Georgia: the Hub Issue

Investor.A MAGAZINE OF THE AMERICAN CHAMBER OF COMMERCE IN GEORGIA ge

ISSUE 29 OCT.-NOV. 2012

Changes to Cabinet

Onoprishvili: A Healthy Business Environment

Tbilisi, A Guide for Kids

Georgia: The Hub Issue

Investor.ge

Investor.ge CONTENT

Investment/ 21 Gateway to the Development Caucasus: Georgia 6 Investments in Brief as investment hub? A brief synopsis of After eight years new investments and of reform, are business news by international companies Avtandil Chedia. looking at Georgia as a regional headquarters? 8 Post Election Cabinet A run down of the 24 Georgian Georgian Dream Agriculture: The nominees for cabinet birth of a hub positions. New initiatives could help Georgia turn from 10 Five Questions a net food importer to a with WB Regional regional exporter. Director Henry Kerali 27 Georgia Seeking its The World Bank’s new Niche as Regional regional director speaks Education Hub with Investor.ge about New universities, 42 Ten Things You Didn’t his plans. unique programs, and Know About… competitive prices are 12 Davit Onoprishvili: attracting students to Tbilisi For Kids Creating a “healthy Georgia from around and competitive” the globe. business environment 28 Georgia: The South 38 Georgia’s Untapped Culture Investor.ge spoke with Caucasus Regional Potential for Trade 42 Ten Things You the Georgian Dream’s Banking Hub and Transit Didn’t Know About… economic policy KPMG’s Besik Sanaia Georgia is a natural Tbilisi For Kids expert – and head of looks at Georgia’s trade and transit hub A break down of what the parliament finance potential to be a for the region. What to do with the children committee – Davit banking center for the does business and the over the weekend. Onoprishvili. Caucasus. government need to do to capitalize on its 14 Georgia Set 34 Building on the potential? to Become Bio Georgian Miracle Research Leader The new government is 40 Tbilisi: A Regional The Richard G. Lugar focused on improving Capital Center could help on the Georgian Investor.ge interviews Georgia become a economy – and its role Zviad Archuadze, the regional center for as a regional hub for head of the economic biological research. business. policy agency at Tbilisi City Hall 18 Creating a Hub An intro to Investor.ge’s feature on Georgia’s potential to be a regional hub.

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AmCham Georgia Patron Members:

AmCham Executive Director Amy Denman mechanical or other means now known or hereafter invented, including photocopying Editor in Chief Molly Corso and recording, or in any information storage or retrieval system without Copy Editor Charlie Fletcher permission.

Marketing & Promotion Salome Tkeshelashvili The opinions expressed in this magazine do not reﬂ ect the opinion of the American Promotional Design Levan Baratashvili Chamber of Commerce in Georgia nor its Magazine Design and Layout Giorgi Megrelishvili Board Members or staff, unless otherwise stated. AmCham Georgia neither endorses, Writers Avtandil Chedia, Nick Clayton, Molly Corso, Maia Edilashvili, Monica Ellena, nor can be held liable for any eventuality Charlie Fletcher, Nino Patsuria, arising from the use of any product or Besik Sanaia service advertised within the pages of this

issue. Photographs Molly Corso, COATS Investor.ge is printed by CEZANNE

AmCham Georgia

36a Lado Asatiani Street, 3rd ﬂ oor Tel: 2 22-69-07 [email protected] [email protected], www.amcham.ge Special thanks to Sarah Williamson, the AmCham Editorial Board and the AmCham staff, as well as to KPMG and PricewaterhouseCoppers, for their help with this issue. www.investor.ge

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Investment in Brief

Bank of Georgia to Host Temur Chkonia Plans to Open District of Tbilisi, Trend reports. The Global Marketing Event in Georgia Palace Hotels in Tbilisi 22- house complex will have a single November and Mestia architectural style. The Bank of Georgia will host Mar- Georgia Palace Hotelswill expand About 2,000 people will be employed keting Kingdom, a European marketing operations and open new hotels in Tbilisi for construction, and a staff of 1,500 will forum, on November 12-13 at its Tbilisi and Mestia, according to the company’s remain after it is open. headquarters, reported Georgia Today. owner,Temur Chkonia. In Tbilisi, an The complex will include a residen- The event, which includes speakers from 18-room hotel located on Erekle Street tial, business, and a recreation zone -- Yahoo, Pepsico, Coca-Cola Hellenic and is slated to open in 2014. Chkonia noted playgrounds, swimming pools and trade Sony Music, is billed as the country’s that he has already invested over $25 mil- outlets -- as well as two public schools fi rst “global” marketing conference. lion in the hotel development. The Bank and kindergartens. of Georgia is fi nancing the construction. TAV Georgia will Invest Carrefour in Tbilisi Another $65 Million Tbilisi The House of Justice opened in On September 13, 2012, the Majid International Airport Tbilisi Al Futtaim Group opened its fi rst Car- The company plans to build a new The new service center can serve refour hypermarket in Tbilisi, a $25 runway, a project that will employ 700 on average 15,000 customers a day and million investment. The hypermarket is people. The project, which should be offers more than 300 services, includ- located on 9,000 square meters in Tbilisi completed in two years, will allow the ing Just drive and Just cafe. Just drive mall and employs 600 people. Carrefour airport to receive all types of aircraft, is a drive-thru service for citizens. The plans to open three more hypermarkets the Ministry of Sustainable Economic Tbilisi Justice House is the 11th in Geor- in Georgia. Development reported in September. gia and has a total area of 32,000 square meters. It was created and designed by European Commission More Georgia-Europe Flights the famous Italian architect Massimiliano Allocated €60 million to Open Fuksas. Support Agriculture in Georgia Georgia Today reported that Fly- Georgia is set to receive €60 million Georgia started Tbilisi-Amsterdam Azerbaijani Company to Build from the European Commission as part fl ights in October, with roundtrip fl ights Dirsichala Complex in Isani- of the 2012EU Action Plan. The grant planned twice a week. In addition, the Samgori District will fi nance modernization programs, budget airline Pegasus added a Batumi- Azerbaijani development company including economic integration and Istanbul fl ight to its schedule, also start- AS GROUP Investment will construct political association with European in- ing in October. Dirsichala complex in the Isani-Samgori stitutions, BPI.ge reported.

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The list of candidates for cabinet, as presented by Prime Minister candidate Bidzina Ivanishvili. The cabinet Post Election will become official after the parliament approves the nominees. For the official list and biographies, see www. Cabinet government.gov.ge. ALEXI PETRIASHVILI, State Minister for European and Euro- IRAKLI ALASANIA, Minister of Defense Atlantic Integration www.mod.gov.ge, 20 General Kvinitadze Str., www.eu-nato.gov.ge, 7 Ingorokva Str., Tel: 293 28 67 Tel: 291 19 63, 291 04 21

PAATA ZAKAREISHVILI, State Minister for Reintegration TEA TSULUKIANI, Minister of Justice www.smr.gov.ge, 7 Ingorokva Str., Tel:292 18 81 www.justice.gov.ge, 24 Gorgasali Str., Tel: 240 52 02

DAVIT NARMANIA, Minister of Regional Development and GURAM ODISHARIA, Minister of Culture and Monument Infrastructure Protection www.mrdi.gov.ge, 12 Al.Kazbegi ave., Tel: 251 05 91, 251 06 88 www.mcs.gov.ge, 14 Sanapiro str., Tel: 293 22 55

NODAR KHADURI, Minister of Finance DAVIT DARAKHVELIDZE, Minister of Internally Displaced www.mof.ge, 16 V. Gorgasali Str., Tel: 226 14 44 Persons from the Occupied Territories, Accommodation and Refugees of Georgia KOTE SURGULADZE, State Minister on the Diaspora Issues www.mra.gov.ge, 15a Tamarashvili Str., Tel: 238 47 98 www.diaspora.gov.ge, 7 Ingorokva Str., Tel: 218 13 70 MAIA PANJIKIDZE, Minister of Foreign GIORGI MARGVELASHVILI, Minister of Education and Affairs of Georgia Science www.mfa.gov.ge, 4 Sh. Chitadze str., Tel: 228 47 47 www.mes.gov.ge, 52 D. Uznadze str., Tel: 243 88 19 DAVIT KIRVALIDZE, Minister of Agriculture LEVAN KIPIANI, Minister of Sports and Youh Affairs www.moa.gov.ge, 6 Marshal Gelovani Str., http://msy.gov.ge/, 9 Cholokashvili str, Tel: 223 54 33, 223 02 03 Tel: 237 80 13, 237 80 09

KHATUNA GOGALADZE, Minister of Environmental IRAKLI GHARIBASHVILI, Minister of Internal Protection Affairs of Georgia www.moe.gov.ge, 6 Gulia Str., Tel: 272 57 00, 272 57 20 www.police.ge, 10 Gulua Str., Tel: 299 53 50, 298 39 43

GIORGI KVIRIKASHVILI, Minister of Economic and DAVIT SERGIENKO, Minister of Health, Labour and Social Sustainable Development Affairs www.economy.ge, 12 Chanturia Str., Tel: 299 77 77 www.moh.gov.ge, 144 A. Tsereteli Ave., Tel: 236 90 26

KAKHA KALADZE, Minister of Energy and Natural Resources SOZAR SUBARI, Minister of Corrections and Legal www.menr.gov.ge, 6 Gulua str, Tel: 235 78 00 www.mcla.gov.ge, 42 Al. Kazbegi Ave, Tel: 231 27 37 Investor.ge

OCT.-NOV. 2012 9 Investor.ge

Five Questions with… WB Regional Director Henry Kerali

Henry Kerali is the World Bank’s need to diversify the economies, increase Vani. In addition, the bank will continue (WB ) new Regional Director productivity, strengthen institutional a policy dialogue and support ofkey for the South Caucasus. Before capacity, and to increase physical and reforms through a planned second devel- coming to Georgia, he was the human capital. We will be working with opment policy operation currently under bank’s manager for transport a broad range of stakeholders in all three preparation. The bank remains ready sector activities in all countries in the European and Central Asian countries to see if there is a need to fi ne to support the government to enhance regions. In an interview with tune the respective partnership strategies human capital in the areas of education, Investor.ge, Kerali outlines the WB’s or to introduce new initiatives. health, pensions or social protection, plans for 2013. Q: What is WB’s top agenda in since Georgia’s people will always be Georgia for 2012 and 2013? In particu- its most precious resource. MAIA EDILASHVILI lar, which projects are you working on Q: During your fi rst press conference presently? in Tbilisi you said that infrastructural and Q: How would you describe WB’s A: The World Bank’s current portfo- heritage projects, as well as the tourism role and strategy in the region? Do you lio of operations — total lending of $680 sector, are the WB’s key sectors of inter- think that there is a need to change any- million — comprises a combination of est in Georgia. What projects are planned thing or introduce new initiatives? investment projects and development to continue supporting these sectors? A: For Georgia, the current World policy operations. Through a program- A: The bank will continue to support Bank Group (WBG) Country Partnership matic development policy operation these sectors through three programmatic Strategy (CPS) for the period up to 2013 series, with the fi rst installment of $60 investments: was prepared against the backdrop of the million delivered in July 2012, the bank The East-West Highway Program: twin crises of the August 2008 confl ict is supporting the government’s reform We are considering fi nancing a fourth with Russia and the global economic measures that are critical to the achieve- project under this program to upgrade the downturn. The Georgia CPS remains ment of competitiveness and inclusive E60 highway from Gori to the Khashuri relevant and is built around two pillars: growth. The main policy areas supported bypass. The Secondary and Local Road meeting the post-confl ict and vulnerabil- by this operation are: competitiveness; Program: Earlier this year the bank ap- ity needs; and strengthening competitive- public fi nancial management; and effec- proved a new project that will fi nance ness for post-crisis recovery and growth. tiveness of social spending. The reform several road segments throughout the The CPS envisages total WBG support of strategy adopted by the government is to country and pilot the use of performance- about $600–$750 million for the period promote a virtuous cycle of productivity based contracts for road maintenance. of 2009 to 2013, including support to improvements, higher investment and The Regional Development Program: private-sector investments through the exports, to generate growth and employ- The fi rst project, focusing on the Kakheti International Finance Corporation. The ment, and to strengthen social safety nets. region, was approved in the amount of bank will soon start consultations with Looking forward, the bank is now $60 million from the bank and $15 mil- the government, civil society, and other working on preparation of another lion from the government and is now stakeholders on the framework for the Regional Development Project to be under implementation. The objective next CPS covering the four-year period delivered in 2013 that will focus on the of the project is to improve infrastruc- from 2014. Imereti region and provide investments ture services and institutional capacity, The common objectives in all three for renewal of cultural heritage treasures, including workforce development, to countries of the South Caucasus are the such as Tskaltubo city and the village of support the expansion of tourism-based

10 OCT.-NOV. 2012 Investor.ge

businesses and cultural heritage circuits in the Kakheti region. A second project, focusing on the Imereti region, is expected to be approved by the bank in November 2012. The overall Regional Development Program aims to encourage the private sector, small and large, to start new businesses or expand their current projects so as to create jobs and support Georgia’s socioeconomic development. In addition to the above, the bank is also supporting: the Regional and Munic- ipal Infrastructure Development Project, which has improved water services and urban roads in several Kakheti towns and villages; the Rural Development Project, which has helped to support lines of credit to microﬁ nance institutions in the region; and the Irrigation and Drainage Project, which has rehabilitated head works and the main irrigation channels in Kvemo Alazani. Among the knowledge products that the World Bank plans to deliver this year are an assessment of potential sources of growth, options for a “green” transport policy, a strategy for regional development, an assessment of Public Expendi- ture and Financial Accountability, as well as a series of surveys on household and ﬁ rm skills and workforce development aimed at enhancing the link between the supply and demand for labor. Q: How important is regional economic integration for Armenia, Azer- baijan and Georgia? Which should have a higher priority — regional or international integration? A: Both regional and international integration are important. The South Caucasus countries are not large. The combined population is less than 20 million, and the combined gross domestic product (GDP) is less than $100 million. However, they do have the potential to be high-growth economies for a sustained period. In order to achieve that, tapping

