Explore! Summer in Georgia
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A CULTURAL CALENDAR OF EVERYTHING YOU NEED IMPROVING ACCESS EVENTS, PERFORMANCES, TO KNOW ABOUT THE TO FINANCE IN EXHIBITIONS AND FESTIVALS YOUTH OLYMPIC GAMES GEORGIA IN GEORGIA Investor.A Magazine Of The American Chamber Of Commerce In Georgia geISSUE 45 JUNE-JULY 2015 Explore! Summer in Georgia JUNE-JULY/2015 • Investor.ge | 3 Investor.ge CONTENT 6 EBRD Signs Deals Worth $55 Million During Annual Meeting 7 Georgian Economy Will Grow Stronger in 2016 – IMF, EBRD 8 Exchange Rates and the Car Market. Why the Declining GEL is Not What You Think 17 12 Improving Access to Finance in Georgia 15 Georgia’s EU Association Agreement: A Clear Winner for “Soft” Economy Sectors 17 Nergeta’s Successful Export: Sharing Our Lessons 19 Five Months On: Armenia In The Eurasian Union 21 The Effects Of Investments In Clean Energy In Georgia 30 22 Breaking The Mold: Creating A New Kind Of Library For Georgia 26 Innovation, Wonder And Awe: Creating Spaces For Children To Explore 30 A Cultural Calendar of Events, Performances, Exhibitions and Festivals in Georgia 36 Everything You Need to Know about the Youth 36 Olympic Games 38 Georgia’s Crying Mountains: A Journey To Mtirala National Park 40 New Frontiers for Georgian Cuisine 42 The Hidden Layers of Rustaveli’s Work 44 NEWS ...... 44 4 | Investor.ge • JUNE-JULY/2015 JUNE-JULY/2015 • Investor.ge | 5 EBRD Signs Deals Worth $55 Million During Annual LLC will be provided to support plans for opportunity for the participants to discuss Meeting local hospitals and the improvement of important economic and investment is- pharmaceutical supplies; and, together sues affecting the EBRD’s region of opera- THE EUROPEAN BANK OF with the EU, a €1.9 million loan will be pro- tions,” he said. RECONSTRUCTION AND DEVELOPMENT vided to local broadcast operator Stereo+ That is important for Georgia, especial- (EBRD) SIGNED FOUR DEALS IN BANKING, BROADCASTING, HEALTHCARE AND Ltd to help switch from analog to digital ly today, when foreign trade, investments WASTE MANAGEMENT DURING ITS broadcasting. and tourism are all down — a trend that ANNUAL MEETING IN TBILISI ON MAY 13- “The EBRD is very keen also to broaden helped push the EBRD to downgrade its 15. INVESTOR.GE’S LIKA ZHORZHOLIANI the impact of its investments and support expectations for the country’s economic SPOKE WITH EBRD DIRECTOR FOR THE into more rural regions and support the growth in 2015 from its initial prediction of CAUCASUS, MOLDOVA & BELARUS, recent development of tourism,” he said. 4.2 percent to just 2.5 percent. BRUNO BALVANERA. “We have a very strong pipeline of “Over the past 22 years, we have investment projects, and we remain com- invested over 2.3 billion euros in more LIKA ZHORZHOLIANI mitted to further developing Georgia’s than 176 individual projects in Georgia,” economy. You just need to watch this Balvanera noted. $55 MILLION IN NEW space.” “Throughout these years, the EBRD has AGREEMENTS, TWO NEW been a critical partner for the develop- COUNCILS ON THE MAP FOR GLOBAL ment of the banking sector, infrastructure, he EBRD-Georgia meeting included INVESTORS and renewable energy, SMEs (including $55 million in agreements and two The EBRD annual meeting and busi- property and tourism) as well as the agri- Tvery important initiatives –the Inves- ness forum in Tbilisi brought together more business sector,” he said. tors Council and Women in Business, Bruno than 2,000 EBRD employees, investors and “The Bank is very keen to encourage Balvanera told Investor.ge. The deals will businesspeople from over 60 countries. and support Georgia on its path toward impact a number of sectors: a $31.5 million The meeting also helped “put Georgia the EU, while helping the SMEs to develop package of loans, including support for on the map of global investors,” Balvanera further to comply with the DCFTA require- SMEs, energy effi ciency and trade fi nance, said. ments.” was signed with Basis Bank; a sovereign “It provided an excellent opportunity In particular, Balvanera said, the loan of €7 million will be provided to intro- for participants to gain further insight into EBRD recognized Georgia’s “particular duce a modern solid-waste management the economic climate of the region, competitive advantage” and “supports system in the southern region of Kvemo especially with regard to investment op- the country’s capacity and aspiration of Kartli; a $10.9 million loan to Aversi Pharma, portunities in Georgia. It provided a fruitful becoming a regional hub.” ADVERTISEMENT DNIJRJƌ@MDIBOC@RD?