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BUSINESS WEEK June 3, 2013 #07

caucasian business week

June 3, 2013, Issue 07

caucasian1 Kakha Kaladze’s final match Pg. 13

BE INFORMED, DO BUSINESS

GEORGIA APRIL GDP GROWTH 4.1%

eorgia’s economic growth accelerated to 4.1% year-on-year in April after only 0.4% growth in March, according to preliminary data released by the state statistics office, Geostat, on May 30. Pg. 2

MICROFINANCE ORGANIZATIONS END 1Q13 IN 13.86 MILLION GEL PROFITS

ational Bank of Georgia reported that total profit of 62 local micro-financial organizations amounted in the 1st quarter to 13.86 million lari. Pg. 7

LADO GURGENIDZE WILL NOT BE PRESIDENT OF LIBERTY BANK FROM JULY 1

iberty Bank increased authorized capital by 15 million GEL, which is kind of message for stockholders on the possible stock capital growth through stock emission. Pg. 8

BELAVIA STARTS KUTAISI-MINSK DIRECT FLIGHTS

elorussian air company Belavia implemented today its first direct flight to Minsk from David Agmashenebeli International Airport of Kutaisi. The company, which already has direct flights between Minsk and Tbilisi and Batumi, will implement Kutaisi flights 3 times a week. Pg. 6

BOSCH TURNOVER IN GEORGIA GROWS BY 50%

ousehold appliances and tools manufacturer Bosch reported that its turnover in Caucasus region for 2012 amounted to 16 million EUR, of which Georgia accounted for 9 million EUR. Pg. 6

EMPLOYMENT AND UNEMPLOYMENT 2012

n 2012 the annual unemployment rate in Georgia declined slightly by 0.1 percentage point, amounting to 15.0 percent. The labor market data related to unemployment are given in the charts. Pg. 9

AZERBAIJAN FIRST AZERBAIJAN-UAE FORUM ON ICT TO BE HELD IN BAKU

ARMENIA GOLD PRICE IN ARMENIA FALLS BY 2.4% TO AMD 16,935.65

s of May 29, gold can be bought at 16,935.65 drams (lower by 2.4% or 407.28 drams from a week earlier) and sold at 18,408.31 (lower by 442.7 drams). Pg. 11

CIS KAZAKHSTAN TO PRODUCE PEUGEOT CARS

t seems like a lifetime ago, but back in the fall of 2012 a lot of people got very worked up about Bidzina Ivanishvili‘s victory in the Georgian parliamentary elections. Jamie Kirchick said that Mikhail Saakashvili’s defeat was a “Russian victory” and that Ivanishvili would “almost certainly move to put Georgia back in Moscow’s sphere of influence.” Jennifer Rubin of the Washington Postcastigated Ivanishvili as “Vladimir Putin’s man in Georgia” and also, for no apparent reason, called him a “bully.” Prior to the election, but very much in keeping with the contempt for Ivanishvili felt in certain sections of the neoconservative right, the Weekly Standard darkly warned that if Ivanishvili triumphed “Georgia’s democracy and Georgia’s minorities may suffer yet another grievous setback.” So what has happened in the seven plus months since the election? What has Ivanishvili actu-

GEORGIA IS MOVING CLOSER TO NATO MEMBERSHIP AND BIDZINA IVANISHVILI DEFINITELY ISN’T A KREMLIN PLANT

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ally done? Has he moved Georgia back towards Moscow’s sphere of influence? Has he rejected integration with the West? Well, not exactly. Here is what “Putin’s man” recently had to say about Georgia’s attempts to join NATO: Next year we should undertake a very vigorous step and get at a MAP[ Membership Action Plan]. We have strictly set MAP as a target and next year when there is a gathering of NATO leaders we should undertake a powerful step in this direction…We should become a NATO member state and those soldiers who now serve in Afghanistan contribute most of all to this deed [of NATO integration]. Doesn’t exactly sound like a Putin clone, does it? Whether or not Georgia will actually receive a MAP in 2014 is a very different question, largely because the decision of whether or not to offer a MAP is not Georgia’s to make (it will be made by the current members of NATO).

BRITAIN’S BIGGEST CLOTHING RETAILER TESCO ENTERS GEORGIA

he clothing brand sold by Britain’s biggest retailer Tesco (TSCO.L) said on Sunday it planned to open more than 50 new franchise stores worldwide over the next five years. F&F, which opened its first franchise store in Saudi Arabia last year, said it would open shops across the Middle East and in Kazakhstan, Geor-

gia, Armenia and Azerbaijan. Up to six stores will be opened this year, with the first in the Kazakh capital Astana next month. F&F gave no details on how much the expansion would cost or how it would be funded. “This announcement builds on the success of the first franchise stores and demonstrates our commitment to growing the brand internationally through this model,” F&F Chief Executive Jason Tarry said in a statement. The company said it would extend its existing agreement with franchise operator Al Hokair, and would also work with new partner Dubaibased Al Futtaim. F&F clothing is already sold in 12 countries, including the Czech Republic and Poland. Reuters

GEORGIAN TIMES BUSINESS RATING AWARD - BOLNURI CROSS WAS GRANTED TO SOCAR

he best business company of 2012 was revealed. The winner of traditional XVI business award of media holding Georgian Times and Social and Marketing Research Center GORBI, became the company SOCAR. SOCAR was nominated as the best company based on hidden voting during the official awarding ceremony held in the hotel Courtyard Marriot. The Bolnuri Cross was awarded to the General Director of SOCAR Energy Georgia, MahirMamedov by the President of the Media

Holdong MalkhazGulashvili and the Company GORPBI President MerabPachulia. Pg. 14

Economy Minister: Fuel and Medicines Prices Shrank after Collapse of Oligopolies Pg. 4 Nodar Khaduri “Georgian economy will become a part of the large European economic space” Pg. 2 Giorgi Kadagidze “Georgia will repay almost all loans to the International Monetary Fund by 2015” Pg. 2

Zaza Chelidze: “Georgia’s Unemployment Rate is Decreasing every Year since 2009”

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Lasha Papashvili: Bank Sector Started Growing Loan Portfolio, Progress is Noticed in Housing Sector too

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Archil Kontselidze: “Quality And Speed Are Keys To Succsess of VTB Bank” Pg. 4 Maya Sidamonidze: ze: Georgia’s Tourism m Pg. 5 Advertising Campaign is Non- transparent Gigla Agulashvili: Rejection of Two Georgian Wines by Russia is not a tragedy Levan Koberidze: “Sairme” to Enter the Russian Market in the Near Future Pg. 5

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TOP NEWS

MEMBERS OF ASSOCIATION OF MANUFACTURERS OF NONALCOHOLIC BEVERAGES MEET WITH ECONOMY EXPERTS

embers of the association of manufacturers of nonalcoholic beverages met with economy experts and discussed expected negative fiscal results of marking nonalcoholic beverages. The association has introduced presumeable economic analysis of new regulations and expected fiscal results. The forecast is pessimistic - the state budget will shrink by about 4 million GEL every year and this will make negative influence in terms of GDP contraction and social issues. At the same time, economy experts made focus on considerable contraction in wages to the field workers. It is unjustified to introduce obligatory electronic marking of non-excisable goods in terms of fis-

cal and economic policy issues. The move will not foster the creation of new job places, business development and growth in budget revenues, but will create barriers to the domestic production and make it uncompetitive compared to foreign companies. The association members also discussed the future cooperation plans and agreed to continue meetings. As reported, according to the decree of the former Finance Minister, obligatory marking was to be introduced on nonalcoholic beverages starting January 1, 2013. New Finance Minister Nodar Khaduri postponed the decree enactment date several times, but the document has not been abolished yet. BPI

“SOVIET DEPOSITS AND PUBLIC INTERNAL DEBT”

ointing at example of Lithuania, doctor of economics Lia Eliava regards that “sums, which were gained from state property alienation and accumulated on currency accounts in National Bank of Georgia (NBG), might be easily used for compensation of Soviet-time deposits”. As the expert notes, NBG’s currency reserves total to $3 billion for today, so “spending part of these reserves for the country’s economy will be absolutely advisable”. This will be inflationary money, which the economy needs by now, as there is “deflation raging in the country”, she declares. According to Levan Karsaulidze, head of unit in Sakstat and member of commission for studying problem of the public internal debt, consideration of debt, aroused due to housing construction, has been already held, while discussion on the deposit issue was not conducted yet.

In terms of compensation, indexing was proposed, but as a result “we have got such a large sum that might become in fact insurmountable difficulty for the budget”, Karsaulidze notes. Chairman of Compensation Fund Malkhaz Tsiskarishvili points that the state recognized 1.2 billion lari an internal debt in 1998, at that 502 million lari has accounted for the deposits. Within frames of housing construction debt settlement, compensation was issued to 850 families, however, but 7,000 families are still awaiting the money, he notes. Above-mentioned considerations were said at the conference, name “Soviet-time deposits and public internal debt”, which was held on May 24. The newspaper brings comments of other participants as well: Zurab Gvasalia (Georgian Banking Association), Mikheil Jibuti (Georgian Economists Association), Elguja Mekvabishvili (Tbilisi State University) and others.

FORBES - GEORGIA IS MOVING CLOSER TO NATO MEMBERSHIP AND BIDZINA IVANISHVILI DEFINITELY ISN’T A KREMLIN PLANT From 1st pg.

