EXPORTING WHAT’S NEXT FOR AN INTERVIEW GEORGIA’S MENTAL THE LARI? WITH BP ON THE REVOLUTION SHAH DENIZ 2

Investor.geA MAGAZINE OF THE AMERICAN CHAMBER OF COMMERCE IN GEORGIA

ISSUE 43 FEB.-MAR. 2015

2015: The Comeback of Georgian Film

FEBRUARY-MARCH/2015 • Investor.ge | 3 Investor.ge CONTENT 6 Economic Freedom in Georgia: An Overview of the 2014 Heritage Foundation Index Grant Thorton provides an overview and analysis of Georgia’s ranking in the annual report on economic freedom.

8 Exporting Georgia’s Mental Revolution

12 BP: Georgia is Off to a “Running Start” on Shah Deniz Project

8 14 ISET Looks at the Numbers Behind Foreign Direct Investment

16 DCFTA: Promising Growth Insights from Grant Thorton’s International Business Report

20 Keeping Out the Cold: Tbilisians Embrace Insulation, Tentatively

22 Taming Tbilisi’s Troubling Homeless Cat and Dog Problem

25 Georgian Banks Spin Off Non-Banking Business

26 ProCredit Bank Focuses on SME Sector, Sells Portfolio to TBC Bank

28 IMF’s Azim Sadikov: Georgian Lari adjusting to major external shocks 12 30 Tracking Tourism

32 KPMG Finds Untapped Potential in Georgia’s Hospitality Sector According to KPMG’s annual analysis of the Georgian hospitality sector, demand for lodging accommodations still exceeds supply.

33 Playing the Host: Georgia’s First Olympics at Home

35 Georgia via Food, Tradition and Cows

38 A New Strategy for Tourism

22 40 Nana Janelidze: “All Flowers Grow from a Dirty Earth” An interview with the director of the Georgian National Film Center, Nana Janelidze, about the new wave of international success for Georgian films and filmmakers using art to grapple with Georgia’s complicated recent history.

35 NEWS ...... 42

4 | Investor.ge • FEBRUARY-MARCH/2015 FEBRUARY-MARCH/2015 • Investor.ge | 5 Economic Freedom in Georgia:

KETEVAN KHORAVA, GRANT scores in each of the foregoing catego- clear leader is Estonia, which is ranked THORNTON ries. Based on its average score, each 11th in the world and is included in the country falls within one of fi ve degrees list of countries having “Mostly Free” of economic freedom: 1) Free (80-100); economies. 2) Mostly Free (70.0-79.9); 3) Moder- Estonia’s high score refl ects years of INDEX OF ECONOMIC FREEDOM ately Free (60.0-69.9); 4) Mostly Unfree reforms, including the country’s linear etermining the specifi c level (50.0-59.9); 5) Repressed (0-49.9), income tax reform, which has contrib- of economic liberalization of which clearly conveys information about uted to the rapid growth of the economy. Ddifferent countries’ economies a country’s freedom. Estonia “linear income tax” experience has recently arisen as necessary and an was so successful that other countries important value for investors, politicians MOVING AHEAD OR FALLING – Lithuania, Latvia and then Russia - and others. BEHIND? copied it in 2001. Ukraine and Georgia The American thinktank Heritage In 2014, the Heritage Foundation also introduced fl at income taxesin 2004, Foundation, in collaboration with the published an analysis of 186 economies as did Slovakia and Romania in 2005. Wall Street Journal, has developed a throughout the world – a report that sent Georgia’s scores refl ect the country’s unified Index of Economic Freedom a clear signal for post-Soviet countries mixed success at reforms; it scores higher that examines countries in the context about their progress. than its neighbors, but still has room for of 50 different parameters, which are For example, results from the South improvement. grouped into 10 major categories: 1) Caucasus and Eastern Europe show that The country is ranked 22nd in the TradeFreedom; 2) Fiscal Freedom; 3) countries, where there are signifi cant 2014 index. Georgia’s highest score is Government Spending; 4) Monetary institutional reforms and where the for labor freedom at 91.2. The country Freedom; 5) Investment Freedom; 6) government is creating a favorable en- also received high marks for business Financial Freedom; 7) Labor Freedom; vironment for investment, are more ef- freedom, 87.8, which is an important 8) Property Rights; 9) Freedom from fectively transitioning to modern, mobile indicator for investors. Corruption; and 10) Business Freedom. economies compared to those struggling Georgia’s score is based on its easy The index is an overall score, which is to implement reforms. business-incorporation policy, which al- derived by averaging equally weighted As for post-Soviet countries, the lows entrepreneurs to register a business

6 | Investor.ge • FEBRUARY-MARCH/2015 An Overview of the 2014 Heritage Foundation Index

with just two procedures in two days. There is no minimum capital require- ment. Completing licensing require- ments typically take just two months to complete. The country also boasts several other advantages, like fl exible working hours, that have helped its score. Unfortunately Georgia has low scores in Property rights, at 40.0 and Freedom from Corruption at 42.8. But ranked between Luxembourg and Swe- den, Georgia’s score earned accolades from offi cials. The country improved in several areas, like business freedom and monetary freedom – and its overall score was higher than the 2013 rank- ECONOMIC LESSONS From a “repressed” economy almost ing, continuing its trend of year on year The Economic Freedom index can be 19 years ago, Georgia has gradually ad- improvement used as a guide for Georgia as it choose vanced to the ranks of the economically the best road to economic growth. Geor- “mostly free,” achieving its highest score REGIONAL TRENDS gia should use the reports published by ever in the 2014 Index. Interesting trends are also observed the Heritage Foundation and the annual But there is still more to do. The in Georgia’s neighboring countries: Ar- edition of the Wall Street Journal on the report’s authors found that “deeper in- menia is ranked 41st; Azerbaijan is in the Index of Economic Freedom to assess stitutional reforms to eradicate lingering 81st position, and Turkey is ranked 64th. reforms aimed at improving economic corruption and increase judicial inde- The improvement of Azerbaijan’s freedom that are planned for each year. pendence are critical to ensuring greater ranking is due to the state’s policy to If one analyzes Georgia’s score for economic freedom in Georgia.” Dynamic promote trade, encourage investments Economic freedom for 2014, one sees positive changes occurred with Georgia’s and establish a moderate tax system. The that itsoverall score is 0.4 point higher with property freedom score from years report found, however, that the country than 2013, with improvements in six of 2007 to 2013, but unfortunatelynow needs institutional and systemic reforms the ten categories of economic freedom, Georgia’s property freedom score is 5 for property rights (the country scored including government spending, invest- points lower than last year. 20), as well as anti-corruption measures ment freedom and monetary freedom. If one assumes that property freedom (the country scored 22.7). “Georgia is ranked 12th out of 43 is one of the determinant factors for Turkey’s ranking was an improve- countries in the Europe region and its investment, then one will come to see a ment over past years. But the report score is well above the regional average,” certain corelation between the two: FDI makes it clear that despite reforms the report noted. as a percentage of the national GDP has implemented in recent years, the govern- Over the 19 years that Georgia has also decreased since 2011. ment still interferes in the economy, and been included in the Index, its economic The Index of Economic Freedom is dynamic entrepreneurial activity requires freedom has advanced over 28 points, the proof that economic growth is not an liberalization of regulations and taxes. third best of any country. isolated event, but rather a consequence According to the 2014 data of the “The impressive growth of Georgia’s of economic freedom. Without it, no Heritage Foundation, Russia ranked 140 economic freedom has been propelled by country can overcome poverty andfurther out of 186 countries of the world due to broad-based score improvements in such itsdevelopment – a lesson the Georgian issues concerning property rights and critical areas as regulatory effi ciency and government should take to heart as it corruption. market openness,” the report stated. continues the country’s reform policy.

FEBRUARY-MARCH/2015 • Investor.ge | 7 There are three foreigners in the Ukrainian cabinet, including Georgian-born Aleksandre Kvitashvili

various capacities, was named a deputy EXPORTING GEORGIA’S justice minister. On February 11, Geor- gian media reported the former Georgian President Mikheil Saakashvili was ap- pointed as an advisor to the Ukrainian MENTAL REVOLUTION president. Foreigners in the newly formed gov- A GENERATION OF GEORGIAN LAWMAKERS MADE A ernment, especially the two Georgians NAME FOR THEMSELVES AFTER THE ROSE REVOLUTION- (who may be joined by other teammates) ERA REFORMS. NOW KYIV IS EAGER TO MAKE USE OF are being hired primarily to recreate Georgia’s 2004-2012 successful eco- THEIR EXPERIENCE AND EXPERTISE. nomic reforms. Their success would alsoprovide a boost for Georgian President Mikheil Saakashvili’s United National Move- HELENA BEDWELL – Aleksandre Kvitashvili, Georgia’s ment, which is now an opposition party healthcare minister in 2008-2010, and back in Georgia. orget about Georgian wine and Eka Zghuladze, who was Georgia’s cheese exports to surprise the deputy interior minister from 2006- REINVENTING GEORGIA’S ROSE FWest. It’s now Georgian knowl- 2012 – were appointed as members of REVOLUTION SUCCESS edge and experience that sells like the Ukrainian government. After gaining power in 2003 follow- hotcakes today, after two Georgians Gia Getsadze, a former offi cial in ing the Rose Revolution, Saakashvili

8 | Investor.ge • FEBRUARY-MARCH/2015 FEBRUARY-MARCH/2015 • Investor.ge | 9 strengthened Georgia’s alliance with the U.S. and ushered in an era of reform. Economic growth followed; Georgian GDP went into double digits in 2007. One of the pioneers of these reforms was Kakha Bendukidze, a former Eco- nomic Minister and the Chief of Staff of Saakashvili’s government. Bendukidze was a staunch sup- porter of major reformsand his ideas gained popularity in Ukraine when he was invited to join the Advisory Board for National Reforms Council (NRC), Ukrainian President Petro Poroshenko’s initiative to coordinate reforms in Ukraine. “The Georgian team’s experience in fast and clean/fresh reforms are really needed in the corrupted [Ukrainian] state, where the past twenty years have been Ukrainian Prime Minister Arseniy Yatsenyuk seriously tarnished with corruption,” Alexander Rodneli, an analyst in Tbilisi, said in an interview. “There is no rela- the road police, and to create a funda- has stressed the role of purely humani- tive factor here, no party relations, less mentally new police patrol with larger tarian assistance and has distanced itself risksof future corruption; it’s new blood.” functions and responsibilities. from more hands-on support for Kyiv For Ukraine, the stakes are high, against Russia, but former officials noted political analyst and former U.S. CLOSE ALLIES believe Tbilisi has a pivotal role to play diplomat Matthew Bryza. The wave of Georgian expertise in Ukraine. Bryza, who worked extensively in the heading to Ukraine is just the latest in a Giorgi Baramidze, who served as former Soviet Union, thinks that Ukrai- long history of good relations between Vice-Prime Minister of Georgia and nian Prime Minister Arseniy Yatsenyuk the two countries. State Minister for Euro-Atlantic Integra- is sending several important messages by Kyiv and Tbilisi have historically tionand is currently a vice-speaker of the hiring foreigners: he is serious about re- helped each other in times of trouble: Georgian Parliament, said in an interview form and will hire the most experienced when Georgian products were banned in that fully unconditionally supporting and capable ministers he can fi nd – in- Russia under the 2006 embargo, Ukraine Ukraine means everything today. cluding a Georgian (and an American) opened its market. Roman Gotsiridze, a former head and Ukraine’s government will not be Also, when Georgia was grappling of the Georgian National Bank, agrees. deterred by invasion, but rather, it will with separatists during the 1992-1993 “These guys have both experience and continue to deepen its ties with the EU, war in Abkhazia, Ukrainian fighters learnt from their early mistakes, their refl ecting the will of its voters. helped Georgian soldiers – a favor a names will be associated with radical The scope and scale of the problems number of Georgian volunteers have reforms, something Ukraine needs now facing Ukraine, however, is much greater been eager to repay. as much as anything else to remove the than what reformers had to tackle in While the number of Georgians fi ght- old guard,” he tells me. Georgia. But Ukraine’s new patriots ap- ing with Ukrainian forces is unknown, at “Ukraine was heavily tarnished pear eager to get down to the business least three have died in the war over the with corruption, and they are desperate of reforms: in comments to UKR TV, Donbass to date. for new blood and Western ideas and Zghuladze said she plans to reorganize The current Georgian government values.”

10 | Investor.ge • FEBRUARY-MARCH/2015 FEBRUARY-MARCH/2015 • Investor.ge | 11 BP COUNTRY HEAD: Georgia is off to a “Running Start” on Shah Deniz Project

AN INTERVIEW WITH BP’S COUNTRY MANAGER, CHRIS SCHLUETER, ABOUT THE SHAH DENIZ PROJECT AND THE IMPACT OF OIL PRICES ON BP’S INVESTMENT IN GEORGIA.