OCT.-NOV. 2012 11 Investor.ge

regional and international markets and production networks will be critical. Davit Turkey is one example where regional economic integration can yield signifi cant dividends. Turkey is the world’s second -largest exporter of apparel and a very successful exporter overall. Onoprishvili: Integrating with Turkish production networks offers signifi cant potential for boosting exports and employment in Georgia. This Creating a is just one example. Georgia is also pursuing a Deep and Compre- hensive Free Trade Agreement with the European Union. Similar “healthy and efforts are underway in Armenia and Azerbaijan. These initiatives would enhance market access and integration with the EU. The South Caucasus also must look eastward to high-growth markets competitive” in East, Central, and South Asia with a combined population of three billion. business The South Caucasus countries are also ideally positioned on the historic Silk Road, at the intersection of east and west, to take advantage of this integration. If one draws a straight line environment between the center of economic mass in Asia and the center of economic mass in Europe, that line would almost certainly have Investor.ge sat down with Columbia to pass through the South Caucasus. Leveraging this geographical University-educated economist Davit Onoprishvili, PM candidate advantage should be an important component of the development Bidzina Ivanishvili’s nominee to strategies of the South Caucasus countries. chair the Committee for Finances Q: You have worked in nearly every continent. What are the and Budgetary Issues, to talk main trends in the global economy? How are current develop- about the Georgian Dream’s plans ments in international markets affecting economies and economic to overhaul the country’s anti- policies in the region? monopoly laws, reconfigure the labor code, and reset relations with A: The global economy is passing through an increasingly the business community. uncertain period. The euro-area sovereign debt crisis, along with fi scal challenges and banking-sector deleveraging in advanced economies, are keeping the global-growth outlook weak in 2012. Overall, global GDP is projected to increase by 2.4 percent in 2012. Growth for developing countries is projected to be 5.3 percent, and ne week after sweeping for advanced economies, 1.4 percent, with the eurozone projected to power in parliament, to contract by 0.3 percent. Obillionaire Bidzina This has two important implications for developing countries. Ivanishvili, the nominee for prime The fi rst is that foreign direct investment and other capital infl ows minister, promised Georgian business are likely to remain uncertain for the foreseeable future in an envi- leaders and foreign investors that his ronment of heightened investor uncertainty, so that more domestic coalition will put an end to monopolies, savings will need to be mobilized to fi nance growth. The second cartels, and price fi xing in the country. is that developing countries will need to double their efforts to Davit Onoprishvili, one of the sustain export growth, by tapping new markets and diversifying architects for Ivanishvili’s economic their production base. The focus should remain on improving platform, told Investor.ge the new competitiveness and enhancing integration to achieve sustainable coalition government is ready to growth and employment generation in the medium term. For the overhaul the country”s anti-monopoly South Caucasus countries, the eurozone crisis poses a potential laws. threat, although this is much less than the potential impacts of the It is a subject Onoprishvili knows crisis on other countries in Eastern and Central Europe. well. He helped write the country’s

12 OCT.-NOV. 2012 Investor.ge

pre-2005 law on monopolies when he they have to pay taxes or (whatever) The coalition itself is planning was a member of parliament during fi nes regulated by laws, they should to create two funds – a billion the government of former President pay. That is it,” he said. dollar agriculture fund and a SME Eduard Shevardnadze. In addition to the anti-monopoly development fund. “What the National Movement did law, Onoprishvili said the coalition Approving the budget, reassessing … they decided this regulation could is planning to review the labor code tax fi nes, pension reform, and the be harmful for developing businesses and other United National Movement creation of a pension fund are also and business itself can regulate the initiatives, such as the Partnership on the agenda – a lot of work for a market and there is no necessity to Fund which was established last year to coalition that has to pass a budget have some [oversight] from the state,” help attract greenfi eld investment. before the end of the year, and has just he said. The labor code should be under a year to implement its platform “And after this, after two or three reformed to meet International Labor before the next election. years, we really got a bad picture. In Organization (ILO) standards, noted Onoprishvili underscored that many areas of the economy, there rose Onoprishvili – a move that should help regardless of the sector, the coalition’s monopolistic structures, it was not a expedite negotiations with the United goal with all the reforms is to improve pure monopoly -- it was a much more States and the European Union over the business climate – and improve complicated, sophisticated cartels.” trade agreements. relations between businesses and the The coalition believes the fuel The Partnership Fund, a major government. industry, pharmaceuticals, and government initiative to leverage state Now, he said, business associations telecommunications are key areas for assets and budgetary funds to help and the government needs to fi nd a restructuring once a new law is passed. fi nance greenfi eld investments, is a bridge to foster more communication. But Onoprishvili stressed that project that deserves close “review,” “We will be for such an open businesses do not have to fear a repeat Onoprishvili said. relationship and we have to create a of the mass arrests and government- “[W]e have the impression this is good business environment and attract sponsored show trials that marked to make a hidden privatization of those investment,” he said. the fi rst years of the Saakashvili shares of those companies that are now “The prime minister himself is a government. [in state control],” he said. business person and he knows better “In our case, we are not going “Plus we should see what the than anybody how it is better to to punish anybody because of their benefi t is from that, what the benefi t is create a business environment and be political views or some other interest to the state from this. We will make a benefi cial to the business itself and the which is legal. Just if somebody careful review, and then we will make state and also to solve at the same time violated laws and has a problem … the decision to leave it or not.” substantial social issues.”

OCT.-NOV. 2012 13 Investor.ge

Georgia Set to Become Bio Research Leader

Georgia will become a regional CHARLIE FLETCHER been stored at the National Center for center for advanced biological Disease Control. The new facility will research with the long-awaited he Richard G. Lugar Center for allow more sophisticated research on commencement of activities at the Public Health Research, named these and other emerging pathogens. Richard G. Lugar Center for Public for the U.S. Senator, was Health Research. T The facility boasts a state of the built to bolster global health security art biocontainment laboratory that has through the identiﬁ cation of infectious no equal anywhere in Georgia or the disease threats and the development region, she stressed. of vaccines and other interventions to “The center provides Georgia mitigate those threats. with a great opportunity to be on the Georgia was a natural partner front line of this global health effort for this effort, says Nata Avaliani, and also establish a long-standing Georgia’s leader of the Global Disease and very important cooperation for Detection Regional Center. the Georgian public health system “There has been an aspiration in with U.S. institutions, such as the this country to play the role of a hub, U.S. Centers for Disease Control a leader in the region in certain areas,” and Prevention, Walter Reed Army she said. Institute of Research, and other partner “Because Georgia is endemic for organizations that will help establish some of the pathogens for potential these capacities in Georgia,” Avaliani biological threat, there has been said. ongoing research studying plague, tularemia, anthrax and other diseases. Identification and Prevention This combination of factors and also The overall purpose of the center the very strong partnership with the is to prevent and mitigate global U.S. government that exists in a epidemics by working in concert number of other sectors, contributed with the World Health Organization to the idea of establishing the center (WHO). The WHO’s International here.” Health Regulations require renewed Avaliani added that the center cooperation and coordination between would also be a safer, more secure countries for full and effective repository for pathogens that had implementation

14 OCT.-NOV.AUG.-SEP. 2012 2012 Investor.ge

OCT.-NOV. 2012 15 Investor.ge

The original partnership started Threat Reduction Agency, which has bacteriophage active against anthrax with the Nunn-Lugar Cooperative been responsible for the development, that was developed by long-time Threat Reduction program building construction, testing and validation of Georgian research laboratory, George the laboratory. As the testing and the facility. Eliava Institute of Bacteriophages, validation of the laboratory concludes, The initial ground breaking for Microbiology and Virology. the partnerships between the Georgian the center occurred in 2004 and Revaz Adamia, the institute’s National Center for Disease Control construction of the 8,000 square meter director, is optimistic about the and Public Health and various partner facility began in 2006. Most major potential the center holds for Georgia. organizations, including the U.S. construction was completed in 2010. It “In general, the idea of creating U.S. Centers for Disease Control and is not operational yet, however. this center is very good. Initially it was Prevention and Walter Reed Army Because of the complexity of the created as a center of excellence for Institute of Research are expanding. center’s laboratories, extensive testing detecting any kind of biohazard in this Both the U.S. Army’s medical research and validation is required before much region of the world, natural or artifi cial. unit and the U.S. CDC will be tenants of the facility can be fully utilized. But now its tasking has been changed. within the facility. Final validation of the Biosafety Level It’s now more oriented toward public But the faculty itself is Georgian 3 biocontainment labs is expected to be health, and it is more oriented toward controlled by a board of governors completed this winter. scientifi c work,” he said. chaired by the Georgian Prime Minister Currently there are 15 full- “I personally like that more and comprising representation from time employees at the center and emphasis is being placed on scientifi c the Georgian ministries of Health, approximately 50 consultants work rather than pure epidemiological Agriculture, Defense, Finance, and conducting validation and testing, surveillance. I think that it is vitally Education & Science. according to Vakhtang Berishvili, the necessary for this country to have With the completion of Georgia’s center’s deputy director. several good scientifi c centers where center, there will be10 such CDC The center’s small staff is currently high-level experimental work can be regional centers worldwide. The developing policies and procedures. done.” facilities are organized in partnership “Our science people are now thinking When fully operational, the with the U.S. CDC Division of Global about what we are going to do and center will be capable of performing Disease Detection and Emergency how we are going to do it. Our expanded gene sequencing, which will Response. admin people are working to create be crucial for today’s basic biological The other nine regional centers infrastructures and systems,” he said. research, noted Avaliani. are in Thailand, Kenya, China, By 2014, the facility is expected “There are no borders for infections Guatemala, Egypt, Kazakhstan, India, to employ more than 200 people, and for public health threats, or for South Africa and Bangladesh. Each of including scientists, laboratory biological threats,” she said. “So these labs works closely with Walter technicians and administrative staff. countries should be equipped with the Reed, the U.S. CDC, and with each capacity, both technical and human other to develop vaccines and other First Project: Genomic Mapping resources capacity to be able to detect, therapeutics and to provide information Although the center will not report and respond to outbreaks in a about infectious diseases of military be fully operational for some time, timely manner. The center provides and public health importance, offi cials expect to begin tackling Georgia with a great opportunity to be according to an offi cial with the some projects as early as October, on the front line of this global health Georgian unit of the U.S. Defense including the genomic mapping of a effort.”

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Rustavi auto market Creating a Hub

18 OCT.-NOV. 2012 Investor.ge

or centuries Georgia has been a hub for trade and Ftransit. Today, thanks to a synergy of reforms, promotion, and new possibilities, the country has the potential to become the regional center for even more: it can also become a hub for education, agriculture, energy, tourism, investment, and even reforms. After years of reporting on Georgia’s economic policies and investment climate, Investor.ge decided to dedicate an issue to exploring the Georgia is a natural hub for the Caucasus and Central Asia region. After country’s potential to grow and adopt a years of painful reforms, the country has the geography, open borders, streamlined legislation, and growing ports to carve out a niche as a hub regional role. for goods, ideas, and transit. Investor.ge spoke with business people, “There are a few obvious reasons economists, and the acting head of the national investment agency about that stand out [for Georgia to become how Georgia can capitalize on its potential to be a regional hub. a regional hub],” noted Sarah

OCT.-NOV. 2012 19 Investor.ge

Williamson, the president of AmCham grew to an $8 million business in streamlined registration laws (it takes Georgia and the vice president of UGT. 2004. By August of this year, it was just 15 minutes to register a car) are At the core of its promise is simple worth $562 million – 24 percent of all helping Georgia usurp Dubai as a car geography – Georgia is the perfect exports, and creating a regional hub on reexport hub in the region. bridge between the markets of Europe par with Dubai, according to a report If the government and private and Central Asia. But years of reforms, by Renaissance Capital. sector can work together, there is the in addition to investor interest and Robin McCone, potential for even more, Livny said. large donor projects, are helping the PricewaterhouseCooper’s tax and Livny and his colleagues at ISET country build on its natural borders. legal practices leader in Georgia Policy Institute are working on a Tradition also helps. Historically, and Armenia, said the impact of the national competitiveness report on Georgia has been on the crossroads of reforms is starting to trickle down to Georgia for the USAID G-PAC and trade routes, a legacy that helped create investors looking at the region. EPI projects. The report includes a the old Silk Road, and has made trade “I am amazed at how many requests special chapter on Georgia’s potential and transit a vital part of Georgia’s I am getting from major multinationals as a regional hub. Georgia could play economy for centuries, noted Eric from all industry sectors to speak that role in a variety of areas including Livny, the director of the International with them about doing business in trade and transport, but also education, School of Economics at Tbilisi State Georgia. I am also increasingly seeing tourism and even healthcare. University. multinational companies who are “Look there are all kinds of things “Georgia is not a country that has already in the region, looking to change that could be done. At the moment been traditionally manufacturing or their business model to move many of we are very far from being any one of producing goods. This is a country their activities through Georgia,” he these,” he said. that has been historically on the transit said, noting that so far most interest McCone and other business route, servicing the fl ows of caravans, comes from fast moving consumer consultants noted that even basic passengers, goods. In fact, that may be goods companies that are attracted by improvements in the labor force, such the source of the wonderful Georgian the ease of doing business in Georgia. as more skilled workers and English- hospitality,” he added. But even more than that, McCone language speakers could make a Williamson said that, in addition noted that the combination of services difference for investors. to geography and good relations with and reforms Georgia offers is unique More investment in infrastructure, Azerbaijan, Armenia, and Turkey, the – and is making the country uniquely more investment in private businesses, government’s strong desire to make attractive to investors. and more coordination between the country a regional player give it an “This convergence of factors public and private actions will be key added push. is increasingly being noticed by to turning Georgia’s potential into a That role can serve Georgia in the companies looking to establish shared reality, Livny stressed. future, Livny emphasized. Georgia service centers or back offi ces in “Coordination is something that can grow by building on its traditional Georgia,” he said. doesn’t always require investment, it value as a transit route. One case in The car reexport industry is one doesn’t always require money. It is just point is the country’s new role as a example of an industry that grew out the ability of government to bring all regional hub for car sales. of Georgia’s strategic location and the the stakeholders to the same table and In 2003, there were zero car exports potential created by the reforms on the coordinate their actions,” he said. from Georgia. As the state started to ground. Renaissance Capital reported “Internally, you need coordination crack down on crime following the in October that the combination between the government and the Rose Revolution, the reexport of cars of simplifi ed trade regimes and private sector, that is the key.”

