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APRIL-MAY 2014 3 Investor.ge Investor.ge CONTENT

AmCham Executive Director 6 After Crimea 26 ISO Certification is Not Amy Denman Will the crisis affect Armenia the Same as Performance and its path toward the Improvement Copy Editor Russian-led Customs Union? TBSC Consulting’s Paul Clark Alexander Melin and TemoKhmelidze on 8 The Road to a Free Trade the difference between ISO Marketing & Promotion Agreement with the US Certification and performance Sophia Chakvetadze Georgian Prime Minister improvement. IrakliGharibashvili’s trip Promotional Design to Washington was an 29 Hotel Construction Renews Levan Baratashvili encouraging step for an Building Boom in Tbilisi Magazine Design and Layout eventual FTA. Giorgi Megrelishvili 34 Georgian Entrepreneurs: 10 Fifteen Years of Georgian An interview with Writers Business LashaPapashvili Emil Avdaliani, Helena Bedwell, Paul Investor.ge looks at how the Clark, Maia Edilashvili, Monica Ellena, Georgian economy and doing 36 Reforming Tax Appeals: An ISET, TemoKhmelidze, Nino Patsuria, business in Georgia has Overview of PwC Research on Cordelia Ponczek, Łukasz Ponczek changed. Best Practices for Tax Appeal Councils Photographs 12 The Economic Report Card: A report published as part of Helena Bedwell, Molly Corso, Grading Georgia on its 15- AmCham’s CLT Committee, Monica Ellena, Davit Khizanishvili / year Performance with the support of East-West UNDP Management Institute, Eurasia 16 15 Years and Counting Partnership Foundation, and Special thanks to the AmCham Editorial Heather Yundt interviews USAID. Board and the AmCham staff, as well as three investors and long time ISET and TBSC Consulting. expats on what brought them 38 Brain Drain: Bringing Back to Georgia, how the business the Best environment has changed, and Investor.ge continues its series how their investments have into brain drain with an fared. interview with Eniko Kovacs, the program manager of Open 20 Cultural, Economic Divide Society Foundations’ Academic Define Women’s Chances Fellowship Program. © The American Chamber of Commerce in Georgia, 2011 to Climb Global Corporate Ladder 40 I am Going Home All rights reserved. No part of this magazine A report from Grant Thornton Helena Bedwell’s first person may be re-printed, or reproduced or utilized in any form or by electronic, mechanical or on women in the business account of the mood in Crimea other means now known or hereafter invented, world. during the March referendum. including photocopying and recording, or in any information storage or retrieval system without 22 The Georgian Tourism Sector: 42 24 Hours Out of Tbilisi permission. An Overview of International The opinions expressed in this magazine do not Travel 44 My City, Tbilisi: refl ect the opinion of the American Chamber of MitrophaneLaghidze and the Commerce in Georgia nor its Board Members or Tale of His Famous Laghidze staff, unless otherwise stated. AmCham Georgia Waters neither endorses, nor can be held liable for any eventuality arising from the use of any product or service advertised within the pages of this issue. Investor.ge is printed by CEZANNE ...... 46 AmCham Georgia 36a Lado Asatiani Street, 3rd fl oor AmCham Georgia Patron Members: Tel: 2 22-69-07 [email protected] [email protected], www.amcham.ge www.investor.ge

4 FEBRUARY-MARCH 2014 Investor.ge

APRIL-MAY 2014 5 Investor.ge

After Crimea: Will the Crisis Affect Armenia and Its Path Toward the Russian-Led Customs Union?

Richard Giragosian: Throughout effectively ended Armenia’s planned ini- the crisis, the Armenian government has tialing of an Association Agreement and been especially cautious, largely due to related Deep and Comprehensive Free a policy decision to refrain from doing Trade Area (DCFTA) with the European or saying anything that would anger or Union set for the Vilnius Summit in late alienate Armenia’s “strategic partner,” November 2013. Russia. At the same time, however, the Moreover, Moscow’s apparent suc- broader context of the Ukraine confl ict cess in forcing Yerevan to backtrack on has signifi cant implications for Armenia, its intention to fi nalize pending agree- Investor.ge interviewed Richard especially in terms of Russian power ments with the EU imposes several Giragosian, the director of the Regional Studies Center (RSC) and influence in the so-called “near signifi cant challenges on Armenia. In in Yerevan, Armenia, about the abroad” and concerning the outlook for the short-term, once Armenia retreated potential impact of the Ukrainian the Russian-led Customs Union. More and reneged on its planned “initialing” crisis on Armenia’s decision to specifi cally, the new Ukrainian govern- of an Association Agreement and related follow Russia into its Eurasian ment’s commitment to signing the As- Deep and Comprehensive Free Trade Customs Union instead of signing sociation Agreement with the EU now Area (DCFTA), it will be hard pressed to an Association Agreement with the European Union. makes the Russian-led Customs Union recover confi dence and credibility. Such signifi cantly less viable and a much less a move not only imperiled several years ven before the Ukraine crisis attractive project. In this way, Moscow’s of diffi cult negotiations and reform, but and the March 16 referendum apparent “loss” of Ukraine may actually also tested European patience and dimin- Ein Crimea, the confl ict between provide the Armenian government with ished European interest in Armenia. The Moscow and the West was playing out an effective way out of having to join the decision to join the Customs Union also between Georgia and Armenia – two Customs Union and an attractive way for offers Armenia little if any alternative neighbors with close trade relations. Yerevan to “save face” and avoid the em- benefi ts, and may lock Armenia even Today, there is little indication of how barrassment of its move to quickly give more fi rmly within the Russian orbit, events will evolve in Ukraine, or what in to Moscow and give up on Brussels. limiting its future to little more than a impact they might have on other for- Investor.ge: Why did the Armenian captive to Moscow’s grand project for mer Soviet republics. For Georgia and government opt for the Russian-led a rival Customs Union, as the fi rst step Armenia, however, the battle over the Customs Union over the EU Associa- toward the so-called “Eurasian Union.” fate of Crimea and Ukraine could have tion Agreement? What does Russia of- And in that broader context, the danger an immediate effect on foreign policy fer Armenia that the EU cannot? for Armenia stems from greater isola- and future trade relations between the Richard Giragosian: Looking back tion, as closed borders remain sealed, two countries. at the surprise announcement on Sep- and from a newly enhanced degree of Investor.ge: How is the crisis in tember 3, 2013 by Armenian President insignifi cance, as the strategic impor- Crimea affecting Armenia? Is it hav- Serzh Sarkisian in Moscow pledging tance of Armenia may only dramatically ing an impact on the debate around that Armenia would join the Russian-led decrease. And, most distressing, Armenia joining the Eurasian Customs Union? Customs Union, and would support Mos- also faces the very real threat of becom- To what extent do you think it could cow’s efforts to “integrate” the former ing little more than a “small, subservient infl uence Yerevan as the government Soviet space, it is now obvious that it Russian garrison state.” moves toward joining the Eurasian was a missed opportunity and a strategic Further, the longer-term impact on Customs Union? setback for the country. That decision Armenia will also be signifi cant, un-