HEATHER YUNDT pipelines coming through Georgia run- transport it along what’s known as the ning effi ciently, reliably and safely, and Southern Corridor through Azerbaijan, s oil prices drop to the lowest there’s nothing that changes about that.” Georgia and Turkey to Europe. Project levels since 2009, multina- “Like everywhere in the company, we planners estimate gas will begin to reach Ational energy companies — in- have to tighten our belts a bit and make Turkey in late 2018 and Europe in late cluding BP — are scaling back. But the our choices about, ‘Well, should we do 2019 or early 2020. BP calls the project head of BP in Georgia says the project this investment this year or next year?’ on one of the most complex endeavors ever that makes up Georgia’s largest private those things we’ve got choices on. You taken on by the oil and gas industry. foreign investment will not be affected. rethink some of your projects.” Schlueter, who took on the role of and its existing operations in country will But not the Shah Deniz project. The BP’s Head of Country last year, said continue to operate full-scale. Shah Deniz, a gas reservoir in the Cas- Georgia is now “off to a running start” “Yes, a decrease in the oil prices in pian Sea the size of Manhattan Island, on its part of the project, referred to as to the forties affects [BP in Georgia], is one of the largest gas discoveries ever the South Caucasus Pipeline Expansion but it does not change our course at all made by BP. The massive Shah Deniz or SCPX. in terms of what we operate here and project, now in its second stage, involves “Whereas a year ago the project was how we operate,” Chris Schlueter told a nearly $45 billion investment to build all signatures and ceremony, we’re now Investor.ge. “In fact, our job is to keep the the infrastructure to extract the gas and physically very busy in the country and

12 | Investor.ge • FEBRUARY-MARCH/2015 “Gas is different. Gas is on demand. you build it, they will come.” This project is justifi ed from gas to be And that long-term investment, he sold based on contracts that are already said, will have a long-term positive im- signed.” pact on Georgia. Europe’s demand for gas continues Schlueter points to a list of sus- to increase at the same time as domestic tainable development projects BP has production decreases, he said, leaving financed, which includes grants to the continent in need of other sources. individuals in communities along the BP has signed a production-sharing pipeline to craft business plans and start agreement for the Shah Deniz that lasts businesses. until 2048, as well as 25-year-long gas BP is also spending 20% of its SCPX contracts with 11 companies in seven Project capital expenditures on local countries. That long-term scope of the goods and services. As BP operates ac- project, Schleuter said, protects it from cording to international standards, the the current low price of gas and short- company’s local contractors are required term volatilities. to boost their own standards, bringing up Georgia’s standards overall. RUSSIA’S SOUTH STREAM The SCPX project is expected to In January, Russian-owned Gazprom create about 2,000 jobs in Georgia when confi rmed the cancellation of its contro- construction reaches its peak in 2016. In versial South Stream pipeline, which addition, of the more than 500 BP em- would have brought gas to Europe via ployees involved in current operations, the Black Sea. about 96% are Georgian nationals. Instead, the company announced “We’re heavily nationalized, which it would opt to route the gas through we’re proud of,” Schlueter said. “In Turkey instead. Despite this, Schlueter Georgia, I think we have gotten there due says the Shah Deniz project, including to the caliber and the capability of the SCPX in Georgia, will remain on track workers and the quality of employment as planned. that we offer. People rise to the challenge “There are so many different sources working for this company.” will be for the next four years,” he said. of inputs into energy in Europe and else- BP has operated in Georgia for nearly Georgia’s SCPX part of the international where in the world, and we’re just one 20 years and has two oil pipelines and project includes building a second pipe- of those,” he said. “Our project stays on one natural gas line crossing the country. line along an existing corridor 62 kilome- course as scoped. It doesn’t change.” Schlueter said he’s “tickled” to be in ters inland from the Azerbaijani border, While the Southern Corridor invest- Georgia at a time when existing opera- two compressor stations that will use ment was justifi ed and sanctioned solely tions and a proven track record have led their jet-engine force to boost the pres- on gas from the Shah Deniz, as with all to strong community and government sure of gas fl owing through the existing resevoirs, supply from Shah Deniz will support and with the massive new SCPX pipeline and additional connections and eventually lessen over time, Schlueter project underway. metering for higher gas fl ows to Turkey is confi dent that the pipeline could be “We’ve earned the right [to build this and additional gas offtake for Georgia. used to carry gas from other locations new project] because people know how Like oil, natural gas prices have also in the future. we operate; they know it’s going to be recently fallen, though less dramatically. “When you build something as a good-quality, safe, environmentally But gas, Schlueter stressed, is fundamen- signifi cant as this, which is a true new and socially responsible operation. Our tally different than oil. Big gas projects energy corridor for this part of the world, proven track record demonstrates that are based on long-term, not on today’s the chances are that just like the [Baku- we are not just coming in. We’re actually prices. Tbilisi-Ceyhan] pipeline for the oil, if going to improve things.”

FEBRUARY-MARCH/2015 • Investor.ge | 13 NINO MOSIASHVILI AND NIKOLOZ do not see real opportunities for attrac- MAKING PKHAKADZE tive profi ts and reasonable chances for a solid return. oreign direct investment (FDI) is Given the crucial role of FDI, it is SENSE critical to every developing coun- prominently featured in many political Fty, and Georgia is no exception debates, but the concept is not always in this regard. Georgia wants to grow well understood. The chart shows Geor- OF FDI out of poverty and catch up with the gian FDI from 2009 to the third quarter economically more developed regions of 2014. As one can see, FDI reaches a of the world. For this to happen, foreign low in the second quarter of 2014 and DYNAMICS resources are needed, particularly if then soars at the very end of the chart. the domestic savings rate is as low as Does this mean that investor sentiments ISET LOOKS AT THE in Georgia. have declined in early summer, but then NUMBERS BEHIND Yet FDI is not only about the capital improved drastically toward the end of made available to the economy but last year? THE FDI STATISTICS. also, and even more importantly, about This is indeed how it was understood trust foreigners have into the Geor- by many journalists and politicians, who gian economy. It is one thing to make issued alarming statements when FDI cheerful statements about Georgia’s went down in the second quarter. And rosy economic future and something when it went up in the third quarter, completely different to risk one’s own the government interpreted this as for- money. Investors will not invest if they eign appraisal of its economic policy.

14 | Investor.ge • FEBRUARY-MARCH/2015 However, the reasons behind the high when a big portion of cash fl ows from commercial banks, microfi nance and intra-year volatility of FDI are much more the direct investors was received. If this insurance companies), data from the complicated. amount had been spread throughout Ministry of Economy on privatizations the duration of the whole project, which (some of which involve foreigners), and, DON’T PANIC! AND DON’T would be the right thing to do if one is most importantly, questionnaires sent to PRAISE! interested in FDI as a measure of eco- companies. While the fi rst two sources After TBC Bank was listed on the nomic activity of foreigners in Georgia, are very reliable, there are consider- London Stock Exchange, the European one would see slightly higher FDI num- able uncertainties regarding the data Bank for Reconstruction and Develop- bers in all previous quarters and no peak obtained from questionnaires. This has ment (EBRD) sold a good deal of the in the third quarter of 2014. implications, as through the years 2007 TBC shares it held. These shares are now to the third quarter of 2014, 79 percent with investors who own less than 10 per- AND DON’T TAKE FDI AT FACE of the identified FDI came from the cent of TBC shares each. By defi nition, VALUE! questionnaires (the fi nancial sector and only fi nancial investments that make According to the defi nition of the privatizations accounted for 11 percent up at least 10 percent of the stock of a International Monetary Fund, direct in- and 9 percent, respectively). company count as FDI, and so the EBRD vestment is “a category of cross-border Questionnaires about FDI are sent is no longer a foreign direct investor investment associated with a resident periodically to about two thousand with TBC. As a consequence, while the in one economy having control or a companies. The list of companies is proportion of foreign ownership of TBC signifi cant degree of infl uence on the updated each quarter to include newly was not changed,the transaction had management of an enterprise that is founded companies. However, a prob- a negative impact on FDI. resident in another economy.” In prac- lem is that companies are not legally Around the same time, TBC bought tice, a “signifi cant degree” translates obliged to fi ll out the surveys (though 80% of the shares of Constanta Bank into the guideline that an investor must GeoStat says that the majority of com- from the foreign OikoCredit, as foreign hold more than 10 percent of the voting panies involved in the survey provide owners were replaced by Georgian power in a company for the investment the information requested). Based on ones, this also negatively affected FDI. to count as FDI, causing a discontinuity a recommendation of international But these events do not negatively re- when a foreign investor increases their organizations, Geostat plans to make duce capital availability – and they do investment beyond 10 percent. This was responding obligatory for companies not indicate a loss of trust in the Geor- behind the anomaly we saw in the third in the near future. gian economy on the part of foreign quarter of 2014. There are a couple of To conclude, politicians and journal- investors. Yet the increase in FDI in the other catches with FDI – one can eas- ists should not take FDI numbers at face third quarter does not justify triumphant ily construct hypothetical examples of value. In a small country like Georgia, comments, either. increases and decreases of FDI that are even the decisions of single businesses The reason for the dramatic upturn not associated with positive or negative can lead to considerable changes was the construction of residential build- economic developments, respectively. in the FDI, as in the second and third ings necessary for the European Youth Some FDI may even be harmful for an quarters of 2014. Olympic Festival (“Tbilisi 2015”), carried economy . Only if it is known how particular FDI out by Chinese investors. This sports All of these considerations are based movements come about, can they be event was acquired for Tbilisi under the on the assumption that FDI data is reli- interpreted economically in terms of previous government, so there is no able, but obtaining reliable FDI data is capital availability and investor confi - justifi cation for the new government to not easy. FDI data – disaggregated by dence. If such background information consider this FDIas foreign support for country and sector – is compiled and in FDI developments is lacking, as it is their economic policies. reported by Geostat quarterly, and it often the case, it would be better to not Moreover, the constructionstarted is based on three sources: data from refer to FDI numbers if one wants to say three years ago,and the third quarter the National Bank of Georgia about something about Georgia’s economic of 2014 just happened to be the period FDI in the financial sector (including fortunes.

FEBRUARY-MARCH/2015 • Investor.ge | 15 NIKOLOZ AKHALAIA, GRANT THORNTON

n 2014 Georgia signed the long awaited association and trade-liberaliza- DCFTA: tion agreements with the EU, known as the Deep and Comprehensive PROMISING GROWTH IFree Trade Agreement (DCFTA). These agreements provide Georgia the opportunity to the decrease its trade defi cit by increasing export capac- INSIGHTS FROM ity, and they make Georgia more attractive for potential investors as well. Due to the importance of the association agreement,Grant Thornton’s GRANT THORNTON’S International Business Survey used a recent survey to explore business INTERNATIONAL expectations from the DCFTA. OVERALL, BUSINESSES POSITIVE ABOUT EU OPPORTUNITIES BUSINESS REPORT The survey of 50 business respondents, conducted in the fourth quarter of 2014, shows that 70% of respondents expect positive or very positive impacts on the economy from the recent trade agreement, while 26 percent do not expect any change.At present, Georgia has unilateral trade conces- IN 2014 GEORGIA GAINED THE OPPORTUNITY TO ENTER A MARKET sions from the EU that removed customs duties for some exported goods. OF 27 STATES WITH OVER 500 MILLION The DCFTA will abolish tariffs for almost all products, which means that HIGH-INCOME CONSUMERS. TO EXPLOIT the country will enjoy zero customs tariffs. The agreement aims to establish THIS OPPORTUNITY, THE COUNTRY MUST MODERNIZE FROM ITS UNPREDICTABLE a more predictable legal and institutional environment, making Georgia AND POORLY IMPLEMENTED BUSINESS more attractive to economic partnership. The skepticism of those who do DECISION-MAKING AND FOCUS ON not expect improvement of economycan be explained by the fact the all the MARKET DEVELOPMENT, CONSUMER necessary processes require time, and while the agreement provides oppor- PROTECTION AND PRODUCT QUALITY, A RECENT SURVEY BY GRANT THORNTON tunities, making the most of them is a test which the country has yet to pass. FOUND. When asked about the impact that business representatives expect

16 | Investor.ge • FEBRUARY-MARCH/2015 from trade liberalization, only 6% were and implement necessary standards. product development to enter the EU not able to answer; 34% said that they market and to be able to compete with did not expect any change and 44% and CONCERN OVER COMPETITION long-established players. And while pre- 16% foresaw positive and very positive Businesses’ lack of confidence is dicting success today is a long shot, the impacts, respectively.Business own- backed up by the fact that companies investment most likely will require a few ers express the same confi dence about need to implement quality standards years to breakeven, after which managers readiness to compete with European and modern practices to be able to keep will start seeing profi ts. counterparts. up with the competition, which requires 50% reported that their supply-chain signifi cant investment of both time and THE ROLE OF THE RUSSIA-UKRAINE management and sustainability are al- money. Georgia can offer natural and CONFLICT ready incompliance with EU regulations, quality food products and European Together, Russia and Ukraine are ma- 4% stated that they will be ready within consumers tend to focus on these product jor players in the eastern European mar- one year, 12% within 2 years, and 4%, characteristics.Nevertheless, it should be ket andthe ongoing confl ict has played within three or more years, respectively. noted that the European market is very a negative part in the region’s develop- At the same time 28% said that they do competitive. Local companies will need ment. In response to Grant Thornton’s not know how long it will take to adopt signifi cant investment in marketing and IBR survey question “What impact has the confl ict between Russia and Ukraine had on your business?” 14.6% of re- spondents in Georgia said they expect a signifi cant reduction in orders within the region. The fi gure is slightly better compared to Latviaand Lithuania,where expectations of reductions in orders are 18% and 24%, respectively, butit is signifi cantly higher compared to Estonia and Armenia, where only 6% have the same expectation. At the moment, 2% from Georgia and Lithuania report that all orders have been cancelled from the region, while Estonia and Latvia report 4%. 6% of respondents in Georgia also say importing of raw materials and goods from Russia or Ukraine has become more complicated, the same as in Armenia and Latvia. The distribution of percentages was interesting for an answer about doing business in Russia or Ukraine. According to the survey,20% of respondents from Armenia and Lithuania said that they do not do business in these countries. Estonia has the largest fi gure – 84%, followed by Latvia 36%, while Georgia has the lowest 8.3%.The expectation for rising energy prices is low,inGeorgia and Latvia about 2% think energy costs might be higher, against 6% in Armenia and Lithuania.

