GEL (01/06/13 -14,8 million GEL), loans - 15,1 million GEL (01/06/13-7,8

million GEL), overall obligations - 30,4 million GEL (01/06/13 -18,6 million). Bank’s actives stand ad 36 million GEL (01/06/13 - 33 million). 70% of Invest Bank’s shares belong to Alexander Kurtanidze. Stock capital does not exceed to 5,7 million GEL. Currently the bank is undergoing rebranding process, it’s changing the name.

GEORGIAN LARI HAS ITS OWN SIGN

rom today Georgian National Currency - Lari has its own sign. Giorgi Kadagidze, Governor of the NBG introduced the winner sign of the national currency to public and its author -Malkhaz Shvelidze, an artist at the presentation held in the National Bank of Georgia. The Governor presented the co-authors of the winner conception with appropriate certificates. “Several months ago by the NBG’s initiative was established the commission for selecting Lari sign, which announced the competition to create the sign. Commission was composed of specialists of relevant fields. Commission activities were quite transparent and at the same time we tried to evaluate the attitude of society towards the process. We can proudly say that this process is already over. Today our national currency- Georgian Lari has its own sign. I would also like to say that there will definitely come a day when our country renounces its own monetary policy, and therefore will renounce its own currency. This will be day when we join Eurozone - the last stage of the Euro integration, which reflects our society’s will. But till that day comes we will do everything for popularization of our national currency and for further confidence-building. I would like to say that next year, Georgian Lari has a 20th anniversary and in this respect we have planned many surprises, which we will tell you later about” -said Giorgi Kadagidze. NBG has announced Lari sign competition in December 2013. The temporary commission consisting of representatives of NBG, the Budget and Finance Committee of the Parliament of Georgia, the State Council of Heraldry, the Ministry of Culture and Monument Protection of Georgia and the Ministry of Education and Science of Georgia has been created. In order to identify the winner sign commission has given priority to the samples presented by the conception designed with Georgian Mkhedruli inscription and made a point of the following criteria: conception, design, accordance with Geor-

gian alphabet, existence of elements marking the currency, possibility of outlining easily and also observance of requests and recommendations determined by competition rules. It is very important that before identifying the final winner the Lari Sign Temporary Commission made a decision to involve interested society in selection process. A poll opened to all internet users during three weeks had the recommendation character and helped significantly Lari sign commission with identifying a winner sign. Lari sign is based on graphic outline of Georgian one arched letter “L”(Lasi). According to the world experience with regard to various signs the first symbol of the sign is crossed by one or two parallel lines. It is notable that with regard to various currency signs addition of parallel lines is designed to transform a letter-mark into sign. In the Lari currency sign the two parallel lines crossed the Georgian (Lasi) are the organic parts of the letter. The so called “leg” of “LASI” represented by horizontal line is the necessary attribute of the sign and adds monumental statics to the upper dynamic arc. The outline of the letter-mark is transformed on purpose in the design in order to simplify its perception and implementation as a Lari sign. Introduction of Lari sign will promote the popularization of national currency both in Georgia and abroad. At the same time the popularity of Lari sign will increase Lari awareness in the society and will have positive effect on the image of Georgian national currency. Usage of Lari symbol will make more practical to place Lari sign after the Georgian money amount, both during the writing on the paper and printing on the computer. Introduction of Lari sign will increase the public trust in national currency. As for the issue on a compliance with different international electronic systems, in particular the registration in the Unicode of Symbols Standard, the representatives of the company have already promised to provide assistance to the National Bank of Georgia and the process of Lari sign registration will be launched in the nearest period.

PROCREDIT BANK HOLDS EXHIBITION AND SALES OF CLIENTS’ PRODUCTS

irst time in Georgia ProCredit Bank organized exhibition and sale of the clients’ products and invites all to Expo Georgia on Thursday. On July 10-13 in the Expo Georgia (#118 Tsereteli) IV pavilion clients of ProCredit Bank, about 80 Georgian companies working in various businesses will present won products with discount. The exhibition space will be divided into 3 parts:

made in Georgia, agricultural and imported products. ProCredit states that with this activity they provide popularization of the products of Georgian companies and enhancement awareness about them. Guests and presenters for the opening ceremony on July 10, at 10:00 include: heads of Ministry of Agriculture, Ministry of Economy, National Bank, Banks’ Association and project Produce in Georgia.