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dermining the Armenian government’s clearly failed to see EU engagement as a On a broader level, therefore, this already meager legitimacy by endan- real threat. Such a view may have been shift in Russia’s policy toward EU en- gering the overall reform program and rooted in Moscow’s perception of the gagement stems from a much larger and significantly weakening pro-Western EU as neither a signifi cant geopolitical more assertive Russian stance, driven by reformers within the government. In actor nor as a serious rival. Second, the an attempt to consolidate Russian power addition, from a broader perspective, rather last-minute shift in Russian policy, and position within the former Soviet the Armenian retreat from its planned as demonstrated by the imposition of co- space and to deter Western “interlopers” Association Agreement with the EU and ercive measures on other states, such as in what Moscow views as its natural its move toward Russia’s Customs Union Moldova and Ukraine, viewed Armenia “sphere of influence,” or the “near also reveal several deeper defi ciencies as more of a “sacrifi cial pawn,” designed abroad,” referred to as blizhneyeza- within the Armenian government in to send a more important message of rubezhye (ближнеезарубежье), which terms of closed public policy, inadequate strength to deter similar European aspira- has been elevated and expanded into a strategic planning and an informal tions by Chisinau and Kiev. wider “post-Soviet space.” Moreover, decision-making process. In the case of Georgia, however, there this trend of a boldly assertive Russia But in terms of Armenia’s surprising is little Russian leverage and no utility in has only deepened in recent years, and decision, it is now clear that the “U- trying to deter Tbilisi’s commitment to is now evident in the larger context of turn” or sudden shift in policy actually its EU aspirations. The Russian strategy Moscow’s policies toward the U.S. and occurred in Moscow fi rst. For example, is not benign, however, and it seems over Syria, for some examples. Another the lack of any real Russian pressure on likely that Moscow will initiate a new demonstration of this trend has been Armenia through the nearly four years campaign of pressure against Tbilisi Russia’s heavy-handed use of coercive of negotiations over the Association targeting the implementation process measures targeting some of its neighbors, Agreement suggests two conclusions. after the signing of Georgia’s Association as the events of 2008 in Georgia have First, for the past several years, Moscow Agreement. only confi rmed.

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APRIL-MAY 2014 7 Investor.ge

than fi ve years from the start of the ne- The Road to a Free Trade gotiations to the signing of FTAs. US political analysts James Roberts Agreement with the US and Ariel Cohen, however, maintain that there is no reason for the negotiations Georgian Prime Minister Irakli Gharibashvili met with US President Barrack with Georgia to be so lengthy. First off Obama in Washington in February. The meeting, albeit brief, is an all, Georgia is a relatively small country, encouraging step for Georgia as it moves toward a free trade agreement which should simplify negotiations. Sec- with the US, analyst Łukasz Ponczek writes. ondly, both countries are already quite free when it comes to the international rime Minister IrakliGharibash- is by and large completely unaware of trade. Thirdly, international exchange vili’s February 24 meeting with the existence of Georgian products, and between the US and Georgia is fairly PUS President Barack Obama the country faces stigma of being a post- modest for both, and for the US, Georgia bolstered Georgia’s goal of signing a Soviet republic, and therefore the market is only a minor trading partner. Free Trade Agreement (FTA) with Wash- for such goods remains undeveloped.The Despite the custom dues being rela- ington. Now, however, the country needs recent action of both governments brings tively minuscule amounts, the FTA could to focus on strengthening economic ties hope of enhancing economic relations. still accelerate the trade between both. In between the two countries and diversify- For example, in January 2009 the US recent years, customs paid by Georgian ing its exports to the United States. and Georgia signed a strategic partner- businesses constituted less than 1% of Currently, the United States is not one ship aiming to deepen the ties. In January the overall trade exchange. However, the of Georgia’s top trading partners. In 2012 2012, Obama and Saakashvili initiated FTA is more than just freeing up trade the US was Georgia’s second top coun- negotiations to sign the FTA. However, completely. It is an important sign for try in terms of products exported and 2012 and 2013 changes of power might corporations that exchange between two sixth top in terms of products imported. have put in question whether the new countries is stable and simple. Georgia had a negative trade ratio with government is still committed to a close The US is a crucial partner for the USA of about $120million. Considering relationship with the US. stability of Georgia, both economic and the signifi cant geographical divide, the However, the February visit of Prime political. Both countries have expressed trade situation between the two seems Minister Irakli Garibashvili to the White declarations of cooperation, and even satisfactory; upon closer consideration, House has obviated those uncertainties, under the new government, Georgia however, it is clear that there is a lot of and confi rmed that Georgian Dreams is trotting along toward strengthening room for improvement. stays loyal to the alliance with the US.It the two country’s ties. However, the Unfortunately, Georgia’s export to is also a sign that the efforts to fi nally economic relations of Georgia and the the USA is very homogenous. Nearly all complete the Free Trade Agreement have US are still fairly weak, signing of the of itconsists of only two types of com- been accelerated. During the visit, John Free Trade Agreement would cement modities. Almost 70%, is the export of Kerry declared that: “We […] commend the current exchange and pave the way iron, and a quarter of the export are fertil- Georgia’s progress on economic reform, for new investment. Diversifying the izers and chemical products. Secondly, and we urge the government to quickly portfolio of products exported from last year, the trade between the two coun- implement its plans to spur trade and Georgia to the US would benefi t both tries has not only signifi cantly shrunk, investment, including with the United countries. The recent visit of the Prime but also the negative, for Georgia, trade States. […] The United States remains Minister of Georgia to the US is another ratio gap widened, since the American committed to strengthening our trade.” step towardsachieving that goal. market faced competition from other Such statement might be more than just countries for Georgian goods. Other mere courtesy; after all it is not unrea- ŁukaszPonczek is a M.A. graduate high quality Georgian products have sonable to expect the FTA to be fi nally from the University of Aberdeen (UK). potential to sweep the American market, signed after the years of negotiation. He spend a year in Georgia with the including for example Georgian wine or Recently,in case of Panama, Colombia, TLG program. Currently he works for an water. However, the American consumer and South Korea, it took the US more energy consultancy company in Poland.

8 APRIL-MAY 2014 Investor.ge

APRIL-MAY 2014 9 Investor.ge Fifteen Years of Georgian Business

Investor.ge looks at how the Georgian economy and doing business in Georgia has changed over the past 15 years.