18 | Investor.ge • FEBRUARY-MARCH/2015 DECEMBER-JANUARY/2014-15DECEMBER-JANUARY/2014-15 • Investor.geInvestor.ge | 1919 MAIA EDILASHVILI ings are becoming attractive in terms of Keeping Out s cold weather sets in and heat- marketing as well.” ing bills rise, energy-effi cient Ahousing – and especially heat- GOVERNMENT’S ROLE? the Cold: trapping insulation – is gaining traction But there are still many in the mar- in the Georgian market. ket – both construction companies and Insulation was once a little-known consumers – lacking knowledge either Tbilisians phenomenon in Georgia and in the about insulation or about the impact it has countries of the former Soviet Union on saving energy and costs. The govern- Embrace generally. Today, however, a growing ment, however, is hoping that the coun- number of construction companies are try’s new construction code will help fi ll starting to include insulation in walls, the gap. The Ministry of Economy and Insulation, windows, doors and ceilings. Sustainable Development is considering Research conducted by Energy Ef- a new draft of the construction code, fi ciency Centre Georgia (EEC), a non- which will include several articles on en- Tentatively profi t NGO work- ergy effi ciency and ing to promote In fact, according to even note building energy effi ciency, a study by the Energy materials that can FOR YEARS THE IDEA found that over help reduce energy the past fi ve years, consumption, said OF INSULATING Efficiency Centre Georgia, the use of energy- Davit Gigineishvili, APARTMENTS AND effi cient construc- insulation reduces the head of the spa- HOUSES WAS ALIEN tion materials has construction prices by tial planning and TO GEORGIA, WHERE increased by 25 policy department COMMON WISDOM to 30 percent each 15percent and energy at the Ministry. HELD THAT CEMENT year. consumption in a building is This draft WALLS MEANT THAT M2 Real Es- code was already NO EXTRA MATERIAL tate, a real estate reduced by as much as 45 reviewed by the WAS REQUIRED TO developer with- Prime Minister’s four building proj- to 50 percent. Economic Council. KEEP A HOUSE WARM ects underway in After some impor- IN THE WINTER AND Tbilisi, uses insulation in its roofs, walls tant corrections are made, it will be sent COOL IN THE SUMMER. and ceilings in all its projects, accord- to the Parliament for consideration and is TODAY, HOWEVER, ing to Irakli Beridze, the head of M2 expected to be passed during the spring NEW INSULATION Real Estate’s development and project session. The new code does not include MATERIALS IN THE management. any measures to force construction MARKET AND ACCESS The company has calculated that, “at companies to use insulation in building TO STUDIES ABOUT a minimum,” these energy-effi cient tech- projects, however. nologies can reduce energy consumption ENERGY EFFICIENCY “This [code] will be just a legislative by 23 percent. framework and will not defi ne how the ARE HELPING CHANGE “Even three years ago no one would law can be enforced,” Gigineishvili told CONSUMER DEMANDS talk on this issue, neither developers nor Investor.ge. AND CONSTRUCTION customers,” Beridze told Investor.ge. “I “Later, the Parliament will instruct HABITS. think that the trend is going to become relevant agencies with the task to make even more popular, as consumers are these articles functional. As a recom- starting to appreciate the benefi ts. This mendation, we just write that it must means that insulated apartment build- take a maximum of three years to achieve

20 | Investor.ge • FEBRUARY-MARCH/2015 this. But this is only a recommendation edge and experience with insulation is they completely lack the trappings of and the Parliament will make the fi nal keeping some market players from using modern energy saving culture. decision.” it in their buildings. He explained that Abulashvili believes that the toughest Giorgi Abulashvili, the director at they do not understand the extent of its task would be to create a fi nancing tool to the Energy Effi ciency Centre Georgia, benefi ts, which are great compared to the fund insulation and other energy-effi cient believes energy efficiency will be- small increased cost for materials. “The measures in old buildings. “The com- come a higher priority for construction construction price increases on average munities created by residents of these companies and consumers as Georgia by just 2 to 3 percent,” he said. apartments have been successful in the implements the EU-Georgia Association In fact, according to a study by past in terms of installing new eleva- Agreement, which spells out energy ef- the Energy Effi ciency Centre Georgia, tors or changing their roofs; insulation fi ciency and energy savings measures. insulation reduces construction prices installment can also be done if these M2’s Beridze agrees, saying that the by 15 percent and energy consumption communities can again successfully at- practice in Europe to have an energy in a building is reduced by as much as tract enough funds.” passport for each apartment is very im- 45-50 percent. Abulashvili thinks that is There are signs that residents are portant, so that consumers know all of the it important to introduce modern norms eager to try. Nino, 39, a resident of energy-related details about their homes. for not just new apartments, but for every Tbilisi, said she and her family sought “The sooner Georgia gets such passports building. The great majority of buildings out a building that was insulated. “We the better,” he noted. in Georgia, almost 95 percent, are old, will save on energy costs and also have Beridze added that a lack of knowl- built 50 or even a 100 years ago – and full comfort inside,” she said.

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FEBRUARY-MARCH/2015 • Investor.ge | 21 Taming Tbilisi’s Troubling Homeless Cat and Dog Problem

This is just one of the many delightful rescued dogs and puppies at the Dog Organization Georgia shelter, waiting to find their forever homes. All D.O.G. shelter dogs are checked by a vet, fully vaccinated and spayed or neutered to prevent more unwanted puppies. Please find us on Facebook - Dog Organization Georgia, or email [email protected] to find out more about adopting a dog.

22 | Investor.ge • FEBRUARY-MARCH/2015 TBILISI CITY HALL spring, though details, such as when TRAP, NEUTER, RETURN IS WORKING WITH and how this will be done, are still being Since August 2012, Tbilisi has worked out with the help of local and in- switched to an approach internationally LOCAL NGOS AND ternational animal welfare organizations. recognized as a humane form of popula- INTERNATIONAL Once the city better understands the tion control: TNR — trap, neuter, return. PARTNERS TO TAME stray population, both Pkhaladze and The idea is to capture street animals, animal welfare experts agree that the city neuter and vaccinate them, and then THE CITY’S RAMPANT will be in a better position to manage it. return them to the streets where they POPULATION OF Before 2012, Tbilisi dealt with its were found. These “community dogs” HOMELESS DOGS stray dogs and cats by trapping and are often cared for by the residents of AND CATS. A killing them. Not only was this practice their neighborhood. condemned as inhumane, it was also Only dogs and cats that are aggres- CENSUS OF STRAYS ineffective. sive or ill are put down — 1,707 last IS PLANNED, AS IS “What they really achieved was that year. However Ursula Goetz, the chief BETTER LEGISLATION people were against them because they veterinarian of Mayhew International, didn’t like that dogs were killed in the a London-based animal welfare charity, TO ENSURE PET street,” says Mariam Chkhikvishvili, says at least 75 percent of the population OWNERS ARE head veterinarian at the Agricultural Uni- must be neutered in order for this strategy NEUTERING AND versity’s Veterinary Clinic and chairper- to be effective. SPAYING THEIR son of Homeless Pets Help Organization. According to the city’s records, about “Everyone saw how they were catching 550 animals were neutered or spayed at ANIMALS. dogs, how they were killing dogs. Even its shelter in 2014, though the shelter kids were there.” housed more than 4,000 animals through- “There was no result,” says Tinatin out the year. In addition to the municipal HEATHER YUNDT Chavchanidze, Chairperson of Animal shelter, two private shelters also care Rights Committee Georgia. Though for stray animals. The Agricultural Uni- alk down any street in Tbilisi many were killed, those that were not versity’s Chkhikvishvili puts aside one and one may notice a dog continued to reproduce, she says. day per week to spay and neuter street Wor cat soaking up sun on a street corner or raiding the community garbage bin. No one knows just how many animals roam Tbilisi’s streets – something City Hall’s new Animal Monitoring Agency plans to change this year in an effort to improve the lives of all residents, human and animal alike.

ASSESSING THE NUMBERS Tbilisi City Hall established the Animal Monitoring Agency on Janu- ary 1, 2015, shifting the responsibility of street animal management and the Tbilisi Municipal Shelter away from the Department of Emergency Services. Now Temur Pkhaladze, the Agency’s head, says plans are being developed to conduct a census of street animals this

FEBRUARY-MARCH/2015 • Investor.ge | 23 animals, sometimes performing up to dents in Georgia over the past two years. the Ministry of Agriculture’s plans to nine surgeries in a day. Last May, the organization visited Tbilisi create a nationwide strategy for rabies While the TNR approach has im- for a second time to provide intensive control, which will include a stray dog proved the situation, Chkhikvishvili says training at the Agricultural University rabies vaccination campaign. Accord- more surgeries need to be done to man- and Tbilisi’s Municipal Shelter. Caroline ing to Mikheil Sokhadze, Georgia’s age Tbilisi’s street animal population. Yates, Mayhew International’s CEO, representative at the World Organiza- One aspect of the problem, she says, says that before Mayhew International’s tion of Animal Health, 250,000 pets is pet owners not neutering their pets. training in 2013, there was little to no were vaccinated against rabies last year “Many dogs in the streets come from neutering happening at the Municipal across Georgia. He expects a similar houses, previously owned dogs,” she Shelter — potentially contributing to number this year. Rabies continues to be says. These abandoned animals then more street animals when dogs and cats a problem in Georgia, with four deaths reproduce in the streets. were released or adopted. due to the disease last year, though none were in Tbilisi. With the exception of a A CHANGE IN MENTALITY TAKING CUES FROM THE UK few tweaks, Chavchanidze says she is But this is changing. Chkhikvishvili, Legislation is the Animal Monitoring satisfi ed with the draft legislation. Still, a veterinarian since 2002, says she is Agency’s planned next step. Representa- she says the city needs more educational neutering more and more pets. The day tives traveled to London in December programs. Her organization has run I spoke to her, there were three pet cats to learn from the UK’s example. The programs in schools in the past but is in the clinic waiting to be spayed. Now, agency has now drafted a responsible pet currently looking for more funding. she says, even owners of purebred dogs ownership law, which Pkhaladze says he “Education is very important. We talk and cats are getting them neutered. expects to pass very soon. about how to avoid dog bites, what the Chavchanidze of Animal Rights The legislation would require pet reason is for doing this sterilization,” she Committee Georgia agrees. “Five years owners to register and vaccinate their says. “And the main one is responsible ago when I began to speak about it, vet- animals, with fi nes — of a presently ownership, because people can’t imagine erinarians did not know about this (new) undetermined amount — for those who what responsibility they have after they simple method, or they thought that they do not. Tbilisi residents who want to have a pet in their house.” would lose their job if pets did not repro- breed their pets would require licenses. Mayhew International’s Yates stress- duce all the time. But now when we go Pkhaladze says registration will cost less es that any solution must be comprehen- to speak at events, the situation is better.” for owners who neuter their pets, and the sive involving education, public health, Mayhew International has played a city will pay for neutering if an animal’s legislation and veterinary provisions. key role in this. The organization has owner cannot afford the cost. “It is as much a people and awareness trained about 100 vets and veterinary stu- The new legislation coincides with issue as it is an ‘animal’ issue,” she says.

24 | Investor.ge • FEBRUARY-MARCH/2015 Georgian Banks Spin Off Non-Banking Business

Georgian banks have a year to re- banking sector, if such investments are “We are in the process of undertaking structure and separate any non-banking not made by banks and do not create a legal-entity restructuring that involves business interests, according to a new additional risks for the banks.” the transfer of ownership and separation decision by the National Bank of Georgia of the banking and non-banking business (NBG). In October, the NBG called on all END TO “LIBERAL APPROACH” from the Bank of Georgia to a Georgian Georgian commercial banks to “submit The decision comes following the holding company which will be 100% a detailed strategy on step-by-step (until NBG’s “liberal approach” that allowed owned by Bank of Georgia Holdings plc,” December 31, 2015) withdrawal from the banks to wade into real estate and other Sophie Balavadze, the head of the bank’s non-fi nancial fi eld to the National Bank sectors following the 2008 fi nancial crisis. PR department, told Investor.ge in an within 30 calendar days.” “The National Bank’s liberal approach email interview. Describing “non-fi nancial” activities as toward banks’ involvement in non-profi le “Neither Bank of Georgia clients, nor “risky” for the sector, the NBG announced activities was part of the policy, which those of non-banking business will be its new requirements after meeting with was developed to overcome fi nancial affected. Non-banking businesses have the business community, it said in a state- crisis of 2008-2009, in line with mitigation always operated on their own, led by ment published on its website on 31 of different regulations,” the NBG said in teams of professionals.” October. a statement. Giorgi Shagidze, the CFO at TBC Bank, “Banks’ involvement in non-profile “The healing trend of real-estate sector said the change will not affect TBC Bank, activity is assessed by the National Bank and increasing scope of banks’ non-profi le since the bank is already focused on of Georgia as risky for the sector in the activity raised the need to change super- “purely” fi nancial products. mid-range perspective. Such practice visory approach.” He supported the NBG’s position be- creates the risk of confl ict of interests. An cause, he noted, it should limit risk. Additional argument is to avoid negative BANKS’ REACTION “I think this is a good initiative because impact to competition in the real sector The Bank of Georgia, one of the any initiative which reduces risks and of economy,” it said. Georgian banks affected by the NBG’s makes the banks more focused on their “It must also be mentioned that the decision, told Investor.ge that the new core business is generally benefi cial for National Bank of Georgia welcomes regulation did not come as a surprise and the sector,” Shagidze told Investor.ge in investments by bank shareholders in non- will not impact the bank’s clients. an interview.

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FEBRUARY-MARCH/2015 • Investor.ge | 25 A REFLECTION OF DEVELOPING ECONOMY n January 27, TBC Bank an- nounced that agreement Obetween ProCredit Bank and TBC Bank was signed, where 39.3 million microloan portfolio of ProCredit bank was sold to TBC. The deal, which had been in the works since November, signaled Pro- Credit Bank Georgia’s exit from the microcredit sector, Asmus Rotne, the bank’s general manager, told Investor.ge. The move, he said, refl ects the changing needs of the Georgian economy. When the bank was founded, nearly 16 years ago, micro businesses were seen as a driver for the economy. Today, however, small and medium businesses are leading growth, Rotne explained. “We entered this segment very much from a development perspective, that this could be the segment that Georgia’s economic ProCredit Bank Focuses on development could come from. And, to a large extent, that really SME Sector, Sells Portfolio did happen,” he said. “And today we think that eco- nomic development is going to to TBC Bank come from the small businesses, the medium-size businesses.”