DELAY IN A DEBT PAYMENT BANK REPUBLIC PROFITS IN JANUARY BECOMES MORE EXPENSIVE oan restructuring has become more sion. Including an increased interest rates, an acTO MAY MARK 13.7 MLN GEL expensive for customers. According curate method and the principle of its formation

ank Republic completed JanuaryMay 2014 with 13,677 million GEL profit (01/06/13 -9,4 million). By June 1 amount of non-banking portfolio equals to 501,2 million GEL (01/06/13 - 434 million GEL), credit portfolio - 712,5 million GEL (01/06/13 - 612 million GEL), overall obligations - 849,5 million GEL.

Overall actives stand at 1,010 billion GEL, market share - 5,7% (01/06/13 - 810 million GEL, 5,5%) The bank operates since 1991. Stockholders are SOCIETE GENERALE (93,6%) and EBRD (6,36%). Stock capital equals to 160,8 million GEL (01/06/13-130,1 million GEL).

to the NGO “Society and Banks”, the majority of banks take a commission fee for restructured loans. As a result, the effective interest rate on the loan additionally increases at the expense of acommission fee. The organization notes that the overpaid amountalso increases in a case of a loan payment exten-

is often unclear. They say the banks often refuse to restructure until the loan is not problem. The reason is that during the restructuring the bank has additional costs: after restructuring the banks are obliged to reserve 10 per cent of the loan and if a loan is not more than 30 days overdue – 2 per cent will be reserved.

CIS caucasian business week

July 14, 2014 #62

UKRAINE GAS DEBT EXCEEDS $5BN, NO JUNE PAYMENTS MADE GAZPROM

U WESTERN DONORS URGE MORE MONEY TO HELP UKRAINE RECOVERY

kraine’s international donors including the EU, the US, Canada, Japan, and some international organizations have agreed further assistance to Kiev is crucial. They also said the Association Agreement with the EU opens a new stage in bilateral relations. In a jointstatement published on Tuesday Ukraine’s donors didn’t specify a particular amount Ukraine would need to settle some of the most burning issues, including strengthening the borders and“elaboration of a special post-conflict rehabilitation program for the Donbas region.” Ukraine’s western sponsors also include such international organizations as the OSCE and OECD, as well as international financial institutions the EBRD and EIB. They agreed to create a joint preparatory committee and provide more money for Ukraine’s Economic Recovery and Growth Agenda for 2014-2016. “In this regard, the Ukrainian Government will invite donors to jointly estimate the funds necessary to complete the priority tasks,” the paper said. Ukraine’s western partners also underlined the importance of the EU-Ukraine Association Agreementsealedin the end of June. “Donors and international organizations recognized the importance of the recently signed Association Agreement, including a Deep and Comprehensive Free Trade Area (AA/DCFTA),

which constitutes the new basis for EU-Ukraine relations aiming at fostering political association and economic integration with the EU as well as the Association Agenda, as the instrument to prepare for and facilitate the entry into force of the Association Agreement,” the document added. A donor conference is usual for the EU, which it uses to help troubled countries, mostly those in Africa and the Middle East that suffered in military conflicts. Similar conferences were held in 2008 and 2009 to help recovery in Georgia. The European Commission approved an 11 billion euro program of economic help for Ukraine in early March. The stabilization part accounts for 1.61 billion euro. The EU promised another 1.5 billion euro from the European Regional Development Fund to support the Ukrainian economy. The other 8 billion euro are virtual, 5 billion will be allocated from the European Bank for Reconstruction and Development and 3 billion from the European Investment Bank. The money will be allocated to investment projects, which will depend on the performance of Ukraine’s economy. Since the beginning of year Kiev has received 850 million euro from the EU. The IMF is developing a separate program to support Ukraine with up to $17 billion, but to receive it Kiev has to perform a number of painful measures including the liberalization of energy prices in the domestic market.