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APRIL-MAY 2014 11 Investor.ge

of its economic sector. Such confronta- The Economic Report tions have, for the most part, been intrin- sically motivated and implemented by Card: Grading Georgia on Georgia. However, as Georgia intensifi es its geo-economic strategy with help from its 15-year Performance outside organizations, there is paradoxi- cally more opportunity for cooperation to aid, and more room for the unknown 2014 represents a milestone year CORDELIA PONCZEK to abet. A 15-year snapshot of Georgia’s for Georgia in many respects: it ecently, over dinner with my economy can give clues as to where marks the 15-year anniversary Georgian expat friend and his Georgia has been, and where this may for an organization that is wife, the conversation turned to take it in the next 15 years. representative of a free market R Georgian wine. My host was lamenting economy—the American Chamber In 1999 Georgia established the of Commerce in Georgia Fittingly, the gradual shift of Georgian winemakers Georgian Stock Market. Still transition- 2014 also marks the year Georgia away from the ancient clay-jar method ing after its break from the Soviet Union is anticipated to sign its Association to more modern, dare I label, “Western”, nearly a decade prior, remnants of that Agreement with the largest trading means of oak or steel vat production. system remained: the most visible ef- bloc in the world. Following such “Sure,” he commented, “it may be fects manifested in semi-authoritarian sweeping bravado, it’s appropriate more convenient or mainstream, but it’s to take a step back and see where leadership, corruption and institutional Georgia has come from and how it not traditional; it’s not Georgian.” opaqueness. Reliable economic infor- is using that past to map its future Georgians are known for many mation was diffi cult to obtain, as every destinations. things, and seamlessly moving away government organization had its own from tradition is not one of them. Despite rendering of matters. Meanwhile, there this,Georgia has transitioned success- was a dearth of independent NGOs to fully from its Soviet narrative and inte- filter and impartially interpret state- gratedsteadily into an ever-diversifying provided data,which corresponded to a global market. In its shift, Georgia has lack of trust. Understandably, business confronted the inevitable modernization investment was sparse—total investment for 1999 was only 1.56 billion lari, ac- cording to IMF data. Investors feared consequences of paying high bribes and assuming higher risk for a product easily obtained in a more stable economy. In June 2000, Georgia joined the World Trade Organization (WTO). This was perhaps the second major turning point for the Georgian economy (the fi rst being the break from the Soviet Union). The WTO required specifi c tenents for membership, including a memorandum from the applicant country concerning all aspects of its trade and legal regime. Preparing an accountable balance sheet forced Georgian leadership to focus on the reality of Georgia’s potential com- pared to the present status. Georgia’s WTO membership was a positive step

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forward, and the Georgian market re- by establishing a credible civil society. cease-fi re saved Georgia from further sponded accordingly: GDP increased 4.7 Despite the populist movement that physical damage, but the psychologi- percent between 2000 and 2001. swept Saakashvili and his UNM party cal damage was irrefutable. The GDP Following three years of growth, to power in 2003, GDP didn’t leap with change between 2008 and 2009 marked 2003 ushered in political change that faith. It held steady, but waited to see the only negative one in this 15-year caused the market to fl ail in uncertainty. what the new leader would bring. For span: -3.776 per cent. Foreign direct in- The Rose Revolution was not an eco- fi ve years he implemented anti-corrup- vestment that had been so well cultivated nomic event, but the people’s frustration tion measures, an increase in western by Saakashvili’s liberal policies tanked, over disputed parliamentary elections relations, and a cooling-off of Russian and in 2009, total investment was a mere mirrored economic undertones of corrup- relations. In 2006, Russia struck a blow 13.14 percent of the GDP. tion and cronyism. The Rose Revolution to the Georgian economy by placing an Georgia broke the malaise through represented not only an offi cial political embargo on Georgian wine and mineral Association Agreement negotiations platform shift, but also an establishment water—key exports to a key partner for with the EU. Like the WTO accession, of checks and balances via the rise of the Georgian economy. In 2008, the negotiations included specifi c policy re- non-governmental organizations. In coolness escalated to a deep-freeze when quirements implemented on a strict time 2003, the Rose Revolution brought in a of tensions over breakaway regions Ab- line. These requirements were marked president who promised to end corrup- khazia and South Ossetia resulted in a by a call for transparency in business and tion and raise foreign direct investment. fi ve-day war between the two countries. the rule of law. In 2012 and 2013, despite It also ushered in new watchdog NGOs Russia tactically hit vital transport routes, a power shift from UNM to Georgian that promised to monitor those promises bombing train lines and tunnels. The Dream, the market remained relatively

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unchanged. This could be attributed to and responsive to its citizenry. Georgia by Georgian people. Not part of any two features (1) the political agenda and has found trading alternatives to Russia, higher framework. Not mandated. There pro-EU stance of Georgian Dream did rebuilt its bombed-out transportation are neither carrots nor sticks. That is not fundamentally diverge from the plat- routes, and forged new friendships. It about to change. Part of Georgia’s EU- form of UNM; (2) both the parliamentary has remained a stable democracy with aspirations, require implementation of and presidential elections were peaceful, healthy opposition. market and political reforms that may thereby showing Georgia’s success as a Moments of weakness in Georgia’s not be as palatable as previous Georgian- transitioning democracy. These factors economy manifest its growing pains— bornreforms. This will create changes contributed to Georgia’s Association moments when the economy took a step driven by both Georgia and outside Agreement negotiations, was refl ected back to allow prevailing policy a few actors, sometimes in cooperation, and in continued growth of the Georgian steps forward. And, while stakeholders other times not. This presents an oppor- market and diversifying its future politi- show confi dence in Georgian investment, tunity for Georgian leadership to show its cal ambitions. In 2013, Georgia went on Georgia has shown confi dence in self- compatibility with outside actors, but it to complete its DCFTA and initial its investment. Largely, those investments also presents a challenge for Georgian Association Agreement. have paid off. WTO membership led to leadership if the reforms (or practical Georgia now stands at another deci- GDP and investment growth; the Rose ramifi cations) were to fl op. Resentment sive moment. The road ahead is replete Revolution brought about progressive could fall on both the EU—which up to with obstacles, both internal and exter- change and liberal policies to garner an now has been an aspirational goal—or on nal. The trend between political events uptick in foreign direct investment; the the pro-western politicians of Georgia. and the market has weighty implications economy even recovered after holding Georgian leaders have proven they are for the direction Georgian leadership ground in the 2008 Russo-Georgian War. ready to lead: the soundest investment wants to take the country over next 15 Like in wine-making, Georgia has found one can make is in the idea that they will years. If Georgia’s trade agreement its strength in both staying the course stay the course. with the EU is successful, the market and using its unique past as a lens for Cordelia Ponczek is a researcher will adjust favorably to available op- its future. based in Warsaw. Previously, she taught portunities. Currently, Georgia is on the Now for the real test: So far, the in Georgia, where she was stationed right track: following the slump after overwhelming majority of economic outside of Zugdidi and later in Batumi. the Russo-Georgian war, the economy changes have been Georgian policies She earned her B.A. in Political Science is now an attractive venue for investors created by Georgian politicians elected at Miami University in Ohio, USA.