Nonetheless, it seems that Georgia’s government is doing exactly what you would expect it to do given the Georgian public’s overwhelming support for further integration with the West: doing the best it can to keep things progressing. As noted in a very good summary in RFE/RL, Ivanishvili’s performance seems to be extremely popular with the Georgian public: 68 percent of the population believes the Georgian Dream coalition can best handle relations with Russia and 54 percent trust it to steer the country into NATO. When you consider the extraordinarily bitter, and nearly violent, political divisions that Georgia faced as recently as the fall, 68% support for Georgian Dream in Russian policy is nothing short of a miracle and is a testament to the fact that Ivanishvili is following a course broadly supported by Georgian society. Why did Ivanishvili, who never made a secret for his pro-NATO and pro-Western proclivities, become such a hate figure among certain sections of the American right? Well, because he had the temerity to oppose Mikhail Saakashvili, who was wildly popular for his ostentatious anti-Russian stances and his equally ostentatious pro-Americanism. Saakashvili very consciously sought to portray himself as “our man in Tblisi,” and quite a lot of people who should have known better were taken in by his act. Because Saakashvili so expertly portrayed himself as America’s one reliable ally in the region, and the one hope for Georgia to become Western, many people assumed that, because Ivanishvili opposed Saakashvili, he opposed everything that Saakashvili stood for. But, at a basic level, the differences between Saakashvili and Ivanishvili were tactical, not strategic, in nature: they mirror, to a truly eerie degree, the debates between many US realists and neoconservatives. Both Saakashvili and Ivanishvili wanted membership in the EU and

KAISER – LIVING THE BAVARIAN PARTNERSHIP FUND COMPLETES FIRST LARGE-SCALE AGRICULTURE LEGEND PROJECT

he Partnership Fund has completed implementing the first large-scale project in the agriculture sector in partnership with the Georgian bank sector and private investors. Under the project, Kalanda swinery complex has been constructed by financial support of Bank of Georgia, the Partnership Fund and private investors. The complex will supply ecologically clean product to the Georgian pork market and the company market ratio will be over 15%. LLC Kalanda, a subsidiary of GeoAgro company introduced and started implementing the project at the end of 2011. The project’s investment value marked 10 million USD. The complex construction works started in June 2012. The asset is located on 13 hectares in the village of Koda, the Tetri Tskaro District. The complex was projected and technological equipment was supplied by German company Big Dutchman. Genetic material was supplied by British company ACMC. Initial output of the compex will be 16 000 swines a year. The complex includes 7 buildings and a combined forage plant and slaughterhouse

caucasian business week

will be also constructed. Big Dutchman will carry out the complex management for at least one year. Kalanda complex will introduce the first high-quality products to the market in December 2013, 300 swines a week. The figure will double in 2014 after the complex moves to a full production cycle. Irakli Kovzanadze, an executive director for the Partnership Fund says the fund has taken part in implementing a special project in the agriculture sector, because it represents the first successful sample of cooperation between the state, the bank sector and businessmen. “I am pleased all of us see the results of joint efforts of the bank sector, the state and the private business. The project is of crucial importance to offer ecologically clean products to the Georgian market through high-technology full cycle. I am sure Kalanda pork will draw much consumer interest from the very beginning on the market. The Partnership Fund is to support private investments and put investments in state priority fields. The agriculture sector is one of the similar priority directions. At this stage, several largescale projects are being discussed in the agriculture sector and we will inform the society on the fund’s financial involvment”, Kovzanadze said. The Partnership Fund provides a 50% financial support of agriculture projects valued at least 5 million GEL. The figure makes up at least 30 million GEL in other sectors. JSC Partnership Fund was founded in 2011. The state owns a 100% stake in the fund. The capital makes up 2.3 billion GEL. Assets are over 5 billion GEL. The Fund is to support private investments in the energy, agriculture, real estate/ infrastructure and production sectors.

NATO and both wanted to remove Georgia from Russia’s sphere of influence. The differences between them were how to accomplish these goals. Saakashvili, for some strange reason, thought that the best way to separate Georgia from the enormous, irascible, and nuclear-armed country to its north was to do everything he could to infuriate the famously short-tempered and vindictive Vladimir Putin. Rather than quietly working to reduce Georgian dependence on Russia and to gradually build up the country’s capability to withstand Moscow’s pressure, Saakashvili telegraphed his intentions to the greatest extent possible, literally going on television to say things like “we want nothing to do with the Russians, we’re a part of the West now.” It’s not hard to see why that “plan” ended in disaster. Ivanishvili, in contrast to Saakashvili, plays a much quieter and more circumspect game, deliberately trying not to stoke tensions with Russia but to minimize them. As a quick glance at his track record shows, this minor tactical difference is really not that important: he is still fully committed to joining NATO and to moving Georgia in a more Westward direction, and to the extent he is seen to be fulfilling these goals the Georgian public supports him. As Georgia moves more and more closely towards NATO membership, it’s worth taking a minute to remember all of the hysterical denunciations of Ivanishvili which greeted his election and to compare those fevered attacks with his actual performance in office. Could Ivanishvili still fail in his quest to bring Georgia into the West? Yes, it’s fully possible that Moscow will recoil in horror at the prospect of further NATO enlargement and do something drastic. Stranger things have happened. But if Georgia’s NATO bid fails it willnot be because Bidzina Ivanishvili was “Putin’s man in Georgia” but due to the inherent difficulty and complexity of the task.

atakhtari brewery has begun producing a new beer – an unfiltered Kaiser wheat beer, which is distinguished by its special aroma. The beer already has an exclusive license in Georgia and is bottled using German traditions. The company held a presentation for the new beer at the Beer Garden and arranged for the degustation of the unfiltered wheat beer. This is the first case of the mass production of unfiltered wheat beer in Georgia. “The beer is mostly produced in Bavaria and has quite a complicated production process. Taking this into consideration, beer brewing companies avoid its production. We dared to take this step and did it quite successfully. As a result, we received a high-quality tasty product,” Giorgi Kokiashvili, Technical Director of Natakhtari says. “The unfiltered wheat beer was produced in Georgia for the first time. This is a beer that has a taste and aroma you will never forget,” said Tornike Nikolaishvili, Marketing Director at Natakhtari. The official license to bottle the famous Kaiser beer brand in Georgia was received by Natakhtari, this is the first time in the history of the Kaiserbrau company. It means that the Kaiser bottle inscription reads “Made in Georgia”. Natakhtari started bottling licensed Kaiser in Georgia in August 2012.

INTERVIEW caucasian business week

June 3, 2013 #07

“GEORGIA’S UNEMPLOYMENT RATE IS DECREASING EVERY YEAR SINCE 2009”

ECONOMY MINISTER: FUEL AND MEDICINES PRICES SHRANK AFTER COLLAPSE OF OLIGOPOLIES

- The unemployment rate in Georgia in 2012 decreased by 0.1 percentage points compared with 2011 and made 15 percent - the National Statistics Office reports. What is the basis for this statement? - I do want to clarify that this is not the first time. Georgia’s unemployment rate has been decreasing every year since 2009. However, the decrease is not very significant. As for a source of information, the main source is the integrated household survey. Approximately 10 000 people are interviewed each year. This is the methodology of the International Labor Organization [ILO]. Almost all countries of the world use a similar methodology. - You say that over the years the unemployment rate has been decreasing. Then, what is the basis for the statements regarding annual unemployment rate increase and as if a decreasing trend is not actually observed? - According to official statistics, unemployment increased from 2007 until 2009. As per the same official statistics, since 2009 the unemployment rate decreased. I want officially to emphasize this because this is our methodology. The methodology we use is used by every country in the world.

urrently foreign investors are on the transition stage from the interest towards the Georgian market to specific investments. Technical and legal issues are being discussed with them. Economy Minister Giorgi Kvirikashvili said in an interview with “Business Time Georgia” magazine and cited the Turkish investors’ visit who, in his words, are interested in building a rapid constructions enterprise. Economy Minister says that these investors will soon make a serious investment. According to Kvirikshvili, the second group of businessmen from Turkey visited Georgia as well and are interested in textile production. The authorities offered them to implement this project in Guria and Imereti regions. “They are now studying these regions, and in fact, they have already decided to invest in the country,” - the Minister of Economy and Sustainable Development says noting that in the second or third quarters the government will present investments and figures to the public. Minister points out that there was oligopoly in some areas of the Georgian market. For example, fuel and pharmaceutical sectors, so now the government is creating a new anti-trust system, and very soon the new antimonopoly law will be submitted to Parliament. The Competition Agency will be also set up which independence will be guaranteed by law. In Kvirikshvili’s words, “the agency’s activities, of course, will not be directed against existing companies. In addition, the Agency will have the right, in a case if a company faces any resistance in terms of market access, to lift this resistance.

An interview with the head of “Sakstat” ZAZA CHELIDZE

Different studies are carried out simultaneously. These researches are conducted by different organizations. Of course, it depends on the focus group. An organization can conduct a research and consider unemployed those people who we consider as employed, or vice versa. Therefore, the unemployment rate differs. For example, in Armenia, the unemployment rate is about the same, in Azerbaijan - a little less. Thus, the methodology that we use is the official statistics, it is recognized and used worldwide. We hear a variety of opinions regarding the level of unemployment, which we understand. When you ask people whether they work or not, the vast majority of self-employed will say that they do not work. Naturally, the unemployment rate will be different. We calculate people differently. We ask them whether they receive income from their own labor. This is very important. So the people who are selfemployed, including private tutors or employed in agriculture, all these people are considered employed. Our problem is not in numbers. The problem is that the vast majority of employed are self-employed and there is a lack of jobs. If we consider self-employed citizens as unemployed and the unemployment rate will be 60 percent instead of 15, will status of these people improve? A 60 percent unemployment is not typical for a country with an economy like ours. A 60 - percent unemployment rate is observed in the most poor and backward countries. These are the African countries where absolutely nothing is produced, where there is hyperinflation, a war and civil conflicts. commersant.ge

“VTB 24” VICE-PRESIDENT SEES NOTHING STRANGE IN RUSSIAN BANKS’ INTEREST IN GEORGIA An interview with “VTB 24” Vice-President VYACHESLAV GRITSAENKO - Recently, it has been reported about the entry of Russian banks in the Georgian market. President said a few months ago that the Russian state banks had intended to purchase Georgian banks. Mikheil Saakashvili named “Sberbank” and “Gazprombank”. The Georgian banks, to which this statement applies, denied the information, but the question remains - how can such large banks be really interested in Georgia? - I have read this information as well and I will answer to this question this way: Russian banks have interest in cooperation and development of banks in different areas. Not only in Georgia and in the CIS - countries ... For example, a few days ago I returned from Shanghai where “VTB” branch was opened. Of course, our group, as a whole, is interested in development. Services and products that banks offer to their customers are basis for the development. Simple example: 7 years ago “VTB 24” was not on the market, a market was divided and a variety of players had enough shares. Within 7 years our share in the lending market has reached almost 11.75%, our share of deposits exceeds 7%. - Is it a wrong approach that “Sberbank” will have no interest in the Georgian market because it is small ? - I think that is wrong. The main is competition, both Georgian and Russian market is open, and various banks, of course, might work on Georgia’s territory. However, a bank that actively develops, grows its own share and offers quality service to its customers will survive. - There is an opinion in the Georgian public that in a case of Russia when it refers to the state-owned banks, their entry into Georgia is associated with some political risks ... - Banks are not up to politics. Banking, as well as any other business, is determined by the efficiency and common sense, sound calculations. Yes, we are state-owned bank, and along with that, efficiency is the basis for our development. The fact that we have increased efficiency and profit in 7 years means that we focus on efficiency. Politicization and efficacy are the factors

that often can interfere with each other. In this situation, we focus exclusively on business, effective business organization whatever territory we work – whether it is Georgian, Russian or CIS countries market. - What is the difference between the Georgian banking sector and the banking systems of the countries in which you are represented? - In my opinion, there is no difference in terms of the retail market. A specific is negligible. The people’s basic requirement is real estate, car purchase, education for children, repair, etc. The bank simply helps them to achieve these objectives. - Is there any difference from the technological point of view? - The technological side is important for any market, because the user’s requirements should be satisfied accurately, qualitatively and in adequate period. Human needs are identical both in Russia, Georgia and in any other country. - What are your plans in the Georgian market? - We’ve prepared basic, launch platform. Service and sales models were introduced. We are introducing various models of service of wealthy customers. On the one hand, the network development, and on the other hand, products development, change of sales and service models – all these will grow. The goal is to increase a market share. - Haven’t the user’s activity changed after the change of power in Georgia? Also, some experts talk about the conservatism of the banking sector ... If you notice any change in one or another direction? - No, the market is unchanged for us, I believe that the market potential is important and general economic situation as well as services and products define the future development of banks... If the welfare of citizens grows, it will also provide the bank’s development. - You want to say that there was not a drop in demand. - Definitely there was not. commersant.ge