PROCREDIT BANK GEORGIA HAS LEFT THE A CHANCE TO EXPAND ProCredit Bank Georgia’s deci- MICROCREDIT BUSINESS TO FOCUS ON THE sion to change its strategy dove- SME SECTOR. IN NOVEMBER, IT DECIDED tailed with TBC Bank’s acquisition TO SELL ITS 39.3 MILLION LARI MICROLOAN of Constanta Bank, a major micro- PROFILE TO TBC BANK. INVESTOR.GE SPOKE fi nancing institution, and its plans to expand in the area of small loans WITH ASMUS ROTNE, GENERAL MANAGER AT – credit from 1,000 lari to 10,000 PROCREDIT BANK GEORGIA, AND NIKOLOZ euros (approximately 23,000 lari), KURDIANI, A DEPUTY CEO AT TBC BANK, noted Nikoloz Kurdiani, a deputy CEO at TBC Bank who manages the ABOUT THE DEAL AND ITS IMPLICATIONS FOR Constanta Bank operations. THE BANKS’ STRATEGIES MOVING FORWARD. Kurdiani said the deal, which will

26 | Investor.ge • FEBRUARY-MARCH/2015 “Today we think that economic development is going to come we have several competitive advantages. One is our people, our staff. We have always been investing dra- from the small businesses, matically more than other banks in the development of our staff,” he said. the medium-size businesses.” “The second thing is that we have a very low cost of funds. I think depositors recognize that ProCredit Bank Asmus Rotne is a kind of safe haven in a way.” The deal is a harbinger of larger possibilities in prod- add about 5,000 customers to Constanta Bank’s micro- ucts and services for clients at both fi nancial institutions, loan portfolio, provided the bank with the opportunity according to the bankers. to grow in communities around the country. TBC Bank Constanta, which will open its 65th branch “We bought it because it adds exactly the segment in March, is working to fi nd innovative ways of introduc- we want to add to Constanta – micro business custom- ing – and educating – people about small loans and ers,” he said. fi nancing. After the deal, for example, TBC Bank Constanta The bank is also considering special fi nancial educa- will have 130 percent more customers in Telavi – a de- tion classes in all its branches. velopment that will be duplicated in cities and towns ProCredit Bank Georgia is focusing its energy on through Georgia. providing even better service for small and medium That growth will help the bank as it expands its busi- business clients, Rotne said, adding that changes to ness and its outreach, Kurdiani said. internet banking and pay boxes will help SME clients TBC Bank Constanta sees microfi nance as “a good make better use of the bank’s technology and services. place to be”, he noted. The bank is also continuing to develop its dis- “It is a segment in rural areas where the only source tance services, like business client advisers of income is their own household business or their agro who come to the client. business,” Kurdiani said. “It is a good place to be, quite Kurdiani said the bank’s new mobile unpenetrated…and also much less competition.” agent program, which provides loan For ProCredit Bank Georgia, TBC Bank Constanta agents with special Samsung Galaxy was the perfect option to take over the portfolio, Rotne tablets so they can approve loans said. and distribute funds to debit “We did not want to sell this portfolio to just anybody. cards on site at clients’ busi- It was not just a question of getting rid of it, because nesses, is already making an these are clients who have been with us for 10 or 15 impact. years, and we wanted to send them somewhere where “We serve you on your they could be taken well care of,” he said, noting that premises; we do not these clients make up just fi ve percent of the bank’s waste your time. We total loan portfolio. keep your emotion “I think TBC Bank, after the acquisition of Constanta, up because you is really in the position to also provide proper servicing are proud to be and continous fi nancing. It is important for us that they doing business are taken care of.” in your busi- ness,” he LOOKING FORWARD said. While the SME business segment is competitive for Georgian banks, Rotne said ProCredit Bank Georgia is up for the challenge. “I feel very confi dent. It is not an entirely new sec- tor for us; we have always been in SMEs and I think

FEBRUARY-MARCH/2015 • Investor.ge | 27 to the deepening crisis in Russia. Another factor for the lari’s fall against the US dollar has been the strength of the world’s leading currency. While Georgia will benefi t from the sharp fall in the oil prices thanks to a lower import bill, Sadikov said, part of these gains will be offset by the decline in external demand and investment IMF’S AZIM SADIKOV: from many of Georgia’s oil-dependent economic partners, such as Russia, Azer- baijan, Kazakhstan, and investors from Georgian lari adjusting the Middle East.

REGIONAL IMPACT to major external shocks While the lari has dipped against the dollar, it is actually faring strongly against other trading partners curren- INVESTOR.GE SPOKE WITH AZIM SADIKOV, cies, Sadikov said, noting that the lari THE INTERNATIONAL MONETARY FUND’S has strengthened to the ruble, hryvnia, REPRESENTATIVE IN GEORGIA, ABOUT THE euro and has been stable to the Turkish lira and the Armenian drahm. DEPRECIATION OF THE LARI, THE NATIONAL Sadikov noted that the National Bank BANK OF GEORGIA’S REACTION AND WHAT of Georgia’s decision to allow the lari WE CAN EXPECT IN 2015. to fl oat has helped keep the lari from becoming too expensive, especially for Georgia’s neighbors whose currience has weakened. FACING DOUBLE SHOCKS foreign investment numbers, Sadikov “If you look at the actions of the he lari’s slide against the dollar said, this led to pressures on the lari, National Bank of Georgia, allowing the – a drop in December, followed causing it to lose value. lari to fl oat freely and move inline with Tby a brief recovery, and more “We saw sharp drops in remittances new market realities was absolutely the recently a loss of around 10 percent – has and exports in November and December, right decision,” he said. captivated the country. by about 20-25 percent compared to a “The lari depreciation was inevitable Concerns about growing prices, fall- year earlier,” he said. and also it was desired because if the ing purchasing power and climbing costs “Georgia is earning less foreign cur- National Bank of Georgia tried to defend for dollar loans have worried businesses rency than it needs to spend on imports the lari…one consequence of that would and consumers alike. and that eventually puts downward pres- have been that Georgia would have be- The root of the lari’s depreciation, sure on the lari exchange rate. The supply come very expensive in the region for according to the IMF’s Azim Sadikov, of foreign currency has gone down and Armenians, Russians, Ukrainians, and lies mainly in the country’s external this inevitably should lead the market to others.” payments gap that has opened up due to correct itself.” If the lari had appreciated even more the deepening recession in Russia and That equation has spelled deprecia- against the ruble and the drahm, or any its impact across the region. First signs tion for the lari. Georgia is not alone: the other regional currency, it would have emerged in the autumn of 2014 when drop in remittances and exports and weak made it even more diffi cult for the Geor- Georgia’s exports and remittances started tourist numbers are directly tied to the gian economy to correct itself – exports to drop. Coupled with relatively modest shocks rippling through the region due would have been pricier for Georgia’s

28 | Investor.ge • FEBRUARY-MARCH/2015 trading partners, Georgian resorts would The National Bank of Georgia’s main adjust to the new realities, including by have been too expensive for tourists objective is to maintain price stability by letting the lari fl oat, he added. from neighboring countries and imports targeting a certain low level of infl ation Sadikov said that, while it is impos- would have become cheaper, squeezing (5 percent in 2015). sible to predict how the exchange rate Georgian producers. This could have Consistent with infl ation targeting will behave over the next few months, thrown the economy into a sharp slow- is a fl oating exchange rate regime, with the economy has already been adjusting down or even outright recession, Sadikov the lari’s price determined by market to the brunt of the shocks. explained. forces. That means it is impossible to “Quite a bit adjustment has already The hardest hit from the lari’s fall predict how the exchange rate moves in happened, but it is obviously diffi cult to against the dollar have book those with the near term. say with confi dence that the adjustment lari incomes and dollar loans – a com- It is beleived the shocks Georgia is has run its course. We will see this in the mon occurrence in mortgage loans and exeperiencing – the fall in the oil prices coming months,” he said. loans to the commercial sector. These and the Russian recession – are “per- “We need to see how exports and borrowers now have to set aside 15-20 manent” in nature, Sadikov said, which imports are reacting to the recent ad- percent more lari to service their debt. most likely oil prices will stay low and justment in the exchange rate. Was this This means households and companies the troubles in the Russian economy will adjustment suffi cient to bring Georgia’s will have less money to consume or continue for some time. balance of payment to a balanced posi- invest, which can have an impact on the The right policy response to such tion? If it is not balanced, the economy economy, Sadikov said. permanent shocks is to let the economy may need to adjust more.”

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FEBRUARY-MARCH/2015 • Investor.ge | 29 Tracking Tourism

30 | Investor.ge • FEBRUARY-MARCH/2015 INVESTOR.GE LOOKS AT A NEW REPORT ON THE HOSPITALITY SECTOR FOR KPMG GEORGIA, THE WORLD BANK’S WORK WITH THE NATIONAL TOURISM AGENCY ON THE NATIONAL TOURISM STRATEGY, THE POTENTIAL OF GEORGIAN COOKING TO OPEN UP RURAL TOURISM AND WHAT THE YOUTH GAMES COULD MEAN FOR TBILISI THIS SUMMER.

FEBRUARY-MARCH/2015 • Investor.ge | 31 The increase was a promising de- – a signifi cant portion. Just 10 percent velopment, despite the fact that the stayed at hostels, and 7 percent rented KPMG Finds number of arrivals has started to stabilize an apartment. Campsites (3 percent) after intense growth from 2005-2012. and private homes (5 percent) were KPMG’s report noted that “The num- also less popular. Untapped ber of international arrivals in Georgia The numbers were fl ipped, however, amounted to 4,187,595 for the fi rst three for domestic tourists, i.e. Georgians quarters 2014, which is a 2.14 percent traveling in their own country. The study Potential in increase from the same period last found that 85 percent of domestic trav- year. An average annual growth rate elers stayed in private homes owned for the last ten years (2005-2014) was by themselves, friends or relatives. Georgia’s 30 percent, with the highest growth Hotels attracted just 3 percent, while 4 rate seen in 2012, when the number of percent stayed in guesthouses and 3 international arrivals increased by 56.9 percent rented rooms. Just 5 percent Hospitality percent.” used other types of accommodations, After Georgia’s boom in tourism like camping. numbers, which peaked in 2012, the KPMG Georgia found that, for most country is now moving closer to the hotel guests, location outweighs cost Sector international norm for visitors, KPMG or brand. Georgia’s report found. The report also detailed upcoming Georgia’s peak season is still the events that will increase demand on ACCORDING TO summer months, KPMG reported in the hotels and hotel developments in the KPMG’S ANNUAL study. Quoting statistics from the Geor- pipeline. gian National Tourism Agency, the study There are seven new major hotel ANALYSIS OF noted that the number of international developments reportedly planned for THE GEORGIAN arrivals increased 2.21 percent in the Georgia, in addition to the Sheraton peak season, compared to the same Metechi expansion (80 more rooms of HOSPITALITY period last year. fi ve-star quality, planned to reopen in SECTOR, DEMAND 2015), as well as the Best Western and PURPOSE FOR TRAVEL Rooms Tbilisi hotels, which both opened FOR LODGING The KPMG Georgia report also in 2014. ACCOMMODATIONS looked at who is coming – and why they Large projects announced in the are traveling to Georgia. media include: Hilton Garden Inn; Inter- STILL EXCEEDS SUPPLY. The biggest portion of international Continental Hotels Group; The Radisson visitors – 37 percent – were coming for Blu Resort Tsinandali; and Park Inn. vacation, leisure or recreation. A sec- “Upcoming events like the European recent report on the hospitality ond large category, 26 percent, came Youth Olympic Festival 2015, UEFA Super sector by KPMG Georgia found to visit friends or relatives. The third larg- Cup 2015,and EBRD annual confer- A several things for hotel and est category – transit – made up 17 per- ence, etc. will increase the number of guest-house operators to be excited cent of international arrivals. Shopping international travelers,” Andrew Cox- about. attracted just 9 percent, while business shall, the head of KPMG Georgia, told and professional travel accounted for Investor.ge. OCCUPANCY RATES UP 9 percent. “On the other hand, after the com- For starters, occupancy rates are up The study also found that 7 percent pletion of the upcoming hotel projects, across the board, from peak season to of visits were for “other purposes” like the number of rooms supplied for ac- low season – and hotels are even fi lling education, training, and medical care. commodation will increase by hundreds more rooms during the “shoulder sea- of units. This may lead to a decrease of son” that bridges the two. DEMAND FOR HOTELS EXCEEDS the current average occupancy rates.” Based on KPMG’s data, last year SUPPLY “Based on our interviews con- hotelsexperienced a 91 percent aver- KPMG looked at where people are ducted with the tourism agencies, the age occupancy rate during the peak staying – and what drives them to select capacity presented in the sector is not season, compared with an 82 percent certain types of accommodations. suffi cient to ensure accommodation average occupancy rate in 2012-2013. The report found that, for inter- of the expected international tourists. The change was equally signifi cant in national visitors in 2013, most people Hence, demand for accommodation the low season, which had a 60 percent stayed in hotels – 43 percent. Over a exceeds supply. This fact makes us think occupancy rate in 2014, 10 percent third of tourists, however, stayed at that the sector is still in the development more than in 2012-2013. private homes with friends or relatives stage,” Coxshall noted.

32 | Investor.ge • FEBRUARY-MARCH/2015 MAIA EDILASHVILI host the games in November 2010 by just fi ve votes, 26-21 . PLAYING eorgia is preparing for The Eu- The competition venues have been ropean Youth Olympic Festival under construction for the past four years G(EYOF)– the fi rst post-Soviet at a total cost of 100-130 million lari, THE HOST: country to host this biennial multi-sport funded by both the Georgian state bud- event. Organizers are hoping the games get and the World and European Sports Georgia’s will help bolster the country’s economy Federations. and pave the way to host more high-level “There is a myth that sports are al- international events in the future. ways subsidy-based. Well, that might be First “Georgia has gone through many true for some categories, but some sports important milestones throughout the cen- can even bring revenue to the country,” Olympics turies, but now we will become hosts of Akhvlediani said. the Olympic fi re for the fi rst time in our history,” Aleksi Akhvlediani, chairman OLYMPIC DREAMS OF PROFITS at Home of the organizing committee of EYOF AND INVESTMENT Tbilisi 2015, said in the interview with Expectations go beyond sports: the Investor.ge. organizing committee of EYOF Tbilisi The country has been preparing since 2015 also sees huge economic benefi ts. Georgia beat out the Czech Republic to “These events can bring investment

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FEBRUARY-MARCH/2015 • Investor.ge | 33 All the participants of the festival will be accommodated at the newly constructed Athletes’ Village located near the Tbilisi Sea. The organizing committee has prom- ised to have all the facilities ready by late May, so that local participants will have a chance to perfect their performances in the event venues. Georgia’s strongest entries are ex- pected in judo, athletics, tennis and swimming. right into those fi elds that are so impor- the second most important sports event “There has been a special three-year tant for a country like Georgia: the needi- after EYOF Tbilisi 2015. And in 2017, program to prepare our young athletes est areas – medium and small businesses. we will host the Men’s Handball Youth specifi cally for this festival, and because I mean, who will see a fi scal impact? World Championship and The Women’s of this we hope that this festival will Those who are engaged in tourism, trans- European Volleyball Championship,” bring the most medals for Georgia, which portation, food, souvenirs, trips and other he said. will infl uence our future results in the related enterprises,” he said.“Therefore, The Olympic Festival will bring 2016 Rio Olympics and the 2020 Tokyo Tbilisi 2015 is not just a ten-day event. over 3,800 athletes, aged 14-18, from Olympics. So, these young athletes are Rather it will be a historic occasion with 49 European countries to Tbilisi. The Georgia’s future Olympians and medal- a lasting impact on our future.” EYOF’s program includes nine sports – ists,” Akhvlediani said. He noted that an estimated 7,000 judo, tennis, artistic gymnastics, cycling, foreign visitors are expected to attend athletics, swimming, volleyball, handball GOLD-MEDAL EVENTS, SPORTING EYOF Tbilisi 2015, which will open on and basketball–which means that new LIFESTYLES July 26 at the Lokomotiv Stadium and Olympic-standard venues will be built There is also hope that the event will end on August 1 at the Athletes’ Village. for each sport, including a new swim- inspire young Georgians to embrace The organizers are also hoping that ming pool with a capacity of 3,000 seats sports and healthy lifestyles. So far, the The European Youth Olympic Festival and a new gymnastics venue that will plan seems to be working. Akhvlediani will inspire more international sporting seat 1,294. Some existing sports venues said that the committee has already events to choose Georgia. The sport- have been slated for European-standard received over 5,000 applications for ing infrastructure under construction is renovations, as well. volunteers, to fi ll just 2500 positions. monitored three times per year by the European Olympic Committee. Akhvle- diani said Georgia has been getting “very high” evaluations for the past half year. Akhvlediani noted that if the country succeeds in organizing this event fl aw- lessly, it will help establish Georgia’s image worldwide as “a country which can organize high-profi le sports events at a high level, which is very signifi cant.” “We already see the fruit of devel- oping this cutting-edge infrastructure – Georgia will host, for the fi rst time in history, the 2016 European Athletics Youth Championships, which will be