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APRIL-MAY 2014 15 Investor.ge

in the years that followed, corruption 15 Years and Counting thrived. Every month men came to Haskell’s door demanding payment for Investor.ge’s Heather Yundt interviews three investors and long-time expats supposed infractions to various laws and on what brought them to Georgia, how the business environment has regulations. changed, and how their investments have fared. “It was impossible to conform in those days, and they knew it.” Haskell said. “The corruption was so petty, and it was so pervasive, that it just made me furious.” At one point, business was going so well that Haskell wanted to expand. She picked out a piece of land, but after pay- ing multiple people all claiming to be its owner, she gave up. The tipping point came in 1999. When the government brought a tax case against Haskell, she called it quits. Haskell sold the business to Stephen Johnson, the owner of Prospero’s Book Shop, and left Georgia. “Most businesses wanted to pay the taxes they owed. It’s much easier to be clean and pay your taxes,” she said. “And they always set it up so that it was impossible.” Haskell didn’t stay away from Geor- gia for long. Soon she was back to start up a small gardening company. That’s when she saw the business environment change. “[Georgia] became a regular place. They fi xed the streets, they fi xed the lights, they fi xed the electricity, they installed gas. They made life normal. The police were not corrupt. It was a place where it was normal to interact with the government and do business.” The impossible-to-follow rules and Betsy Haskell woman, opened Betsy’s Place in 1994 at corruption that proved too much for the request of the US Embassy. The only Haskell were now gone. “Everything he unfi nished, unsigned outer other hotel for foreigners had been taken became easy and straight,” she said. walls of the nondescript Tbilisi over by a paramilitary group, and the “Everything worked and the relief was Tbuilding gave little indication embassy needed a safe place for offi cials immense.” of the thriving seven-room hotel inside. and humanitarians to stay. “I didn’t know Today, Betsy’s is a 57-room boutique Despite limited electricity and infrastruc- when I came how dangerous it was,” hotel overlooking central Tbilisi, and ture, the hotel was booked solid. Busi- Haskell said. “Who could have imagined Haskell has just started up her latest ness was good — but it was far from easy. what it was really like?” business providing logistical services Betsy Haskell, an American business- As the country recovered from war to representatives of the US Treasury.

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have. So the approach was taken to not do what we couldn’t do.” Khoroshvili said. “A lot of red-tape was removed, and I think that had a signifi cant boost to the development of businesses.” Undermining these reforms, how- ever, was the insecurity of property rights. Allegations began to emerge of businesses being expropriated by the government. The perception of insecu- rity that followed negatively affected business, Khoroshvili said. “If you’re not sure if your business will be yours after 10 years, after it’s successful, then there’s not much incentive to invest in your business.” Despite recent improvements to property rights, there have been setbacks, Khoroshvili said, such as a recent law Opening her business last fall, Haskell company that later became EY Georgia. banning foreigners from buying agricul- saw how far things have come. “It was At a time when it was common tural land. Khoroshvili himself owns a easy as pie,” she said, thanks largely to practice for companies to pay auditing vineyard with foreign partners. Though the House of Justice, a one-stop public fi rms to sign the papers rather than do the the activity is mainly for fun, the new law service center. Instead of running around work, Georgian Consulting Group stood has put a damper on hopes of expansion. for weeks to collect all of the necessary out, Khoroshvili said. “There was no real Today, EY Georgia’s business comes papers, the entire process took about an responsibility in other auditing fi rms. more from local clients than in the hour. That was not the case in this company. past, its largest client being the Bank But there’s more to be done to im- It was run objectively and with profes- of Georgia. Though Georgia remains prove the business environment, Haskell sionalism.” a small market affected by economic said. “The challenge is to acknowledge “There was a lot of corruption; and political events beyond its borders, what was done during [former president however. there was more or less a level Khoroshvili, now the fi rm’s Managing Mikheil Saakashvili’s] term and build playing fi eld for businesses to develop,” Country Partner, has a positive outlook on it.” Khoroshvili said. “You knew that you on the future. could bribe somebody to get the same “Maybe I’m optimistic, but I think Ruslan Khoroshvili benefi ts that others got. There were op- that the situation is improving. Today is After studying at an American high portunities for business to work.” much better than it was fi ve years ago,” school for a year, Ruslan Khoroshvili Khoroshvili watched the economy Khoroshvili said. “It’s a level playing returned to Georgia with a plan for his grow in the years following the Rose fi eld, there are no artifi cial hurdles to future. He wanted to earn a good living, Revolution. He saw improved rule of developing your business, there are laws and he was ready to work for it. law, a reduction of corruption, and high that work, and the judiciary is freer than He enrolled at ESM Tbilisi, now foreign investment in Georgia. Former it ever was in our recent history. There- Free University of Tbilisi, which un- economy minister Kakha Bendukidze fore, it is a good environment to develop like some other universities, rewarded played a role by eliminating unneces- a business.” studying rather than bribes. He worked sary licenses and regulations. “Although hard, and in 1999, during his third year, some regulation is necessary, it comes Ted Jonas a lecturer recruited him for an intern- at a cost. To do regulation you need In August 2007, Ted Jonas, an Ameri- ship with Georgian Consulting Group, a experienced people, which we did not can lawyer with DLA Piper, got a call

18 APRIL-MAY 2014 Investor.ge

from a prominent American law fi rm. ties didn’t want you to pay your taxes law. “The fact was that you were always Their client, a major Kazakh bank, was honestly. The system was run by people at risk of choking on infl ated tax claims planning to open in Georgia, and they who wanted to take a cut personally.” and having your property expropriated. wanted Jonas to represent them. With Five years later, Jonas returned to The judiciary wasn’t independent, so business at an all-time high and a more- Georgia to join DLA Piper as its man- there was no protection whatsoever. than-full workload already, Jonas tried to aging partner and observed a striking Everyone was at risk of being arrested politely turn them down. The American change. During the move, Jonas cleared on trumped up criminal charges.” partner refused to take no for an answer. his belongings past customs, bought a Throughout his career, Jonas saw this “He would not stop calling me day in and house, and registered his car locally — government pressure on business fi rst- day out.” Jonas said. “That’s what it was all without encountering a single demand hand through the defense cases of foreign like back then. You couldn’t beat them for a bribe. investors his fi rm was involved in. off with a stick.” And the economy was booming once Despite some improvements in recent Jonas, who fi rst came to Georgia with again, something Jonas contributes to the months, DLA Piper has yet to return to its the National Democratic Institute, helped good international business climate, the peak levels. The fi rm has fewer attorneys found Georgian Consulting Group in government’s spending on infrastructure, and lower revenue than it did prior to the 1996. In the midst of the country’s cor- and the marketing of Georgia to interna- 2008 war and fi nancial crisis, attributable ruption, Jonas noticed a sense of oppor- tional investors. as much to the lower prices clients are tunity amongst international investors. But the growth was short-lived. In willing to pay as to the decrease in the “Georgia was very, very underdeveloped, 2008, Georgia and Russia went to war volume of business. but they were on a very good trend. It was and an economic crisis struck the world. Despite improvements in the political very democratic and things were going “The on-going perception of instability and legal environment, Jonas said, Geor- the right way.” in the region is a major impediment to gia’s economy remains on a “downward Jonas moved back to the United investment,” Jonas said. slide,” in part due to the instability in States in 2000 as Georgia took a turn for Despite former economy minister Ukraine. the worse, becoming more corrupt and Kakha Bendukidze’s reduction of red- “This government has got to put in more politically polarized. “Most busi- tape, which made transactions like set- place strong, centralized mechanisms for nesses couldn’t do their taxes honestly if ting up a business much easier, Jonas economic policy and development. There they wanted to,” he said. “The authori- says investors suffered from poor rule of isn’t the time to keep drifting.”