20 OCT.-NOV. 2012 Investor.ge

MONICA ELLENA ally Georgia is a natural hub for the Gateway to region.“You’ve got it all: a port, trans- n his heyday, former U.S. Vice portation network, stable politics, low the Caucasus: President Dick Cheney claimed that levels of corruption, investor-friendly IAmerica had to become “the best environment and good relationships with Georgia as place in the world to do business.” both Armenia and Azerbaijan. Taken one Georgia has been quick to follow suit. by one, these countries’ economies are Investment The country has a stellar record in estab- too small, but if you combine them, you lishing the conditions for investors to set have quite an interesting and sizeable Hub? up shop. Accolades include the World market.” Bank’s number-one reformer, to number The Georgian government has one in enterprise surveys in spending the Moving here: What are the focused on reforming the business least time dealing with regulations, to advantages? climate in order to attract foreign 12th in ease of doing business in 2011, Initiatives are mushrooming, from direct investment. After eight years and seventh-least corrupt country accord- of reforms, Investor.ge looks at private projects to government measures. Georgia’s potential to be a hub for ing to Transparency International. Projects such as the recently-built Tbilisi international companies looking to Logistic Center can boost the move- invest in the region. But is that enough? ment of goods with its state-of-the-art, For EsbenEmborg, the Tbilisi-based 90,000 square meter container terminal partner of the Washington ﬁ rm, SEAF- with rail and road access, a container Management LLC, it is a no-brainer. depot and TIR Parking. Actions like the Logistically, politically, and operation- double-taxation avoidance treaties are an

OCT.-NOV. 2012 21 Investor.ge

incentive for companies to locate here. did make use of Georgia’s Advanced Tax LLC, 100% of Georgian Oil and Gas Georgia currently has double-tax avoid- Ruling (ATR) system.“The ATR allowed Corporation LLC, 100% of Georgian ance agreements with 31 countries. us to get clarity on the taxation for our State Electro System LLC, and 49% of Orifl ame Cosmetics SA, a Swedish operations and mitigate risk of possible Electricity System Commercial Opera- cosmetics and beauty products company, future tensions with tax authorities,” tor LLC. Currently the fund has a total entered the South Caucasus via oil-rich Lovenetskiy said. “It helps both parties capitalization of roughly $2 billion. Azerbaijan in 1998, opening in Georgia to have a clear frame of understanding, Nevertheless, some fear this could in 2000. The company took a step ahead at least in the medium term.” be a deterrent for private investors. “The this year by registering Orifl ame Cauca- Nonetheless, because Ukraine has risk is that foreign investors will feel put sus as a special trading company (STC), a stronger manufacturing industry and off at entering a market where the gov- which it located in Tbilisi. An STC is a infrastructure than Georgia, JTI decided ernment is already present with an equity special corporate category in Georgia to keep their operation there. As retail, fund that size,” says Emborg, of SEAF, that uses special taxing rules designed services, hospitality, and even agriculture whose company operates two funds with to facilitate reexport of its products. are expanding in Georgia, the manufac- assets totaling $72 million, invested in “This new entity takes advantage of turing sector is struggling to keep the 15 companies focusing mainly on retail. the government’s efforts to encourage pace here, they said. companies to use Georgia as a regional Economies of scale center,” saidLevan Bokuchava, Orifl ame Government investment “Size is one of the three main differ- Georgia’s country director.“At the mo- attraction or deterrence for ences between us and private funds, the ment Orifl ame has management offi ces private investment? other differences being the sectors and in both Yerevan and Baku,” he said.“But The Georgian government launched the types of companies we decide to operationally, it’s Tbilisi that feeds the the Partnership Fund in June 2011, add- invest in,”Hizanishvili said. “As a gov- Caucasus.” ing to its various efforts to give the sector ernmental body, we are able to invest in Georgia’s favorable tax system is yet a push. However, of the four portfolios areas and on a scale that foreign investors another incentive for multinationals to comprising the fund, the manufacturing could not get into. None of our projects operate here. Last year, Japan Tobacco portfolio so far remains the only one are smaller than $30 million, apart from Inc., the world’s third-largest tobacco without funded projects. The other three agriculture, where the bottom limit is $5 company by sales, moved its top and — real estate, agriculture and energy — million.” The fund invests mainly in so- middle management for the Caucasus are up and running. called greenfi elds, or start-up companies. from Kiev to Tbilisi. “The market has “The challenges are the sizeable By contrast, private equity funds tend to grown signifi cantly over the last decade. investments needed and the small mar- focus more on brownfi elds, or already It simply made sense to manage it on the ket Georgia represents,” said Kakha existing fi rms.The bottom line is that spot rather than remotely,” said Dmitriy Hizanishvili, the fund’s chief investment Georgia’s Partnership Fund facilitates Lovenetskiy , the company’s chief fi - offi cer. “That’s why pushing the regional the creation of new companies and nancial offi cer for the Caucasus region. hub idea can also boost the sector. We encourages other funds to buy minor- “Currently the legal entity is limited to need investors to look at Georgia as the ity ownership shares as selling stakes, operate in Georgia, but our plan is to entry point to the Caucasus as a whole, says Hizanishvili. “The government has expand into the neighboring republics providing them with the conditions to done everything it can to bolster foreign in 2013. The Caucasus economies are build plants and factories. Textiles and investments in Georgia,” stresses Nicole growing fast, so you need a center to pharmaceuticals have real potential. Jordania, an investment advisor at the feed them. Georgia is the default center.” These sectors have access to a friendly Tbilisi-based consultancy fi rm, The Noè JTI considered using an STC tax tax regime, cheap energy, a cheap but Group. “The results are clear, with poten- regime in Georgia, however they de- educated labor force and transport links.” tial investors from countries that range cided that there is still some ambiguity The state transferred stakes in key from the United States to India,” she said. in the legislation and a lack of practical infrastructure companies to the fund “The challenge now is to make Georgia experience with it that make it a risky to provide its initial, paid-in capital, an investment center for the whole South option for the company. However, they including, 24% of Georgian Railway Caucasus region.”

22 OCT.-NOV. 2012 OCT.-NOV. 2012 23 Investor.ge

Georgian Agriculture: the birth of a hub?

Entrepreneurs and policy makers NINO PATSURIA Georgia has long standing agree- are betting on new initiatives to ments with some former Soviet repub- bolster agriculture production in the ith Georgia’s unique cli- lics as part of the Commonwealth of country – and take the first steps to mates, soil types, and deli- Independent States (CIS). In addition, turning Georgia into an export and cious produce, few disagree reexport hub for food products. W Tbilisi benefi ts from long-standing, duty- with Georgia’s potential as a regional free agreements with the United States center for agricultural goods. The ques- and the European Union, and is in the tion, however, is how to tap into it. process of negotiating comprehensive Currently the statistics are not en- free-trade agreement with Brussels. All couraging: Georgia imports 80 percent of these agreements and negotiations of the food it consumes, according to should make exporting more profi table. offi cial statistics. In addition, the agri- “Since the Rose Revolution, Georgia culture sector has been steadily shrinking made it a priority to become a regional — from 47 percent of GDP in 1995 to hub from many directions, including just nine percent today. agriculture and logistic, as well as fi - Giorgi Tsikolia, the director of the nancial and tourism,” he said. “[Trade Department of Investment and Export agreements] coupled with our simple Policy at the Ministry of Economic business-oriented taxation policy, cor- and Sustainable Development, believes ruption-free environment, low-cost labor Georgia’s current — and future — trade force, and geographic location, will boost agreements provide a valuable key to get plenty of new enterprises, logistic centers out of the country’s import rut by making and other industries to be developed in exports more affordable. Georgia.”

24 OCT.-NOV. 2012 Investor.IInnvveesttoorr.gege

OCT.-NOV.OOCTOCCT.-N.-.--NNOOVOV.VV. 201222001212 2525 Investor.ge

New solutions for better etables Export Company LLC. Launched country’s agriculture sector, according products during the summer, the company is to Lasha Gotsiridze, the university’s However, agriculture specialist, charged with helping farmers export their rector. “It is an open secret that success- Davit Shervashidze, a senior advisor goods to markets overseas by taking care ful agricultural business hires foreign in Agribusiness Sector at Georgian of marketing and logistics. technologists,” he said. “Now we prepare Regional Development Fund of SEAF The fi rst test for the new policy will cadres who get western educational skills (Small Enterprise Assistance Funds), be in the Ukrainian market, where the in all the agriculture-related jobs, both noted that if Georgia received a free trade company is focused on ensuring qual- land farming and food processing, and agreement with the EU today, it would ity — and quantity — delivery, noted so forth.” not have the goods to export. Giorgi Jakhutashvili, the head of the The university hopes to become the Part of the problem boils down to export company. leading scientifi c-research center in the financing. Farmers do not have suf- Jakhutashvili believes his company South Caucasus.With a full spectrum of fi cient access to affordable bank loans. will serve as an “ice-breaker” for the pri- labs for both educational and scientifi c- But an equally challenging problem is vate sector. Businesses can benefi t from research purposes, it is trying to attract quality.Entrepreneur, David Lee, the the state’s market research and logistics Georgian scientists working at leading general manager of MagtiCom Ltd. and policy, not to mention its work breaking universities abroad. the owner of a large farm in Imereti, said into new markets, he says. Scientists at the university are work- that, with the proper strategy, Georgian The state-owned company is also ing to develop a new species of endemic agriculture can fi nd a market overseas. investing in cold-storage facilities in wheat and grapes. They are even experi- Armenia and Azerbaijan are both promis- Ukraine to help ensure high quality. menting with the creation of a new type ing markets for meat, he noted, and sell- Jakhutashvili noted that once Ukrainian of Georgian bee as part of the genetic ing wine and out-of-season vegetables traders were convinced that Georgia research happening at the lab. to Europe and other countries could be could provide for the middle and hig These efforts are expected to help profi table niche markets. segment of the market, demand increased Georgia establish a brand name on the “With six climatic zones and 26,000 from other countries too. international market, said Kakha Dide- rivers, I believe the businesses them- “We ensure marketing and logistics bulidze, the head of the educational selves will fi nd and develop markets of the harvested product from the fi elds microbiology lab at the university. once we get the focus and strategy better to the shelves of the export market in line “Everybody knows that Chinese silk defi ned and some pilot projects under- with international standards,” he said, is the best. The world should learn that way,” he said. adding that the state company’s budget Georgian wine and Georgian wheat are A new government initiative — part allows it to ensurethat there are enough very good once and for all,” he said. of the 10-year strategy for agriculture goods exported to meet the demand in “On the innovation side, we prefer to that was approved in the spring — will the new markets. focus on an endemic Georgian specimen help, offi cials say. Currently the Ministry Among the other initiatives also at from a pure marketing point of view, to of Agriculture, together with the United work in the private sector is the use of embed a Georgian product at the market. Nations Food and Agriculture Organiza- education to change farming practices. Based on these researches we actually tion, are devising a four-year action plan Kakha Bendukidze, a former economic make a passport to our endemic product to improve irrigation, increase access minister, is working to reform the private to raise awareness of Georgian wine to modern farming techniques, develop sector from the ground up. Last year he brands, vine, wheat, honey and bee, like export infrastructure, and set up new purchased the Georgian Agricultural everybody knows that the Chinese silk enterprises. University. is the best, the world should learn that One of the fi rst steps in this strategy The newly renovated university will Georgian wine and Georgian wheat is was creating the State Fruit and Veg- prepare Georgians to modernize the very good once and for all.”

26 OCT.-NOV. 2012 Investor.ge

Each year, GAU has five to 10 non- Georgian students out the 1,000 registered full time students at the university. ISET has a steady number of foreign students, as well. Tbilisi State Medical University (TSMU) gets the biggest share of non- Georgian students,1,000 from more than 30 countries this year. TSMU stands out not only in the Caucasus region, but also as a leader in the entire Eastern European region and in post-Soviet countries for its westernized teaching system and tradi- tions, says Giorgi Giorgobiani, head of the Department for Foreign Students. Degree programs at TMSU last for six years. The annual tuition fee for the English-language faculty is $3,500, Georgia Seeking its Niche about twice what it would cost for similar course work at a Georgian-language as Regional Education Hub faculty. “Tuition rates in Georgian New universities, new international partnerships, and new programs are institutions are lower than most other bolstering hope that Georgia can become a regional hub for education. countries and Georgia has excellent western-based programs that have room for regional students,” said Cowgill, who is also the vice-president of AmCham MAIA EDILASHVILI more than 1,700 -- 408 of whom come Georgia. “The visa regime is very stu- from India, 337 from Russia, and 336 dent friendly as well. Further, Georgian ducation can play a critical role from Azerbaijan. In addition, 297 Turk- students benefi t from the exposure to in Georgia’s economic growth ish students, 24 Ukrainians, 20 Greeks, students from other countries and gain E— particularly as a hub for re- nine Americans, and six Germans regis- a better understanding of their cultures gional students, according to education tered, according to offi cial data. and ideologies, which is invaluable in a specialists. “Georgia’s geographical location is global economy.” The number of foreign students at a big plus and can attract students from Georgia’s higher education institutions both the East and West,” says Michael More universities, more in the 2000-2001 academic year was Cowgill, the president and co-founder students? just 420, according to GeoStat, the state of the Georgian American University Ideas for increasing Georgia’s po- statistics offi ce. Ten years later, there are (GAU), which opened in Tbilisi in 2005. tential as a regional education hub have