This is one of the most important and also painful questions, because in the recent period a lot of companies had to leave the business because mega companies did not allow them to operate. Therefore, we are trying to support these companies so that they will be able to return and continue their business. I can say that we have already received specific results in this process. To look at the pharmaceutical market, prices for medicines have significantly decreased. A decrease in the price is also observed in oil sector ... In particular, I know that some non-branded companies buy filling stations. 3-4 new companies are being formed, new distributors appear who are bringing fuel in small and medium quantities. With all this, we can provide a competitive market where everyone will be able to start his own business ... “- Minister adds. According to him, tourism remains one of the highest priorities for the new government because it is a strategic sector of Georgia’s economy and it is important in terms of employment. “We have moved to business to business model, consolidated local tourist agencies and we try our best to have contacts with companies. We do not just take part in exhibitions. We are bringing foreign tour operators in Georgia, organize tours for them, maximally fund such activities ... I think the support of small aviation will help in development of mountain tourism. The flights will be available not only to Svaneti region but also to other mountain regions, “- says the Minister of Economy. In his words, the government is working on a general plan for the development of tourist areas.

LASHA PAPASHVILI: BANK SECTOR STARTED GROWING LOAN PORTFOLIO, PROGRESS IS NOTICED IN HOUSING SECTOR TOO

hy a decline in economic growth is being observed in Georgia? The influential rating agency Standard & Poor’s linked a reduction in economic growth with political instability. This issue has become one of the main reasons for European Bank for Reconstruction and Development [EBRD] to cut economic growth forecast . Radio “Commersant” was interested in how the current political processes in the country affect the businessmen’s activity and whether or not the business is still in a waiting mode. The well-known businessman Lasha Papashvili has not noticed the transition of business into a waiting mode. Moreover, as Papashvili explains to “Commersant”, after the parliamentary elections business has revived sooner than it was expected. The businessman says that banks woke and started lending as well as progress is being observed in the construction business. According to Papashvili, the company “Redix” has already started the implementation of a multi- million project with the support of EBRD and local commercial banks.

ARCHIL KONTSELIDZE: “QUALITY AND SPEED ARE KEYS TO SUCCESS OF VTB BANK”

rchil Kontselidze, director general of VTB Bank Georgia, says in an interview with the newspaper that Georgian banking sector’s average annual growth makes up 30% for the last 10 years. There are several problematic issues in this sector and personally I have to single out in the first instance cost and term of resources, Kontselidze declares. Unfortunately, resources are quite expensive, correspondingly, loans cost high and terms are not long enough, he explains, adding that in fact, domestic resources longer than 2 years do not exist. At the same time, “interest rates are significantly decreased on all products and credits are reduced in price by 2-3% on average” in VTB Bank Georgia, Kontselidze says. According to him, the bank issues credits for less than 10% for big corporate clients. According to Kontselidze, the bank has already issued 4 million (currency is not indicated, supposedly, lari) within frame of agriculture crediting program and plans to increase this volume up to 25 million until the end of this year. Regarding economy, Kontselidze considers that growth decline is a temporary phenomenon, as “economic formation is changed in the country in fact”. “In past period, public sector was artificially inflated at the expense of infrastructure projects”, he declares.

June 3, 2013 #07

INTERVIEW

caucasian business week

BIDZINA IVANISHVILI: CO-FINANCING FUND MAY EXCEED 5 BILLION USD

o-financing Fund may exceed 3 billion and reach 5 billion USD. Georgia’s Prime Minister Bidzina Ivanishvili said in an interview with “Georgian Times” newspaper. “When I announced about a 3 billion fund, there were so many people wishing to invest in the fund that it may exceed 5 billion. This would be a great additional charge. That was my idea. I am a businessman and I am well aware that in such a developing country like Georgia, which is not very trusted and where there is not economic and political stability, for any investor is important who will be his local partner.

This fund offers any investor partnership of 25 to 75%. This simplifies the investor’s decision. It certainly would work, but it takes time. The information was spread and there is already a very good reaction. It will be an added incentive,”- Ivanishvili says noting that, apart from this fund, two another funds will be established. Two weeks left. Prime Minister announced for the first time about a sovereign fund, a private investment fund and the Youth Fund a few months ago. Investment, the same co-financing will be filled with private capital and in a case of an interesting business - ideas 25-75% of the project cost will be funded. Ivanishvili talks about infrastructural projects in an interview and points out that the development of infrastructure, which the previous government boasted, will be 2-3 times bigger. For 9 years, they constructed 100 kilometers of road. I had a meeting with the Minister of Infrastructure David Narmania, and just this year, we will build minimum 50 km. For 2 years, we will do a lot more. In his words, the new government lays the foundation of “true development.” “The economy is stagnant. It is very difficult to

change it in a few months, but the foundation that we lay for the country’s economy is very stable and fundamental. Business is exempted from any pressure and interference. Business requires free and competitive environment that we have practically founded. In addition, we are launching improvement of some economic laws. Most of them were normal on the sheet of paper. They have done something in terms of economy but it had no value, while the business was entirely managed by the government, “- said Ivanishvili. He says that Georgia is very interesting for investments - a unique location, good climate and conditions economic boom to start in Georgia. “This is my dream, but as I say, the signs of this should be observed in the second year and the third year should be good,” - Prime Minister adds. In his words, the representatives of the previous government are still trying to create the impression that something terrible is happening in Georgia. Economic growth is likely to be lower than in previous years, but Prime Minister says that economic recovery has begun. “It was ailing, artificially created and managed economy and the growth was based on credits. The government did what was not its job - Ivanishvili notes.

GIGLA AGULASHVILI: REJECTION OF TWO GEORGIAN WINES BY RUSSIA IS NOT A TRAGEDY An interview with Chairman of Parliament’s Committee on Agriculture and Rural Affairs GIGLA AGULASHVILI

- Russia’s Chief Sanitary Doctor says that his office had to block three varieties of Georgian wine produced by “Schuchmann Wines”. Also, Onishchenko announced about incompatible of five species of “Askaneli Brothers” cognac with the standards of the Russian market. Did you expect such relationship from Russia’s Chief Sanitary Doctor and his agency? When high-quality products manufactured by two well known companies are rejected, what are we dealing with and whether can you see the signs a fear of which existed earlier that it would be

speculation to some extent? - The question sounds so as if the situation is alarming. I do not share this assessment. Agreement on 234 products was reached, “Borjomi” has already returned to the Russian market as well as other products are returning. I think it is not necessary to give political motive to this process or the department’s actions or statements of certain persons. By the way, one kind of “Askaneli brothers” products was rejected while others were allowed to the market. “Schuchmann” products were rejected, and as far as I am informed, a survey and the analysis were conducted three times. Therefore, it seems to me logical the company’s position concerning the fact that they will wait for the official results, and then will make detailed comments and a decision. They can apply to the court for the infringement on business reputation. I know “Schuchmann Wines” wines, a very highquality wines. However, whether a particular consignment met the standards, it may be the subject of litigation. It is a common thing; it can happen between Russia and Georgia or any other states as well. So, the product quality control is in our interest, and of course, in the interest of the recipient country. I do not see any tragedy. I can’t make any conclusion that this is someone’s moti-

vated steps so far due to these two facts because 234 products were allowed to the market. I think it is a normal working process. - Here we are dealing with the company, including “Schuchmann Wine” which products are exported to the EU market... - I do not know, I have to repeat the same thing. In my opinion, there is nothing special about this. Instead of me and you, “Schuchmann Wines” should speak in this regard. They should see analysis response, the samples of the specific consignment, this is a procedure that can be the subject of litigation between the two companies. Do not create unnecessary stir. If “Schuchmann” says its wine was good, we will be able to talk about something, but in my opinion, it is a normal working process. - What is about the return of other products? - The process is going on, this applies to other agricultural products. Here is a process that is associated with exchange of the relevant legal framework between each other. At the same time, phytosanitary and veterinary certificates were sent and exchanged. This is a working process. About one week now since the certificates were sent, so I expect a decision to be adopted in the near future. Commersant.ge

MAYA SIDAMONIDZE: GEORGIA’S TOURISM ADVERTISING CAMPAIGN IS NONTRANSPARENT

he former head of the National Tourism Agency, tourism expert Maya Sidamonidze speaks about non-transparency of government‘s advertising activities. Commersant.ge was told by Maya Sidamonidze, this year focus was made only on social media and television advertisements have not appeared. “There is less or no advertisements on TV, the public is not informed about the type of advertising campaign carried on about Georgia,” – Sidamonidze notes. She adds that, as a rule, promotional activities abroad begin before summer and winter seasons and should be conducted not just on social media, but on TV. Sidamonidze notes that the focus should be made not only on target, namely the Commonwealth of Independent States countries, but on the secondary markets, where there is a big chance to attract tourists. Sidamonidze names Japan and China among them. The expert says that the study should begin in the global markets that will enable the distribution of Georgia’s accents correctly, because dependence on only some markets can’t lead to the desired result. “It is good that the focus is made on the CIS markets, according to the latest data, 70% of visitors come from neighboring countries, but we should not forget the secondary markets and we should enter them as well,” - says Sidamonidze. She points out that the government should also consider those countries’ tourism potential where direct flights from Tbilisi airport are performed. At the same time, Sidamonidze explains, compared with the same period of last year, the number of visitors has increased by 30% and tourists are being observed in such large cities as Tbilisi and Batumi. “The planned measures to attract tourists are still more or less but held,” - says Maya Sidamonidze. Commersant.ge