34 | Investor.ge • FEBRUARY-MARCH/2015 Georgia via Food, Tradition and Cows

INVESTOR.GE HAS ASKED U.S.-BASED FOOD BLOGGER JENNY HOLM TO WRITE ABOUT HER ADVENTURES EXPLORING THE TANGY AND TANTALIZING CHANGES IN GEORGIAN CUISINE, AS CHEFS AND AMATEUR COOKS WORK TO CREATE NEW DISHES AND PRESERVE ANCIENT TRADITIONS. HER FIRST COLUMN IS ABOUT A RECENT TRIP TO SEVERAL REGIONS OUTSIDE OF TBILISI. Nana forms kubdari at Hanmer Guesthouse in Etseri, Svaneti

JENNY HOLM eral years: a food-centric journey across both restore native traditions that were Georgia on which I’d learn to cook re- nearly wiped out during the Soviet period his past October I finagled a gional specialties with local home cooks and breathe new life into a food culture month off work to take a trip and meet the chefs, winemakers, and that hasn’t always welcomed innovation. TI’d been dreaming of for sev- artisanal producers who are helping to I’d spent a semester teaching English

FEBRUARY-MARCH/2015 • Investor.ge | 35 at a public school in Batumi in 2010 and can speak Russian and basic kitchen Georgian, so I felt confi dent in being able to get around and handle daily situations on my own. I started out in Tbilisi and returned there periodically throughout the month. The restaurant scene in the capital has become considerably more interesting since I last visited. Wine-focused Azarpesha and its sis- ter wine shop, Vino Underground, show- case small producers and natural wines, many of them fermented the traditional way—underground in clay amphora called qvevri. Azarpesha’s menu features heritage grains like red doli wheat (used to make a nutty, satisfying bread) and makes use of seasonal ingredients found often in home cooking but rarely in res- taurants, such as wild herbs and foraged mushrooms. Other standouts included co-owned Shavi Lomi and Lela, which serve up traditional Georgian fl avors in non-traditional ways, and Culinarium, a restaurant and cooking school founded A Meskhetian feast at the home of the Aspanidzes near Aspindza, Samtskhe-Javakheti and operated by Tekuna Gachechiladze, whose creative “Georgian fusion” cui- After a few days in the capital, I was ern Georgia where a contact had set me sine has brought her both fame and a itching to get out into the countryside. I up with a local host family. On my fi rst degree of notoriety among locals. headed to Samegrelo, a region in west- morning in the village, I awoke with a kitten on my chest and a cow mooing outside my window—a sound that would become a familiar refrain over the next several weeks. Megrelian food tends to be spicier than that of other regions, thanks to liberal use of the hot chili paste adjika. My host Arleta uses it as a dry rub on roasted chicken, mixes it into the walnut sauce that can dress up just about anything, and rolls a mint-spiked version into a roulade of homemade cheese. She grows many of her ingredients herself in a small orchard of hazelnut, walnut, and fruit trees and a kitchen garden. Next I moved on to Svaneti, where a Canadian friend and his Georgian wife run a guesthouse in the village of Etseri, Learning to make puff pastry for penovani khachapuri with Donari Aspanidze near Aspindza, Samtskhe-Javakheti far from the tourist trap of Mestia. The

36 | Investor.ge • FEBRUARY-MARCH/2015 gia, two elderly sisters demonstrated how they make their own puff pastry for khachapuri using lard, which gives it a slightly smoky, porky tinge. Traveling outside the capital and eating with families in their homes gave me the chance to try dishes I’d be hard-pressed to fi nd in any restaurant: aromatic pumpkin and quince pilaf with raisins and orange marmalade layered MEGRELIAN BAZHE among the rice, a Meskhetian soup called (WALNUT SAUCE): qaisapa made with dried fruit and sau- téed onions, a savory walnut and wheat 1 cup walnuts berry porridge served to commemorate the dead. 1-2 cloves garlic, peeled It also gave me a taste of Georgian ½ tsp. white wine vinegar life very different from that in the urban playgrounds that Tbilisi and Batumi 1 tsp. ground coriander represent. 1/2 tsp. ground marigold These kinds of unsanitized experi- (ask for “qviteli qvavili” or ences that encourage personal connec- yellow fl ower) tions between travelers and hosts are ½ tsp. ground fenugreek what so many travelers crave. With its (ask for “utskho suneli” or historic wine-making tradition, unique foreign spice) yet accessible cuisine, and plethora of family-owned farms, orchards, and vine- 1 ¼ – 1 ½ cups water view from their front door is breathtak- yards, Georgia could become a popular ½ –1 Tbsp. red adjika if ing, all snow-capped peaks and golden destination for adventurous travelers available; otherwise, add ½ meadows dotted with the neighborhood interested in culinary and agritourism. –1 tsp. crushed red pepper cows. Their Svan neighbor Nana taught Limited English skills outside the fl a k e s me the fi ner points of fi lling and roll- capital, underdeveloped accommoda- ½ tsp. salt ing kubdari, a savory pie stuffed with tions in rural areas, and a paucity of chopped meat and onions that she bakes guides specializing in food and wine A small handful of fresh coriander inside the wood-burning oven that also remain obstacles to full development of heats the home. I tried my hand at milk- this sector at the moment, but as media ing their cow, then learned to make Geor- coverage and word of mouth about Puree all the ingredients gia’s ubiquitous imerulicheese from it. Georgiaas a tourism destination spread, in a food processor until smooth. Adjust seasonings Over the course of the month, I man- I hope to see local and international en- to taste: if it tastes fl at at trepreneurs respond with opportunities aged to visit six of Georgia’s twelve fi rst, try adding a little more regions. In Akhaltsikhe, the owner of for travelers to experience the country’s salt and vinegar. This sauce Edemi Guesthouse, Marina Nariashvili, food and wine as its own people do: in is best after a night in the took me under her wing for three days, the home and on the land. fridge: the garlic mellows teaching me everything from the easiest Outside of her day job, Jenny Holm signifi cantly overnight. Bring the sauce to room way to slice a pumpkin (with an axe) to is a freelance writer and recipe devel- temperature (but do not oper based in Washington, DC. You can how to make caulifl ower so good it’s ad- heat it) and serve with dictive. In a tiny village not far from the fi nd her writing and Georgian recipes roasted or fried chicken, Vardzia cave complex in southern Geor- on her blog, GeorgianTable.com. fi sh, or vegetables.

FEBRUARY-MARCH/2015 • Investor.ge | 37 To tackle the problems and tap into bers …but also by spending,” he said, A NEW Georgia’s potential, the Georgian Na- noting that today tourists are just spend- tional Tourism Agency, together with the ing an average of $600 a visit – which economy ministry and the World Bank, is does not refl ect Georgia’s real potential. STRATEGY developing a national, ten-year strategy But to get the money, Georgia has for tourism development. to develop. FOR “Tourism is one of the most important Currently the country ranks low in and priority sectors of Georgian econo- terms of competiveness, according to the my. The fi eld is developing at a rapid World Economic Forum Tourism Com- TOURISM pace and still holds immense potential for petitiveness Report: just 80 out of 140 in the country. This year, Georgia will fi nal- business environment and infrastructure THE GEORGIAN NATIONAL ize its Tourism Development Strategy, and 91 out of 140 in terms of human, TOURISM ADMINISTRATION, which identifi es key issues, barriers and cultural and natural resources. THE MINISTRY OF ECONOMY AND SUSTAINABLE solutions for further development of the Pilot programs by the World Bank as DEVELOPMENT AND THE fi eld,” the head of the National Tourism part of its regional development projects WORLD BANK ARE WORKING Administration, Giorgi Chogovadze, told in Imereti and Kakheti have found gaps TOGETHER ON A NEW Investor.ge. in the market in terms of facilities, tours, NATIONAL STRATEGY THAT He added that the strategy will help souvenirs and services – all areas that WILL IDENTIFY THE COUNTRY’S the tourism administration focus its ef- can generate spending from tourists and PRIORITIES, NEEDS AND VISION forts on key issues, including raising revenue for locals. TO DEVELOP A SUSTAINABLE international awareness about Georgia; AND COMPETITIVE TOURISM assisting the private sector in creating ROLE FOR THE PRIVATE SECTOR SECTOR. higher quality and niche tourism prod- “Tourism is a crucial aspect of the ucts; stimulating the domestic tourism Georgian economy. This growing in- market; and improving service quality. dustry offers signifi cant potential for job Chogovadze noted that the improve- creation and economic benefi ts across ments will help Georgia not just develop all regions of the country,” Chogovadze a better tourism sector – they will help said, noting that the new strategy – as the sector earn more money from tourists well as the new tourism legislation – will willing to spend more for their holidays “focus” on supporting private-sector in the country. investment in the tourism industry. “Therefore, the country will adopt The World Bank’s Eiweida said the a more sustainable and profi t-oriented business community is a “cornerstone” policy of attracting higher spending for turning the strategy into a reality. tourists. One of the major aspects in this “We see them [the business com- regard, and our competitive edge, will munity] as a cornerstone in the strategy. Georgia’s tourism sector has been be emphasizing Georgia’s uniqueness Tourism is by nature a kind of private steadily growing for the past decade and authenticity as a tourism destina- sector,” he said.“Tourists when they – and the boom of international ar- tion,” he said. come, they are served by the private rivals from 2010 (1,067,338) to 2013 Ahmed Eiweida, the World Bank’s sector.” (2,065,296) indicates the industry holds program leader for sustainable develop- The strategy, which has been devel- promise for the future. ment programs in the South Caucasus, oped over the course of several months But the growth has also highlighted said today tourists in Georgia do not and included intensive consultation with real challenges in the sector: problems spend very much – in part, because all major stakeholders, including local such as a lack of accommodation, poor there is not much for them to spend their communities, businesses, and the Geor- facilities, and undertrained cadre threaten money on. gian Orthodox Church, will be fi nalized to hamstring development. “Tourism can be measured in num- this spring.

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FEBRUARY-MARCH/2015 • Investor.ge | 39 NANA JANELIDZE:

of the 1990s. Levan Koguashvili’s 2010 drama, Street Days, was about drug ad- “All Flowers Grow diction, Nana Ekvtimishvili’s celebrated 2013 coming-of-age fi lm, In Bloom, was set during the Abkhazia war years, along with Tangerines and Corn Island. “For today’s fi lmmakers, it’s hard not from a Dirty Earth” to refl ect what’s been happening since independence. They have lived through AN INTERVIEW WITH THE DIRECTOR OF THE GEORGIAN our violence, our collapse; twenty years NATIONAL FILM CENTER, NANA JANELIDZE, ABOUT THE NEW of inspiration. All fl owers grow from a dirty WAVE OF INTERNATIONAL SUCCESS FOR GEORGIAN FILMS earth. They feel it in their fl esh and blood AND FILMMAKERS USING ART TO GRAPPLE WITH GEORGIA’S and have to refl ect their artistic nature, which is fi lled with passions. There are lots COMPLICATED RECENT HISTORY. of stories, rich stories. They have something to tell. And storytelling through fi lm is a PAUL RIMPLE Film, while Giorgi Ovashvili’s Corn Island, tradition deep in the genes.” won the Crystal Globe at the prestigious Although the Soviet experience rt imitates reality, as the saying Karlovy Vary International Film Festival and quashed artistic freedom, the state nev- goes, and few art forms are as was shortlisted for an Oscar. ertheless funneled a nearly bottomless Arepresentative of this axiom as “We are seeing a new wave in terms amount of resources to fi lm production. cinema. Georgia understands this well, of theme and style. It’s a new generation There were 25 fi lm production companies having been at the forefront of cinema- with a new style – not a Soviet type (of in the Soviet Union. Of these, Tbilisi’s was tography for over 100 years. Even within fi lmmaking),” said Nana Janelidze, direc- the strict framework of Socialist realism dur- tor of the Georgian National Film Center. ing the repressive Soviet period, Georgian She should know. directors battled with censorship to create Janelidze has witnessed Georgia’s some of the most highly acclaimed fi lms cinematographic arc from its height as a in the world. co-writer of the screenplay for Monanieba The days of state-imposed restrictions (Repentance), Tengiz Abuladze’s 1984 on art are behind us; now it’s the market Cannes-winning masterpiece about that sets the conditions of what can be the Georgian experience during Stalin’s made. The tumultuous decade following purges. Her own debut feature, Iavnana “It’s like a bead of light in a dark society. But even with a very low budget, we are starting to grow the audience. We now have children thinking in terms of a ‘cinema civil society.’”