kraine’s gas bill has risen another $838 million, after Kiev failed to make a payment for 1.7 billion cubic meters of Russian gas supplied in the first half of June. “The deadline for paying June bills expired yesterday; we again didn’t receive the money from Naftogaz Ukraine. As a result Ukraine’s debt to Gazprom for the 1.7 billion cubic meters supplied from June 1 through June 16 rose to $5.296 billion,” Gazprom CEO Aleksey Miller said on Tuesday. Miller added that Ukraine needs to pay for 11.535 billion cubic meters of Russian gas, which is a“gigantic” volume, comparable to the total supplied to Poland. “Ukraine’s principle unwillingness to pay for Russian gas is becoming chronic, and once again shows the transition to aprepayment system, included in the contract, was the only correct decision,” Miller added. The new bill is calculated on a price of $485 per thousand cubic meters that came into effect in April. Ukraine has insisted it would pay the debt if it was charged $326, saying the new Gazprom price was unfair and politically motivated. On June 16, when Ukraine’s gas debt stood at $4.458 billion, Gazprom moved Ukraine to a prepayment system, which meant Kiev had to pay in advance for any new supplies of Russian gas. Ukraine has recently increased its effort to find alternative sources of gas to substitute Russian supplies. On Friday Ukraine’s Finance Ministry put forward an eight point plan to escape Russian gas dependence, through developing its own production as well as looking for other suppliers. The new plan included switching from boiler heating to biofuels, as well as getting more out

of coal, and building sea terminals for liquefied natural gas (LNG). Ukraine also says it could get up to 20 billion cubic meters in reverse flow from neighboring Slovakia, Poland and Hungary, which it expects to compensate for part of the “lost” Russian gas. However Gazprom and RT experts doubt that even having the equipment to reverse the gas flow, the scheme would be legal. Russian President Vladimir Putin called such supplies artificial saying there’s no way one pipe could be used to supply gas in both directions. The President said that Russia “sees everything”; however the country is not responding, only because it doesn’t want the situation to worsen. WESTERN SPIN Ukraine’s oil and gas utility Naftogaz has announced its currently looking for foreign partners to buy out parts of its decrepit gas pipeline and storage system. Naftogaz’s CEO, Andrey Kobolev, stressed that Russian companies aren’t among those being considered to take part. Last week, the Ukrainian parliament passed a bill allowing foreign investors up to 49 percent of the country’s national gas transportation system (GTS). Prime Minister Arseniy Yatsenyuk came up with the initiative, and said it was part of a bigger plan to modernize Ukraine’s GTS and also strengthen Ukraine’s position as a transit country. Previously, Naftogaz has talked about the possibility of creating a US and German-owned gas hub in Ukraine. American and German companies view the hub as “an opportunity to gain a foothold in the region,”Naftogaz Deputy Chairman Aleksandr Todiychuk, told the Russian Kommersant daily.

RUSSIA PUSHES FOR BRICS ENERGY ASSOCIATION

ussia is to urge its BRICS counterparts to set up an energy association that will include a fuel reserve, as well as the institute for energy policy, according to Russian presidential aide Yuri Ushakov. “Russia will propose a number of specific issues for consideration, including establishing a BRICS energy association aimed at ensuring the energy security of its member states, and to conduct integrated research and analysis of global hydrocarbon markets. It is suggested that a fuel

reserve and an energy policy institute for the BRICS will be created within this association,” Russian presidential aide Yuri Ushakov told journalists on Thursday. On top of that, Russia will suggest a network to link the leading universities of Russia, China, Brazil, India and South Africa that will specialize in economics and technology, TASS reports. Ushakov also said the BRICS Development Bank, expected to be officially launched at next week’ssummit in Brazil, will be headquartered in Shanghai. On Wednesday Russian Finance Minister Anton Siluanov said New Delhi was the other favorite. On July 15 and July the 16 leaders of the five emerging economies will sign agreements on the $100 billion New Development Bank, a separate $100 billion contingent foreign exchange reserve pool, and a memorandum on cooperation in export-loan insurance. BRICS countries near development bank deal to rival IMF, WB BRICS leaders are also expected to discuss IMF reform that would give the emerging economies a louder say in the decision making process in the fund. The BRICS countries represent the world’s biggest and fastest growing market in the world. The five countries are home to 40 percent of the world population (2.9 billion people) and their combined gross domestic product (GDP) grew more than 300 percent in the last decade, which compares with 60 percent for the developed economies. Mutual trade almost doubled in the 5 years to 2013 to reach $300 billion.