“SAIRME” TO ENTER THE RUSSIAN MARKET IN THE NEAR FUTURE An interview with “Branding.Ge” Director LEVAN KOBERIDZE - What was your reaction when you heard that Russia’s Chief Sanitary Inspection rejected “Schuchmann Wines” and “Askaneli Brothers” products? How expected was it towards these companies and what could be a reason? Chairman of Parliament’s Agricultural Committee considers that it is not a reason to panic. What is your assessment? - It is very unpleasant to listen to the same type of information, when the agency of the neighboring country, which is able to issue certain export documents and quality control, refuses the Georgian company because of the quality. Whereas, these companies have operated for a very long time in Georgian and not only Georgian market. Consequently, this type of messages raises too many questions. - Namely, what questions are raised? Is Georgian wine, this particular product, defective or the Russia’s Sanitation Department has its own rules and regulations, which are unknown and incomprehensible for us? - We assured a few years ago that Russian Sanitary Service has peculiar vision concerning vari-

ous issues, including with respect to the quality. However, nowadays it is very important that such statements are made about the companies that deserve the trust of Georgian jurisdiction and Georgian regulatory organizations. - After the opening of the Russian market, was it expected that Russia’s Chief Sanitary Inspector would take such decisions in respect to particular products? - It’s a little hard for me to say how expected it was. It is difficult to foresee. However, first of all, it would be desirable that any company that is recognized as high quality by the Georgian side, were automatically included in any other country’s export list. This would be the perfect solution. - Maybe we have internal problems and just do not want to recognize it? - I cannot say, it is the responsibility of the relevant authorities. However, these two companies, which are named, are exporting their products not only to Russia and Georgia. Consequently, they have not had such type of problems yet. - What are the prospects of the companies which

you provide certain advertising and marketing service to enter the Russian market ? - We provide services to “Sairme Mineral Waters”. This is Sairme carbonated water and Sairme streams manufacturer. In the nearest future there will be an official confirmation of the fact that it will be allowed to the Russian market and a mineral water will be exported to the Russian Federation at a very fast pace. We

also cooperate with several wine companies, they have a similar tendency regarding the Russian market. - Whether were there questions about the quality in your case? - They underwent a procedure, which was reached by the Georgian and Russian sides, as a result of the agreement. Commersant.ge

ECONOMY

caucasian business week

ECONOMY MINISTER ACQUAINTS AMBASSADORS OF EU COUNTRIES WITH GEORGIA’S MAIN PRIORITIES

eorgian Minister of Economy and Sustainable Development Giorgi Kvirikashvili held a meeting with ambassadors of EU countries and other members of diplomatic corps. Main topic of the meeting, being initiated by EU ambassador Philip Dimitrov, was key tasks, defined by the government for the country’s economic, and ways of their achievement. According to the Georgian Ministry of Economy and Sustainable Development, discussion has touched also necessity of expansion and deepening of existing economic ties. “Participants of the meeting have noted that capacities, existing in these directions, should be saturated”, the Ministry said. Sakstat reported that EU countries accounted for almost half of total foreign direct investments to Georgia, made in 2012 (i.e. for 402.16 million). Georgia’s trade with these countries in that year made up 2.78 billion (i.e. 27% of total turnover).

GEORGIA TO HOST GEORGIASWITZERLAMD BUSINESS FORUM

wiss ambassador Gunther Bechler held meetings with Georgian Minister of Finance Nodar Khaduri and recently appointed Minister of Agriculture Shalva Pipia today. The ambassador offered Finance Minister to hold Georgia-Switzerland business-forum in Georgia. In his turn, Khaduri asked Swiss assistance in establishment of alternative macroeconomics center, which was promised by Bechler. At the meeting with Agriculture Minister, Swiss

ambassador acquainted himself with situation in Georgia’s agriculture. As the Agriculture Ministry said, the sides have discussed already achieved results as well as revealed violations and gaps and forms of respective reaction and discussed necessity of farmers’ cooperation. The sides agreed that such working meetings would have systematic character, which should facilitate further development of relations between the two countries, the Ministry noted.

EXPERTS: KHUDONI HPP PROJECT MUST BE EXPLORED ADDITIONALLY

inal version of assessment of KhudonHES construction’s environmental impact was presented today in Tbilisi. Group of international experts consider that assessment of geological threats (including seismic risks, erosion, etc.) is required, as well as additional, broader analysis of expenditures and revenues. Special attention should be paid to identification of accounting of problems of population, being under potential impact, the experts say. The problem was named with filling of reservoir with solid precipitation (sedimentation), which will be completed in 95 years, according to data of 1966-1986. According to Deputy Minister of Environment Protection and Natural Resources Nino Sha-

June 3, 2013 #07

POTI SEAPORT TO OPEN NEW GRAIN TERMINAL

he company Pace Group together with the companies APM Terminals - Poti and Agricom plans to open the terminal for wheat processing in the port Poti (Georgia). Previously, Georgia did not have similar types of terminals.

As APK-Inform Information Agency announced, the facility will allow to the countries-exporters of Central Asia to consider Georgia as the alternative route for the exports of wheat to the countries of the Mediterranean and Black Seas. The terminal capacity is 500 thousand tons per year.

PRESIDENT OF ARCHIMEDES GROUP: ARCHIMEDES GLOBAL GEORGIA WILL NOT WITHDRAW FROM STATE MEDICAL PROGRAM

ika Ramishvili, president of Archimedes Group, declared that there are a year and a half remained until expiration of the contract, so Archimedes Global Georgia is not going to leave state medical program. Ramishvili pointed, however, that the state did not review in February, despite reached agreement, the prices, envisaged by the program. Funding per beneficiary in Tbilisi has to make up 15 lari, while in regions – 11-14 lari, he said. According to Ramishvili, out of total premium, attracted by Archimedes Global Georgia in this year, about 70% accounts for state insurance programs. According to Archimedes Global Georgia, number of beneficiaries in Tbilisi made up 211,768 as of October 2012. Besides, the company served 27,095 beneficiaries in Samegrelo region and 29,060 – in Kakheti.

FAO: IRRIGATED AREA MAY ACCOUNT FOR 33% OF TOTAL CULTIVATED LAND IN GEORGIA rashidze, sedimentation rate is so high that possible operation life of the dam may be 20 years instead of planned 80-100. She noted that this is extremely disadvantageous for both the country and the investor, so the project requires at least 1 year of additional study. In his turn, Deputy Minister of Energy Ilia Eloshvili declared that 1 year is unacceptable, while Paata Tsereteli, director general of the project’s investor TransElectrica, promised to present to Ministry of Environment Protection and Natural Resources broader results of sedimentation study in near future. According to the assessment, being presented today, expected cost of the project makes up $775 million, while its implementation will lead to flooding of 528 ha (including 4 villages).

BOSCH TURNOVER IN GEORGIA GROWS BY 50%

ousehold appliances and tools manufacturer Bosch reported that its turnover in Caucasus region for 2012 amounted to 16 million EUR, of which Georgia accounted for 9 million EUR. Last year, the company reported turnover for 2011 of 10 million EUR and 6 million EUR, respectively. Thus, year-on-year growth in 2012 made up respectively 60% and 50%. To remind, Bosch opened its Caucasus office in Tbilisi, in 2012. Since 2011, the company was represented in the region by Robert Bosch Ltd.

xperts of FAO (Food and Agriculture Organization of the UN) say that irrigation system covers now 73,00080,000 ha in Georgia, accounting this way for 25% of total cultivated land area of the country. The experts expect that this share will increase up to 33%, if Agriculture Ministry will manage to complete successfully plan on irrigation expansion. The experts point that “The strategy of the government includes gradual adoption of more efficient irrigation systems such as drip irrigation, pivots, which could dramatically increase productivity and margins”. They note that introduction of such systems will be funded by Georgian Agricultural Corporation, while projects will be

implemented through partnership between private and public enterprises. FAO experts say that currently, large part of irrigation systems’ rehabilitation is funded by donor organizations. They also mention process of water consumer associations’ establishment, started in some parts of Georgia, pointing that it has “mixed results” however. The experts consider that “problem with this approach was that the current scale of agricultural investments in Georgia is not sufficient, in the short to medium term, to change the overall structure of land-holding significantly”. The mentioned considerations are provided in report, prepared by FAO by order of EU, representing part of assessment, conducted within Eastern Partnership Program of the latter.

BELAVIA STARTS KUTAISI-MINSK DIRECT FLIGHTS

mi, will implement Kutaisi flights 3 times a week (Tuesdays, Thursdays and Saturdays). According to deputy director general of Belavia Vladimir Barkun, cost of ticket for Kutaisi-Minsk flight will make up 300 EUR, exceeding by 20 EUR the cost of Tbilisi-Minsk flight.

BUSINESS

June 3, 2013 #07

caucasian business week

MICROFINANCE ORGANIZATIONS END 1Q13 IN 13.86 MILLION GEL PROFITS

ational Bank of Georgia reported that total profit of 62 local microfinancial organizations amounted in the 1st quarter to 13.86 million lari. Total assets of these organizations amounted to

729.33 million lari, increasing quarter-on-quarter by 7.42%. At that, issued credits totaled to 557.05 million lari (growth – 7.8%). Total liabilities made up 537.27 million lari (growth – 5.69%). Borrowings amounted to 409.49 million lari (growth – 7.8%),

ILIAUNI BUSINESS REVIEW: 61% OF CUSTOMERS IS PLEASED WITH SERVICE QUALITY OF ELIT ELECTRONICS

liaUni Business Review, customer poll issue of Ilia State University, reported that 61% of Elit Electronics’ customers are pleased with service quality of this household appliances’ retailer and have no complaints regarding queues. 29% consider service quality as appropriate and have minor remarks regarding the queues. Only

10% have negative assessment of the company’s service and situation with queues. 57% of customers mention high quality of appliances, being sold in the company’s chain. 36% have minor remarks on the subject, while 7% consider that production’s quality is completely unacceptable. The poll was conducted in shops of Elit Electronics’ chain during a week.

IC GROUP OFFERS CAR INSURANCE FOR 1.99%

C Group announced that car owners, having 3-year history of driving without accidents, are eligible for car insurance for 1.99% of car cost. These terms are valid until July 1. Car insurance of the company covers road accidents, fire, explosion, vandalism, natural disasters, theft (including of accessories), robbery. The policy envisages also additional services, such as free service of wrecker, IC discount card for use in various car centers.