APRIL-MAY 2014 19 Investor.ge

Cultural, Economic Divide Define Women’s Chances to Climb Global Corporate Ladder

March 8 was International Women’s ANA GABEDAVA not translated into higher proportions of Day – a good time to take stock women reaching the top of the corporate of where women are in business. lobally, the proportion of senior ladder. And while women are more likely New research from Grant Thornton roles fi lled by women in 2014 to achieve these senior roles in emerging International Business Report (IBR) is 24%. This is exactly the reveals that despite a groundswell G markets, there has been a worrying lack of discussion and debate, the same proportion as in 2013, 2009 and of movement globally over the past de- proportion of top jobs around the 2007, and only 5% higher than the 19% cade. This is clear evidence that we need world held by women remains at recorded ten years ago in 2004. Region- actions rather than words. We would just under a quarter. The survey ally, there has been very little signifi cant like to see businesses and governments finds growing support for regulation change over the past decade with Eastern implementing measures that support the for quotas to get women onto Europe (37%), Southeast Asia (35%) boards, but also several measures career paths of women. that businesses can take to facilitate and China (38%) leading the way. Japan The IBR also shows growth in sup- the career paths of women. (9%), India and the United Arab Emirates port for the introduction of quotas to get (both 14%) continue to prop up the table. more women on corporate boards. Glob- That greater diversity in decision ally, close to one in two business leaders making produces better outcomes is no (45%) would now like to see quotas for longer up for debate. For businesses, the numbers of women on the boards of better decisions mean stronger growth, large listed companies, up from just over so it is in their interests to facilitate the one in three (37%) in 2013. Interestingly, path of women from the classroom to support has grown sharply in the EU the boardroom. (from 33% to 41%) where the imposi- The concern is that recent improve- tion of quotas are most likely, but also in ments in the access of women to educa- the BRIC economies (41% to 72%), and tion, especially in emerging markets, has support remains high in Latin America (68%) and Asia Pacifi c (57%). Across the G7, however, only 33% of business leaders are in support of quotas. Quotas may be controversial, so businesses themselves can also imple- ment measures which could make a real difference. Research shows that just a fi fth of the average global graduate in- take is female. You would expect a fair proportion of a business’s future leaders to come from its pool of graduates, so getting more women starting at that level will increase the odds of women making it to the top. It’s better for businesses too; a wider breadth of candidates means more chances of hiring star performers.

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And more could be done to support BRICs. In comparison, only 21% working mothers. Providing fl exible of senior positions in the G7 are working hours is helpful but it’s not occupied by women, and 22% in enough: businesses should consider the euro zone. At the board level providing tangible support for the specifi cally, 26% of board members burden of childcare if they want to in BRIC economies are women, retain their most talented women. compared to just 16% in the G7 and One may look into the issue 19% globally. of women in business also from There is a wealth of research another angle – leadership styles. suggesting that decision making is There is a stark regional split in affected by the gender balance on business leadership practices. While boards. As businesses with higher Asia Pacifi c and Latin American proportions of women in senior economies appear more open to management tend to be found in the use of coaching, intuition and emerging economies, the ques- creativity, peers in Europe rely on greater emphasis on more modern man- tion is whether this offers them an more traditional practices. This split in agement techniques and are also more advantage in the global race for growth. leadership styles also closely mirrors a willing to delegate. Grant Thornton’s Economies in Europe and North divergence in the proportion of women research defi nitely indicates a difference America are picking up and business in senior positions. of approach that highlights the value to leaders are looking forward to the effect Research identifi es two very differ- business of having gender diversity in this will have on the growth of their own ent types of business leader. In markets senior roles. operations. But longer-term, the danger like Brazil, the Philippines, Thailand and Grant Thornton research revealed is that the diversity and openness to Vietnam leaders termed “Modernists” earlier this year that while leaders in modern leadership styles exhibited by are evident – they are open to coaching, these emerging economies display dif- Modernist peers could result in better value creativity and intuition, and are ferent behavior, they are also more likely decision-making and, ultimately, stron- much more likely to be women – or sur- to be female. 32% of South East Asian ger growth in Modernist countries, while rounded by women in senior positions. senior business leaders are women, 29% countries tending to be Traditionalist will By contrast, leaders in European econo- in the Asia Pacifi c region and 28% in the lag behind. mies like France, Germany, Spain and the UK are so-called “Traditionalists” – they are far less likely to use a coach, place less value on creativity and intuition, and are less likely to be women. Business leaders were asked how important they believe certain attributes are to good leadership. Globally, integ- rity, a positive attitude and communica- tion came out on top, but an interesting split emerges in leadership traits such as creativity and intuition which have increased in significance relatively recently. The fact that business leaders in these economies are more likely to be women is not a coincidence. They appear to show greater openness to coaching, place

APRIL-MAY 2014 21 Investor.ge

in fi rst place with 1,597,438 arrivals (an The Georgian Tourism increase of 4%). A signifi cant increasing trend has Sector: An Overview of been observed in the number of travelers arriving from the Russian Federation. International Travel This has been caused by the visa liber- alization process and the reintroduction of direct fl ights. In 2013, arrivals from GIORGI BREGADZE Russia increased by 49%. The largest percentage increases were registered in eorgia’s border crossing regis- February (138%) and March (103%). tration procedure allows for the There has been a signifi cant increase From a statistical point of view, Gidentifi cation of different types in the number of arrivals from Israel, he tourism industry in Georgia in of arrivals. Out of the total number of Poland and Ukraine, caused by the in- 2013 can be characterized as a visits, 38% lasted longer than 24 hours, troduction of direct flights to Poland period of further growth. In 2013, the number of international arrivals 40% were same day visits, and 22% were (Wizz Air), and the addition of fl ights to grew by 22%, overstepping the five for the purpose of transit. Ukraine. It is important to mention here million mark for the first time. The A comparison of global international that marketing campaigns administered five-millionth international visitor arrivals growth rates with that of Georgia by the Georgian National Tourism Ad- was even awarded a prize to stress shows that in the past fi ve years inter- ministration played a signifi cant role the importance of the event. The national arrivals in Georgia increased in the increases. Yearly data shows the high growth rate in tourism was also highlighted by international considerably faster than in the rest of the following increases in the number of organizations. According to the world. Even during the global fi nancial arrivals: Israel 29%, Ukraine 65%, and World Tourism Organization’s crisis of 2008 when arrivals worldwide Poland 79%. report, “UNWTO World Tourism fell by 4%, the number of international The introduction of direct fl ights to Barometer” (December, 2013), arrivals to Georgia increased by 16%. Iraq boosted the number of arrivals from the increase in the number of The statistics for the past three years that country. In 2013, the number of ar- international arrivals in Georgia was rated as the highest in Europe demonstrate that the most popular travel rivals from Iraq stood at 41,239, a 493% in 2013. season among international travelers is increase over last year. summer. During the summer, the num- In 2013, there were 208,754 inter- ber of international arrivals to Georgia national arrivals from EU countries, equaled 1,880,515 (June: 490,796; July: representing a 4% share of total arrivals 613,604; August: 776,115), which is 35% and an increase of 16% over last year. of all international arrivals for the year. The largest share of visitors, 87% The majority of all arrivals to Geor- (4,699,387) arrived in Georgia by land gia in 2013, 88% (4,732,529), were transport, followed by air transport, from neighboring countries: Armenia, 585,701 (11%). Arrivals by sea and rail- Azerbaijan, Russia and Turkey; only way had almost the same share of 44,239 12% arrived from other countries. In (1%) and 62,976 (1%) respectively. The 2012, those countries’ share was higher, busiest border crossing is at Sarpi (on the 91%, suggesting a decreasing trend in Turkish border), which saw 1,605,666 this number. Turkey is the annual leader crossings in 2013, amounting to 30% of in terms of the number of international all border crossings. This is followed by arrivals to Georgia. Although the number the crossing at Sadakhlo (on the Arme- of arrivals from Armenia was greater nian border) at 17% and the crossing at in December with a total of 121,732 Tsiteli Khidi (on the Azerbaijani border) (27%), annual data showed Turkey to be at 16%.