@~NK@>OMPH <K@M<>F<BDIBMJ?P>ODJI AJMOC@uMNOODH@DI @JMBD< GGJNND=G@JGJMN £¦¢yN@M@O@GDQ@IP@y¢££«y=DGDND| @JMBD< @G|{¬««§¥¤¤¥§©¢¢¤y¬««§¥¤¤¥§©¢¢§y RRR|>@U<II@~R@=|>JH6 | Investor.ge • JUNE-JULY/2015 to a number of factors, including a sub- Georgian Economy Will Grow Stronger stantial drop in remittances (down over 21 percent this February), as well as lower in 2016 – IMF, EBRD foreign trade and investments. Galt & Taggart Research forecast in FORECASTS FOR THE GEORGIAN ECONOMY SHOW THE COUNTRY WILL SUFFER A SHORT DIP IN GROWTH IN 2015, BUT IT IS EXPECTED TO START TO RECOVER IN 2016. its March 2015 report that “depending on the dynamics in tourism/FDI inflows IFI EXPECTATIONS percentage points to 2.5 percent, com- and imports, we expect the US$/GEL to he Georgian economy will grow in pared to their initial, January forecast of remain within the 2.10-2.30 range for the 2015 at a faster rate than neighbors 4.2 percent, EBRD also predicted stronger remainder of the year.” TArmenia and Azerbaijan, according growth in 2016. In an interview with the Georgian bpn. to a May 19 report from the International ge website, the (IMF) Resident Representa- Monetary Fund (IMF). WEAKER LARI, STRONGER DOLLAR tive in Georgia, Azim Sadikov, praised how The IMF pegged Georgia’s growth at The Georgian lari has noticeably the National Bank of Georgia has handled 2 percent, which is down from 4.7 percent weakened over the past several months, the currency exchange situation, saying in 2014, but stronger than Armenia’s (ex- echoing of similar trends across the region. that allowing the lari to fl uctuate com- pected to have a negative growth rate The IMF report said economies across pared to the U.S. dollar has been “best of -1.0 percent) and Azerbaijan’s, which is the Caucasus and Central Asia are suffer- reaction to economic shocks.” dropping from 2.8 percent growth last year ing due to a stronger dollar and a weaker He noted that “a more fl exible lari” will to just 0.6 percent growth in 2015. ruble, as well a drop in oil prices. help Georgia develop in the mid-term. The Russian economy, according to “The twin shocks of the economic “The government may run the fi scal the IMF report, will grow slightly in 2015 slowdown in Russia, a key trading partner, policy, while the National Bank of Georgia compared to 2014, from 0.2 percent last and lower oil prices are taking a toll on the may tighten the monetary policy. How- year to 0.5 percent this year. The European region,” Juha Kähkönen, Deputy Director ever, this could lead to a recession and Bank for Reconstruction and Develop- of the IMF’s Middle East and Central Asia depress the economy. So there is a choice ment (EBRD) published similar fi ndings in Department told reporters in Almaty, Ka- between temporarily strengthening the May.While the EBRD cut expectations for zakhstan, according to the IMF website. lari and economic growth,” Sadikov was Georgia’s economic growth by nearly two The lari’s decline has been attributed quoted as saying. ADVERTISEMENT JUNE-JULY/2015 • Investor.ge | 7 Exchange Rates and the Car GEORGE WELTON he four most commonly cited Market. Why the Declining reasons for the declining lari are Tdecreases in trade, remittances, FDI and tourism. Of these, trade is the GEL is Not What You Think most signifi cant. In simple volume terms, exports are about double the size of THE DECLINE OF THE GEORGIAN LARI HAS BEEN AT remittances and three times the size of THE CENTER OF A HUGE AMOUNT OF DISCUSSION IN FDI as sources of foreign currency. It is GEORGIAN POLITICS AND BUSINESS CIRCLES. THIS IS NOT also clear that the year-on-year drop of SURPRISING. AT ITS LOW POINT IN MAY 2015 THE GEL HAD exports has been troubling. In the fi rst DECLINED A TOTAL OF 35% SINCE OCTOBER 2014. THIS quarter of 2015, exports were down 28% HAS OBVIOUSLY INCREASED THE PRICE OF IMPORTS AND compared to the same period in 2014. CAUSED INCREASES IN LOAN PAYMENTS FOR ANYONE Most of this decline is generally WITH USD-DENOMINATED LOANS. IT IS THEREFORE blamed on the regional market, but the A POTENTIAL RISK FACTOR NOT ONLY FOR IMPORT “regional market” explanation misses the BUSINESSES BUT FOR THE ECONOMY AS A WHOLE. fact that more than half of the decline oc- ADVERTISEMENT 8 | Investor.ge • JUNE-JULY/2015 JUNE-JULY/2015 • Investor.ge | 9 example, if they are coming from Europe. It is also partly the result of local demand. Understanding the dy- namics of the car business in Georgian balance of trade is important for a range of rea- sons. Most obviously it means that the pressure on the cur- rency that was created by the huge trade imbalance is likely to decline in the near future. Imports dropped by 15% in April 2015 compared to March, and there is strong anecdotal evidence that lo- cal car prices have dropped curred in the car market and is explained the Azerbaijani government initiated a signifi cantly.