IFC TO ALLOT $14M TO M2 REAL ESTATE

nternational Finance Corporation (IFC, member of the World Bank group) will allot long-term renewable credit of $14 million to m2 Real Estate. Out of this sum, $4 million will be provided by IFC’s Canadian program on climate change response. According to Irakli Burdiladze, head of supervisory council of m2 Real Estate, the funding will be directed to implementation of the company’s 3 project in Tbilisi center. These projects envisage

design of buildings, which will facilitate effective consumption of energy, water and raw material and will reduce negative impact on environment, m2 Real Estate says. IFC regional manager in South Caucasus Thomas Lubeck noted that this allotment is the Corporation’s first funding for residential construction in Georgia. Georgia became IFC member in 1995. Since that, total volume of IFC’s allotments for 49 projects in the country amounted to $607 million.

KID’S WEEK FROM NEW LIGHT

or raising culture of the artificial lighting in Georgia, the company New Light launches various Informational and Discount campaigns from April , 2013 until the end of

2013. In each season there will be held the campaigns dedicated to one or two special conceptions, to a special date and a special period of time . The consumers will be able to benefit from the discount offers to the selected products through the campaign period and besides they will be able to learn more about the certain lightings or technologies through the blog of New Light’s website.

Within the framework of the above mentioned project, the third “Kid’s Week“ will start on May 30, 2013 and will last until June 8, 2013. This WEEK is completely dedicated to the children’s lightings, on which is announced discount by 25%. Discount applies to : the kid’s chandeliers and ceiling lamps intended for children from the age of 1 to 14, the table lamps, the wall lamps and the cartoon character shaped decorative lightings intended for the youngest children. In general, the main purpose of children’s lightings is creation of the merry and colourful atmosphere for children, appealing the children for being more active and playful. The collection presented in New Light offers a wide variety of the beautiful, cheerful and entertaining children’s lightings , which undoubtedly will fascinate your kids. And what is the main and the most important – these lightings are safe and secure, no matter how frolicsome and unquiet your child is, these lightings are produced according to the most strict rules eligible for the child safety in Europe. In addition to being safe lightings, they are made of material which are ecologically friendly and covered with the wood and nontoxic paints. The part of these lightings is accompanied by Phillips efficient light bulbs of the highest quality, which are notable for their brightness - so necessary for a child’s room.

FLYGEORGIA WINS COMFORT AND SAFE FLIGHT NOMINATIONS IN BUSINESS RATING

lyGeorgia has been named among 25 best companies in the business rating organized by the Georgian Times and Gorbi. The airline has won the nominations: Comfort and safe flights to over 20 countries, affordable tariffs, public image, efficient management, invetsment environment. Lasha Khutsishvili, a head for the Revenue Service, handed over a special award to Bijan Mougouee, a director general for FlyGeorgia. “We are pleased FlyGeorgia has taken part in

the event. This fact encourages us. The Georgian markett is very interesting for our company and consequently, we have serious plans”, Mr.Bijan Mougouee (Chief Executive Officer) noted. Moreover, the airline will issue free of charge tickets to any direction to three children and their parents for operation.m The 14th business award ceremony of the sociology and marketing research center of Gorbi and the Georgian Times was held at the Courtyard Marriott Hotel on May 30. BPI

GEOPLANT WINS AWARDS IN NOMINATIONS OF SUCCESSFUL EXPORTER AND HIGH ECOLOGICAL STANDARDS

eoplant, a manufacturer of Gurieli tea, has been named among 25 best companies in the business rating of the Georgian Times and the Gorbi research company. The company has won awards in the nominations of Successful Exporter, Revival of Traditional Field, High Ecology Standards, New Technologies. Mikheil Chkuaseli, a director general for Geoplant told the Georgian Times, it is important to develop the tea growing sector as one of the strategic fields in the agriculture sector of Georgia. “Gurieli Tea has won the awards and the company has been named among 25 best companies. Gurieli Tea is exported to the EU countries: France, Germany, Greece. Britain, Poland, Kyrgyzstan and the Baltic States. We plan to further activate our efforts on exports makrets”,

Chkuaseli added. Moreover, Geoplant plans to hand over Gurieli Tea to the oncological-hematologic department of Iashvili Central Hospital for Children free of charge for a year. The 14th business award ceremony of the sociology and marketing research center of Gorbi and the Georgian Times was held at the Courtyard Marriott Hotel on May 30. BPI

TASTY SPRING WATER “BAKHMARO” IN THE NEW PREMIUM PACKAGING

tarting from May 18 customers can buy the tasty spring water “Bakhmaro” in the new premium packaging. Introducing the new packaging was determined by different circumstances and most importantly the advantage of highquality glass bottle, which is more convenient and visually prettier and keeps natural qualities

and taste of the Bakhmaro spring water for a longer period. Since 2002 “Bakhmaro” water has been bottled in Georgia by the company “Healthy Water”. However, until now the mineral water appeared only in plastic bottles. “Bakhmaro – Caucasian Spring” is the water born in the mountains of Guria, enriched with natural oxygen and characterized with a wonderfully soft taste. The Bakhmaro spring takes start from 1926-2050 meters above the sea level. Through a pipeline the water reaches the factory, where it goes through several stages of mechanical filtration but keeps its initial natural chemical composition. “Bakhmaro” belongs to the low-mineral water types, is rich with oxygen and is characterized with the ideal PH indicator (7.5). It is used in child feeding to prepare dry mixtures and is approved by the G. Natadze Sanitary, Hygiene and Medical Ecology Scientific-Research Institute.

BANKING NEWS caucasian business week

June 3, 2013 #07

KSB EXTENDS CONSUMER LOANS CAMPAIGN

OR Standard Bank (KSB) declared that action on consumer loans, being planned to hold through May 31, will be extended through June 30. The action envisages availability of consumer loans for interest rate of 14%. Volume of unsecured loans may vary within 500 GEL (300 USD, 200 EUR) and 10,000 GEL

CURRENT CONDITION OF COMMERCIAL BANKS’ LOAN PORTFOLIO

he volume of lending by commercial banks (including loans to nonresidents) in April, 2013, compared to the previous month, increased by 95.5 million GEL (1.1 percent) and exceeded 8.8 billion GEL by May 1, 2013. The volume of loans provided in the national currency increased by 80.7 million GEL (2.8 percent) and the volume of loans in a foreign currency increased by 14.9 million GEL (0.3 percent). By the end of April 2013, commercial banks issued to resident legal entities 833.6 million GEL worth of national currency-denominated loans (2.2 percent or 18.4 million GEL less compared to the previous month) and 3.9 billion GEL worth of loans in a foreign currency (1.2 percent or 44.5 million GEL more compared to the previous month). Out of the total volume of lending to legal en-

tities, the biggest share falls on trade – 46.7 percent. Compared with the previous month, in April, 2013 the volume of loans provided for trade decreased by 3.5 percent or 79.9 million GEL and constituted 2.2 billion GEL. Share of loans provided to the industrial sector constituted 20.5 percent of all loans to legal entities and amounted to 960.3 million GEL by May 1, 2013 (8.5 percent or 74.8 million GEL more compared to April 1, 2013). 9.0 percent fall on construction, amounting to 421.5 million GEL (1.3 percent or 5.5 million GEL less, respectively). Therefore, 76.1 percent of the total volume of lending to the legal entities falls only on three sectors – industry, construction and trade. The volume of lending to resident individuals increased by 2.3 percent or 87.5 million GEL, during the April 2013, and exceeded 3.8 billion GEL by May 1, 2013.

CURRENT CONDITION OF COMMERCIAL BANKS’ ASSETS

s May 1, 2013, the banking sector in Georgia is represented by 20 commercial banks, including 15 foreign-controlled banks and three branches of non-resident banks. Compared with the same period of previous year, total assets of Georgian commercial banks (in current prices) increased by 2.0 billion GEL (by 15.8 percent) and constituted 14.6 billion GEL. The banking sector’s own funds (equity capital)

equal to 2.6 billion GEL, which makes up 17.6 percent of commercial banks’ total assets. The share of foreign capital in banks’ total paidin capital constituted 74.3 percent. In April 2013, the banking sector finished with profit. The net profit constituted 36.4 million GEL. The share of five banks having the largest assets within the total amount of the banking sector assets constituted 79.9 percent.

CURRENT TENDENCIES OF BANK DEPOSITS

urrent Tendencies of Bank DepositsTotal volume of the non-bank deposits in the country’s banking sector increased by 2.5 percent or 198.4 million GEL compared with the April 1, 2013, and reached 8.2 billion GEL by May 1, 2013. In April, 2013, compared to the previous month, the volume of demand deposits increased by 176.0 million GEL (5.2 percent) and term deposits increased by 22.4 million GEL (0.5 percent). The dollarization ratio of the total non-bank de-

posits constituted 63.03 percent by May 1, 2013. It decreased by 1.11 percentage points compared to April 1, 2013. The annual average weighted interest rate on term deposits constituted 8.1 percent. In particular, the interest rate for national currency denominated deposits was 11.1 percent and the interest rate for foreign currency denominated deposits 7.2 percent. The share of US dollar in the total volume of foreign currency denominated deposits equals to 79.9 percent and the share of Euro equals to 17.9 percent.

Bank REPUBLIC OFFERS INVESTMENT LOANS FOR 9.95%

ank Republic announced that investment loans for middle-sized and large businesses are available for 9.95%. The bank is going to hold the action until end of July. The loans are issued in the US dollars with duration of 2-7 years. Minimal volume makes up $200,000,

while upper volume is not defined, being dependent on the borrower’s turnover, Republic told Sarke. The bank stressed that these credits are not available for start-ups and eligible borrower should have at least 3-month history of operation. Like regular loans, investment ones also can be secured or unsecured, while interest rate does not depend on change of official currency rate of National Bank of Georgia. Currently, Republic runs 38 outlets countrywide and has over 225,000 clients.

(6,000 USD, 4,000 EUR), while duration makes up 3-36 months. Eligible borrower should have monthly income of 500 lari at least (or equivalent in foreign currency), confirmed by any bank. Secured loans may reach 50,000 GEL (30,000 USD, 20,000 EUR), while their maximal duration makes up 60 months. Required minimal monthly income makes up 350 lari (or equivalent in foreign currency), while security may be real estate or car. Bank confirmation is not required in this case. KSB charges a borrower, which is its client, with commission fee of 1% in both cases. Fee rate for other borrowers makes up 2%.

BANK OF GEORGIA TO APPLY EXPRESS BONUSES TO REMOTE TRANSACTIONS

ank of Georgia announced today an action for holders of cards (except American Express), which will last until November 15. Within the action, those clients, who will implement transactions through remote tools of the

bank (Internet-banking (ibank.ge, eonline.ge), mobile banking or SMS banking), will get 10 Express bonuses for each such transaction. Until now, Express bonuses were avilable only for transactions through Express Card of the bank. Eligible remote transactions include transactions between own accounts, transaction to other accounts in Sakartvelos Banki, transaction to other banks, payment of utility bills, etc.