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Travel Behavior of International visits are mostly under- Kobuleti (6%), Mtskheta (5%), Kutaisi International Visitors, 2013 taken for holiday, leisure or recreation (5%) and Borjomi (2%). An inbound tourism survey led to a purposes (37%). Other frequently ob- qualifi ed estimate that almost 5,351,021 served purposes include visiting friends Sector Outlook international visits were made to Georgia or relatives (26%), transit (17%), shop- Against the backdrop of the global in 2013. A total of 60.3% (3,226,953) of ping (9%) and business/professional trips economic crisis, the Georgian tourism these visits included at least one over- (4%). Only 8% of visits were for other industry continues to grow. The outlook night stay and 40.7% (2,124,068) were purposes. for the industry is highly optimistic. It day trips. is forecast that the industry will create Out of a total of 5,351,021 visits, Accommodation more jobs and generate more income 69% were repeat visits and 31% of trips The most frequently used form of ac- in the years to come. The number of ar- were for the fi rst time. Thus, Georgia had commodation was hotels (43%). Slightly rivals to Georgia is expected to increase up to 1,643,241 new visitors within the more than a third of tourists (34%) substantially thanks to the various steps period covered. resided at a friend’s or relative’s private taken by both the government, in gen- Most of those visiting from neighbor- apartment. Other types of accommoda- eral, and the Georgian National Tourism ing countries have traveled to Georgia tion are less utilized by international Administration (GNTA), in particular. before. The highest share of repeat visits visitors. For example, only 10% stayed Among the actions taken by the was observed among residents of Azer- in guesthouses. GNTA toward increasing the number baijan (89%). In contrast, a larger share of travelers in the country are: the de- of European visitors came to Georgia for Travel Destinations velopment of tourism infrastructure; the the fi rst time. Over 46% of international trips were facilitation of international travel; the to Tbilisi, the capital city of Georgia, improvement of service quality; increas- Duration and Purpose of Travel while 41% of international trips were to ing awareness about Georgia; large-scale The average duration of a trip is fi ve Batumi. Other destinations had a lower marketing campaigns; internet market- nights and varies by country of residence. number of visits. ing; targeting new markets; and tourist Visits from neighboring countries tend to Among them Marneuli was the product development. last for shorter periods, except for visits most popular (8%). Other destinations The development of tourist infra- from Russia, which average eight nights. included: Kazbegi (8%), Rustavi (6%), structure stands high amongst the pri-

APRIL-MAY 2014 23 Investor.ge

orities of the government. New tourist boring countries or EU countries, which international level. For this purpose, information centers are in the process of are the main contributors of international famous Georgians were appointed as construction in Tbilisi (Pushkin Square), travelers to Georgia. representatives of tourism in the UK and Martvili and Chkhorotsku, and major Another signifi cant issue is service Japan to promote Georgia as a tourism reconstruction works related to tourism quality enhancement. This is achieved destination in those countries. In addi- are underway (e.g. information centers through intensive training for represen- tion, according to an agreement between in Zugdidi, Tsalenjikha, Poti, Kazbegi, tatives of the tourism and hospitality Japan and Georgia, a new information and Bakuriani). industry throughout Georgia. New ser- center will be established in Tokyo. The Signifi cant steps were taken toward vices for tourists have been introduced information center will be responsible for travel facilitation and visa relaxation as well: a 24-hour hotline for tourists, giving all types of tourism information over the past several years. Georgia has mobile guides and English-speaking about Georgia to Japanese citizens, with a no visa-free regime with around 117 taxis are among the successive projects the objective of increasing tourist fl ow countries. Among them are the United introduced in 2013. from Japan. States, Canada, and European Union Flyers with the number of a 24-hour Marketing undoubtedly plays a vital member states, whose citizens can enter hotline are distributed at all border cross- role in tourism growth. Activities under- Georgia solely on the basis of a passport. ings of Georgia. By using this number taken by the GNTA include promotional Travelers from most other countries are visitors can receive information about all campaigns in both domestic and interna- issued visas on arrival. tourist products of Georgia immediately. tional markets, press and familiarization A new visa law has recently been In the summer season mobile guides trips, participation in international travel- voted on, although it has not been (mainly represented by Georgian stu- fairs, production of print materials, social implemented yet. According to the latest dents) were instructed to give all required media marketing, etc. information, as written, the new visa law information to tourists at every tourist Online marketing is a priority for will have minimum effect on tourism in destination of Tbilisi. This kind of project Georgian tourism administration. A new Georgia. It is not yet been made public improves tourist information accessibil- website under construction will allow which countries’ citizens will be subject ity and stresses the importance of tourism potential visitors to fi nd all tourist infor- to additional procedures to enter Geor- for the country. mation in one place. Using this website, gian territory. However, it is known that The GNTA has actively worked to tourists will be able to plan trips to Geor- these countries will not be from neigh- increase awareness of Georgia on the gia, book hotels, buy tourist packages