OCT.-NOV. 2012 27 Investor.ge

taken root in the government. President Mikheil Saakashvili announced this summer that the European Commission may open a University in Georgia: Georgia, similar to the College of Europe in Belgium. Consultations are ongoing in Brussels, according to the Delegation of the European Union. the Southern Other new universities in Georgia are also planned. Construction of the new American IT University in Batumi was opened on September Caucasus 22. The Ministry of Education and Science of Georgia has issued a tender to select a partner university from the United States. The list of regional bidders includes Michigan State University, University of Missouri, New York Institute for Technology, and Texas International Education Consortium, among others. banking hub The new university, which is expected to meet Georgia’s growing demand for qualifi ed personnel in IT, engineering, and natural sci- Georgia is currently ranked ences, will offer bachelor’s, master’s and possibly doctoral degrees in in 64th place in the world these fi elds. It will target students from Armenia, Azerbaijan, Ukraine, according to Transparency Turkey, Iran and Central Asia, according to the ministry. International’s Corruption The new Multimedia Education Center (MEC) is also set to serve Index 2011, and has as a hub to educate future journalists. Students come from countries made progressive steps throughout the region.The project was developed as part of the USAID- towards to diplomatic and economic relations with the funded and IREX implemented G-MEDIA program (Georgian Media United States and Western Enhance Democracy, Informed Citizenry and Accountability), which European Countries. These focuses on media development in Georgia. The estimated cost for positive trends are reflected building renovation, equipment, software and furnishings was about In the Georgian banking $600,000. and financial sector. Currently, along with Georgian peers, Azeri and Armenian students from the Tbilisi-based Caucasus School of Journalism and Media BESIK SANAIA Management (GIPA) are studying at the MEC. “We know there is a high demand for professional journalism train- ncreased investor protections, strong ing throughout the region and we are confi dent the MEC will attract economic fundamentals, low corrup- additional users as more people become aware of its capabilities and Ition, government reforms, signifi - availability,” said Matt Shelley, chief of party at IREX G-MEDIA, said. cant progress in economic and business Iv. Javakhishvili Tbilisi State University (TSU) is also a favorite of development processes had a positive foreign students, both for humanitarian studies and economics. For the impact on the Georgian economy and 2011-2012 years, the total number of non-local students at TSU is 233 banking sector. in bachelor’s programs and 50 studying in master’s programs. “The Georgia’s strong economic recovery highest demand is for social and political sciences — in particular for is refl ected in its standing among the vari- the Russian faculty of Journalism, as well as English-language classes ous fi nancial rating services. Georgia’s for MA studies in economics at International School of Economics at sovereign debt is rated BB- by Standard TSU,” said Nana Mamagulishvili, head of public relations at TSU. & Poor’s Financial Services LLC and B Zeeshan Arshad, 25, coming from Pakistan’s city of Jhelum, arrived by Fitch Inc. S&P raised its rating to BB in Tbilisi in 2006 and is studying at Medical University to become a from B+ in November, 2011, and Fitch physician. He picked Georgia on the advice of his friends who had been raised its outlook from stable to posi- studying here. Zeeshan, who plans to return to Pakistan after gradua- tive in March, 2011. Moody’s Investors tion, is happy with his decision and appreciates the “good professors, Service Inc. fi rst assigned a Ba3 rating security and friendly people.” However he would like to get more in October 2010. The ratings echo a practical knowledge in clinical skills. reduction in both the budget and current

28 OCT.-NOV. 2012 Investor.ge

account defi cits, an improvement in the banks in Georgia. The Bank of Georgia, be regulatory limits on the size of bank fi nancial sector’s health and easing of the second-largest bank in the Caucasus assets. Johnson points out that size limits political risk. by assets, and TBC Bank, which repre- “provide protection against both the sys- sented 62.9 percent of banking sector temic risk and the competitive distortions Positive trends, potential risks assets in 2011. The question is, are there created by fi nancial institutions that are and financial stability banks in Georgia that are too big to fail? too-big-to-fail, which are not adequately Since 2004, the Georgian banking The advantage of banks becoming addressed by existing regulations. We sector has achieved remarkable growth bigger is that in a global economy there is believe these limits should work out to due to economic reforms, foreign invest- a need for fi nancial institutions with scale no more than four percent of GDP for ments and aggressive lending. However, and global capacity. Large banks can of- all banks and two percent of GDP for consistent with most small economies, fer their customers products, services and investment banks, but that is a debate the Georgian fi nancial sector was nega- infrastructure that smaller banks simply we are willing to have.” If we analyze tively affected by the 2008 global cannot match, from multicity branch the Georgian banking sector on the basis financial crisis. The negative effects networks to global coverage. These fac- of Johnson’s calculations, we get the fol- resulted from losses and asset reductions tors act to lower costs to the customer. lowing picture: Total assets of the Bank banks experienced during the third and However Simon Johnson, a former of Georgia as of Dec. 31, 2011, amounted fourth quarters of 2008. Banking assets chief economist for the International to 22.5 percent of Georgia’s GDP in 2011 decreased 6.5 percent in 2009. Neverthe- Monetary Fund, who is now a professor and TBC Bank’s total assets amounted less, the banking sector rebounded from at the MIT’s Sloan School of Manage- 15.9 percent of GDP for the same period. the global fi nancial crisis, with assets ment and a contributor to Bloomberg Please note that everywhere GDP is used growing 27.4 percent in 2010 and 20 View, believes that in line with the in this publication, it represents GDP at percent in 2011. current developments in regulations of current prices and not real GDP, unless Signifi cant growth in assets of certain financial services firms (Dodd-Frank explicitly mentioned otherwise. Georgian banks has resulted in having Wall Street Reform and Consumer Pro- As Fitch ratings noted in 2012, two so-called systematically-important tection Act, Basel III, etc.) there should “Georgia is one of few emerging mar-

OCT.-NOV. 2012 29 Investor.ge

kets with zero government ownership of and high transparency because of high overall, the Georgian banking sector is banking system, which is very important foreign ownership. well capitalized and comfortably liquid, for the banking sector”. Low private-sector leverage. pre-impairment performance is strong, Given the unique nature of the and asset quality is stable. Georgian banking sector and its strong Standard & Poor’s reviewed the The sector is undergoing substantial economic fundamentals, we believe that Georgian banking sector under its up- liberalization. It has already become currently too-big-to-fail is not an issue dated Banking Industry Country Risk a regional banking hub, which was of concern for the local banking sector. Assessment (BICRA) methodology, evidenced by interest expressed in the However, the NBG must monitor the and Georgia ranks in BICRA group 8, Georgian banking sector by international expansion of asset bases of these two along with countries such as Argentina, fi nancial institutions. banks in order to avoid what happened Azerbaijan, Kazakhstan, Latvia, Nigeria In general, the investor protection in small developing economies (e.g. Ice- and Tunisia. index is signifi cantly higher in Geor- land) and what became one of the major Small economies are exposed to the gia compared to other countries in the criticisms of developed countries (United risk of what economists refer to as mul- region. According to the World Bank’s States, United Kingdom, Switzerland, tiple equilibria, meaning that concerns “Doing business in Georgia – 2012,” etc.) in 2008. about a country’s potential financial Georgia is ranked 17 out of 183 econo- The point is that once cumulative meltdown could lead to massive with- mies for the strength of its investor numbers of several big banks exceed the drawals out of a small country’s assets, protection index. While the indicator country’s GDP, those banks may become which would then lead to a fi nancial does not measure all aspects related to too big to save. meltdown, even if their banking systems’ the protection of minority investors, Total assets of the Georgian banking fundamentals are strong. Normally, this a higher ranking does indicate that an system have grown from approximately is the result of traders’ speculative ac- economy’s regulations offer stronger 31 percent of GDP in 2006 to more than tions by betting on the country’s default investor protections against self-dealing 52 percent in 2011, which is signifi cant, and driving its credit default swaps, or in the areas measured. but not out of line with small countries CDS, spreads artifi cially. Georgia’s path from ex-Soviet state that have become international fi nancial However, Georgia’s linkage to the to noticeably developing economy can be centers, such as, Hong Kong, the Neth- world fi nancial markets is not that signifi - explained by a general liberalization of erlands, and Switzerland). cant. We have not been able to identify the economy, privatization, globalization By comparison, total assets of the any fi nancial institutions who sell CDS — with signifi cant investments made by Azerbaijan banking system as of De- on Georgian sovereign debt. Therefore, international fi nancial institutions in the cember, 2011, was 28.5 percent of GDP, we believe that the probability of Georgia Georgian banking sector — and well- and total assets of the Armenian banking being exposed to this risk is remote. educated young people who often receive sector was 54.7 percent of GDP for the schooling abroad and are trained in a same period. Premium listing on London fi nancial market that is disproportionate Standard & Poor’s, in its publication Stock Exchange to the size of the country. The result has “Banking Industry Country Risk Assess- In June 2012, the Bank of Georgia, been an increased optimism and a posi- ment: Georgia,” which was published became the second foreign bank to have tive trend in the Georgian fi nancial and in July 2012, lists the following major a premium listing on the London Stock banking industry. The above analysis of strengths of the Georgian Banking In- Exchange. The bank became a part of Georgia’s banking sector suggests that it dustry. FTSE 250 and FTSE 250 All Shares has the potential to be transformed from index, a step widely assessed to be a one that is focused primarily on its do- Strong long-term macroeconomic move toward strengthening the liquidity mestic markets to one providing fi nancial growth prospects. position of the bank and increasing its services in the region, into Europe and, Advanced regulation compared recognition in fi nancial markets. perhaps, the rest of the world. with regional peers and recent progress Besik Sanaia is a senior associate in structural economic reforms. Georgia, regional banking hub at KPMG Georgia. The opinions ex- Sound banking-sector governance According to Fitch ratings offi cials, pressed are his own.

30 OCT.-NOV. 2012 Investor.ge

OCT.-NOV. 2012 31 Investor.ge

tributed to the combination of positive 7.739 billion lari as of December 31, Georgian business environment and policies, a 2011, an increase of 23.6 percent, year relatively high degree of transparency over year. The loan portfolio growth was Banking in of the fi nancial system, high profi tability 20.7 percent in 2010. and Georgia’s overall growth. Currently, Profi tability: From September 2008 there are no ownership restrictions set by through December 2009, the Georgian Numbers the government or the National Bank of banking sector registered significant Georgia (NBG). losses, which reached 215.7 million lari High concentration of assets: The in December 2008 and 65.3 millionlari top fi ve Georgian banks by total assets in December 2009. These were the result are: Bank of Georgia, TBC Bank, Pro- of an economic downturn that started Credit Bank, Liberty Bank and Bank in August 2008 linked to the military Republic (Société Générale Group). On conflict with Russia and the global December 31, 2011, the market share of financial crisis. Beginning in March these banks by total bank assets was high 2010, the Georgian banking sector has Number of banks: As of Dec.31, at 81.8 percent. The market share of the demonstrated impressive growth in 2011, there were 19 commercial banks two leading banks (Bank of Georgia and profi tability. Overall, net profi t for 2010 (including JSC HSBC Bank Georgia TBC Bank) amounted to 62.9 percent amounted 156.3 millionlari, followed which subsequently ceased operations at the end of 2011, as compared to 59.4 by 323.0 million lariof profi ts in 2011, in April 2012) with total assets of 12.7 percent at the end of 2010. which represented a 106.7 percent in- billion lari. Among these, 13 are for- Growth of loan portfolio: Georgian crease year over year. eign controlled. The high proportion banks have successfully increased their Return on equity, for the Georgian of foreign-controlled banks can be at- lending volume in the last few years to banking sector overall was 17.3 percent in 2011, up from 9.6 percent in 2010. Regulatory environment and international investors: Since 2004, international fi nancial institutions, such as the European Bank for Reconstruction and Development, the World Bank, the International Financial Corporation, the Dutch Development Bank, the German Development bank, and other institutions have made signifi cant investments in the Georgian banking industry, which resulted in increased confi dence from existing international and potential investors. Capital requirements for commercial banks are consistent with the standards of the Basel Committee on Banking Supervision and corresponding EU direc- tives. The level of minimum capital for commercial banks is set by the NBG at 12 million lari for newly founded commercial banks and branches of foreign banks. Recently, NBG proposed to adopt Basel II implementation for all Georgian banks in 2013.

32 OCT.-NOV. 2012 David Marsagishvili Freestyle Wrestling

BP congratulates David Marsagishvili on his success at the London 2012 Olympic Games Investor.ge

and third in number of days to start a Building on the Georgian Miracle business. However, it also ranks near the bot- Economists with the new government are focused on continuing to improve tom on such indicators as “protection of the Georgian economy — and its role as a regional hub for pro-business reforms and policy. minority shareholders’ interests” (119th), “effectiveness of anti-monopoly legislation” (135th) and “intensity of local competition” (128th). Nodar Khaduri, who co-authored the coalition’s platform, said the new government will seek to increase transparency and competition across the board. For now, he said, it is diffi cult to propose particular policy changes because the previous government was often opaque in its regulatory policies and their implementations — an assertion backed up by the World Bank’s Country Partner- ship Strategy for 2010-2013. In the report, the World Bank also said that many government institutions remain weak and “continued efforts are needed to reduce the perception that [the judiciary] is not independent, and that it can be heavy-handed in its approach.” A more independent judiciary in Georgia would be a great improvement, says Lasha Gogiberidze, a partner at BGI Sarphi Border Crossing Legal. BGI primarily handles transaction NICHOLAS CLAYTON praised, but institutions like the judiciary fi nance and corporate M&A deals. High- lack the transparency and independence ranking offi cials now rarely interfere ver the past eight years, Geor- necessary for a free and open market. with low-level cases, such as unemploy- gia’s economic policy has been Georgia’s scores on World Bank ment disputes, he says. Still, he said he Omarked by waves of reform. “Ease of Doing Business” indexes regularly sees decisions that are “totally Now expectations are high that bil- soared under the previous government, out of whack.” lionaire, Bidzina Ivanishvili, and his but Georgian Dream representatives Nonetheless, Georgia’s reforms in Georgian Dream coalition will build on point out that the country is still ranked a number of areas have made a stark the country’s reputation as a regional hub 88th out of 142 countries in the World impression on its neighbors. and incubator for pro-business laws and Economic Forum’s 2011-2012 Global Stepan Grigoryan, director of the innovations. Competitiveness Report. Analytical Centre on Globalization and While much has been done to free Within the report, Georgia scores Regional Cooperation, in Yerevan, Ar- up Georgia’s economy and improve its high in a number of areas including sev- menia, said that Georgia’s police reform public services, the coalition still has enth in the overall burden of government is “legendary” in the region. Every year, work to do. Tax policy has been widely regulation, third in trade tariff burdens hundreds of thousands of Armenians

34 OCT.-NOV. 2012 Investor.ge

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travel to Georgia, and most come back are considering reorganization, McCone impressed with the business environ- said. He pointed out that these reforms ment, the quality of public services also improve the asking price for Geor- and especially Georgia’s streamlined gian companies, whose bidders may be customs system at the border, which worried about historic exposures. Grigoryan said is incomparable with “If a target company has done an ATA Armenia’s. then these risks are removed. This means Offi cials around the region have also the normally lengthy and expensive tax approached the private sector in Georgia due-diligence process can largely be for advice on replicating the country’s avoided,” McCone said. “In my view successes. these developments refl ect the attitude David Tomadze, a manager and tax and objectives of the revenue service expert at the Georgia branch of Price- which is to cooperate with taxpayers waterhouseCoopers, said that his offi ce and create an environment where there fi elds inquiries from abroad about Geor- is more certainty to do business.” gian policies on a daily basis. Earlier this Advisors to the Georgian Dream year, Tomadze, who used to work in the coalition say that they intend to expand state revenue service, traveled to Kyrgyz- upon the previous government’s tax re- stan to give a presentation on Georgia’s forms, with particular emphasis on the ju- renovated tax system. dicial system. In the coalition’s campaign In April, Georgia announced that it platform, it pledged to create specialized was taking a model approach to its repu- tax judges to “restrict the dominant role tation as an effective reformer — turning of the state in tax-disputes” and promised reforms into an export product. “We’ve to end the practice of sequestering busi- had numerous visits from countries like nesses’ bank accounts and assets amid Kyrgyzstan and Moldova, where they ongoing audits and rulings. learn all the basics with which we started McCone remains hopeful that coun- the reforms of our government, judiciary, tries across the former Soviet Union ports and customs, interior police system, will begin adopting some of Georgia’s tax reforms, fi ghting corruption,” said more effective innovations, although he Giorgi Tsikolia, director of the invest- stresses that much of the country’s suc- ment and export policy department at the cess arose from a confl uence of factors Ministry of Economy and Sustainable that include having a small population Development. and a historic level of public will to Robin McCone, director of Pricewa- totally overhaul the system. terhouseCoopers in Georgia, said that “I think it was the will and the desire two specifi c tax reforms stand out above to get rid of corruption that was more the rest, the Alternative Tax Audit (ATA) important, not the changing of the sys- and the Advanced Tax Ruling (ATR). tem. You’ve got to get to the edge of the ATA allows companies in Georgia to use cliff,” he said, noting that other countries, independent accounting fi rms to compre- such as his native New Zealand, have hensively audit them for open tax years. gone through similar processes. “The Meanwhile, the ATR allows com- country was basically bankrupt, so that panies to determine their future tax meant that the population was willing for positions. This is particularly useful for everyone to take a bit of pain and suffer companies thinking to relocate to Geor- for two to three years to turn everything gia or those already in the country that around.