PROCREDIT BANK OPENS 13TH RENEWED BRANCH

roCredit Bank has opened a branch in Tbilisi (Chavchavadze Avenue), which became the 13th outlet countrywide, redesigned according to the bank’s new concept “Service in One Point”.

Cost of the new branch is not disclosed by the bank. By the end of the year, ProCredit Bank is going to launch 36 branches, designed in accordance with the mentioned concept, planning to invest $7 million for that end. Besides, the bank told Sarke that several oldfashioned branches would change their location (in particular, those ones on Tsereteli Avenue, near Grmagele subway station and on Eliava construction market – all in Tbilisi).

HALYK BANK INCREASED CAPITAL TO 48 MILLION GEL

alyk Bank (Georgia) increased authorized capital by 17 million, to 48 million GEL. Bank informs, that it actively continues positioning on the corporate market and involved in the Preferential Agro Credit program. Bank is represented by 3 branches in Batumi and Tbilisi and plans to add one more by the end of the year. Subsidiary of Kazakh Halyk Bank has operated on Georgian market since 2008. By May 1, bank’s market share according to actives (80 million GEL) equals to 0,5%. GBC

LADO GURGENIDZE WILL NOT BE PRESIDENT OF LIBERTY BANK FROM JULY 1

iberty Bank increased authorized capital by 15 million GEL, which is kind of message for stockholders on the possible stock capital growth through stock emission. Bank informs, that authorized capital increased to 85 million GEL is expressed by 6 billion common (0,01 GEL nominal price) stocks of 70 million GEL cost and 7,5 billion) common and 1 billion privileged stocks instead of 1 billion privileged stocks. Besides, term of supervisory board chairman Lado Gurgenidze became infinite, or permanent. From July 1, present deputy George Arveladze will take position of director general. Lekso Liparteliani, Armen Matevosian, Sandro Rtveladze and David Verulashvili, along with

Arveladze will share Gurgenidze’s curatorial directions. Gurgenidze will direct his liberated resources to strategic development of the bank. He mentioned that he’ll have more time for it. According to the decision, made on May session by Bank’s stockholders, authority of supervision board members - Melani Chan, Vladimer Gurgenidze and Iaap Rotgans will have prolonged authorization with the second term from September 21. Based on Bank’s stockholders decision, from June 18 privileged stockholders of JSC Liberty Bank will get dividends with 17% interest from 2012 10 million profit. GBC

June 3, 2013 #07

STATISTICS

caucasian business week

EMPLOYMENT AND UNEMPLOYMENT 2012 In 2012 the annual unemployment rate in Georgia declined slightly by 0.1 percentage point, amounting to 15.0 percent. The labor market data related to unemployment are given in the charts.

RAPID ESTIMATES OF ECONOMIC GROWTH, APRIL 2013

he estimated real Gross Domestic Product (GDP) increased by 4.1 percent y-o-y in April 2013. The estimated real GDP growth in Q1 2013 equaled 1.9 percent. The Geostat produces monthly rapid estimations of real GDP growth using administrative data on VAT taxpayersâ&#x20AC;&#x2122; turnover, fiscal and monetary statistics. The compilation of rapid estimates is an internationally adopted practice to obtain preliminary monthly growth of real GDP. For those sectors, where preliminary monthly data do not exist (e.g. agriculture, non-observed economy etc.), the estimations are based on the data for previous periods. Therefore, the actual quarterly real GDP growth may significantly differ from monthly rapid estimates. Furthermore, the data on VAT taxpayersâ&#x20AC;&#x2122; turnover for the previous months might be updated on a monthly basis, implying corresponding adjustments of real GDP growth estimates.

AZERBAIJAN

10 FIRST AZERBAIJAN-UAE FORUM ON ICT TO BE HELD IN BAKU

zerbaijan and the UAE agreed to organize the I Forum on Information & Communication Technologies in Baku. The Ministry of Communications & IT of Azerbaijan reports that an arrangement to conduct the forum was achieved in the meeting with Communication & IT Minister Ali Abbasov with representatives of Datamafix and the Dubai Chamber of Commerce held within the World Economic Forum on the Middle East and North Africa (May 25-26, Amman). “The subject of negotiations with the UAE reps was to attract investment in the High-Tech Park (YTP), created in the country, and the appearance of Azerbaijani companies to the world market. During the discussion, the parties agreed to hold the first Azerbaijani-UAE ICT Forum within the exhibition Bakutel 2013 (December 2-5),” the MCIT informed. The forum organizers will be partners from the UAE. There the sides will discuss the practice of technology parks, the ICT Development Fund, the University of Information Technologies, broadband services.

HIGH QUALITY WINE AT 4 EURO PRESENTED IN BAKU

he Azerbaijani-German Chamber of Commerce (AHK Azerbaijan), established in November 2012, continues to promote the German products to the Azerbaijani market. So, presentation of German manufacturers of alcoholic beverages took place in Baku. AHK Azerbaijan representative Florian Schroeder stated that presentation is one of not large projects of AHK. “Formally six manufacturers were presented, but each of them represents a group of 4-5 plants. We believe that these manufacturers have excellent prospects in the Azerbaijani market. They offer high-quality alcoholic beverages (wine and beer) of wide price range - from 4 to 50 or more euro per bottle. Even with taking into account transport and customs costs, these products generally correspond to the price level in the Azerbaijani market,” Schroeder. In general, two brewers (Karlsberg Zoller-Hof Graf-Fleischhut) and 4 wine producers (Weingut Leitz, Elnig-Zenzen, Westhofen and Kalkboedele) were presented. AHK Chamber is part of a network of more than 120 such chambers in the world and simultaneously the second such structure on the CIS area, after the Chamber operating in Moscow. Today the Chamber member ranks are numbering about 135 German and Azerbaijani companies. Among the AHK Azerbaijan’s work directions are targeted market research, assistance to finding business partners, individual advice on trade issues, assistance to registration of enterprises and search personnel, information and organizational support.

AZERBAIJAN REFUSED TO SIGN PROTOCOL ON TRACECA FERRY-RAIL LINE

zerbaijan has refused to sign an additional protocol on international ferry-rail line and transit development to the main multilateral agreement on Transport Corridor EuropeCaucasus-Asia (TRACECA). TRACECA national secretary Akif Mustafayev says that the Azerbaijani government has taken this decision on the basis of inter-ministerial examination of the draft protocol. “All the 10 agencies that conducted the examination were against it, admitting it not conforming to national interests and the requirements of the law. In this regard, the TRACECA Secretariat has been officially notified of Azerbaijan’s refusal to sign the protocol,” Mustafayev said. The protocol signing is planned at the X session of the TRACECA Intergovernmental Commission to be held in Dushanbe in September. “As Azerbaijan declined to sign the protocol, other states out of the 13 TRACECA members may sign a protocol, ratify it, and it will act only in respect to them,” Mustafayev said. The TRACECA agreement was signed in 1998 in Baku, where the TRACECA Secretariat is located. abc.az.

June 3, 2013 #07

caucasian business week

IMF FORECASTS ‘RESILIENT GROWTH’ IN REGIONAL OIL AND GAS EXPORTING STATES

conomies of the Caucasus and Central Asia (CCA) countries are currently experiencing strong growthnear 6 percent, which is achieved mostly thanks to high oil and gas prices and strong remittances. In its regional economic outlook update, the International Monetary Fund (IMF) keeps the nearterm outlook broadly favorable for CCA oil and gas exporters (Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan), reflecting the region’s limited direct exposure to Europe, and continued high oil prices. “Growth is projected to be resilient, at an average of 5.8 percent in 2013 and 6.1 percent in 2014. Most oil and gas exporters are projected to grow

between 5 percent and 8 percent in 2013-14, supported by high non-oil growth and, in Kazakhstan, higher oil production. Azerbaijan’s growthstill largely sustained by strong non-oil growth-is expected to recover in 2013-14, as oil output is beginning to stabilize,” the report reads. But, the IMF noted that policymakers, particularly in the oil-importing countries, should take advantage of the favorable outlook to re-establish fiscal policy buffers that were eroded in the aftermath of the global crisis. The Fund believes that the region is vulnerable to shocks due to dependency on remittances and commodity earnings. “Current account developments are following different paths among oil and gas exporters and

importers. The current account balance in the CCA oil and gas exporters declined to 7.1 percent of GDP in 2012, from 10.6 percent in 2011, mainly because of stagnating oil and gas production coupled with strong import growth in light of solid non-oil economic growth. By contrast, the current account deficit in the oil and gas importers remained high at 9.9 percent in 2012, though Tajikistan posted a much lower and declining deficit, helped by benign global conditions for import prices and growing remittances that reflect the continuing recovery of Russia’s economy, “ the report reads. The IMF noted that the CCA countries should reinvigorate their reform efforts to address longstanding structural issues, with a view to improving governance, building an investor-friendly environment, developing a more inclusive financial system, and fostering regional trade and finance integration. “Downside risks, arising from slower global growth, domestic political uncertainties, and geopolitical risks in the region, continue to weigh on the outlook for CCA economies. Should any of these risks materialize, growth would sharply decline through lower exports, remittances, and foreign investment. Policymakers across the CCA economies should take advantage of the still-favorable outlook to re-establish fiscal policy buffers. This should be done through enhancing the quality and efficiency of public spending, avoiding further increases in hard- to-reverse items, revising the numerous existing tax exemptions, improving tax collection, and reining in general subsidies,” the report reads. The Fund believes that countries also need to reinvigorate their efforts to diversify their economies away from natural resources, further improve their infrastructure, reduce the role of the state in the economy, and promote transparency and good governance. “Lowering regional trade barriers would also promote greater economic diversification and growth,” the report noted.

BAKU TO HOST INVESTMENT SUMMIT IN 2014

aku will host the Azerbaijani Investment Summit “2020 and further: accelerating economic development” in March 2014, a statement on the website of the summit’s organizer The Economist says. The agenda of the two-day summit will include the discussion of the concept of “Azerbaijan 2020: A Look into the Future”, key elements of the program of economic diversification and

trends affecting the economic development. In addition, the summit participants will discuss measures to support the oil and gas sector in Azerbaijan, the prospects for the second phase of the Shah Deniz gas project and the country’s potential in this industry. One of the summit’s sessions will focus on the development of agriculture in Azerbaijan and the investment attractiveness of the industry. Also, the participants will discuss the situation in

the ICT field in Azerbaijan, the role of information technology as a catalyst for sustainable economic development and investment opportunities in the sector. A special session of the summit will focus on investments in infrastructure in Azerbaijan, study of the main problems in this area and analysis of the most effective investments in energy, transport, water, logistics and other areas that are vital for productivity and economic growth.