KAZAKHSTAN SEEKS TO ISSUE VISAS IN E-FORMAT

azakhstan’s Foreign Ministry intends to start issuing visas in electronic format. First Deputy Foreign Minister Rapil Zhoshybayev made the remark at a press conference in Astana on July 10. “The ministry initiated amendments to the existing rules of issuing Kazakh visas. The basis of new edition of the rules will include such innovations as automation and integration of services for registration of electronic visas, what will exclude the person-to-person contact and greatly simplify the issuance of visas,” Zhoshybayev said. He said an inter-departmental working group has been created to develop a new legal act, which will greatly simplify visa issuance for foreign investors and tourists. Under the new rules, investors are envisaged to receive single visas for up to 30 days of stay. These visas are issued by Kazakhstan’s embas-

sies abroad. The investors arriving in Kazakhstan with their families will get a separate category of investor visas for family members. The business and investor visas are also assumed to be renewable.

AZERBAIJAN July 14, 2014 #62

caucasian business week

WORLD BANK TO FINANCE NEW PROJECTS IN AZERBAIJAN

he World Bank will allocate additional financing for two projects in Azerbaijan. The WB Board of Executive Directors approved on July 9 two International Bank for Reconstruction and Development (IBRD) loans to the Azerbaijan, a message by the Bank said. Loans in the amount of $100 and 50 million will be directed to projects he Judicial Services and Smart Infrastructure Project (JSSIP) and Azerbaijan Rural Investment Project (AzRIP) respectively. The first loan, in the amount of $100 million, will support the Judicial Services and Smart Infrastructure Project (JSSIP). This project builds on the current Judicial Modernization Project, and aims at improved access, transparency, and efficiency of selected judicial services. JSSIP constitutes a second phase of World Bank support for Azerbaijan’s efforts to improve the performance of its justice sector and strengthen access to justice, especially for the vulnerable. The project is designed to sustain Azerbaijan’s justice sector modernization by expanding access, strengthening due process, and ensuring transparency in the delivery of key justice and legal services. World Bank Director for South Caucasus, Henry Kerali said modernization of Azerbaijan’s judiciary can play a vital role in the country’s future economic development. “The project will support this transformative process by supporting judicial infrastructure; introducing e-services; establishing more effective dispute resolution and business inspections systems; increasing transparency of judiciary; and improving legal aid services to citizens, particularly to vulnerable segments of the population, such as internally displaced persons and residents of remote regions. We hope the project will promote effectiveness of and public confidence in

the judiciary,” Kerali said. The Project has four components that will upgrade e-justice services, such as case filing and case management systems; improving business registry and inspections, and enforcement of judicial decisions; improving information technology capabilities of the justice sector; and expansion and modernization of judicial infrastructure. The second loan, in the amount of $50 million, is an additional financing for the ongoing Azerbaijan Rural Investment Project (AzRIP), which helps rural communities in Azerbaijan improve their well-being by supporting small-scale infrastructure and income-generating activities. “Almost half of Azerbaijan’s population lives in rural areas where infrastructure needs - such as community roads, irrigation and drainage, potable water, and health and education facilities - are still significant. The Azerbaijan Rural Investment Project brings local communities together, and directly involves them in identification, implementation, and monitoring of project interventions” the report reads. Implementation of the original project has, so far, benefited over 1.5 million people in more than 600 communities. Microprojects, supported by AzRIP, helped improve over 2,000 km of intra-community roads, which significantly reduced travel times to schools and markets. Improvements in the local irrigation and drainage systems have positively affected over 700,000 farmers whose average productivity has risen by 30 percent. Kerali said AzRIP has empowered rural people to take agreed decisions in identifying and addressing priority development needs of their communities. He noted that it has demonstrated a new and highly successful approach to public service delivery in Azerbaijan. “The additional financing will allow this operation to expand into new regions that have high concentrations of internally displaced persons in order to reduce their vulnerability and foster growth,” Kerali said. The additional financing will support 670 more infrastructure micro-projects. It will also provide technical assistance for the identification and preparation of income-generating activities that will then be supported through AzRIP’s grant facilities. The current World Bank investment portfolio in Azerbaijan includes 17 projects. Since joining the World Bank in 1992, commitments to the country have totaled over $3 billion for 54 projects.