24 APRIL-MAY 2014 Investor.ge

and upload photos and video materials wine tourism, ecotourism, and adventure to take place in Tbilisi. The sporting in- taken during their trips to Georgia. In tourism, to name but a few. frastructure of the city will be renovated addition, a new Facebook page allows As a result of these projects, the com- according to European standards and an establishing direct contact with visitors petitiveness of Georgian tourism on the “Athletes’ Village” will be built. For this who express their interest in travelling to world market increased by seven posi- event the city of Tbilisi is expected to Georgia and are looking for more infor- tions, ranking 66th among 140 nations host more than 10,000 visitors, of which mation. Other social networks are used in the Travel & Tourism Competitiveness approximately 5,000 will require 3-star to deliver information to tourists as well. index in 2013 (Score: 4.10), as compared hotel accommodation and about 200 will Among them are Twitter, Instagram, Pin- with 2011 (73rd position). In addition, need 5-star hotel accommodation - all terest, VKontakte and YouTube. according to “Rough Guides,” Georgia within Tbilisi. Considering the fact that Choosing the right markets is un- ranks 5th among the top ten countries there are only 6,207 lodging beds in doubtedly an integral part of marketing. to visit in 2014, coming behind Brazil Tbilisi (including guesthouses and family While maintaining existing markets, the and Turkey. Georgia was successful in home stays), there is an immediate need GNTA also concentrates on tapping into international relations as well. Georgia for new hotel investment to fi ll the gap new countries, including new emerging has been elected as Vice-President of the in supply. This festival represents a good economies with immense potential. Sev- Committee on Statistics and the Tour- opportunity for the country to showcase en presentations were held in Ukraine, ism Satellite Account of the UNWTO. its rich tourism potential. Azerbaijan, Lithuania and Latvia in Georgia is also Vice-President of the 2013. More than 600 travel agencies European regional committee of the UEFA Super Cup 2015 and representatives of different media UNWTO. The UEFA Executive Committee attended these presentations. has given Tbilisi the opportunity to Making the most of Georgia’s rich European Youth Olympic host a mega sporting event, the UEFA natural and cultural resources by offering Festival 2015 Super Cup. The UEFA Super Cup is an new tourist products provides increased The 39th General Assembly of the annual football match between the win- possibilities for targeting travelers of European Olympic Committees chose ners of the Champions League and the different tastes. The GNTA efforts focus the Georgian capital to host the Youth Europa League. The game will be held on the development of different types Olympic Festival in 2015. Over 4,000 at the newly renovated Mikheil Meshki of tourism such as MICE (meetings, athletes from 49 European countries Stadium. This event will gather football incentives, conferencing, exhibitions), will participate in the festival, which is fans from all over the world.

APRIL-MAY 2014 25 Investor.ge

turing processes. The basic premise was ISO Certification is Not that to obtain constant product quality one must standardize not only products, the Same as Performance but also the manufacturing processes used to create the products. This new Improvement approach was widely used in factories producing armaments for the Allies. In the late eighties there was another paradigm shift, when ISO started to stan- TBSC CONSULTING; TEMO dardize more ephemeral matters, such as KHMELIDZE; PAUL CLARK; BSENG, standardizing quality management. The MSENG, MBA, CPT fi rst set of quality management standards, Over the past several years, ISO 9000:1987, was published in 1987. Georgian companies have here are two truisms about im- increasingly turned to ISO These standards were based on the UK certification as a benchmark for proving performance: 1) every Standard BS 5750 and the US Mil Specs performance and quality. While ISO Torganization can significantly systems, and concerned quality man- certification provides many benefits improve their performance and 2) the agement in manufacturing and service for business, it does not replace benefi ts of those improvements are large industries. Later versions of the standards performance improvement. and they will directly improve fi nancial were published in 1994, 2000 and 2008. performance. A new version will be published in 2015. For many directors and owners, the Organizations receive and retain fi rst thing that comes to mind when think- an ISO 9001 certificate (a standard ing about performance improvement is within the ISO 9000 family) after they ISO certifi cation. While ISO certifi cation go through periodic external and internal is certainly worthy, it is not the best way audit processes to confi rm that the orga- to improve performance. Rather, apply- nization complies with its own written ing performance improvement technolo- procedures. At present, there are about gies before ISO certifi cation is probably one million active ISO certifi cates all the optimal path. The reason for this is over the world, among them about 50 discussed in this article. in Georgia.

History of ISO ISO Certification Today In 1904, electrical experts from In general, the ISO 9000 family of around the world gathered in St. Louis standards regulates several types of to standardize electrical machines so management processes such as Quality equipment made in one country could Management, Management Responsibil- operate in other countries. This precedent ity, Resource Management, Measure- to standardize product specifications ment, Analysis, Improvement and so became the basis of the International forth. The standards give indications and Organization for Standardization (ISO) sometimes requirements of what ISO based in Geneva. Over the past 110 years, views as the optimal way of doing things ISO has established more than 15,000 in an organization. product standards for everything from ISO certifi cation is often taken to screw threads to sea containers. mean an organization has high-quality During World War II, the general ap- processes and high-quality products proach of standardizing product specifi - and services. While this may be true for cations spread to standardizing manufac- some organizations, in practice ISO cer-

26 APRIL-MAY 2014 Investor.ge

tifi cation is better described as 1) writing Finally, ISO certification concen- certifi cation process. and standardizing how things are done trates only on management processes, Performance improvement technol- within an organization, 2) following the while some of key organizational chal- ogy has been significantly improved written procedures and 3) periodically lenges (e.g., eliminating waste, increas- and systematized in the past 50 years. auditing organizational conformance to ing customer service responsiveness) are Thousands of organizations have gone procedures. only partially affected by management through formal performance improve- processes per se. ment projects. Methods used in many Benefits and Criticism of ISO of those projects and the results of those Certification History of Performance projects have been well studied by aca- ISO certification, properly imple- Improvement demicians and practitioners. A signifi cant mented, creates consistent application Performance improvement is a very body of scholarly and practical work has of organizational processes. ISO cer- broad concept that can be applied to documented what does, and what does tifi cation may, but not always, ensure any area, system, individual, group or not work, for performance improvement high-quality-products and services. organization. Performance improvement purposes. The best performance im- Proponents of ISO certifi cation claim methods have been used throughout his- provement practitioners are designated that certifi cation creates a more effi cient tory. One of the earliest documented uses by their peers as Certifi ed Performance and effective organization; increases Technologists (CPT); there are fewer customer satisfaction and retention; im- than 1,500 CPT’s in the world, including proves employee motivation and morale; “While ISO certification one in Georgia. reduces waste; increases productivity and so forth. is certainly worthy, Performance Improvement On the other hand, ISO certifi cation is it is not the best Today a heavily criticized management concept way to improve Essentially, performance improve- and the number of organizations that performance. Rather, ment means to develop and implement choose to not renew their certifi cation applying performance the optimal way of doing everything is signifi cant. Detractors emphasize that in a part of or an entire organization. ISO certifi cation creates an inordinate improvement The general process is to identify and (and claimed unnecessary) paperwork technologies before prioritize performance gaps, determine burden, promotes unnecessary specifi ca- ISO certification is the root causes of the performance gaps, tions and controls and creates resistance probably the optimal develop solutions to the root causes and to innovations within the organization path.” then implement the solutions. Perfor- (e.g., our way or the highway). Often mance improvement technologies can be after the ISO implementation and cer- applied to all or part of an organization. tifi cation project is complete, organiza- Performance improvement efforts tions fi nd that sub-optimal processes are comes from Roman Military History. In have one or both of two basic goals: 1) standardized (i.e., frozen) or that some particular, it was the superior organiza- increase effi ciency (i.e., achieve results new processes are simply not followed tion and tactics (processes) of Roman with fewer resources) or increase effec- or both. Legions, developed through a well- tiveness (i.e., achieving more or better re- Other critics believe that ISO certifi - documented performance improvement sults with existing resources). Improving cation cannot create genuine performance process, that enabled one small city-state effi ciency might mean requiring less time improvement because (nearly) everyone on the Apennine Peninsula to conquer to produce a product or service; smaller involved in an ISO implementation and what is now the European Union, much (i.e., right-sized) staff; less expensive certifi cation project (i.e., management, of the Middle East and North of Africa. mix of inputs; smaller inventory and so employees, preparatory consultants and Tongue-in-cheek, imagine how European forth. On the other hand, improving ef- auditors) focuses on obtaining the ISO history would be different if Rome’s fectiveness might mean increasing output certifi cate rather than obtaining dramati- historical organization and tactics had without increasing inputs; creating more cally improved performance. been frozen into place through by an ISO innovations; increasing customer satis-