Georgia’s independence in 1991 was (Lullaby), based on a short story by Iakob disastrous for the country’s cinematogra- Gogebashvili, was shot during the 1991- phy industry, as the state could no longer 1992 civil war and released in 1994. She afford to support the expensive art of spent much of the next two decades di- fi lmmaking, and cinemas closed across recting theater, but returned to the screen the country. in 2011 with Netaviik teatri aris?! (Is There A Today, however, Georgia appears Theater Up There?!), a captivating docu- to have turned the corner, as Georgian mentary about the renowned actor Kakhi directors are fi nding the means to make Kavsadze and his family’s relationship with internationally acclaimed fi lms. In 2014, c ommunist Georgia and the USSR. Zaza Urushadze’s Estonian-produced fi lm One common theme for many of Tangerines picked up a Golden Globe Georgia’s contemporary fi lmmakers is life and Oscar nominations for Best Foreign during the rough-and-tumble decade

40 | Investor.ge • FEBRUARY-MARCH/2015 “For today’s filmmakers, it’s hard not to reflect what’s been happening since independence. They have lived through our violence, our collapse; twenty years of inspiration. All flowers grow from a dirty earth. They considered one of the top three, along feel it in their flesh and blood and have to reflect their artistic nature, with Moscow’s and Kiev’s. Studying which is filled with passions. There are lots of stories, rich stories. cinematography was serious business. Most professionals got their credentials They have something to tell. And storytelling through film is a tradition in Moscow at the State Cinema Institute deep in the genes.” (GIK). Today, Georgia’s fi lm institute lacks the seasoned professionals that make the writing their own scenarios. There are no One in Batumi. That’s it. We had 120 be- study of cinematography so valuable. screenwriters.” fore. Tickets were 20 kopeks. You could go “Georgian cinema in the USSR was The Georgian National Film Center to the cinema at ten in the morning and highly educated. The (Tbilisi) fi lm institute (GNFC) was established in 2001 under the stay till eleven at night. All the villages had doesn’t have experience in fi lm, at least Georgian Ministry of Culture to support the cinema clubs. Now, tickets are so expen- not by fi lmmakers like before. There’s TV production and distribution of Georgian sive and in the regions, you can’t watch directors. You need a master or a good fi lms. However, it is severely under-funded, a fi lm on the screen with an audience. But system to draw kids. with a current budget of 5.2 million lari. A this year, we began a ‘cinema in schools’ There is no practice of connecting turning point in the GNFC came in 2011, program for the regions. Village kids can students to big directors. My generation when it became a member of Eurimages, go see fi lms after school: Chaplin, Visconti, had Abuladze, Chkheidze, Danelia, who a Council of Europe entity that promotes Fellini, Abuladze… And after each screen- gave us hands-on training… Of course, our European cinematography. While this ing, there is a discussion. They come to fi lms were also the product of friction within helps Georgia get international exposure, Tbilisi and meet directors. It’s like a bead of the totalitarian system. It took three years Janelidze feels more must be done pro- light in a dark society. But even with a very to write Repentance. Now you don’t have mote cinema domestically, starting with low budget, we are starting to grow the the budget to write like that. Before, writers putting people back in the cinema. audience. We now have children thinking worked in the cinema. Now, directors are “There are only two cinemas in Tbilisi. in terms of a ‘cinema civil society.’”

Tangerines, short listed for an Oscar

FEBRUARY-MARCH/2015 • Investor.ge | 41 NEWS

CONTENT

A Fond Farewell to Amy Denman, 45 Welcome to George Welton

43 President of the National Bank of Georgia Giorgi Kadagidze Overviews Lari, Economy 43 CanArgo’s Cliff Isaak Teaches AmChamYoung Leaders How to Nail their Next Job Interview 44 Amcham Speaks with Former PM About Economy 44 AmCham Secures Big Success on Labor Migration Law 45 A Fond Farewell to Amy Denman, Welcome to George Welton 48 Member Feature: Ras Al Khaimah Investment Authority Georgia 49 AmCham New Members 50 Member Directory 52 Social: The annual Burns Supper

42 | Investor.ge • FEBRUARY-MARCH/2015 NEWS

students were given an opportunity to do CANARGO’S CLIFF ISAAK TEACHES mock interviews and receive feedback in a safe, supportive environment from both AMCHAM YOUNG LEADERS HOW TO the mentor and peers. In his workshop, Cliff especially NAIL THEIR NEXT JOB INTERVIEW emphasized the importance of the fi rst minute, which starts with strong hand- shake, eye contact and relevant outfi t. “It is always better to be overdressed than underdressed,” he told students. After “the fi rst minute” portion, Cliff moved on to the introduction, differen- tiating questions, wrap-up and exit parts of the interview process and had each student go through each step so that all of them could gain valuable interviewing experience and brush up on professional skills. “Always ask a question at the end of the interview. You’d better ask a ques- CanArgo Georgia’s Chief Adminis- at his workshop, “The Art of the Inter- tion. If you don’t, it sends a bad message trative Offi cer Cliff Isaak shared job in- view” on December 12. that you don’t want to engage with the terview strategies and tips with AmCham Cliff gave students unique insight interviewer, or you haven’t done a re- Youth Leadership Program participants into the interview process from both search about the company,” Cliff stressed to help them nail their next job interview employer and candidate perspectives. All to students. PRESIDENT OF THE NATIONAL BANK OF GEORGIA GIORGI KADAGIDZE OVERVIEWS LARI, ECONOMY

President of National Bank Giorgi Kadagidze provided an overview of the Geor- gian macroeconomic environment and also explained the reasons behind the Georgian Lari’s recent depreciation during AmCham’s monthly roundtable meeting at the Tbilisi Marriot Hotel on January 27. The bank president explained to AmCham members why defending the short-term cur- rency movement was unjustifi ed and layed out short, medium and long-term strategy for Georgian economic growth in the future. Kadagidze, who was recently named The Banker’s Central Banker of the Year for the region, also answered members’ questions during a candid discussion.

FEBRUARY-MARCH/2015 • Investor.ge | 43 NEWS

AMCHAM SPEAKS WITH FORMER PM ABOUT ECONOMY

ment. For example, board members pointed to challenges caused by the new visa law, the law on foreign ownership of agricultural land, the law on pharmaceu- ticals, etc., and the negative perception they create for foreign investors. The AmCham board also discussed with Mr. Ivanishvili, the challenges being cre- ated by ineffi cient implementation of processes in government procurement and the public registry. Mr. Ivanishvili expressed his eagerness to work along- side AmCham to resolve these issues quickly and constructively. Both sides also discussed the educa- On 12th February, the board of Am- larly interested to hear Mr. Ivanishvili’s tional challenges facing the country and Cham met with former Prime Minister thoughts on the interaction of business the direct impact on economic develop- Bidzina Ivanishvili to discuss challenges and government in Georgia. ment. The board and Mr. Ivanishvili and opportunities related to strengthen- On this theme, AmCham highlighted agreed that Georgia’s education system ing Georgia’s investment climate. the need for increased consultation was in considerable need of development Meeting participants discussed a between the business community and and in particular in the fi elds of science range of themes. As the former Prime government, particularly related to legis- and technology. Minister, a successful businessman lative and regulatory policy and drafting The meeting was engaged, frank and and founder of the Georgian Dream processes for legislation that affects the productive - and AmCham looks forward Coalition, board members were particu- business community and foreign invest- to future cooperation.

AMCHAM SECURES BIG SUCCESS ON LABOR MIGRATION LAW

In late January, AmCham was invited to bring in the expertise that they needed. required by the EU Visa Liberalization to the Ministry of Economy, along with We were also worried that it would be Process. We therefore, contacted the EU a range of other stakeholders, to discuss poorly implemented and that combined offi ce and discovered that this particular the draft Law on Labor Migration. with the new visa regulations and the law provision was in no way an EU require- The most troubling component of restricting foreign ownership of agricul- ment. We have received fi nal confi rma- that law was Article 16, which required tural land, it sends a terrible message, tion that the provision with which we had that any business which wanted to hire a suggesting that Georgia does not want a problem, had been removed entirely foreigner had to go through a process of foreigners or foreign businesses. from the draft law. This is a huge suc- looking for a Georgian fi rst, and justify to Following the meeting, we engaged cess for us, along with the other business the Ministry of Labor Health and Social in intensive lobbying to change this associations who lobbied on this effort. Affairs why they had not done so. law. We wrote to a range of actors in the We would, of course, hope to be involved Of course, we were very unhappy government and then we followed that earlier in the process next time, but are with this provision as it would have put meeting with engagements and regular grateful to the government for taking additional bureaucratic demands on com- discussions at the highest level. It has on board our concerns and responding panies and would make it harder for them been suggested that this provision was so quickly.

44 | Investor.ge • FEBRUARY-MARCH/2015 NEWS AMY DENMAN: FAREWELL BUT NOT GOODBYE

LETTER FROM THE PRESIDENT

Dear AmCham Members, Partners and Friends,

I would like to offi cially announce succeed Amy as Executive Director of USAID-fi nanced Commercial Law and the handover of the position of AmCham AmCham. George has lived and worked Tax Projects, implemented by AmCham. Executive Director from Amy Denman in Georgia as a professional researcher, George is already fully on board to George Welton. mostly looking at economic development and, due to his longtime involvement in Amy was the founding ED and she issues, for 10 years. During that time he AmCham and Amy’s dedication to see- has been a fundamental part of making has worked for USAID, Asian Develop- ing the Chamber continue to grow and AmCham into what it is today - the ment Bank, UNDP, UNICEF, BP, KFW, improve, the transition has been seamless largest, most well-respected, active and GIZ, UK’s DFID, the Swiss Agency for and is almost complete. In the meantime, relevant international business associa- Development and Cooperation (SDC) I know you will join me in wishing Amy tion in the country. The board & I, the and many others. all the very best in her next adventures new ED and Amy all look forward to George did a fantastic job as acting and in welcoming George back with us working together in the future, just in a ED of AmCham during Amy’s leave as ED at AmCham. different format! from 2010-2012. He has served on I am thrilled to also announce that Dr. many of our committees and designed Sincerely, George Welton has accepted our offer to and managed two highly successful

INTERVIEW WITH AMY DENMAN

AFTER 17 YEARS, AMY DENMAN, THE FOUNDING EXECUTIVE DIRECTOR OF THE AMERICAN CHAMBER OF COMMERCE IN GEORGIA, IS MOVING ON TO NEW ADVENTURES AND CHALLENGES. BEFORE TAKING THAT FINAL STEP FROM RUNNING OUR CHAMBER TO BEING A MEMBER, SHE RECOUNTS SOME OF THE STANDOUT MEMORIES THAT WENT INTO HELPING FASHION GEORGIA’S STRONGEST INTERNATIONAL BUSINESS ASSOCIATION.

Q: What was it like to start Georgia’s In 1998 I left a well-organized highly fi rst voluntary business association? established Georgian offi ce, where I It is hard to underestimate how far managed a relatively large staff, to take our Chamber has come since the days on the biggest career challenge (and in 1998 when US Ambassador Kenneth risk) of my life. I became Coordinator Yalowitz fi rst proposed the idea and and then Executive Director of an as- Betsy Haskell and Leigh Durland shelled sociation with no budget, no offi ce, no Amy with her special appreciation award for her commitment to upholding the principles out a personal loan for the offi cial reg- staff, no reputation . . . I was working and ideals of the chamber in 2005 istration fees. out of my kitchen, on my own ancient

FEBRUARY-MARCH/2015 • Investor.ge | 45 NEWS

By the time of the Rose Revolution in 2004 we were a serious voice and a well-respected business associa- tion. We matured into a group that could work on systemic issues. We had major long term projects in Tax, Customs, Energy, Ethics in Business, and trade and investment promotion to name a few. A few stand out memories are: Our hugely successful Customs Re- form Project, and our Tax Code Review Project were more than 50 experts and businesses dedicated their time to overhaul the tax code. I have great memories of our “clean air” television public service an- nouncements and our Petroleum Advisory Group report, which ended up on then-President Bush’s desk. As ED I led a private Board lunch with then President Mikheil Saakashvili and Amy at the podium with Gia Bazgadze (E&Y) and then-US Ambassador to Georgia John Tefft at the Sheraton Metechi Palace hotel was chosen as one of 10 delegates to meet Laura Bush. In 2008, just weeks after the war laptop, during a time of very intermittent power, water and with Russia, I and a few other members of the Board had the gas. I was calling strangers and driving myself around the chance to meet with a senior US delegation to speak with city in a Lada Niva to introduce the concept of a voluntary them about what Georgia needed. That delegation eventu- business association. ally recommended the post-war $1 billion in economic aid I was usually met with “I think I’ll just wait and see how you to Georgia. I’m proud of our role, though small, in such an do – if you’re still around in a year come back and talk to important event. me then.” And that was all it took: I was hooked. I wanted to During my tenure, AmCham Georgia and the US Govern- prove our value and potential! It was an exciting and wildly ment co-hosted two major US-Georgia business summits and challenging time for me. we organized our fi rst (but not last) high profi le delegation to By the end of the year AmCham had a whopping 15 Washington DC. More recently, we went to the mat over the members and we held our fi rst members’ luncheon. It picked Labor Code and the law on ownership of Agricultural Land. up momentum from there: by 1999 I was hosting regular meet- These are just a few of the stand out memories for me – sinking ings and we latched onto our fi rst ever advocacy effort – the our teeth into serious issues and important causes always left Law on Chambers of Commerce in Georgia. The same year – from the same kitchen - I published our fi rst newsletter and Amy, together with Cliff Isaak (CanArgo), Sarah Williamson never looked back. (AmCham President, UGT), Nino Suknidze (DLA Piper), Neil Dunn (BP), in Washington, DC as part of AmCham’s delegation. For the fi rst fi ve years, we had a lot of meat to sink our teeth into. There were a tremendous number of issues to deal with in the fi nal years of former president Eduard Shevardnadze’s government. The tax code was a catastrophe, customs was a misad- venture in corruption, the Labor Code was a Soviet holdover, regulatory bodies lined up for hand-outs from companies… It was like whack-a-mole – as soon as one problem was seemingly solved, three others would pop up. Our biggest challenge was to keep AmCham on top of a game where the rules were made up, changed, made up again, broken and/or blatantly ignored. Q: And the next phase? What are some standout memo- ries?