AZERBAIJAN INCREASES QUOTA IN IMF

zerbaijan’s decision to increase its quota in the International Monetary Fund (IMF) - adopted at a Baku meeting of the IMF voting group and the World Bank - reflects the country’s high level of economic development. “The country now ranks 65th in the world by economy’s volume, compared to 1995, when it ranked 124th,” Head of Azerbaijan’s Central Bank (CBA) Elman Rustamov, said addressing the event. He also noted that Azerbaijan’s nominal GDP per capita has doubled every five years since 1995. Saying that currently the level of poverty in Azerbaijan is three times lower than the global level, Rustamov put emphasize on the continuously improving international rating of Azerbaijan adding that the country ranks 39th by the index of global competition. Country’s decision to increase its quota in the IMF was announced by Finance Minister Samir Sharifov who also addressed the event. Meanwhile, Division Chief of the IMF Middle East and Central Asia Department, Hossein Samiei said Azerbaijan’s management model of its energy resources provides an opportunity for sustainable economic growth, as well as a diversification of economic development. The International Monetary Fund, which includes 188 countries, is working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Overseeing international monetary system and monitoring the financial and economic policies of its members, Azerbaijan keeps track of economic developments on a national, regional, and

global basis, consulting regularly with member countries and providing them with macroeconomic and financial policy advice. When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members of broadly comparable economic size and characteristics. The IMF uses a quota formula to help assess a member’s relative position. A member’s quota subscription determines the maximum amount of financial resources the member is obliged to provide to the IMF. Moreover, the quota largely determines a member’s voting power in IMF decisions. What is more, the amount of financing a member can obtain from the IMF (its access limit) is based on its quota. For example, a member can borrow up to 200 percent of its quota annually and 600 percent cumulatively. However, access may be higher in exceptional circumstances. Usually every five years, IMF’s Board of Governors conducts general quota reviews. Any changes in quotas must be approved by an 85 percent majority of the total voting power, and a member’s quota cannot be changed without its consent. There are two main issues addressed in a general quota review: the size of an overall increase and the distribution of the increase among the members. First, a general quota review allows the IMF to assess the adequacy of quotas both in terms of members’ balance of payments financing needs and its own ability to help meet those needs. Second, a general review paves the way for increasing members’ quotas to reflect changes in their relative positions in the world economy. Azerbaijan joined the IMF on September 18, 1992, and its quota amounts to about $ 248 million.

ANKARA, BAKU TO EXPAND ECONOMIC TIES

zerbaijan and Turkey will further enhance bilateral relations in the economic sphere, Turkish Deputy Prime Minister Beshir Atalay said, TRT Haber TV channel reported. Azerbaijan and Turkey are among the major prosperous states in the region, he said, adding that both countries are realizing major economic projects in the region. “The projects that Azerbaijan and Turkey are implementing are important not only for the region, but also for the whole world,” Atalay noted. He stressed that the bilateral relations between Ankara and Baku in the fields of politics and economics will continue to develop further, which is extremely important for the fraternal countries. Azerbaijan-Turkey relations have always been strong due to a common culture and history and the mutual intelligibility of Turkish and Azerbaijani languages. Turkey was the first country in the world to recognize Azerbaijan’s independence in 1991 and

has been a staunch supporter of Azerbaijan in its efforts to consolidate its independence, preserve its territorial integrity, and realize its economic potential that arise from the rich natural resources of the Caspian Sea. The countries share a short 8 km border, with the Aras River separating Turkey from the Nakhchivan exclave.

UK SAYS EUROPE NEEDS STABLE ENERGY SUPPLIERS, SUCH AS AZERBAIJAN

he development and strengthening of relations with Azerbaijan is among the main priorities of the UK foreign policy, British Energy Minister Michael Fallon said in Baku on July 10. Fallon arrived in Azerbaijan on July 9 for a three day visit to hold talks over new areas of cooperation with Azerbaijani leadership, ministers of energy, finance, telecommunications and high technologies, representatives of Azerbaijani State Oil Company (SOCAR) and other structures. He said the cooperation between Azerbaijan and UK can be assessed as good and strong adding that the governments of both countries are seeking to expand the relations even further. Fallon said Azerbaijan can play a leading role in the regional and European energy security. Mentioning the latest events in Ukraine and recent crisis in Iraq, Fallon said these issues prioritized the diversification of energy supplies sources and reduction of Europe’s dependence on unstable sources. Speaking of renewable energy sources, Fallon noted the further development of the “Shah Deniz” field, as well as the implementation of the “Southern Gas Corridor” project. As for the Southern Gas Corridor, Fallon noted that Azerbaijan is actively implementing the project. He underscored that the Southern Gas Corridor is extremely important from strategic, energy and political points of view. The minister noted that one of the purposes of his visit to Azerbaijan is to confirm UK’s commitment to this project that is designed for transporting Azerbaijani gas produced at the Shah Deniz field to Europe via Turkey. He further said in September an important date will be marked - the 20th anniversary of the signing of the “Contract of the Century “[The contract on the development of “Azeri-Chirag- Guneshli” fields in Azerbaijan]. Fallon said the event would lead to further discussions on a new contract, as well as further deepening of UK-Azerbaijan relations. Europe needs stable energy suppliers, such as Azerbaijan, Fallon said adding that Europe needs reliable oil and gas supplies.