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Georgia’s Untapped Potential for Trade and Transit

Of all Georgia’s possible roles in trade a priority: massive reforms have signifi cant progress streamlining laws the region, trade and transit are streamlined bureaucratic hurdles and and limiting burdens -- solid steps toward the most natural fit. Reforms and insured no crime or corruption hindered facilitating the trade and transit industry. investment in infrastructure have cargo moving through the country. To fulfi ll its potential, however, Geor- bolstered the country’s regional role moving oil and gas, as well as Today, trade is a major industry for gia needs more investment in logistics other commodities, to Central Asia. Georgia. Last year the Caucasus Transit and infrastructure – the building blocks But transit and trade specialists Corridor (CTC) handled 8.5 million tons to creating inexpensive and efficient believe even more is necessary if of liquid bulk and 8,457 20 foot long con- routes for cargo. the country is to develop into its tainers by rail (TEU) – a unit of measure “I think the country needs to develop full potential as a hub for regional used by customs offi cials – and 8,010 infrastructure projects, like a logistical commerce. TEU’s by road, according to a report by center,” he said. “This will be very help- or centuries Georgia’s greatest Deloitte Consulting. ful to attract more cargo, to accumulate wealth has been in its location. The data, published in the “Competi- more cargo, to add value in this logistic FWhile it lacks oil, gas, and pre- tiveness Analysis of the Caucasus Transit center to the cargo and then redistribute cious metals, its invaluable ports allowed Corridor Improving Transit Potential it to the different markets in the region. the nation to play a treasured role in mov- for Central Asia-Europe Traffi c,” was This is very important.” ing neighbors’ goods to far fl ung markets. written as part of the USAID Economic Giorgi Doborjginidze, a senior rep- Before that meant caravans. Today it Prosperity Initiative (EPI). resentative Caucasus TransCare and the means pipelines, railways, and container Georgia has the potential to be a re- chairman for the Georgian Logistics trucks. gional center for trade and transit goods Association, is working on a $35 million The oil and gas pipeline projects put – a regional center for moving goods logistics center project created by Trans- Georgia back on the world’s transit map between large markets in Europe, Central Care. “The cargo potential of Georgia is after decades of closed borders under the Asia, and even China, noted transport relatively small,” Doborjginidze said. soviets. But corruption and crime kept specialist Vakhtang Marsagishvili. “[T]o have a profitable ports and the country from reaching its potential Marsagishvili, who works for De- profitable companies you need addi- before the Rose Revolution. loitte on trade and transportation issues tional cargo, so to attract this cargo you President Mikheil Saakashvili and his for USAID’s Economic Prosperity Ini- need good infrastructure, you need good government, however, made customs and tiative (EPI), said the country has made people in effi cient management, and you

38 OCT.-NOV. 2012 Investor.ge need good prices … I think this will come Developing Georgia’s step by step.” Logistic centers will allow goods Potential as Transit Hub: brought in by rail and container to be processed in one location – and should A hit list of actions make the process faster and cheaper. Specific Recommendations to improve Reducing the time and cost of cus- Georgia’s capacity as a transit hub from the toms is vital if Georgia wants to compete “Competitiveness Analysis of the Caucasus with other transit corridors heading east, Transit Corridor Improving Transit Potential like the popular Baltic-Russian route, for Central Asia-Europe Traffic” a report published by Deloitte Consulting LLP as part noted John Braeckeveldt, the director of the USAID Economic Prosperity Initiative at Gosselin Georgia and the co-chair of (EPI). the AmCham Trade & Transportation committee. “This was always the idea – trans- Further modernization of Georgian Railways portation hub, distribution hub. To make infrastructure and motive power; Georgia the best,” he said. But despite Expansion of container handling capacity good reforms, the Baltic route is still of Poti port cheaper – and Georgia is losing potential Deepening of the channel at Poti allowing clients due to the cost and effectiveness. liner vessels to call at the port providing direct ser- Tom Kennedy, an EPI consultant in vices to Asia, North America and Northern Europe transport & logistics and the author of Provide additional warehousing capacity at the “Competitiveness Analysis of the Poti for specialty cargos, such as export cotton, Caucasus Transit Corridor” study, found additionally there may be opportunities for further that if the cost of going through the CTC processing of cotton at Poti resulting in added went down 10 percent, processing time value in Georgia was reduced by one week, and the ferries Increase the professionalism and effi ciency on the Caspian became more effi cient, of the logistics industry in Georgia the corridor through Georgia would be More transparency and stability in the as- competitive – opening it up to cargo sessment of port and customs charges at Poti port. heading to and from Europe, Central Creation of a bi – national corridor working Asia, and China. group that would not only develop working solu- “More than 0.5 million tons of Cen- tions to the issues of Baku Port and the Caspian tral Asian traffi c now moves through Sea ferries, but would also be instrumental is de- Baltic ports. If a regular schedule for veloping, among the various participants, a single the Caspian Sea ferries could be imple- seamless pricing system so customers see only a mented and a more transparent pricing single organization, as the customers of Plask using policy at Baku port, it would be possible the Viking service between Klaipeda and Odessa as to reduce the cost and decrease transit well as the other private container trains operated time over the CTC route, resulting in over thousands of kilometers from Baltic Ports increased transit traffi c,” Kennedy wrote. to Almaty and other destinations in Central Asia. “While the additional traffi c which These organizations provide the one – stop window could be attracted to the CTC from for railway pricing and are the real vision of the these other routes cannot be determined future of the Trans Caucasus Corridor becoming with precision, it can be concluded that, increasingly price and service competitive. based on discussions with existing and Provide additional ferry capacity on the Cas- potential users, it is quite signifi cant.” pian Sea and establish greater service regularity

OCT.-NOV. 2012 39 Investor.ge

Tbilisi: A Regional Capital

Tbilisi — home to over 30 percent qualifi ed and cheaper workforce.” of Tbilisi linking Aghmashenebeli Alley of the population and 70 percent of Studies have highlighted Tbilisi’s with Gelovani Avenue in Saburtalo. the country’s industry — is already growing potential for service, fi nancial, The creation of new attractions and an economic hub for the country. industry and real-estate sectors. The recreational spots — like the continued The city government, however, believes the city has the potential government thinks that attracting more development of Rike Park, a 10-hectare to become a hub for the entire capital should stay a priority. The plan recreational zone in downtown Tbilisi region. Investor.ge spoke with to increase Tbilisi’s income and pro- — are also on the agenda. In June a Zviad Archuadze, the head of the file includes ambitious rehabilitation new gondola route between Rike Park economic policy agency at Tbilisi programs, plus huge infrastructure and and Narikala fortress opened, allowing City Hall, about City Hall’s plans to construction plans. In 2010 the Asian visitors to enjoy the marvelous views turn Tbilisi into a regional capital. Development Bank approved a $300 of the Old Town for just one lari for a million loan to assist the mayor’s offi ce’s one-way ticket. transportation master plan. More plans are coming. The city “Projects are underway to revamp intends to restore some of the Soviet-era not only the facades of the buildings but cable cars and add several new commuter also a total rehabilitation has been ongo- routes to make aerial tramways part of ing,” Archuadze said. “We launched the the capital city’s transport infrastructure MAIA EDILASHVILI revitalization of entire neighborhoods, — a system that has been defunct for and when the projects are over, these nearly two decades. A new cable car bilisi, according to Zviad Arch- neighborhoods will have new economic system between the Rose Revolution uadze, the head of the economic and tourist functions.” Square and the Funicular in Mtatsminda Tpolicy agency at Tbilisi City To ease traffi c, a long standing head- will be opened by spring 2013, according Hall, is already an important economic, ache for residents in the capital, Tbilisi to city offi cials. social and cultural actor in the Eastern City Hall has invested heavily in new Another major task has been to Europe and the Caucasus region. bridges and tunnels along the right bank capitalize on Tbilisi’s tourism potential, “Our goal is to make Tbilisi the main of the River Mtkvari — a plan that should including a campaign to offer free WiFi center for regional cooperation,” Arch- help traffi c fl ow faster. Under this proj- on Tbilisi streets, squares and public uadze said, adding that the city already ect, new bridges and tunnels have been transportation, starting from June. The offers investors several business benefi ts. constructed in fi ve places along the bank, system will use the Tbilisi Loves You “The costs of running a business are including a 248-meter bridge connecting server. The service is expected to be lower in Georgia compared to Europe’s traffi c from Ortachala to Heroes Square, available in all city districts by the end big cities. In addition, we have a highly- and a 100-meter tunnel at the entrance of this year.

40 OCT.-NOV. 2012 Investor.ge

OCT.-NOV. 2012 41 Investor.ge

Ten Things You Didn’t Know About... Tbilisi For Kids

In the race to see Georgia, there is ou have been to the zoo, seen While there are more and more a tendency to forget Tbilisi. Despite the fountain at Rike Park, and guidebooks about Georgia and Tbilisi, popular opinion, the capital is more rode the rides at Mtatsminda there is still a lack of literature about the than just Vake, Vera, and Meidani Y Park. Georgians love children, Tbilisi is city’s attractions for children. To ﬁ ll the Square. Like any small city, Tbilisi is full of colorful neighborhoods and, a great city. vacuum, Investor.ge spoke with parents, over the next several issues, Investor. So why is it so hard to come up entrepreneurs, and nursery school op- ge will (re)introduce you to their with things to do with your kid on the erators about the city’s hidden treasures charms. weekend? for the underage set. For links to maps

42 OCT.-NOV. 2012 Investor.ge

detailing the locations, please go to www. few passengers and friendly conductors, of Moscow but Tavisuplebis Moedani investor.ge. it is a fun trip. Plus, the train station at the (Liberty Square) and Tseretli metro stops Planes, trains, automobiles. For all airport is new and trés Star Trek. have both been renovated. Plus there are 1 the locomotive lovers out there, there Times and train numbers are avail- outdoor stations on the fi rst line between is a train that runs from the central train able at www.railway.ge, under the traf- Vagzlis Moedani (Station Square) and station to the airport and back again, for fi c schedule menu. The metro is also a Didube, which offer a cool perspective two-lari a ticket. The scenery is urban, treat, especially for toddlers. Many of on the city. Metro rides cost 50 tetri,and and the train is defi nitely Soviet, but with the stations are old and lack the glamour children ride free. A Metromoney card is

OCT.-NOV. 2012 43 Investor.ge

required. It costs two lari to activate and is only available at the metro station) to purchase tickets. Parks, rides. There are three famous 2parks in Tbilisi: Mtatsminda Park, the amusement and strolling park located on the top of Mtatsminda Mountain above the city center; Rike Park, the new park on the bank of the Mtkvari River, reachable by the glass bridge that connects the two river banks near Sioni Church in Old Town; and Vake Park, the large park that stretches from Chavchavadze Avenue to Kus Tba. But Tbilisi is also full of smaller, neighbor- hood parks that are worth a second look, such as Red Park on Kazbegi Avenue in Saburtalo. The park equipment is old and in disrepair, but there are great tennis courts, and lovely wooded (ungroomed) trails that are great for exploring. Rose Park, off of Aghmashenebeli Avenue, is a treasure of small amusement park rides and quiet paths. Mushtaid Park, behind Dinamo Stadium, was recently renovated and includes rides and a cafe. Vere Park is located across Kostava Avenue from the Philharmonia concert hall. Closed off to pools, although not many are the all- pipeline construction. In addition, for traffi c, the park is full of wide boulevards seasons, all-ages pools families are used older children and history buffs, the top- that are perfect for strolling and bike rid- to in the United States. So it is best to call fl oor exhibit Museum of Occupation is a ing. There are public chess boards in case ahead to check age requirements, as well must. The Ethnographic Museum near you want to polish your game, as well. as water temperature, and pool condi- Kus Tba, is an outdoor exhibition of Lisi Lake, although less popular than tions. Swimming lessons, both private Georgian houses from every region in the Kus Tba, is undergoing some renovations and group, are available at pools around country. The trails leading from house to and is a great starting off place for hikes the city, although few allow parents to house are good for strollers and safe from around in the beautiful nature that sur- be present in the pool during the class. traffi c. The Money Museum, located rounds the city. Mziuri Park, located off For pool addresses and contact numbers, next to the National Bank of Georgia, Chavchavadze Avenue, is also a lovely check out the city’s great online yellow 3/5 Leonidze, is a neat trip through respite from the hustle and bustle of the pages, www.yell.ge. Georgian history via all the different city. There is new playground equipment Museums. Museums in Tbilisi are types of coins used — from the ancient in the park and new walkways smooth 4an inexpensive day out and what Greeks to the Soviets and the days of enough for riding. they lack in polish, they make up for in hyperinfl ation following independence. Fountains, pools. Vere Park has a friendliness. The great history museum, The city also has a lovely doll museum, 3 great set of fountains for splashing now called the Janashia Museum, 3 but it is currently closed for repairs and and cooling off in the heat, as does the Rustaveli Avenue, has a child friendly set to reopen on Aghmashenebeli Avenue lovely Jansugh Kakhidze Garden at 136 permanent collection of gold artifacts un- later this year. When more information Aghmashenebeli. Tbilisi is also full of earthed during the Baku-Tbilisi-Ceyhan is available, Investor.ge will post it to its