46 | Investor.ge • FEBRUARY-MARCH/2015 NEWS

me exhilarated and ready for new challenges. Our member community is an invaluable resource to Q: And any crazy moments? support economic impact assessments – which I hope will be Too many to recount, although I’ll never forget the bomb required on major business legislation in the future. threat minutes before the start of our 10th anniversary gala. I believe AmCham already has the right approach for 350 guests, including 11ambassadors and many senior gov- maximum collaboration on legislative changes. I was told re- ernment offi cials, were expected at any moment when an cently by a senior government offi cial, and I’m paraphrasing anonymous bomb threat was made. The hotel was evacu- here, that the government listens carefully to AmCham be- ated; Sarah Williamson and I, fl exible and determined, put on cause we are smart and constructive with our advocacy and our ball gowns and make-up in the parking garage and met input. He said that we are taken seriously because we do our the guests with a champagne reception in the lower parking homework and provide well reasoned and well researched lot. An hour and a half and a lot of champagne later, the information rather than just dismissive negative remarks. That’s Ministry of Interior and the bomb-sniffi ng dogs gave us the a real compliment to this organization. I think we should stick OK. All the guests, only slightly worse for wear, stayed and to what is working. had a fabulous time. Q: What will you miss? My fondest memories of AmCham are working with the people who make up the Chamber: the staff, the board and the members. The professional staff, the talented Board of Directors and the committee members are the ones that really led the Chamber to success. The staff of AmCham both past and present is an exceed- ingly bright group of people. I will always take great pride in the opportunities for growth that I could give my staff. Modesty aside (cough, cough), I have a talent for hiring smart, moti- vated people who see AmCham as a chance to learn, and excel professionally. I’ve always been the type of manager who gives deserving young employees wings. Those who have left for an amazing education or career opportunity have told me again and again that I was their mentor and their motiva- tion. I take this as the greatest of compliments. Q: You’ve told us how AmCham’s grown…what about you personally? Working with the Boards of Directors and the members over Amy at the 2014 AmCham General Assembly, making sure the vote went smoothly with Michael Cowgill (AmCham First Vice President, the years has been an amazing learning experience. I have GAU), Tengiz Lomitashvili (TBSC Consulting) and K.G. Moore (U.S. been privileged to be part of one of the most important and Embassy) infl uential groups of business people in Georgia. The fascinat- ing discussions on important issues that take place both in and Q: What’s next? Will you stay involved? out of Board and member meetings kept me on top of the I’ve already applied to become a member. I intend to most relevant current events in politics and business. Most of stay an active part of this incredible organization that I helped my closest friends have come out of my work with AmCham. build. I’ll certainly miss the daily interactions with staff. They It’s been an honor and a privilege to serve as the Executive are all wonderful, dedicated and smart people and I consider Director for nearly 17 years. However, now it is time for me them as my AmCham family. to move forward to other exciting and important areas and I bid a very fond farewell to the past and present Boards opportunities in my life both personally and professionally. I of Directors. Such an active and engaged Board has been remain very committed – and very proud – of all that AmCham invaluable to the success of AmCham. I don’t think any Am- Georgia has become and has accomplished during my time Cham I’ve ever had contact with has had such an amazing as executive director. Board to work with. Q: And a look forward for AmCham? George Welton is a highly capable person, as well as a Our Chamber is positioned to remain a positive change good friend, and I know he’ll continue the job with the same agent. The EU Association Agreement is opening a new passion and intensity that I had. It takes a special character period of challenges and opportunities for Georgia and the to run a consistently successful offi ce in a very inconsistent business community. I hope the Georgian government real- environment. I think, and hope that I’ve succeeded. izes the value in collaborating with AmCham to ensure that The foundation has been built – I am confi dent that Am- legislative changes are made with as little negative affect on Cham will be not only around, but as strong as it is today in businesses as possible. 10, 20 or even 100 years.

FEBRUARY-MARCH/2015 • Investor.ge | 47 NEWS

GUGA TSANAVA: INVESTMENTS IN TBILISI PROJECTS WORTH TENS OF MILLIONS ALREADY PLANNED From the latest Georgian movie visitors per year,” Tsanava said. Tsanava noted that statistics indicate theater to open in the capital to Tbilisi’s “RAKIA Georgia and Rakeen Up- the Georgian hospitality sector has room newest fi ve-star hotel and spa, Rakia town development have already spent to grow, which provides a good opportu- Georgia has big plans for 2015 and be- more than $10 million to fi nalize con- nity for investors today. yond, Guga Tsanava, the CEO of Ras Al structionon the second and third fl oors “We agree that demand for hotel Khaimah Investment Authority Georgia in 2014, to escalate the process for En- rooms is increasing faster than the sup- told Investor.ge. tertainment feature of the Mall, which ply. This was one of the factors which Projects in the pipeline include fi nish- will soon open a multi-screen cinema, help us to make the decision to invest $25 ing the second and third stories of Rakia’s and many other modern entertainment million, because the market and economy successful Tbilisi Mall project – a $10 services ,” he said. are growing and we believe that project million investment that includes a new “We are in negotiations with other will be very successful,” he added. multiplex brand movie theater, additional entertainment companies which would Tsanava added that Rakia Group is entertainment features – and the $25 mil- return mall into pure highest standards in talks with the government to launch lion makeover for the group’s Sheraton international quality entertainment des- new investment projects in the hospital- Metechi Palace Hotel. tination, rather than just shopping mall, ity sector. The group is also reshaping its strat- by the end of the year.” egy for its Poti-based Free Trade Zone, Foot traffi c is increasing every day, FIZ AND BEYOND with the help of an international com- Tsanava noted, adding that the mall Rakia Georgia also has big plans for pany, which is working on a feasibility introduced a traffi c counting analyzing the group’s free zone in western Georgia, study, Tsanava said. system that provides daily information in the Black Sea port city of Poti. Rakia Georgia is also in talks with the about the number of visitors. Currently, Rakia Georgia is work- government on new projects it hopes will “No one in the beginning could imag- ing with an international company on a be green lighted, including new ventures ine that Tbilisi Mall traffi c could count feasibility study that will help the group in the hospitality sector. tens of thousands people per day, which reshape the FIZ’s development strategy The group, he said, is capitalizing is currently the reality,” he said. and business model. on the bright prospects for tourism and Tsanava noted that Georgia’s EU Georgians’ increased demand for qual- A MAKEOVER FOR TBILISI’S Association Agreement will attract new ity retail. SHERATON METECHI PALACE business and investment to the country, The group is also investing $25 mil- which will provide increased opportuni- TENS OF THOUSANDS OF lion to renovate and upgrade the Sheraton ties for the FIZ. SHOPPERS EVERY DAY Metechi Palace hotel. In addition, he said Rakia Georgia Rakia Georgia was the fi rst investor “The reconstruction of Sheraton has “close relations” with the Georgian to really tap into the need for an enter- Metechi Palace is main and major object Co-Investment Fund, although the group tainment “destination” in the capital: in our agenda,” he said, noting major has not invested in any projects to date. three years ago, the notion that thousands construction work should start by April. “During these years, wehave beentar- of Tbilisians would fl ock to DidiDighomi “We are aiming for Sheraton Metechi geting the development and restructur- every day to buy groceries, clothing and Palace to turn into real fi ve star inter- ing of our existing portfolio (Tbilisi Mall, shoes seemed a bit preposterous. national standard hotel, which would Sheraton Metechi Palace, Rakia FIZ). But, since the Tbilisi Mall opened in offer surprising services not only for However, since we are already done with 2012, the shopping center’s “signifi cant Georgians but to all travelers who wishes these projects, we are ready to enhance number of internationally acknowledged to use Sheratons services in the near our relations with the fund to fi nd a mutu- brands to attract signifi cant number of future,” he said. ally benefi cial project,” he said.

48 | Investor.ge • FEBRUARY-MARCH/2015 NEWS NEW MEMBERS

Corp A Corp B Corp B Corp B Corp B International Efes Brewery in Georgian Beer IGroup Noblet Media Ltd. Medical Support Georgia - JSC Company JSC Legal services, Noblet Media CIS Services (IMSS) Lomisi The team which government affairs & was founded in 2004 in IMSS Ltd. Georgia is Production of is experienced in the public policy advocasy, Kiev, Ukraine. In 2008 a leader in 24/7 quality alcohol (beer) and production of Georgian public relations and the company started health care provision non-alcohol (CSD) beer and non-alcoholic communications. operating in other CIS and emergency beverages. fresheners started new igroupgeorgia.com countries. Today the readiness response. natakhtari.ge production of beer company operates in IMSS medical staff and non-alcoholic 7 former SU countries consists of expatriate beverages with unique Noblet Media CIS offers and internationally water in the entrance its customers a full qualifi ed (US& of village Saguramo, range of professional European trained) at the foot of Zedazeni PR, marketing and Georgian physicians, mountain-a new era communication who regularly undergo of beer started at the services via an unique training in leading UK Georgian market. network extending hospitals and other Within record period across the CIS international medical of 7 months an and Georgia. The centers. Doctors are unprecedented factory representative offi ce in fl uent in Georgian, was designed and built, Georgia was launched English, Russian and which is exemplary for in 2010 and since that German. famous German and time it implemented imss.ge Czech breweries. A successful mission of the company communication is to combine the projects for the highest standards of following companies beer and carbonated and organizations: soft drinks production EBRD, EU Delegation to with the best Georgian Georgia, MasterCard, water in order to obtain PayPal, BOSCH (Power mass product that Tools) and satelite Georgia will be proud operator SES ASTRA. of. nobletmedia.com geobeer.ge

  DNIJRJƌ@MDIBOC@RD?@~NK@>OMPH FODJI AJMOC@uMNOODH@DI @JMBD< GGJNND=G@JGJMN £¦¢yN@M@O@GDQ@IP@y¢££«y=DGDND| @JMBD< @G|{¬««§¥¤¤¥§©¢¢¤y¬««§¥¤¤¥§©¢¢§y RRR|>@UJH FEBRUARY-MARCH/2015 • Investor.ge | 49 AmCham Company Members as of February 2015

PATRON MEMBERS Chemonics International Greco Group Sheraton Metechi Palace Hotel 6a N. Ramishvili St., 0179 1 Nutsubidze St. 20 Telavi St. BP Exploration Georgia Tel: 2234311; Fax: 2234309 Tel: 2393138; Fax: 2311107 Tel: 2772020; Fax: 2772120 24, S. Tsintsadze St. www.chemonics.com www.greco.ge www.sheraton.com/tbilisi Tel: 2593400 www.bpgeorgia.ge Colliers International GT Group T&K Restaurants (McDonald’s Georgia LLC 48 B. Cholokashvili St. Georgia) Exxon Azerbaijan Ltd 37/39 Kostava St., Tel: 2740740 1 Dzmebi Kakabadze St. Landmark Suite 300, 95 Nizami St., Grato Business Center 7th Floor www.gtgroup.ge Tel: 2921246; Fax: 2251422 Baku, AZ1010 Azerbaijan Tel: 2224477 www.mcdonalds.ge www.colliers.com GULF Georgia Tel: (994-12) 4982460; Fax: (994-12) by Sun Petrolium Georgia LLC TBC Group 4982472 Cushman & Wakefi eld - Pixel Business Center, 7 Marjanishvili St. www.exxonmobil.com Veritas Brown 34 Chavchavadze Ave. Tel: 2272727; Fax: 2228503 6th fl oor, Block 10, 71 Vaja-Pshavela Tel/Fax: 2496444 www.tbc.com.ge PricewaterhouseCoopers Ave. www.gulf.ge 7 Bambis Rigi St., 0105 TMC Global Professional Tel: 2474849 Tel: 2508050; Fax: 2508060 Hilton Batumi Services www.veritasbrown.com www.pwc.com/ge 13 Takaishvili St., Batumi 6001 Indian School Road NE, Suite Dechert Georgia LLC Tel: 292092 190, Albuquerque, NM 87110, USA TBSC Consulting 7th fl oor, Pixel building, www.hilton.com Tel: (1 505) 8723146 3, Rapiel Eristavi Street, IV Floor 34 Chavchavadze avenue www.tmcservices.com Iberia Refreshments, JSC Tel: 2959019; Fax: 2420215 Tel: 2334719 Tetri Khevi Hesi District, Orkhevi www.tbsc.ge www.dechert.com Tel: 2241091; Fax: 2241090 CORPORATE B MEMBERS UGT Deloitte www.pepsi.ge Air Astana Airlines JSC 17a Chavchavadze Ave., 7th fl oor 36a, L. Asatiani St., 0105 IMSS Ltd. 5th Floor, Pixel Business Center, Tel: 2220211; Fax: 2220206 Tel: 2244566; Fax: 2244569 31 Makashvili St. 34 Chavchavadze Ave. www.ugt.ge www.deloitte.ge Tel: 2938911 Tel: 2514999 CORPORATE A MEMBERS Diplomat Georgia www.imss.ge www.airastana.com 65, Kakheti Highway Alliance Group Holding, JSC KPMG Georgia LLC Aliance Georgia Ltd 47/57 M. Kostava St., 0179 Tel: 2984950 3rd Floor, Besiki Business Center, www.diplomat.ge 33 Samurzakano St. Tel: 2424181; Fax: 2998112 4 Besiki St., 0108 Tel: 2243773 Tel: 2935713; Fax: 2982276 www.agh.ge DLA Piper Georgia LP www.groupaliance.com www.kpmg.ge Auto Service Caucasus 10 Melikishvili St. AMK Law 5 Shalikashvili St. Tel: 2509300; Fax: 2509301 Maersk Georgia LLC 1 Iv. Javakhishvili Sq., 0102 Tel: 2208080 www.dlapiper.com 6 Khetagurov St. Tel: 2054628 www.precisiontune.com Tel: 2200800; Fax: 2200815 EY Georgia www.amklex.com www.maerskline.com Avon Cosmetics Georgia LLC 44 Kote Abkhazi St. 117 Tsereteli Ave. Tel: 2439375; Fax: 2439376 Magticom Asseco Georgia Tel: 2226805; Fax: 2226806 www.ge.ey.com 5 Politkovskaya St. 24 Mosashvili St. www.avon.com Tel: 2171717; Fax: 2171171 Tel: 2720901 FINCA Georgia www.asseco.ge F H Bertling Georgia Ltd. www.magticom.ge 71 Vazha-Pshavela Ave. 3rd fl . 10 Shevchenko St. Tel: 2207410 Marriott Hotels, Resorts & Suites Aversi Pharma Tel: 2252287 www.fi nca.ge 13 Rustaveli Ave. 148/2 Aghmashenebeli Ave. www.bertling.com Tel: 2779200; Fax: 2779210 Tel: 2987860 Betsy’s Hotel / Prosperos Books Frontera Resources Georgia www.marriott.com www.aversi.ge 32/34 Makashvili St. / 34 Rustaveli 12 Paliashvili St. Ave. Tel: 2252412 Microsoft Georgia LLC Baker Tilly Georgia Ltd. Tel: 2987624, Fax: 2923592 www.fronteraresources.com 34 Chavchavadze Ave. Meidan Palace, 44 Kote Abkhazi St. www.betsyshotel.com Tel: 2970123 Tel: 2505353; Fax: 2505353 Georgian American Alloys, Inc. www.microsoft.com www.bakertillyinternational.com Booz Allen Hamilton, Inc. 200 S Biscayne Blvd Suite 5500, 4 Freedom Sq. Miami FL 33131 USA NRC Bank of Georgia Tel: 2481348; Fax: 2481349 Tel: (1)3053757560 9 Khvichia St. 0160 3 Pushkin St. www.boozallen.com www.gaalloys.com Tel: 2244141, 2382825 Tel: 2444134; Fax: 2983269 www.nrccintl.com British American Tobacco www.bog.com.ge Georgian American University 71 Vazha Pshavela Ave. Pfi zer Luxembourg SARL 8 Aleksidze St. Bank Republic Tel: 2157500/01/02; Fax: 2157503 Representation Offi ce in Georgia Tel: 2206520; Fax: 2206519 2 Gr. Abashidze St. www.bat.com 58 I. Abashidze St. www.gau.ge Tel: 2925555; Fax: 2925544 Catoni & Co. Georgia Tel: 2252986 www.republic.ge 7 Dzmebi Zubalashvilebi St. Georgian Audit & Consulting www.pfi zer.com Company Basis Bank JSC Apt.22/23 Philip Morris Axis Business Pl, 2 Gamrekeli St. 1 Ketevan Tsamebuli Ave. Tel: 2989230; Fax: 2922264 1 Tabidze St. Tel: 2904522; Fax: 2904523 Tel: 2922922; Fax: 2986548 www.hapag-lloyd.com Tel: 2439001; Fax: 2439005 www.gacc.com.ge www.basisbank.ge Caucasia Trading www.philipmorrisinternational.com Apt 11, Bld 7, 16 Krtsanisi St. GMT Group ProCredit Bank BDO LLC Tel: 14433050083; Fax: 4 Freedom Square 154 Agmashenebeli Ave. Pixel Center 8th fl oor 14433788388 Tel: 2988988; Fax: 2988910 Tel: 2202222; Fax: 2202222-2226 Tel: 2545845; Fax: 2399204 www.caucasiatrading.com www.gmt.ge www.procreditbank.ge www.bdo.ge Caucasus University 77 Kostava St., Bld.6, 4th fl . Gosselin Moving Georgia Radisson BLU Iveria Hotel BGI Advisory Services Georgia Tel: 2377777; Fax: 2313226 3 M/D, Didi Digomi 1 Rose Revolution Sq. 18 Rustaveli Ave., II fl oor www.cu.edu.ge Tel: 2596601/02/03; Fax: 2596600 Tel: 2402200; Fax: 2402201 Tel: 2997292; Fax: 2996615 www.moving.gosselingroup.eu www.radissonblu.com www.bgi.ge CH2M Hill 5th Floor, GMT Plaza, Freedom Grant Thornton LLC SEAF Management LLC BLB (Business Legal Bureau) Square 61 D. Aghmashenebeli Ave. 7, Niko Nikoladze St. II Floor. 1 Shevchenko St, Apt.1 Tel: 2474040; Fax: 2470210 Tel: 2604406 Tel: 2998115; Fax: 2923533 Tel: 2995797 www.ch2m.com www.grantthornton.ge www.seaf.ge www.blb.ge