He said that a big portion of the oil supplies was expected to be provided by Iraq, however the situation changed in such a way that now Europe needs oil supply from more stable countries, like Azerbaijan. Fallon stressed that the purpose of his visit was to further strengthening relations between Azerbaijan and Great Britain, not only in the energy sector but also in the financial sector, infrastructure and other areas. UK seeks settlement of NagornoKarabakh conflict Britain would like to see the Nagorno-Karabakh conflict resolved, Fallon told reporters. “We are not a part of the OSCE Minsk Group, which deals with this issue, but certainly we would like to see this conflict resolved,” he said. The conflict between the two South Caucasus countries began in 1988 when Armenia made territorial claims against Azerbaijan. As a result of the ensuing war, in 1992 Armenian armed forces occupied 20 percent of Azerbaijan, including the Nagorno-Karabakh region and seven surrounding districts. The two countries signed a ceasefire agreement in 1994. The co-chairs of the OSCE Minsk Group, Russia, France and the U.S. are currently holding peace negotiations. Armenia has not yet implemented the U.N. Security Council’s four resolutions on the liberation of the Nagorno-Karabakh and the surrounding regions.

SOCAR OPENS NEW OFFSHORE WELL

zerbaijan’s state energy company SOCAR has commissioned a new well in the shallow part of Guneshli field in the Azerbaijani sector of the Caspian Sea. The well, located on the Guneshli-11 platform, was included into the operational fund with a daily debit of 85 tonnes of oil and 16,000 cubic meters of gas, the company reported. Guneshli field plays an important role in the oil and gas industry of Azerbaijan. The shallow part of the field is being developed by SOCAR independently, while the deep part is being developed

as part of the Azeri-Chirag-Guneshli block (together with foreign partners). SOCAR plans to drill 20 new wells to increase oil and gas production in Guneshli field’s shallow part. Existing wells at this field are being repaired, besides the drilling the new ones. 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, as compared to 43 million tonnes in 2012, according to SOCAR.

PUBLICITY caucasian business week

July 14, 2014 #62

WORLD NEWS July 14, 2014 #62

caucasian business week

CHINA BUYS $22BN WORTH OF US HOMES, LEADS GLOBAL PACK

oreign buyers of US residential real estate surged 35 percent last year, with Chinese buyers, searching for moderately priced, safe investments in a sea of economic and political uncertainty, outspending the rest of the world. Chinese buyers spent $22 billion on US homes in the 12-month period ending in March, or about 24 percent of total foreign sales by dollar value, according to a study released Tuesday by the National Association of Realtors (NAR). That’s up from $12.8 billion, or 19 percent, on the previous year. Total international purchases of American homes jumped to $92.2 billion, according to the NAR, an increase of $68.2 billion on the year before and $82.5 billion for the year ending in March 2012. Foreign clients made up about 7 percent of transactions in the $1.2 trillion US real estate market. Thanks to a surging economy that has seen China rival the United States as the world’s economic superpower, newly affluent Chinese customers are the silver lining in the US real estate market, which is slowly rebounding following the 2008 financial crisis. Chinese buyers, looking for their own piece of the ‘American Dream,’ paid on average $523,148 per property. By comparison, Americans paid an average price of $199,575, according to NAR’s statistics. Sixteen percent of sales went to Chinese buyers, and is the fastest growing sector, behind Canada at 19 percent, down from 23 percent the year before. Mexico ranked third with 9 percent of sales and India and the UK both accounted for 5 percent. Chinese buyers are mostly flocking to Southern California, with Los Angeles, San Francisco and Irvine as their top three choices, according to the survey. Chinese purchased 32 percent of homes