AZERBAIJAN INTERESTED IN BOOSTING TOURISM COOPERATION WITH FRANCE

zerbaijan is interested in expanding cooperation with France in tourism, the Minister of Culture and Tourism Abulfas Garayev said during a meeting with French MPs within the Second World Forum on Intercultural Dialogue in Baku on May 29. The minister said that Azerbaijan would very much like to see larger flows of tourists from France. “I believe Azerbaijan is attractive for French tourists. In regards to tourism, we are ready for any kind of cooperation,” Garayev said. Azerbaijan and France may implement interesting projects in tourism and culture. Readers of Alexander Dumas may become acquainted with

the route of his journey to the Caucasus by traveling to Azerbaijan, the minister said. According to him, Azerbaijani companies are actively participating in tourism fairs in France, and French companies are doing likewise in exhibitions in Azerbaijan. In the past year, an info tour was organized for leading French travel companies and media representatives, the minister said. Garayev also added that the ties in the field of culture between the two countries have also intensified in recent years. He noted the special role of the First Lady of Azerbaijan, the President of the Heydar Aliyev Foundation Mehriban Aliyeva in the expansion of cultural relations between Azerbaijan and France.

AZERBAIJANI BUSINESS HAS SPENT ALMOST 60% OF SUBSIDIZED LOANS PROVIDED FOR 2013

he National Entrepreneurship Support Fund under the Ministry of Economic Development of Azerbaijan provided 59.4% of concessional loans designed for 2013. The Fund informs that the soft loans for about AZN 148.5 million have been given to the 1,608 businesses since early 2013 for creation of more than 5,300 new jobs. Within the framework of the State Program of

Social-Economic Development of Baku & Suburban Villages 2011-13, for the period the National Fund provided AZN 121.8 million to entrepreneurs of Baku and suburban villages to finance 510 investment projects that will create an opportunity to open around 4 million new jobs. This year the subsidized lending from the Fund is expected to make AZN 250 million (AZN 150 million from the State Budget and AZN 100 million at the expnse of repaid loans).

In 2012, subsidized loaning from the Fund reached AZN 218 million versus the forecast of AZN 200 million. In 2011, the NESF provided loans for AZN 138 million, including AZN 104 million due to repayment of the previously given loans and AZN 34 million at the expense of budget assignments envisaged for 2012. By early 2012 the Fund has given AZN 720 million to businesses for the entire its history. abc.az.

ARMENIA

June 3, 2013 #07

caucasian business week

ARMENIA’S PRESIDENT HOSTED PRINCE CHARLES

he President of the Republic of Armenia Serzh Sargsyan had a meeting with His Royal Highness Charles, Prince of Wells, who paid a visit to Armenia on the invitation of the “Yerevan – My Love” charity foundation. The Media and Public Relations Department of the President’s Office informed “Armenpress” that Serzh Sargsyan welcomed the Prince in Armenia, where HRH can get acquainted with our country, people, and historical and cultural heritage as well. The President of the Republic of Armenia Serzh Sargsyan laid a heavy emphasis on the age-old history of the Armenian-British relations, and stated that the Armenian people has a very warm attitude towards the British people and royal family in particular. Also Armenia’s President asked to convey his greetings and warmest wishes to HRH Queen Elizabeth II. Among other things Prince Charles expressed his gratitude to the President for warm reception and Armen Sargsyan for the invitation and emphasized the significance of “Yerevan – My Love” charity program and the Dilijan international school program as well and noted that he had been the Chairman of “United World Colleges” consortium for 14 years. Also His Royal Highness underscored that he highly appreciates the attention the Republic of Armenia pays to the projects targeting education and youth development. In addition Prince of Wells expressed willingness to expand his program of supporting

young entrepreneurs in Armenia as well. His Royal Highness paid a visit to Armenia on the invitation of “Yerevan - My Love” charity initiative. The former Prime Minister of the Republic of Armenia, the first Ambassador of the Republic of Armenia to London Armen Sargsyan is the founder of “Yerevan - My Love” program. This program targets renaissance of architectural monuments, which greatly resembles “Dumfries House” charity program in Scotland, aimed at architectural heritage. This program enjoys the personal support of the Prince of Wells himself. Armen Sargsyan has always been among the ardent supporters of “Dumfries House” restoration. Within the framework of his visit Prince Charles had already paid a visit to the library and scientific centre of ancient manuscripts Matenadaran. There are over 17.000 manuscripts in Armenian and foreign languages kept in Matenadaran. The Mashtots Matenadaran Ancient Manuscripts Collection was inscribed on UNESCO’s Memory of the World Programme Register in 1997 in recognition of its world significance. HRH Prince Charles will also attend the concert in the Yerevan Opera House, which will be followed by a reception and gala supper in honour of “Yerevan- My Love” program benefactors. “Yerevan My Love” is a heritage-led regeneration project dedicated to preserving architecturally significant buildings in Yerevan and, by adaptive reuse, to improve the life experience of disabled children, young people and disadvantaged families.

It is an ambitious charitable project with two main aims: Restore and reconstruct: to safeguard and restore the historic districts of Yerevan and coordinate efforts to save the artistic and architectural heritage of this 3000-year-old capital city, its traditions and neighbourhoods. To restore historic buildings and adapt them for new and vibrant uses; but above all, to put people, their living conditions and their quality of life at the centre planning. Social impact: to improve the education and life

experience of children and young people, especially orphans and those who come from disadvantaged communities; to help children and youth with social and health disadvantages and to assist them in gaining confidence and independence in the course of their everyday life. The ultimate aim of Yerevan My Love is to preserve the authentic architectural heritage of the city and to place the people of Yerevan in the heart of “Yerevan My Love”. oratert.com

PUBLIC DISCUSSION ON GAS TARIFF IN PSRC NOT HELD

GOLD PRICE IN ARMENIA FALLS BY 2.4% TO AMD 16,935.65

he Public Services Regulatory Commission of Armenia (PSRC) intended to hold today the first working discussion concerning the increase in natural gas and electricity tariffs. However, the discussion did not take place as numerous citizens were registered to participate in the discussion and there was not enough space for all participants in the hall. The commission chairman Robert Nazarian called upon the public discussions’ participants to calm down and move to a larger hall, but the participants rejected his proposal, saying all interested strata of society, including those people who gathered in the yard of the PSRC, should take part in the discussion. “I have no desire to be involved in a show and for

s of May 29, gold can be bought at 16,935.65 drams (lower by 2.4% or 407.28 drams from a week earlier) and sold at 18,408.31 (lower by 442.7 drams). The State Depository of Precious Stones and Metals Agency, an affiliation of Armenian Finance Ministry, has set new prices for government agencies to buy and sell precious stones and metals which are effective for this week. The new prices are for one gram of chemically pure metals. Silver is to be bought at 273.99 drams (-9.24) and sold at 297.81 drams (-10.05); platinum is to be bought at 17,925.34 drams (-388.55) and sold at 19,484.07 drams (-422.33); palladium is to be bought at 9,086.86 drams (+179.37) and sold at 9,877.02 drams (+197.97). ($1 – 416.47 drams). ARKA

that reason we are not going to request a large hall. Instead we will hold discussions with various strata of society every day,” Robert Nazarian said. Those present rejected this proposal as well. Member of the Public Council of Armenia Arshak Sadoyan intervened in the dispute and proposed that the discussion be held in the Public Council’s hall which is much larger. Sadoyan’s proposal was applauded, while the PSRC chairman announced that the discussion will not continue today. Robert Nazarian said the discussion will continue tomorrow, without media presence. “Mass media representatives will not participate in the discussions so as not to occupy a lot of room. Besides, you are in favor of a show, but I am not,” Robert Nazarian declared.

ABOUT $15.7 MLN TRADED AT NASDAQ OMX ARMENIA STOCK EXCHANGE LAST WEEK

T CARD TRANSACTIONS VIA INTERNET UPPED 17.5% TO AMD 1.7 BLN IN MARCH

s of late March, card transactions processed via Internet in Armenia valued at 1.7 billion drams, which was 17.5% higher from February, the Central Bank said in its monthly newsletter for March 2013. The newsletter stated total of 95,264 transactions were processed within the reported month, that was 27.4% higher from a month earlier. According to the source, the card transactions pro-

cessed through ATMs, POS-terminals, and some other accepting devices in Armenia amounted to 92.13 billion drams ( plus 36.4%) in March, total of 1,768,028 transactions were made (plus 40.6%). Total of 1,463,308 transactions were made via ATMs hitting 72.5 billion drams in March. Transactions via POS-terminals and imprinters accounted to 209,456 and valued at 17.8 billion drams. ($1 – 416.47 drams). ARKA

he Central Bank of Armenia said nearly $15.7 million was traded at NASDAQ OMX Armenia stock exchange from 20 to 24 of May. It stood at $12.8 from May 13 to 18, according to the report. It said an average weighted exchange rate was 415.45 drams per $1 at NASDAX OMX Armenia. There were no transactions effected with euros or Russian rubles. NASDAQ OMX Armenia (former Armenian Stock Exchange, Armex), was established in

2001 as a voluntary merger of 21 broker (dealer) companies. In November 2007 the stock exchange was reorganized into OJSC. OMX (current NASDAQ OMX) is a holder of 100% stock of NASDAQ OMX Armenia. The stock exchange obtained 100% stock of Armenia’s Central Depository. NASDAQ OMX Armenia received a trade license from CBA on November 7, 2005. The trades on the stock exchange were officially launched on 15 November 2005. ($1=415.35drams). ARKA

CIS

caucasian business week

June 3, 2013 #07

Kyrgyzstan

he Kyrgyz government has approved the agreement on the transportation, distribution and sale of natural gas by Gazprom. It is noted that after the signing of the agreement, Gazprom will supply and distribute natural gas in the territory of the Kyrgyz Republic. In addition, the Russian side will carry out the construction, reconstruction and operation, including maintenance, diagnosis and repair of gas transmission and distribution systems, underground gas storage facilities and other infrastructure of gas industry. In accordance with the agreement Gazprom will invest at least 20 billion rubles within five years. The Russian side is committed to the development and modernisation of equipment and gas pipelines, compliance with the tariff policy, approved by the Government of the Kyrgyz Republic. It should be noted that since the transfer of state-owned shares of KyrgyzGas to Gazprom, all debt obligations of company are delegated to the Russian side.