50 | Investor.ge • FEBRUARY-MARCH/2015 BLC Law Offi ce Georgian Beer Company Luca Polare Tbilisi View 4 Gudiashvili Sq. 3311 Saguramo, Mtskheta District 54 Oniashvili St. 4a, Freedom Sq. Tel: 2922491; Fax: 2934526 Tel: 2437770 Tel: 2990399 Tel: 2999980 www.blc.ge www.geobeer.ge www.lucapolare.com www.tbilisiview.ge

Canargo Georgia Georgian Resource Company Mina JSC Teliani Valley JSC 67 Aghmashenebeli Ave. 3-5 Kazbegi St. 4 Besiki St. 2 Marshal Gelovani Ave. Tel: 2332527 Tel: 2936676 Tel: 2449981/82/83; Fax: 2449980 Tel: 2313245; Fax: 2313249 www.mina.com.ge www.telianivalley.com Capital Bank www.georgianresources.com 1 Vertskhli St. Theco Ltd. Globalink Logistics Group Mira-Group Ltd. Tel: 2428888 16 Chikovani St. 14-A Shartava St, 2nd fl , Suite 7 Brose Street Turn,Old Tbilisi www.capitalbank.ge Tel: 2242244/55/88 Tel: 592107515 Tel: 2253262; Fax: 2439002 www.tbilisia.ru Casino Adjara www.globalinkllc.com www.riverside.ge 1, 26 May Sq. National Center for Dispute Thermarsenal Ltd. Tel: 2335519; Fax: 2334520 Gvinadze & Partners LLC Resolution 101, Tsereteli Ave. www.casinoadjara.com 44 Kote Abkhazi St, Tbilisi 0105 4/7 Rustaveli St., Rustavi Tel: 2473112 Tel: 2438970, Fax: 2438971 Tel: 2193406 www.arsenal.ge Caucasus Online LLC www.gvinadzeandpartners.ge 71 Vazha-Pshavela Ave. www.ncdr.ge VD Capital 77 Kostava St., 0175 Tel: 2480048; Fax: 2480048 Holiday Inn Noblet Media Tel: 2363672; Fax: 2364302 www.caucasus.net 1, 26 May Sq., 0171 Offi ce 46, 30a Vazha-Pshavela Ave. Tel: 2300099 Channel Energy (Poti) Limited Tel: 2396300 Wimm-Bill-Dann Georgia Ltd www.hi-tbilisi.com Georgia LLC, By Petrocas Energy www.nobletmedia.com Village Ponichala, Tbilisi 0165 Tel: 2475290 Group Hualing International Special Nodia, Urumashvili & Parnters www.wbd.ru 52, David Agmashenebeli St., Poti Economic Zone Offi ce #28, IV Block, Tel: (995493) 2-7-08-60 25 Apt. 34/36 Kobuleti St. 71 Vazha-Pshavela Ave. Wings and Freeman Capital www.petrocasenergy.com Tel: 591005900 Tel: 2207407 Green Building, 6, Marjanishvili St. Château Mukhrani, J.S.C. www.hualing.cn www.nplaw.ge Tel: 2940051; Fax: 2940053 III fl oor, Didube Plaza, www.wfcapital.ge IGroup Overall Management Group 116 Tsereteli Ave. 197/24g Kazbegi Ave. (OMG) Inc. Wissol Georgia Tel: 2201878; Fax: 2201878; Tel: 2308483 29 Marjanishvili St. 74b Chavchavadze Ave. www.mukhrani.com www.igroupgeorgia.com Tel: 2436052; Fax: 2436052 Tel: 2915315; Fax: 2915615 City & Co. www.wissol.ge Paine Stevens LLC 4 Besiki St. ILF Beratende Ingenieure ZT 1 Ivane Javakhishvili Sqr. Tel: 2920921 NON-PROFIT ORGANIZATIONS GmbH Branch in Georgia Tel: 2903211, Fax: 2903291 15 Tamar Mepe Ave. Crystal, MFO JSC www.painestevens.com Agricultural University of Tel: 2199453 72 Tamar Mepe St. Kutaisi, 4600 Georgia www.ilf.com Policy and Management Tel: 431253343 140 David Aghmashenebeli Alley Consulting Group (PMCG) Tel: 2594901 www.crystal.ge Imedi TV 57 Uznadze St., 4th Floor www.agruni.edu.ge David Tvildiani Medical Univesity 51 Ljubljana St. Tel: 2921171 2/6 Ljubljana St. Tel: 2464646 www..pmcg.ge American Friends of Georgia Tel: 2516898, Fax: 2527196 www.imedi.ge 77 Nutsubidze St. www.aieti.edu.ge Publicis Hepta Tel: 2397174; Fax: 2388495 Imperial Tobacco International 17 V. Jorbenadze St. www.afgeorgia.org Duty Free Georgia Limited Representative Offi ce in Tel: 2745672; Fax: 2745671 3rd fl oor, 4 Besiki St., Besiki Business Georgia www.publicishepta.com CARE International in the Center Caucasus 12 Dariali Turn, 0162 Rakeen Development LLC Tel: 2430150 37 Tsagareli St., 0162 Tel: 2232438 Pixel Business Center, www.dfg.ge Tel: 2291941 www.imperial-tobacco.com 34 Chavchavadze Ave. www.care-caucasus.org.ge Efes Brewery in Georgia - Tel: 2933393; Fax: 2933993 Interco Travel Holding Lomisi JSC www.rakeen.ge 36 Al. Kazbegi St. Eurasia Partnership Foundation Village Natakhtari, Mtskhta Region 3 Kavsadze Str. Tel: 2294343 Resolution Insurance Brokers, Tel: 2357225 Tel: 2253942; Fax 2252763 (ext. 112) www.intercontinental.ge Georgia LLC www.natakhtari.ge www.epfound.org 61, Gorgasali St. JTI Caucasus Gebrüder Weiss LLC Tel: 2936305 Free University of Tbilisi VII Floor, Pixel Business Center, Airport Adjacent Territory, www.rib.ge 140 David Agmashenebeli Alley 34 Chavchavadze Ave. Kakheti Hwy Tel: 2200901 Tel: 2604111 Rustavi Azot Ltd. Tel: 2710011 www.freeuni.edu.ge www.gw-world.com www.jti.com 2 Mshvidoba St. Rustavi-3702 Tel: 995341270900 Georgian Wine Association GeoCapital Microfi nance Kordzahia, Jgenti Law Firm www.azot.ge 12 Mtatsminda St. Organization Ltd. 10 Petriashvili St. Tel: 2505456 5 Tsereteli St, Kutaisi Tel: 2921878 Rustavi Steel LLC 12 Y. Gagarin St., 3700 Rustavi Tel: 431 267070 www.kjlaw.ge QSI International School of Tel/Fax: 260 66 99 www.geocapital.ge Georgia KSB Bank www.rmp.ge Village Zurgovani, Tbilisi Geocell 3 Ketevan Tsamebuli Ave. Tel: 2537670; Fax: 2322607 3 Gotua St. Tel: 2550000, Fax: 2507707 Sayali Ltd. www.qsi.org Tel: 2770100, ext. 7435; www.ksb.ge 6 Ushangi Chkheidze St. Fax: 2770119 Tel: 2951212; Salvation Army www.geocell.ge www.sayali.ge Legal Partners Associated LLC 16 Ikalto St. Offi ce #203, Besiki Business Center, GeoEngineering LLC Silknet Ltd. Tel: 2333786; Fax: 2330227 4 Besiki St. 0108 15a Tamarashvili St. 95 Tsinamdzgvrishvili St. www.salvationarmy.org Tel: 2200203; Fax: 2250458 Tel: 2910345; Tel: 2311788; Fax: 2311787 San Diego State University - www.lpa.ge www.silknet.com www.geoengineering.ge Georgia Geomill LLC Lemondo LLC SRG Investments LLC 3 Chavchavadze Ave. 4, Chirnakhuli St. 13 Dzotsenidze St. 49a Chavchavadze Ave, 3rd fl oor Tel: 2290820 Tel: 2400000 Tel: 2193377 Tel: 2253581 www.sdsu.edu www.geomill.ge www.lemondo.com www.silkroad.ge Transparency International Georgian Airways Liberty Bank JSC Statoil Georgia 12 Rustaveli Ave. 74 Chavchavadze Ave. GMT Plaza, 4 Freedom Sq. 26 Rustaveli Ave. 0108 Tel: 2999730; Fax: 2999660 Tel: 2555500; Fax: 2912269 Tel: 2471002 Tel: 2932129 www.georgian-airways.com www.libertybank.ge www.statoil.com www.transparency.ge

FEBRUARY-MARCH/2015 • Investor.ge | 51 NEWS 6th Tbilisi Burns Supper & Ball

This year’s Tbilisi Charity Gala Burns Supper & Ball celebrating the birth of Scotland’s most famous poet, Robert Burns, took place at the Funicular Ballroom. The exciting new venue provided a spectacular backdrop for the event, in which guests were treated to the Scottish bagpipes, Burns Poetry and traditional toasts, as well as wonderful Glenmorangie whisky, sponsored by Veritas Brown. The Glencraig Scottish Dance Band, sponsored by KPMG, fl ew in from Scotland for their 6th visit and kept the guests on the dance fl oor until the wee hours of the morning. The live auction of art and other unique lots by auctioneer extraordinaire, Cliff Isaak, together with a Grand Raffl e with prizes donated by generous donors including QSI, Hilton Batumi, Rooms Hotels, Radisson BluIveria, Betsy’s Hotel, Sheraton Metechi Palace and Omega Motors helped the event to raise a record amount once again – over 40,000 lari. Funds raised from the event will support the Temi Community helping socially vulnerable people in eastern Georgia; the Monk Andrews Foundation, which provides a caring home for children with cancer as well as the community organization, Katarziswhich gives 300 homeless elderly people a hot meal each dayand Dog Organization Georgia, which operates shelter for stray dogs along with sterilization, immunization and adoption programmes.

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FEBRUARY-MARCH/2015 • Investor.ge | 53 NEWS

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FEBRUARY-MARCH/2015 • Investor.ge | 55 NEWS

Board Of Directors 2015

SARAH WILLIAMSON PRESIDENT

R. MICHAEL COWGILL IRAKLI BAIDASHVILI ESBEN EMBORG FIRST VICE-PRESIDENT VICE-PRESIDENT & TREASURER DIRECTOR

LASHA GOGIBERIDZE BADRI JAPARIDZE STEVE JOHNSON DIRECTOR DIRECTOR DIRECTOR

AmCham Executive Director Writers George Welton Nikoloz Akhalaia, Helena Bedwell, Maia Edilashvili, Jenny Holm, Ketevan Khorava, Paul Rimple, Heather Yundt Copy Editor Alexander Melin Social Photographs Dato Khizanishvili Marketing & Promotion Sophia Chakvetadze Special thanks to the AmCham staff, the editorial board, and all of our contributors, especially Grant Thornton for their submissions, IMF for its kind Promotional Design advise and attention, and ProCredit Bank and TBC Bank for their time and Levan Baratashvili attention. This magazine would not be possible without you.

Magazine Design and Layout Giorgi Megrelishvili 56 | Investor.ge • FEBRUARY-MARCH/2015 NEWS

TED JONAS KETTI KVARTSKHAVA ROBIN MCCONE DIRECTOR DIRECTOR DIRECTOR

CHRIS SCHLUETER BETSY HASKELL, K.G. MOORE DIRECTOR FOUNDING ADVISOR EX-OFFICIO MEMBER

GEORGE WELTON EXEC. DIRECTOR

AmCham Georgia Patron Members:

© The American Chamber of Commerce in Georgia, 2014 arising from the use of any product or service advertised within All rights reserved. No part of this magazine may be re-printed, or the pages of this issue. reproduced or utilized in any form or by electronic, mechanical Investor.ge is printed by CEZANNE or other means now known or hereafter invented, including AmCham Georgia: photocopying and recording, or in any information storage or rd retrieval system without permission. 36a Lado Asatiani Street, 3 fl oor. Tel: 2 22-69-07 The opinions expressed in this magazine do not refl ect the opinion [email protected] of the American Chamber of Commerce in Georgia nor its Board [email protected] │ www.amcham.ge Members or staff, unless otherwise stated. AmCham Georgia neither endorses, nor can be held liable for any eventuality www.investor.ge FEBRUARY-MARCH/2015 • Investor.ge | 57

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For more information contact BGI partners: Zaza Bibilashvili - [email protected] Lasha Gogiberidze - [email protected] Sandro Bibilashvili - [email protected]

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