sold to foreign buyers in the state, according to an April survey by the California Association of Realtors. But the Chinese are not alone in their preference for sunny California residences. Buyers from Canada, India, the United Kingdom, Australia, Ireland and Russia are also investing in the popular – and most populated - US state. Foreign interest in the US home market looks set to continue as investors seek out a good deal. “We live in an international marketplace, so while all real estate is local, that does not mean that all property buyers are,” NAR President Steve Brown told the Los Angeles Times. “Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability and an incredible opportunity for investment in their future.” Due in large part to an overheated Chinese housing market, Chinese buyers “want to diversify because the housing market over there is just way too hot,” William Yu, an economist at the University of California Los Angeles, told the Wall Street Journal. Political instability also figures into the trend, said Mr. Yu. “There’s no trust in the rule of law,” he said. “If they’re making money, smart people are going to try to keep the money here in case something happens in China.” There is yet another reason for China’s heightened interest in US property: a slowing economy at home. New-home prices in China dropped in June for a second straight month as a sluggish economy and excess supply has dampened domestic interest, according to the China Real Estate Index System Survey. Meanwhile, US house prices have increased 26 percent since March 2012, after tumbling 35 percent from their June 2006 peak, the S&P CaseShiller Index of 20 cities shows.

US MAY END CONTROVERSIAL FIVE-YEAR ‘EASY MONEY’ PROGRAM IN OCTOBER

he US Federal Reserve said it could end the controversial five-year-old ‘quantitative easing’ program that has pumped about $4 trillion into the US economy as early as October, if there are no signs the economy is still in trouble. “If the economy progresses about as the [Fed] expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting,” according to Wednesday press release of June 17-18 Minutes of the Federal Open Market Committee. Monthly bond purchases are already cut from a peak of $85 billion to $35 billion following the results of the June meeting. The Fed plans to successively reduce purchases at its next three policy meetings, cutting them in October from $15 billion to zero. After five years of recession the US economy started to show positive results, indicating recovery. Last month, the unemployment rate had fallen to 6.1 percent, the lowest since September 2008, according to US Bureau of Labor Statistics. A level that Fed officials didn’t expect to see before the end of the year was led by 288,000 extra jobs. June resumed a five month 200,000-plus job gains chain which is an almost 15-year growth record. After GDP shrank by 2.9% from January to March, mostly due to a brutal winter, the US economy is expected to stabilize and grow at a

healthy 3 percent for the rest of the year. Meanwhile the US inflation rate of 2.1 percent is also approaching the Fed’s 2 percent target. Since January the Federal Open Markets Committee (FOMC) has been reducing the volume of Treasury bond and mortgage-backed securities purchases, known as quantitative easing (QE), but did not set an end date for the scheme. The policy also known as ‘easy money’ was mostly used to buy debt and junk financial instruments from the market like Treasury bonds and mortgage-backed assets to provide the financial system with plentiful cheap cash. It was also aimed to stimulate investors to back stocks or corporate debt and to keep long-term interest rates down in order to boost the economy. Since being introduced in 2009 during the financial crisis, QE became the largest financial aid scheme in history, as it provided the US financial markets with the estimated $4 trillion. Critics of ‘easy money’ in Congress and elsewhere have warned that the program will lead to another financial bubble or excessive inflation. Potential Republican presidential candidate Senator Rand Paul is a long-time critic of QE, and has worried that the recovery of the US economy is “illusory”, says the Guardian. Andrew Hussar a former manager of the Fed’s mortgage-backed security purchase program and a senior fellow at Rutgers Business School said in the Wall Street Journal that QE had helped Wall Street far more than Main Street.

BRICS COUNTRIES NEAR DEVELOPMENT BANK DEAL TO RIVAL IMF, WB

he emerging economies of Brazil, Russia, India, China and South Africa, are a couple of days from agreeing the $10 billion BRICS development bank, as well as a $100 billion currency pool. It could challenge global lenders like the IMF and World Bank. The bank will be called the New Development Bank, and will provide finance for infrastructure projects. Its creation will meet the needs of emerging and poorer economies according to Russian Finance Minister Anton Siluanov. In a speech Wednesday he confirmed the funding would be divided equally, Russia will contribute $2 billion in initial capital for the BRICS bank over seven years. The bank will start with $10 billion in cash and $40 billion in guarantees. The $50 billion will be eventually built up to $100 billion. The bank will be able to start lending in 2016, the minister says. The final decisions concerning the creation of the bank are expected to be made by the BRICS leaders at a summit in Brazil on 15-16 July. Apart from the BRICS countries other UN members may also participate in the bank’s development, but their total share won’t exceed 45 percent. The location of the headquarters is still not decided, but Siluanov said the two favorite cities areShanghai and New Delhi.