KAZAKHSTAN TO PRODUCE PEUGEOT CARS

he Kazakh Ministry of Industry and New Technologies has said that the Peugeot automobiles will be manufactured in Kazakhstan. The production of the Peugeot automobiles is planned to be carried out at industrial sites of the AgromashHolding JSC in Kostanai. According to the ministry, the PSA Peugeot Citroën, AgromashHolding JSC and the Kazakh ministry will sign a memorandum of cooperation in Astana next week. Earlier in March it was reported that PSA Peugeot Citroen and AgromashHolding signed an agreement for the assembly and distribution of the Peugeot passenger cars in Kazakhstan. According to the agreement, assembly of the Peugeot cars will start in June with a large range

of models (301, 3008, 508 and Partner). The production capacity will reach 4,000 units per year in the initial stage and then the figure may be brought up to 10,000 units per year and more. Along with locally assembled models, Peugeot will offer the Kazakh market the Peugeot 408 manufactured on the full-cycle Russian plant of PSA Peugeot Citroen in Kaluga. PSA Peugeot Citroen is the second largest carmaker in Europe. In 2012, the company sold 2.9 million vehicles worldwide and got revenues worth 55.4 billion euros. azernews.az

BP PUSHES FOR ‘BLOCKING’ RIGHTS IN ROSNEFT MERGER

osneft shareholders will meet on June 20 to consider amending the company’s charter which would grant BP certain veto powers on future decisions. According to two sources close to Rosneft’s board of directors, there is a possibility amendments will be adopted which would authorize the purchase and sale of Rosneft shares, Vedomosti reported. BP sold 50 percent of TNK-BP to Rosneft in March, and increased its shareholding in Rosneft to 19.85 percent, to become the company’s second largest shareholder after the Kremlin. If the new charter stipulations go through, BP will likely push for blocking rights. Rosneft’s spokesperson said the ‘blocking’ right would be used as a measure to extend the ability of shareholders to increase capital authorization. The amendment will not add any additional shareholders to the mix. The amendments will greatly enhance the role of minority shareholders, like BP CEO Robert Dudley, who has been promised one of two BP seats on the nine person Rosneft board. The second ‘BP seat’ has not yet been filled. Under the amendments, Rosneft won’t be able to liquify, make big deals, repurchase shares, or authorize capital, without the approval of the shareholders. The proposal isn’t novel in the Russian gas in-

RUSSIAN HYPERMARKET LENTA MULLS $1,5BN IPO IN LONDON

dustry; Lukoil set a precedent in 2005 when it changed its charter to incorporate such a ‘blocking’ vote after ConocoPhillips bought 20 percent of its shares. Rosneft announced its plan to acquire TNK-BP as early as 2003, and the two companies have almost fully integrated, with BP bosses out of the picture and Rosneft President Igor Sechin calling most of the shots. Since the acquisition, minority shareholders have been crossing their fingers that Sechin will buy them out, or at least fold the assets into the new merged company, neither which has happened. Sechin’s lack of initiative in paying out minority shareholders has spooked buyers and markets, and has has sent the stock price plummeting. On May 22, Sechin proposed that Rosneft would only be accountable for TNK-BP dividends as of March 21, when it took control of operations. The stock price fell from 7.140 to 6.770, over 5 percent, in 24 hours and still hasn’t climbed above the 7 dollar mark before Sechin provoked fear that dividends would severely decrease or be axed. TNK-BP may follow the fate of other Russian subsidiaries bought under large conglomerates, and may cease to exist. In order for Rosneft to fully dissolve TNK-BP, it needs to buy out or bring in TNK-BP Holding, which would prove difficult as 5 percent of the shares are public and free floating. rt.com/

ne of Russia’s leading retail chains have begun talks with banks on potential listing on the LSE as European IPO market is reviving. The retailer is hoping to use funds raised on the markets to take advantage of increased spending by Russia’s middle class, the FT reports. The owners of the grocer, including US private equity fund TPG and Moscow-based VTB capital, plan to offer global depositary receipts on the LSE no earlier than next year. “Lenta plans to hold an IPO in the coming years. But it will definitely not happen this year”, daily Vedomosti quotes sources close to the matter.

he last Russian IPO in London was Megafon’s $1.8bn listing in November 2012. The telecoms offering was the largest London listing last year. The last Russian retail IPO on LSE was O’Key raising $419.5mn in 2010. Lenta’s public offering would show private equity funds reviving plans to list companies they own, amid recovering equity markets and lower volatility, the FT reports. Six private equity-backed IPOs have been placed in Europe so far this year, compared with only five for the whole of last year, according to Reuters. rt.com

UKRAINE IS AMONG TOP 50 WORLD GOLD HOLDERS

kraine’s gold reserves are estimated at more than 36.1 tonnes, according to the national bank, and is ranked 47 in world standings. In March Ukraine was 51 according to the World Gold Council. For the second consecutive year Ukraine is trying to diversify its international reserves and is actively buying gold on both foreign and domestic markets. However the price is turbulent and experts argue, whether the Central Bank should join in the rush or wait until the price settles. There have been reports Ukraine is going to start

gold mining. Experts estimate Ukraine’s gold resources at 400 tons in the Carpathian Mountains and 500 tons in the Donbass region. Some gold is also believed to be in the Crimea and Dnepropetrovsk regions. Right now Ukraine has no gold production of its own and buys around 5 tonnes of gold a year. Domestic production of gold could start this year, the deputy head of National Bank, Vera Rychakovskya said. In three to five years Ukraine is expected to produce at least one ton of gold domestically and gradually increase capacity which will allow to cut imports by a third. rt.com

UKRAINIAN GAS PIPELINES WORTH OVER $26 BILLION

ccountants looking at the Ukranian gas transit network have put a value on it of between $26-29 billion. The figures have been presented to the Ukrainian government before a decision on whether Russia’s Gazprom is allowed to take over the network. Ukraine is considering a deal which would see the country get cut price gas from Russia in exchange for the pipeline reports Kommerstant Ukraine newspaper. The newspaper says the figures come from a source within the Ukraine Energy Ministry, but they have not been confirmed officially, nor have advisers Baker Tilly who say the information is confidential. Several companies have calculated the value of the Ukrainian gas transportation system in recent years. In 2007 Ukraine’s the pipe network was valued at $24.8 billion. Two years later in 2009 brokerage Uvekon calculated the value at between $9.9 billion and $16 billion, but this didn’t include the vast underground gas storage facilities. The new estimates, according to the Ukrainian newspaper, take such facilities into account. Earlier this year there already have been reports in the Ukrainian media suggesting the value of the country’s gas transportation system was between $20 billion and $26 billion. Reports also referred to Baker Tilly. New estimates of the gas pipeline network started to emerge in the media after Ukrainian authorities resumed talks over transferring Ukraine’s gas pipelines to Gazprom in exchange for slashing prices of imported gas and guarantees of safe transit.

Earlier this week reports said the Ukrainian authorities are ready to let Russia control the main gas pipeline, while the Ukrainian East European fuel and energy company (Vetek) will oversee local gas distribution, according to a Kommersant source. Current Ukrainian legislation does not allow the pipe network to be leased or sold. Forbes-Ukraine has reported that Russia considers the fair value for the Ukrainian gas transportation system at between $15 billion and $17 billion. The gas transportation web of Ukraine spans 37,600 kilometers of trunk pipelines delivering Russian gas to Europe. In recent years Gazprom has been trying to diversify transit routes, increasing exports through Belarus and via the Nord Stream route running through the Baltic Sea. However, the Ukrainian gas transportation system remains the main channel for Russian gas supplies to Europe. rt.com

June 3, 2013 #07

PHOTO REPORT caucasian business week

THANK YOU KALA

would like to thank to the organizers of the Event. SOCAR has been entered since 2006 on Georgian Market and since that, participation in the awarding is an additional stimulus for us. I am glad that the tradition was restored. I feel the greatest proud for the award-declared MahirMamedov. In addition, 25 best companies were revealed which were selected by the specially invited experts. The prizes and certificates were awarded to the winners. The representatives of Georgian Businesses were awarded in various nominations on the ceremony. The special prize for special contribution to making Georgian business free was awarded to the mother of BadriPatarkatsishvivli, NatelaPatarkatsishvili. “Today my son has been raised from the death. He was such person that he was worth to have it. The organizers of the event arranged everything very nice. I would like to thank to Mr. MalkhazGulashvili and Nana Gagua. I would like to show my sorrow that my son is not alive, but win the dead is called in a good what, it is the best thing-mentioned NatelaPatar-

BUSINESS RATING caucasian business week

katsishvili The winner of one of the nomination-the company elected by the Journalistswas Smart. The 25 best companies of 2012 nominated were Bank Constanta, TBC Bank, Geocell, GeoplantGurieli, Goodwill, Socal Energy Georgia, Orbi Group, Vagonmsheni, Company Natakhtari, Tea company Petra, Bank of Georgia, Fly Georgia, Rustavi Azoti, Georgian Waters and power, Kimerioni, Gas Energy, Wissol Group, VTB bank Georgia, Georgian Sugar, Company Zedazeni, Sarajishvili, Smart, Rustavi Metallurgy Factory, Company Aversi, Georgian Industrial Group, Georgian American Elois, Water Useful-Nabeglavi, PSP group, Integrated gerogia Systems. The golden Sponsor of the ceremony was SOCAL, General Sponsor “Fly Georgia”, Silver Sponsor “Gas energy” Partners: The Ministry of Finance of Georgia, International commerce Chamber, Georgian Business Association, US Chamber of Commerce The organizer of survey: Georgian Public Opinion and Marketing Research Company “Gorbi”.

June 3, 2013 #07

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 4 Odessa St., Tbilisi Tel: 224-48-58 E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: 75 21 11, Fax: 75 21 20 Kingdom of Sweden Embassy 12 T. Tabidze St. Tbilisi Tel: 55 03 20, Fax: 25 12 26 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 61 Agmashenebeli Ave. Tbilisi Tel: 91 01 94, 91 01 95, 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

TBILISI GUIDE

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 Resident Mission of the Asian Development Bank (ADB) Address: 1, G. Tabidze Street. Tbilisi Tel: +995 32 225 06 19, EXT:101 Cell: +995 577 900 128 e-mail: qtvalavadze.contractor@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

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

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

For Sale 550000 $ / 846 $ m² Space 650 sq.m Land 150 sq.m Address Tbilisi, Vake-Saburtalo, Saburtalo, Sairme hill Phone 595008000 All floors: 4 Room(s): 12

Price: 2.950.000$ Business center Total Space: 3000 sq.m. Home conditions: New building Renovation: Newly renovated Adress: , Tbilisi, Vake-Saburtalo, Didi digomi, Agmashenebeli alley Telephone: 2333560; 599363399

Akhvledianis Khevi N13, Tbilisi, GE. +995322958377; +995599265432

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caucasian business week

June 3, 2013 #07