44 OCT.-NOV. 2012 Investor.ge

website and fb page. don’t fancy eating with a child in your lap providers and organized by preschools. Theater. Children are a welcome or feeding them from the stroller, come To name a few: Sun Yoga Tbilisi is of- 5part of theater life in Georgia, and prepared. Children’s menus are also a fering children’s yoga and karate classes, families attend performances at the rarity (they do have them at the Tbilisi as well as family film night, www. ballet, www.opera.ge, and the Philhar- Marriott and some chain restaurants). sunyogatbilisi.com; Art, gardening, and monia, www.concerthall.ge, as well as However getting an extra plate and theater classes are available in English at the city’s other great theaters. Matinees splitting a dish is usually not a problem. NataBuachidze’s Studio, 599-15-55-13; are inexpensive, and, as a rule, children Georgian cuisine and western style Hip Hop and other dance classes for chil- under 3 can attend for free. There are burgers and pizza – as well as a growing dren at www.dstarstudio.ge (2220561 also children’s theaters like Meori Sakhli number of Italian, Indian, Thai, Iranian, and 592703512). (Second Hand), 58 Aghmashenebeli, and and Turkish eateries – are opening (and Getting out and about. For school- Nodar Dumbadze Theater, 99/1 Agh- closing) with dizzying regularity so it 8aged children, Tbilikids organizes mashenebeli, and the Fingers Theater, 8 pays to check out some of the city’s great out of town day trips for school age Marjanishvili. Plus, if you are in the Old online restaurant guides, including www. children (7 and up), and plans to add ski Town, every day at noon and 7pm there info-tbilisi.com, www.tripadvisor.com, weekends in the winter. More informa- are mini performances at the large clock and www.apetito.ge. Sunday brunch is tion is available on their Facebook page, on Shavteli Street. gaining popularity in the city. All the facebook.com/Tbilikids. For younger Feeding small bellies. Eating out is a major hotel chains offer them, normally children, Nino Shvelidze-Blauvelt (nsh- 6family affair in Georgia, and children with special deals for younger children. [email protected]), the director of are welcome at restaurants and cafes. Betsy’s Hotel, 32-34 Makashvili, also Vake English Daycare, organizes outings Smoking is allowed in most eateries in offers a Sunday brunch, as does Tartine and excursions around Tbilisi. Tbilisi, but if you go before the dinner on Meidani Square and the Hanger Bar Balls, bats, and baskets. There are rush, i.e. before 8pm, there are normally on Shavteli Street. 9a multitude of classes available for fewer people, and fewer smokers. While Nurturing growing minds. There children of all ages, ranging from tennis restaurants are child friendly, few have 7are a growing number of classes for to chess. While it can be more difﬁ cult to high chairs or booster seats, so if you children of all ages, both by independent ﬁ nd activities in English, it is not impos- sible. There are English-language tennis classes at Vake Park, Tika 555-33-52-64; and softball/baseball teams for children: contact Jackie Koney, jackiekoney@ gmail.com, for more information. In addition, QSI is holding Saturday sports clinics. For more information, call the school at 253-76-70. Playgroups, parents classes. 10TIPs, http://ca.groups.yahoo. com/group/TbilisiParents/, is an online parents’ forum where expats and locals exchange information and ideas. The local IWA has a playgroup for small childre: contact group organizer Matt Maloney, [email protected], for more information. In addition, there is a parenting class, “Mum & Me,” held every Monday from 12-4pm at Sun Yoga; visit www.doulatbilisi.com for more information.

OCT.-NOV. 2012 45 CONTENT

47 AmCham Meets U.S. Ambassador Norland

47 AmCham Meets U.S. 48 CLT Committee’s Success, 51 Member Profile: American Ambassador Norland Plans for Futuer Friends of Georgia

47 AmCham Meets U.S. 48 AmCham Poolside Drinks 52 New Members Ambassador Norland Reception 54 Membership Directory 47 Division of Power Underscores 48 AmCham, Commerical Law Post Election Reality Development Workshop 56 Social: Poolside Reception at the Holiday Inn 47 AmCham Meets New PM 49 Member Profile: GeoCapital 57 Social: COATS 50 Member Profile: Saunders Group 58 Board of Directors

46 OCT.-NOV. 2012 U.S. Ambassador Richard Norland AmCham Members Meet New U.S. spoke with AmCham members during the ﬁ rst roundtable event of the season Ambassador Richard Norland on September 25. During a candid, off the record dis- cussion at the Tbilisi Marriott, Ambas- sador Norland touched on the October 1 elections, as well as Georgian-American relations, and the upcoming elections in the United States. Ambassador Norland comes to Georgia after serving in Russia, during perestroika, as well as Latvia, Uzbeki- stan, and Afghanistan. His most recent assignment was as the International Af- fairs Advisor/Deputy Commandant at the National War College. In addition to meeting the ambassador, AmCham members were introduced to the latest developments at the Lisi Lake Project. Kakha Kolelishvili, CEO of the projoct, explained the project, particularly its goals to provide “green living” in the city. Giorgi Togonidze, Marriott Hotels, Irakli Baidashvili, GMT Group, U.S. Ambassador Richard Norland Division of Powers Sarah Williamson, UGT, and Michael Cowgill, Underscore Post GAU, attend PM Bidzina Ivanishvili’s meeting Election Reality with business leaders The Georgian Constitution provides real power for President Mikheil Saa- kashvili, even as his party loses control of parliament and the cabinet, according to Lasha Gogiberidze, partner, BGI Law Firm, Ted Jonas, managing partner, DLA Piper Georgia, and Ketti Kvartskhava, partner, BLC Law Firm. The three lawyers, all members of the AmCham Board of Directors, walked members through the intricate legal procedures that dictate which powers will be passed to the new ruling party and which will stay in the hands of the president. The October 10 meeting was held during the monthly round table at the Sheraton Metechi Palace.

OCT.-NOV. 2012 47 CLT Committee’s First Year Successes, Plans for the Future

Investor.ge spoke with the co-chair of actually -- becoming very disruptive to lobbying will be effective’ ,” he said. the CLT Committee Ted Jonas, a member the whole banking sector,” he said. “Where we have clear and demon- of the AmCham board of directors and AmCham’s CLT committee worked strable impact in that was…on the clari- managing partner at DLA Piper, and behind closed doors with a half dozen fi cation of certain issues of the tax code.” George Welton, the former executive government offi cials, using research and Jonas noted that writing commentar- director of AmCham, about the com- analysis to convince them to change the ies for the tax code could help businesses mittee’s accomplishments in 2012 and amendment.Some government offi cials avoid tax penalties based on poor inter- its plans moving forward. were openly supportive of repealing the pretations of the code by taxpayers and Over the past twelve months, Am- amendment. “We gave them sugges- inspectors. Cham’s Commercial Law and Tax (CLT) tions for legislative language, we gave The committee is now in the process Committee has been a strong lobbying them justifi ed position papers when they of “boiling down” an intense analysis force for businesses, advocating for bet- claimed the law was adopted from other of problems businesses face during the ter tax practices and working with the countries,” Jonas said. “So I think that process of disputing tax claims so it can government to ease legislation that hurt was very key.” offer the Revenue Service concrete rec- the business community. In addition, the committee has be- ommendations. The committee was created after come a forum for businesses, auditors, Post-election, Jonas said the need for AmCham received a grant from the lawyers, and accountants to discuss prob- the committee is even larger than before. United States Agency for International lems with the tax code – and has turned “We need to watch very closely Development (USAID), EWMI, and into a key liaison between the business whether the new government is going to EPF, within the Judicial Independence community and the Revenue Service. bring about an improvement in the rule and Legal Empowerment Project. George Welton, a former executive of law, particularly in the independence Ted Jonas, a co-chair of the commit- director of AmCham, who helped start of the courts and in the use of due pro- tee, noted that a major early success was the committee, noted that the Revenue cess in tax collection and administrative that the committee helped to convince Service was extremely receptive to proceedings,” he said. the government to withdraw amend- working with the committee. One key “As always happens when a gov- ments to the tax code and the judicial demonstration of this relationship is that ernment changes, they might have a enforcement law that were jeopardizing when the revenue service started writ- desire to investigate alleged illegality Georgia’s strong banking sector. This ing commentaries to the tax code, they in the previous administration and this happened because the new amendments asked the committee to help prioritize will be a critical test case to see they do undermined the previous system for the which articles of the tax code should be that legally, using due process. This is priority of loan collateral and therefore explained fi rst. important to the business community made it harder for banks to lend money Central to the success of the commit- so that the business and economy of the confi dently tee, Welton argues, is that it has taken a country will not be disrupted. The best “I believe we were the key actor in very pragmatic approach to engagement. thing the new government can show getting the government to withdraw the “You are trying to fi gure out those issues Georgian and international investors is amendment to the law that had given and the areas which you can realistically that they are going to respect the law and super-priority to tax liens over bank liens push for change. It is not just ‘what is the the independence of the courts when they and which was not only potentially – was problem’ but ‘what is a problem where pursue their agenda”. AmCham, Commerical Law Development Program Workshop Commercial Law Development shop was Litigation and Adjudication Sakpatenti. Special guest from United Program (CLDP), which is a division of of Copyright and Trademark Disputes. States participated in workshop – US United States Department of Commerce, The participants were lawyers, city court District Court Judge Edmund Sargus. organized a workshop in Signagi on and court of appeal judges, employees The event was technically organized and October 12-13. The topic of the work- of Georgian Copyright Agency and managed by AmCham Georgia.

48 OCT.-NOV. 2012 but live on money received from abroad. This can lead people into an incorrect understanding of the fi nances of their family. Financial literacy education is crucial in helping to resolve these issues. Only 2 percent of Georgian adults Education for a Better Tomorrow engage in any kind of saving, using either a formal account or a community-based method (World Bank’s Measuring Finan- cial Inclusion report). According to the OECD, fi nancially-literate consumers are more likely to save than less fi nancially literate consumers. In order to expand the curriculum of the free classes as well as make them more accessible, GeoCapital recently founded the non-profit organization GeoCapital Education that aims to give individuals the missing fi nancial, technical, professional and personal health GeoCapital is Georgia’s fastest- fi nancial manager for the company as skills needed to succeed in life, through growing, internationally-backed microfi - well as fi nance instructor for those who training at the grassroots level. nance organization and the largest direct sign up for the free classes, which are GeoCapital Education focuses on US investment in Kutaisi with American open to everyone. More than 100 people skills that are not easily accessible to the management in place. The Company participated in the summer sessions. general population. serves both a social and for profi t mission “Because of its Soviet past, there is In particular, trainings will cover and offers competitive rates, excellent no tradition of fi nancial planning and fi nancial management skills, technology, service and basic fi nance education to saving. It’s common for people to live project management, public relations, ca- the people of Georgia, thus creating op- from hand to mouth, often getting them- reer skills and promotion, personal health portunities for small business develop- selves into debt, and not to set any money skills, entrepreneurship and other skills ment, job growth, and entrepreneurship, aside for a rainy day, ” says Mr. Harmsen. required for improved employability, helping Georgia build a better tomorrow. Many people in Georgia are un- business startup and management. The company started in Kutaisi in comfortable discussing money. Nobody “Our goal is to build a pipeline that 2011, and recently opened its second, wants to admit they have little money, takes existing training curricula and central branch in the center of the city. but at the same time there can be social make it easily available to motivated, GeoCapital has about $3 million loaned pressure to consume conspicuously, enthusiastic people in Georgia,”says to the local community, and is planning with, for example, expensive cars and Ralph Burleson, Chairman of GeoCapital to expand its operations beyond the city lavish dinners. Financial planning is on Education. of Kutaisi. It is also planning a promis- the other hand, fundamentally long term “Knowledge has a transformative sory note offering, which will allow planning. But we often see that people do social impact – especially in the areas ordinary Georgians to invest a bit of not understand how the fi nancial deci- of fi nance and health.” their money in GeoCapital, and earn a sions they make today -- or the decisions When you add even modest technol- handsome return. As a part of its social they neglect to make -- will infl uence ogy training to the mix, you give smart mission, this summer GeoCapital (GC) their lives tomorrow. motivated people the opportunity to kicked off its fi nancial literacy program Many people don’t need to develop participate in the global marketplace and for the people of Kutaisi. Recent Harvard the usual fi nancial discipline, because to build a better tomorrow for themselves graduate Daan Harmsen is acting as both they do not earn their money themselves, and their families.

OCT.-NOV. 2012 49 response during crisis management. Saunders Group holds ample engineers on staff to deal with a wide range of Infrastructure projects and can source additional engineers within any project commencement timeline. Urban Planning – Energy effi ciency planning for total urban layout, layout planning for relieving congestion and ease-of-access for services in urban dwellings and minimising the total transport requirements for access to activities thus ensuring planning that effectively reduces traffi c congestion, time for resi- Saunders Group: dents to access work places, schools, parks and other vital urban activities. Urban Development in the Public Transport Planning - Super effi cient integrated transport systems are Caucasus possible within every new city or region and the ability to modify existing trans- SAUNDERS Group, an engineering the world, including in Brazil, USA, New port systems to cater to regional growth consulting concern, has been actively Zealand, Germany, Holland, Armenia, through computer modelling. Saunders engaged in various development proj- Algeria, India and Georgia. With such a Group has provided local project man- ects in Georgia and the neighbouring wide base of experience, Saunders Group agement support to Georgian Railway countries. Dr.Michael Saunders, a New can combine Western practices in de- for diversion of cargo traffi c away from Zealand and Georgian dual citizen who veloping countries with the best results. the capital city and assistance in its mod- has a background in urban planning and Urban & Agricultural Infrastruc- ernisation programs. It has also provided engineering, established Saunders Group ture – Saunders Group provides urban specialist consulting support to Yerevan in 2009. Saunders Group is growing water supply systems, agricultural wa- Metro in its efforts to restructure its rapidly to cover the lack of professional ter, sewerage or storm water consulting company into a more effi cient operation. engineering services in the Caucasus services.It’s imperative that the planning Batumi and Tbilisi Public Transport Proj- and Central Asian region and with a phase of the asset lifecycle provides the ects funded by the EBRD to improve bus specifi c focus on an area that has long greatest opportunity for delivering water service capacity and introduce European been overlooked on large projects in de- and sewerage services at the lowest life- ticketing practices were also successfully veloping countries - professional Urban cycle cost while also meeting social and completed by Saunders group. Infrastructure Consulting & Planning environmental requirements. Saunders Mining & Natural Resources – with Project Management Support in Group is responsible for rehabilitation Saunders Group provides various engi- conjunction with Western Consultan- and reconstruction of water and waste neering services for companies outsourc- cies. It provides effi cient local support water systems for over 22 cities covering ing their work, resulting in overall cost in emerging markets for large engineer- the entire territory of Georgia. effi ciency and achieving desired results ing, urban and agriculture development Infrastructure – engineering ser- without engaging precious company re- projects. We have a team of 30 local vices in the fields of bridges, roads, sources. With a well-qualifi ed engineer- and internationalstaff that cover all as- tunnels, rail and the associated admin- ing pool, Saunders Group caters to the pects of project management, fi nancial istrative support therein. Infrastructure demand for qualifi ed expertise for local and administrative control and support. development is essential for economic companies or international fi rms seeking Saunders Group staff are engineers and development, trade opportunities, in- expertise for any projects in Georgia or specialists with experience from all over creased employment potential and faster the CIS.