BRICS leaders are also expected to sign an agreement to establish an additional $100 billion fund to steady the currency markets. “We have reached an agreement that, in the current conditions of capital volatility, it is important for our countries to have this buffer a so-called “mini-IMF”- a financial organization which could quickly react to capital outflow, providing liquidity in hard currency, in particular in US dollars,” Siluanov said. The need arose after the long inflow of cheap dollars which fueled a boom in the BRICS countries for a decade reversed into a sharp outflow in 2013. Even though the new bank will be a small rival to the World Bank which has capital of $223 billion, or the International Monetary Fund, it will serve as a reminder to the US of the shift in the global economy towards the developing world. Currently BRICS countries make up over 40 percent of the world’s population and account for more than 25 percent of global GDP.

PLAN OF $40BN NICARAGUA CANAL OFFICIALLY APPROVED

icaragua has approved a route for a new ship canal to link the Atlantic and Pacific Oceans costing $40 billion. The project would compete with the Panama Canal and could completely change transoceanic trade. The plan would see the canal finished in 2019 and beginning commercial operations in 2020, Reuters cites a member of the Nicaraguan steering committee Telemaco Talavera. The plan for the canal is expected to be 172 miles (278 km) long from the mouth of the Brito River on the Pacific side to the Punto Gorda River on the Caribbean coast. When constructed it would be more than three times longer than the Panama Canal built a century ago. The canal will be between 230 meters and 520 meters (755 feet to 1,706 feet) wide and 27.6 meters (90 feet) deep. The plan will be finalized

after ground studies due to be completed by the end of the year. The creation of two free-trade zones, and two ports linked by a railway along with an international airport close to the canal would involve “a formative change in job creation,” the BBC quotes Paul Oquist, a close adviser to President Daniel Ortega on the project. According to government estimates the project would pull more than 400,000 people above the poverty line by 2018. Opponents of the plan complain about the social and environmental impact. In particular, it is feared Lake Nicaragua, which is a strategic fresh water source, could suffer after the transoceanic canal is opened. The canal plan was proposed by the HK Nicaragua Canal Development Investment Co Ltd (HKND Group). HKND is headed by ambitious Chinese lawyer Wang Jing, who also heads China’s Xinwei Telecom Enterprise Group.

FIDDLING THE BOOKS? EU TO INVESTIGATE AMAZON’S TAX RATES IN LUXEMBOURG

fficials from the European Commission have demanded that Luxembourg hand over documents relating to book retailer Amazon’s tax affairs. The crackdown by the EU has already affected Apple, Starbucks and carmaker Fiat’s financial arm. The European Commission is investigating Amazon to see if its Luxembourg tax base complies with EU state aid rules and to see what kind of relationship exists between the tiny EU country and the bookseller, the Financial Times reports. The Brussels-based Commission is carrying out fact-finding missions in various EU countries as part of its campaign to clamp down on so-called “sweetheart” tax deals with large companies. There has already been significant criticism across Europe at Amazon’s tax structure. Evidence has come to light that some multinationals are paying virtually no tax at a time when EU governments have been forced to bring in tough austerity measures to cut state budget deficits. Amazon is already under the spotlight about questions on its business practices, including harsh working conditions in its warehouses, squeezing suppliers and its role in pushing small high street book retailers into liquidation. The latest accounts filed by Amazon EU Sarl reveal its sleek tax structure in Luxembourg, which

reduced Amazon’s overall tax rate by 8 percent to 31.8 percent. The investigation into Amazon comes after similar probes into Apple, Starbucks and Fiat Finance and Trade, which are also based in Luxembourg. The investigations scrutinized the companies’ “transfer pricing” arrangements, which determine how taxable profits are allocated between countries – allowing them to pay significantly less tax.Luxembourg, according to the European Commission, has failed to fully cooperate with their investigation. EU competition commission Joaquin Almunia is believed to want the investigation to be well under way by the time he leaves office later this year. He also hinted when the probe into the three multinationals began in June that the net could be cast more widely to catch companies pursuing“aggressive” tax avoidance. “In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes,” he said. Apple’s tax affairs stirred disquiet last year after a US Senate committee claimed that by keeping its tax base in Ireland, it allowed the company to apply a corporate tax rate of just 2 percent. Separately, the Paris based Organization for Economic Cooperation and Development (OECD) is planning to overhaul international tax rules for digital companies.

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July 14, 2014 #62

TBILISI GUIDE July 14, 2014 #62

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

July 14, 2014 #62