50 OCT.-NOV. 2012 OCT.-NOV. 2012 51 Dechert Georgia LLC Frontera Resources Dexus Corporate A Member Corporation Corporate B Member Corporate A Member MEMBERS

Dechert Georgia LLC, a subsidiary of Frontera is a US-based international oil Dexus is a business group focused on Dechert LLP, combines local service and gas exploration and production com- distressed asset management, property with the global knowledge that comes pany whose shares are traded on London development, construction and property NEW with being part of a preeminent world- Stock Exchange AIM market. Frontera’s management. Dexus offers its corporate wide legal practice. Lawyers in Dechert’s current activities in Georgia are focused customers a proactive and creative ap- Georgia-focused team have extensive on the exploration and development of proach in restructuring loan and invest- experience in all types of cross-border a large acreage in Kakheti region known ment obligations. transactions and disputes and advise as Block 12 where Frontera has the ex- Dexus Group considers its human capital clients on capital markets (both debt and clusive right to explore for, develop and as its major asset. The company employs equity transactions), M&A, infrastruc- produce petroleum pursuant to a 25-year highly skilled managers with extensive ture and project fi nance, international Production Sharing Agreement entered real estate experience and consistently arbitration and dispute resolution and into with the Georgian government. invests in their skill development. general corporate and commercial mat- With over 190 employees based in the One of the company’s major projects is ters. Our clients have included various company’s Houston, Tbilisi and Kakheti the turnaround of Centerr Point Group, state-owned companies; global, regional fi eld offi ces, Frontera is the largest US- the largest property developer of Geor- and local corporations; banks and other based investor in Georgia’s upstream oil gian pre-crises real estate market. The fi nancial institutions; prime international and gas industry. latter owned the assets of approx. 100 investment banks; private equity spon- www.fronteraresources.com million USD, including 25 develop- sors; and investment funds, as well as ment projects and 17 land units in the ministries, agencies and instrumentalities land bank. of the sovereign. Lawyers in our Tbilisi According to the latest market research, offi ce are qualifi ed in Georgia, the U.S., Dexus nowadays manages the assets the UK, France and Canada and are fl uent of approx. 1/3 of under-construction in English, Georgian, Russian, French residential property market in Georgia. and Italian. www.dexus.ge Dechert LLP is an international law fi rm with more than 800 lawyers in 26 offi ces throughout Europe, Asia, the Middle East and the United States. Dechert Georgia LLC’s offi ce is at Pixel Building, 7th Floor, 34 Chavchavadze Avenue, 0179 Tbilisi. For more information about the fi rm, please visit www.dechert.com

52 OCT.-NOV. 2012 Hualing International Kordzakhia, Jgenti Statoil Azerbaijan Theco Limited (Terex Special Economic Zone Law Firm Georgia Branch Heavy Equipment) Corporate B Member Corporate B Member Corporate B Member Corporate B Member MEMBERS

Hualing International Kordzakhia, Jgenti GP pro- Statoil is an international THECO limited is an interna- Special Economic Zone viding full-service package energy company with operational company with a wide It is a comprehensive range of on real estate, fi nancial, in- tions in 37 countries. Build- experience in the sphere of facilities including an indus- frastructure and technology ing on 40 years of experience construction and design. Our NEW trial park, export processing sector is one of the leading from oil and gas production company apartments for rent and logistics area, bonded Law Firms on the Georgian on the Norwegian continental and sale in new elite housing zone, commercial district, market. shelf, we are committed to estate «Tbilisia» eco-com- fi ve-star hotel, Olympic Vil- The firm is operating on accommodating the world’s plex at level of 5 star hotel. lage, residential complex, re- Georgian market for more energy needs in a responsible Our complex is located in sort and entertainment areas. than decade after its founda- manner, applying technol- one of the most ecologically Hualing Free Industrial tion by David Pataraia, Irakli ogy and creating innovative clean area of Tbilisi in Vake Zone in Kutaisi Kordzakhia and Irakli Jgenti. business solutions. Statoil district, Shatberashvili Street The 52-hectare Hualing Free All of them had advocacy is headquartered in Nor- and at the same time just 5 Industrial Zone is the coun- practice and were advanced way with 21,000 employees minutes from the centre of try’s third foreign direct in- specialists in their field of worldwide, and is listed on the city. All apartments of our vestment business park of its practice prior to establishing the New York and Oslo stock complex have beautiful pan- kind. The USD100 million joint practice. exchanges. More information oramic view of the city from zone enjoys many tax-free Kordzakhia, Jgenti provides onwww.statoil.com one side and green mountains concessions. Business ac- legal services to Georgian Statoil is, through its subsid- from the other. For your tivities include production, and international entities. At iary Statoil Azerbaijan a.s., convenience on the ground processing, manufacturing, various times the fi rm was en- the commercial operator of fl oor we have cafe, gym, spa imports and exports, with gaged in consultancy services the South Caucasus Pipeline centre, swimming pool and convenient transportation to the World Bank and IFC, Company (SCPC), where a grocery store. There is an links available by air, road, US Government, USAID BP is the technical operator. underground parking. All rail and sea. funded projects, diplomatic SCPC owns the South Cau- territory is under security for Banking offi ces accredited in Georgia. casus Pipeline (SCP) and 24 hours. Modern infrastruc- In June 2012, the Hualing Among corporate clients are is engaged in all activities ture, fresh air and fi rst class Group became the fi rst pri- large commercial banks and related to this major gas service make “Tbilisia” eco- vately owned enterprise in non-bank financial service transportation system. SCP complex unique. If you are China to acquire an overseas providers, communication transports natural gas from interested in our offer please bank when it took over Geor- companies and real estate the Sangachal terminal near contact us: gia’s JSC Basisbank. developers. The fi rm has di- Baku in Azerbaijan, crossing 995 592 107515; Mining versifi ed pro bono services to through Georgia and ending 995 599 076 763; Along with hydropower and benefi t the community. at the border of Turkey. 995 597 291 492. forestry, Hualing Group owns www.kjlaw.ge Gas sales to Azerbaijan, [email protected] mining and gold mining in Georgia and Turkey from Pure air, nature and coziness Georgia as well. Shah Deniz Stage 1 are ad- of an eco-complex «Tbilisia» Forest harvesting /Wood ministered by the Azerbai- will give you new forces for processing jan Gas Supply Company realization of your plans and Hualing operates a fully inte- (AGSC) which is also oper- will help to achieve success! grated production line, from ated by Statoil Azerbaijan a.s. www.tbilisia.ru initial logging and cutting to Statoil opened its offi ce in fi nishing and building furni- Tbilisi in 2006. ture. Some 95% of products www.statoil.com are exported with the remain- ing 5% sold in the domestic market. www.hualing.cn

OCT.-NOV. 2012 53 AmCham Company Members as of November 2012

PATRON MEMBERS Chartis Europe S.A. Georgia Hangar Bar, the Radisson BLU Iveria Hotel Branch 20 Shavteli St. 1 Rose Revolution Sq. APM Terminals 7 Bambis Rigi St., 0105 Tel: 2931080 Tel: 2402200; Fax: 2402201 52 D. Aghmashenebeli St., Poti Tel: 2439025; www.thehangar.biz www.radissonblu.com Tel: 493-20660; Fax: 493-20688 Fax: 2439026 www.apmterminals.com www.chartisinsurance.com Iberia Refreshments, JSC SEAF Management LLC Tetri Khevi Hesi District, Orkhevi 7, Niko Nikoladze St. II Floor. Chemonics International BP Exploration Georgia Tel: 2241091; Fax: 2241090 Tel: 2998115; Fax: 2923533 6a N. Ramishvili St., 0179 38 Saburtalo St. www.pepsi.ge www.seaf.ge Tel: 2234311; Fax: 2234309 Tel: 2593400; Fax: 2593488 Sheraton Metechi Palace Hotel www.chemonics.com KPMG CIS Ltd. Tbilisi Branch www.bp.com 20 Telavi St. 3rd Floor, Besiki Business Center, Dechert Georgia LLC Tel: 2772020; Fax: 2772120 4 Besiki St., 0108 Exxon Azerbaijan Ltd 7th fl oor, Pixel building, www.sheraton.com/tbilisi Landmark Suite 300, 95 Nizami St., 34 Chavchavadze avenue Tel: 2935713; Fax: 2982276 Baku, AZ1010 Azerbaijan Tel: 2334719 www.kpmg.ge T&K Restaurants (McDonald’s Tel: (994-12) 4982460; Fax: (994-12) www.dechert.com Georgia) 4982472 Levon Travel 1 Dzmebi Kakabadze St. www.exxonmobil.com Deloitte 20 Chavchavadze Ave. Tel: 2921246; Fax: 2251422 36a, L. Asatiani St., 0105 Tel: 2250010; Fax: 2232399 www.mcdonalds.ge Tel: 2244566; Fax: 2244569 www.levontravel.ge PricewaterhouseCoopers TBC Group 7 Bambis Rigi St., 0105 www.deloitte.ge Maersk Georgia LLC 7 Marjanishvili St. Tel: 2508050; Fax: 2508060 Diplomat Georgia 6 Khetagurov St. Tel: 2272727; Fax: 2228503 www.pwc.com/ge 65, Kakheti Highway Tel: 2200800; Fax: 2200815 www.tbc.com.ge Tel: 2984950 www.maerskline.com UGT www.diplomat.ge TBSC Consulting 6 Marjanishvili St. 17a Chavchavadze Ave., 7th fl oor Magticom DLA Piper Georgia LP Tel: 2959019; Fax: 2420215 Tel: 2220211; Fax: 2220206 5 Politkovskaya St. 10 Melikishvili St. www.tbsc.ge www.ugt.ge Tel: 2171717; Fax: 2171171 Tel: 2509300; Fax: 2509301 www.magticom.ge CORPORATE A MEMBERS www.dlapiper.com Marriott Hotels, Resorts & Suites ABRIS Distribution AG. Economic Prosperity Initiative CORPORATE B MEMBERS 21 Liubliana St. (EPI) 13 Rustaveli Ave. Tel: 2527271; 6 Samghebro St. Tel: 2779200; Fax: 2779210 Aliance Georgia Ltd www.abrisdc.com Tel: 2438924 www.marriott.com 33 Samurzakano St. www.epigeorgia.com Alliance Group Holding, JSC Tel: 2243773 Metromedia International Group www.groupaliance.com 47/57 M. Kostava St., 0179 Ernst & Young 8000 Tower Point Dr., Charlotte, NC Tel: 2424181; Fax: 2998112 44 Kote Abkhazi St. 28227 www.agh.ge Tel: 2439375; Fax: 2439376 Tel: 2171201; Fax: 2210101 GZ American Academy in Tbilisi 37a Chavchavadze Ave. Avon Cosmetics Georgia LLC www.ge.ey.com www.metromedia-group.com Tel: 2227441; Fax: 2227889 117 Tsereteli Ave.. Frontera Resources Georgia Microsoft Georgia LLC www.aat.ge Tel: 2226805; Fax: 2226806 12 Paliashvili St. www.avon.com 34 Chavchavadze Ave. Tel: 2252412 Tel: 2970123 Bagebey City Group F H Bertling Georgia Ltd. www.fronteraresources.com www.microsoft.com 49b Chavchavadze Ave. 9 Tarkhnishvili St. Georgian American University Tel: 2913152; Fax: 2290169 Tel: 2443356; Fax: 2443376 8 Aleksidze St. Mobipay (OpenRevolution www.bagebeycity.com www.bertling.com Tel: 2206520; Fax: 2206519 Georgia) Baker Tilly Georgia Ltd. Betsy’s Hotel / Prosperos Books www.gau.ge 19 T. Abuladze St. 0162 Meidan Palace, 44 Kote Abkhazi St. 32/34 Makashvili St. / 34 Rustaveli Tel: 2235403 Georgian Audit & Consulting Tel: 2505353; Fax: 2505353 Ave. www.mobipay.ge Company www.bakertillyinternational.com Tel: 2987624, Fax: 2923592 47 Kostava St. Suite 29 MSD (Schering Plough Central www.betsyshotel.com Tel: 2984039; Fax: 2438352 East AG) Bank Constanta Booz Allen Hamilton, Inc. www.gacc.com.ge 44 K. Abkhazi St. 0105 139 Tsereteli Ave. 7 Bambis Rigi St., 0105 Tel: 2438978 GMT Group Tel: 2401401 Tel: 2439072; Fax: 2439059 www.merck.com 4 Freedom Square www.bankconstanta.ge.com.ge www.boozallen.com Tel: 2988988; Fax: 2988910 NRC Bank of Georgia British American Tobacco www.gmt.ge 9 Khvichia St. 0160 71 Vazha Pshavela Ave. 3 Pushkin St. Gosselin Moving Georgia Tel: 2244141, 2382825 Tel: 2444134; Fax: 2983269 Tel: 2399103/01/02; Fax: 2399104 www.nrccintl.com www.bat.com 3 M/D, Didi Digomi www.bog.com.ge Tel: 2596601/02/03; Fax: 2596600 Perdue Farms Inc. Catoni & Co. Georgia www.moving.gosselingroup.eu Bank Republic 11 fl oor, 154 Agmashenebeli Ave. 3 Lesia Ukrainka St. Apt.7 2 Gr. Abashidze St. Grant Thornton LLC Tel: 2957129 Tel: 2989230; Fax: 2922264 Tel: 2925555; Fax: 2925544 3 Mamardashvili St. www.perdue.com www.hapag-lloyd.com www.republic.ge Tel: 2604406 Caucasia Trading www.grantthornton.ge Pfi zer Luxembourg SARL Apt 11, Bld 7, 16 Krtsanisi St. Representation Offi ce in Georgia Basis Bank JSC Tel: 14433050083; Fax: Greco Group 58 I.Abashidze St. 1 Ketevan Tsamebuli Ave. 14433788388 1 Nutsubidze St. Tel: 2252986 Tel: 2922922; Fax: 2986548 www.caucasiatrading.com Tel: 2393138; Fax: 2311107 www.pfi zer.com www.basisbank.ge www.greco.ge Caucasus University Batumi Oil Terminal 77 Kostava St., Bld.6, 4th fl . GT Group Philip Morris GMT Plaza, 4 Freedom Sq. Tel: 2941691; Fax: 2253814 48 B. Cholokashvili St. 7 Bambis Rigi St., 0105 Tel: 2241818; Fax: 2241817 www.cu.edu.ge Tel: 2740740 Tel: 2439001; Fax: 2439005 www.batumiport.com www.gtgroup.ge www.philipmorrisinternational.com CH2M Hill 5th Floor, GMT Plaza, Freedom Hall, Booth, Smith & Slover, P.C. ProCredit Bank BDO LLC Square 41 Vaja Pshavela Ave. 0177 154 Agmashenebeli Ave. 42 Kazbegi Ave. Tel: 2474040; Fax: 2470210 Tel: 2394417, Fax: 1-404-9545020 Tel: 2202222; Fax: 2202222-2226 Tel: 2545845; Fax: 2399204 www.ch2m.com www.hbss.net www.procreditbank.ge www.bdo.ge

54 OCT.-NOV. 2012 BGI Advisory Services Georgia Georgian Resources Company New Construction LLC Wimm-Bill-Dann Georgia Ltd 18 Rustaveli Ave., II fl . 3-5 Kazbegi St. 2 Al. Kazbegi Ave. 0160 Village Ponichala, Tbilisi 0165 Tel: 2997292; Fax: 2996615 Tel: 2936676 Tel: 2373594 Tel: 2475290 www.georgianresources.com www.wbd.ru www.bgi.ge New School - Int-l House 35 Tskneti Highway, Bagebi BLB (Business Legal Bureau) Globalink Logistics Group Wings and Freeman Capital Tel: 2231728 1 Shevchenko St, Apt.1 14-A Shartava St, 2nd fl , Suite 7 Green Building, 6, Marjanishvili St. www.newschoolgeorgia.com Tel: 2995797 Tel: 2253262; Fax: 2439002 Tel: 2940051; Fax: 2940053 www.blb.ge www.globalinkllc.com Nodia, Urumashvili & Parnters www.wfcapital.ge Offi ce #28, IV Block, Goodwill (G-Mart) Wissol Georgia BLC Law Offi ce 71 Vazha-Pshavela Ave. 1 Parnavaz Mepe Ave. 0131 74b Chavchavadze Ave. 4 Gudiashvili Sq. Tel: 2207407 Tel: 2243673; Fax: 2243673 Tel: 2915315; Fax: 2915615 Tel: 2922491; Fax: 2934526 www.nplaw.ge www.blc.ge www.goodwill.ge www.wissol.ge Orifl ame Georgia Casino Adjara Gvinadze & Partners LLC 57 Uznadze St. 1, 26 May Sq. 44 Kote Abkhazi St, Tbilisi 0155 Tel: 2911064; Fax: 2911068 NON PROFIT ORGANIZATIONS Tel: 2335519; Fax: 2334520 Tel: 2438970, Fax: 2438971 www.orifl ame.ge www.casinoadjara.com www.gvinadzeandpartners.ge American Friends of Georgia Overall Management Group 77 Nutsubidze St. (OMG) Inc. CaucasTransExpress Holiday Inn Tel: 2397174; Fax: 2388495 12 M. Javakhishvili St. 10a Tashkent St. 0160 1, 26 May Sq., 0171 www.afgeorgia.org Tel: 2375715 Tel: 2300099 Tel: 2436052; Fax: 2436052 www.cte.ge www.hi-tbilisi.com Policy and Management CARE International in the Consulting Group (PMCG) Caucasus Caucasus Online LLC HRG Georgia “Sky Travel LLC” 49b Chavchavadze Ave, 3rd Fl. 71 Vaja-Pshavela Ave. Meidan Palace Business Center, 30 Shevchenko St. Tel: 2921171 Tel: 2291941 Tel: 2480048; Fax: 2480048 44 Kote Abkhazi St. www.care-caucasus.org.ge www.caucasus.net Tel: 2438958 www..pmcg.ge www.hrgworldwide.com Publicis Hepta Danish Refugee Council Château Mukhrani, J.S.C. 17 V. Jorbenadze St. 88 Paliashvili St. III fl oor, Didube Plaza, Hualing International Special Tel: 2745672; Fax: 2745671 Tel: 2230659 116 Tsereteli Ave. Economic Zone www.publicishepta.com www.drc-sc.org Tel: 2201878; Fax: 2201878; 25 Apt. 34/36 Kobuleti St. www.mukhrani.com Tel: 591005900 Rakeen Development LLC East West Management Institute, www.hualing.cn 20 Telavi St. 5th Floor Inc (EWMI) City & Co. Tel: 2933393; Fax: 2933993 3rd Floor, 5 Marjanishvili St. 4 Besiki St. Ioli Supermarket www.rakeen.ge Tel: 2505404; Fax: 2202441 Tel: 2920921 13 Abuseridze-Tbeli St. www.ewmi-gpac.org Tel: 2745053 Rentals Ltd. Crystal, MFO JSC www.gastronomia.ge 46 Rustaveli Ave. Eurasia Partnership Foundation, 72 Tamar Mepe St. Kutaisi, 4600 Tel: 2454566 the Tel: 431253343 JTI Caucasus www.rentals.ge 29/31/33 Chavchavadze Ave., www.crystal.ge 15 Kipshidze St. 2nd Floor, 0179 Tel: 2604111 Rustavi Azot LLC Tel: 2253942; Fax 2252763 (ext. 112) Dexus www.jti.com 2 Mshvidoba St. Rustavi-3702 www.epfound.org 150 David Agmashenebeli Ave. Tel: 995341270900 Tel: 2207887 www.azot.ge Foundation - Centre for Training Kor-Standard Bank JSC www.dexus.ge and Consultancy 43 Chavchavadze Ave. Saunders Group 34 Al. Kazbegi Ave., Plot #3, 0177 Tel: 2507700, Fax: 2507707 Dika Ltd. 24 G. Tabidze St. Tel: 2206774 www.ksb.ge 40 Rustaveli Ave. Tel: 2182112 www.ctc.org.ge Tel: 2990994; Fax: 2990994 www.engsg.com Kordzahia, Jgenti Law Firm Georgian Wine Association Silknet Ltd. Dutch Design Garden 10 petriashvili St. 5 Marjanishvili St. 95 Tsinamdzgvrishvili St. 20 km, Agmashenebeli Alley Tel: 2921878 Tel: 2505456 Tel: 2530779 www.kjlaw.ge Tel: 2910345; www.silknet.com www.dutchdesigngarden.com International School of Legal Partners Associated LLC SRG Investments LLC Economics at TSU Financial Brokers Georgia Offi ce #203, Besiki Business Center, 49a Chavchavadze Ave, 3rd fl oor 16 Zandukeli St. 36a Lado Asatiani St. 4 Besiki St. 0108 Tel: 2253581 Tel: 2507177; Fax: 2984815 Tel: 2969123 Tel: 2200203; Fax: 2250458 www.silkroad.ge www.iset.ge www.fi nancial-brokers.ge www.lpa.ge Statoil QSI International School of GeoCapital Microfi nance Liberty Bank JSC GMT Plaza, 4 Freedom Sq. Georgia Organization Ltd. 74 Chavchavadze Ave. Tel: 2471002 Village Zurgovani, Tbilisi 5 Tsereteli St, Kutaisi Tel: 2555500; Fax: 2912269 www.statoil.com Tel: 2537670; Fax: 2322607 Tel: 431 267070 www.libertybank.ge www.qsi.org www.geocapital.ge Teliani Valley JSC Luca Polare 2 Marshal Gelovani Ave. Salvation Army, the Geocell 54 Oniashvili St. Tel: 2313245; Fax: 2313249 16 Ikalto St. 3 Gotua St. Tel: 2990399 www.telianivalley.com Tel: 2333786; Fax: 2330227 Tel: 2770100, ext. 7435; www.lucapolare.com Theco Ltd. www.salvationarmy.org Fax: 2770119 16 Chikovani St. www.geocell.ge Mgaloblishvili, Kipiani, Save the Children Federation Dzidziguri (MKD) Tel: 592107515 Inc. Georgia Country Offi ce GeoEngineering LLC 71 Vaja-Pshavela Ave., www.tbilisia.ru 20 Gotua St. 15a Tamarashvili St. Offi ce 24 Thermarsenal Ltd. Tel: 2244520 Tel: 2311788; Fax: 2311787 Tel: 2553880/81; Fax: 2973884 101, Tsereteli Ave. www.savechildren.org www.geoengineering.ge www.mkd.ge Tel: 2473112 Transparency International www.arsenal.ge Georgian Airways Mina JSC Georgia 12 Rustaveli Ave. 4 Besiki St. VD Capital 26 Rustaveli Ave. 0108 Tel: 2999730; Fax: 2999660 Tel: 2449981/82/83; Fax: 2449980 77 Kostava St., 0175 Tel: 2932129 www.georgian-airways.com www.mina.com.ge Tel: 2363672; Fax: 2364302 www.transparency.ge

OCT.-NOV. 2012 55 SOCIAL PAGE On September 6 AmCham members met for poolside drinks during the Chamber’s End of Summer reception at the Holiday Inn Tbilisi pool. Friends and colleagues mingled over wine and cocktails, and AmCham President Sarah Williamson welcomed Amy Denman back as executive president. Williamson thanked George Welton for his hard work during Amy’s absence.

56 OCT.-NOV. 2012 SOCIAL PAGE On October 13 at the Radisson Blu Iveria Hotel, schoolchildren and volunteers from local schools including, the American Academy, New School, the French School, the German School, the European School, and QSI, helped vulnerable children select warm clothing for the winter during the annual COATS event. COATS -- Clothing Others Against The Snow -- is a community outreach project geared to engage community youth to become active in helping those less fortunate.

OCT.-NOV. 2012 57 Sarah Williamson, PRESIDENT In Tbilisi since June 1998, Sarah Williamson is the co-owner and Vice President of United Global Technologies (UGT), the largest IT company in Board Of Directors 2012 Georgia.

R. Michael Cowgill, Irakli Baidashvili, First Vice-President Vice-President & Treasurer In his 12th. year in Georgia, Michael Cowgill is Irakli Baidashvili is the Senior Vice President of currently the President and co-founder of Georgian GMT Group. The company is one of the largest US American University’s business and law schools in direct investments in Georgia, the owner of two Tbilisi, Georgia. Marriott hotels, production facility SANTE and several major real estate sites in Tbilisi .

Neil Dunn, Director Esben Emborg, Director Neil Dunn is the general manager of BP Esben Emborg has been in Georgia since 1999. He Georgia since October 2008. He has 30 years of has worked a General Manager for Caucasus Region experience in the oil and gas industry, having for Cadbury Schweppes and Nestle until 2008. Now various engineering and operations assignments. he is working as Principal Partner for an Investment Fund (SEAF) that is currently managing a 30 mil USD portfolio of investments all over Georgia.

Lasha Gogiberidze, Director Badri Japaridze, Director Lasha Gogiberidze is a founding partner of BGI Badri Japaridze has been the Deputy Chairman of Advisory Services Georgia and the director of the Supervisory Board of TBC Bank since 1999 BGI Legal. Previously, Lasha worked at Ernst & and the Vice-President of Young’s Georgian ofﬁ ce. Lasha graduated from Georgian Glass and Mineral Water Co. (GG&MW) Tbilisi State University, has a LL.M. from the since 1995. University of Illinois, and is licensed to practice law in NY state.

Steve Johnson, Director Ted Jonas, Director Steve Johnson is the proprietor of Prospero’s Ted Jonas is the Managing Partner of DLA Piper’s Books and the General Manager of The Hotel Tbilisi ofﬁ ce. He advises clients on international Betsy. Prospero’s Books and Caliban’s Coffee business transactions, energy and infrastructure House is the leading English language bookstore projects, government relations, and dispute in Georgia. resolution.

Ketti Kvartskhava, Director Robin McCone, Director Ketti Kvartskhava is a Partner of BLC Law Ofﬁ ce. Robin McCone is a NZ lawyer. He leads PwC’s Her professional experience includes her work as tax and legal practice in Georgia and Armenia. He a Commercial Law Advisor at the USAID Georgia has been with PwC mainly based in CEE countries and as an instructor at Tbilisi State University. for over 16 years. Prior to moving to Tbilisi he She also worked as a Legal Counsel for the US- spent two years in New York as the leader of Georgian Commercial Bank JSC Absolute Bank the CEE Desk. He looks forward to utilising his and JSC Transcaucasia Bank. large international network in his role as a board member.

David Lee, Chairman Emeritus John Ashworth, Ex-Officio Member David Lee is the General Director of Magticom, the John Ashworth is the Deputy Chief of Political largest telecommunications operator in Georgia and and Economic Affairs and Senior Economic/ took up his position March 2004. David is also the Commercial Ofﬁ cer at the U.S. Embassy. He Chairman of the Eurasia Partnership Foundation worked previously in Uzbekistan, Barbados, and is a Chartered Accountant with an MBA from and on the State Department’s India Desk in Warwick Business School. A Russian speaker, he Washington. has worked extensively in the former USSR and served as a Royal Naval Ofﬁ cer for 9 years.

Betsy Haskell, Founding Advisor Amy Denman, Exec. Director Betsy Haskell is an 18 year resident of Georgia who Amy Denman came to Georgia in 1996 from Chicago started four successful businesses, and is currently where she worked in the Marketing Department in the developing a resort hotel and villas in the wine secondary education division of publishing company country. For the past 15 years, she has been the Houghton Mifﬂ in. After working for the IFRC for a Georgia Contractor for Metrica, Inc, a US Treasury year, she became the coordinator then the founding Department sub-contractor. Executive Director of the Chamber.

58 OCT.-NOV. 2012 OCT.-NOV. 2012 59 OUR BANKING AND FINANCE PRACTICE

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