APRIL-MAY 2014 27 Investor.ge

faction and so forth. Performance Improvement Unlike ISO certifi cation, which has a “Unlike ISO And ISO Certification Are sense of “one size fi ts all”, performance certification, which has Complementary improvement uses a wide variety of tools a sense of “one size Though quite different in nature, and approaches for each unique solu- fits all”, performance performance improvement and ISO tions. Performance improvement tools certifi cation can be very complemen- include methods such as process stan- improvement uses a tary if done in the proper order. First, dardization or re-engineering; statistical wide variety of tools performance improvement technologies quality control; six-sigma management and approaches for should be used to determine and imple- methods; key performance indicators each unique solutions.” ment optimal processes within part or all (KPIs); customer satisfaction surveys; of an organization. Second, if optimiza- optimized management systems; ad- tion is done organization-wide, then ISO vanced planning systems; motivation that money invested in proper perfor- certifi cation can be used to freeze those systems; advanced analytical tools mance improvement has a very high re- optimal processes into place. (e.g., fi nancial or marketing profi tability turn on investment, upwards of 150 per- This will ensure there is little back- metrics) or simply bright ideas based on cent per year with short payback periods. sliding into the old way of doing things. common sense or cultural preferences. For example, when public companies Third, the organization should create a Sometimes performance improvement announce performance improvement ef- separate unit or process to constantly solutions might be based on software forts with large costs (often right-sizing evaluate existing processes and, as situa- or equipment implementation, but it is staff levels) stock prices generally move tions change, design and implement new not a rule. up, not down as might be expected from and improved processes. That is, the a generally negative announcement (e.g., organization should periodically change Benefits And Criticisms Of we must spend a lot to fi x ourselves). the processes against which ISO certifi - Performance Improvement In addition, non-monetary improve- cation is audited. In practice, sustainable performance ments are also signifi cant. For example, Performance improvement technolo- improvement requires a lot of very a large Georgian bank increased its gies are very useful even if an organi- in-depth analytical work, attention to customer satisfaction by 40 percent in a zation already has ISO certification. details and (probably) signifi cant cultural six-month period, reaching a level twice Improved processes, once designed in change. These are all hard and expen- the industry average; imagine the share- a performance improvement effort, can sive matters for any organization. Often holder value that this created. simply become the new processes against outside consultants are used to either Finally, if done properly, perfor- which ISO certifi cation is audited. The perform the detailed analytical work or mance improvement creates a cultural fact that ISO certifi cation already exists to manage a performance improvement shift; improving performance becomes makes improvements of this type easier effort done by organization staff. the norm rather than an exception and as the organizational culture already has Another criticism of performance im- onetime thing. in place the idea of writing down how provement efforts is that sometimes there things are to be done, and then to do that is signifi cant backsliding; staff returns to and nothing else. the (good) old way of doing things and benefi ts are not achieved. This is particu- “Though quite different About TBSC Consulting larly problematic when the magnitude in nature, performance TBSC Consulting is based in Tbilisi. of changes and improvements are large. We have helped clients improve their Given that this is a common problem, one improvement and ISO performance for more than 30 years in can plan methods to prevent backsliding. certification can be very North America, Western Europe, Central As noted later, one way is to go through complementary if done Europe and Georgia (for 14 years). The an ISO certifi cation process after the in the proper order.” only CPT in the Caucasus is a principal performance improvement effort. at TBSC. We have helped others; we can On the other hand, the good news is help you.

28 APRIL-MAY 2014 Investor.ge

Hotel Construction Renews Building Boom in Tbilisi

Lisi Lake Development in Tbilisi.

Six large hotels planned – and One major difference from the 2005- 18 percent. a score of smaller construction 2007 boom is the driving force behind In Tbilisi, he said, the four and fi ve projects – are giving Tbilisi’s the growth: this time around, large hotel star hotel market is already “saturated.” dormant building sector a buzz. But projects are pushing the sector forward, But there is room for three star accom- unlike the construction explosion from 2005 to 2007, this boom is far not mortgaged apartment sales, noted modations. from a bubble, industry specialists Tengiz Lomitashvili, a managing con- “The 3-starred hotel segment has the say. sultant and partner at TBSC Consulting. highest potential as far as 4-5 starred Over the next two years, six major hotel segment is gradually becoming hotels are planning to open in the capi- saturated, considering the existing pipe- tal: Rixos, with 180 beds; Millennium line supply in this segment. Out of 170 Hotel, with 220 beds; Park Inn, with 200 of all class hotels and 7,000 beds at the NINO PATSURIA beds; Hilton Garden Inn, with 180 beds; moment in Tbilisi, there are only up to Rooms Hotel Tbilisi, with 150 beds; and ten larger (50 rooms and up) hotels. As he building business is making a Intercontinental Tbilisi, with 200 beds. for the announced pipeline, more than comeback in Tbilisi, after years Lomitashvili noted Georgia’s grow- 1,000 rooms will be added in next 2-3 Tof recovery following the 2008 ing number of tourists is luring large years, most of which will be in 4-star fi nancial crisis. But industry specialists hotel projects to the capital: last year segment. The whole the 3-star segment believe the new development trend sig- the tourist infl ow in Georgia grew by is free,” he said. nals major differences in how the sector 22 percent – the highest in Europe, put- is growing and maturing after the 2007 ting the number at over 5 million. The A Changing Market construction bubble. offi cial prognosis of GNTA for 2014 is Hotel construction provides a more

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30 APRIL-MAY 2014 Investor.ge

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launched two large residential projects in Saburtalo, a central, primarily residential region of Tbilisi. The construction, a $14 million investment, have been fi nanced by the International Financial Corpora- tion (IFC) and FMO, the Dutch develop- ment bank. The Georgian Co- Investment Fund is also primed to make new investments in the sector. Among the potential projects named by the fund in its initial presenta- tion, there were hotels in Tbilisi and in the regions. In March, the fund also an- nounced tentative plans for a large scale real estate development in central Tbilisi. Irakli Burdiladze, the chairperson of the Supervisory Council for m2 Real Estate, noted, however, that the market The Park Inn by Radisson Rustaveli Tbilisi is also changing based on consumer stable environment for the sector to ing. In addition, Redix, which entered the demands. rebuild. Now, noted Lomitashvili, the real estate market in 2007, also holds a Unlike the boom years, when people impetus is on good management, not portfolio of offi ce and commercial space. were willing to trust developers and pur- quick profi t. In response to questions by Investor. chase apartments in buildings that had He said that change signals there has ge, Redix said “demand” is high in the yet to be constructed – a practice known been a fundamental shift in the market market, noting that their luxury apart- as “buying in the air,” today, consumers structure. To an extent, the large compa- ment project was quickly “full.” demand good management and better nies that used to dominate the real estate Other real estate development groups guarantees. “We never start a project industry have been replaced by fl exible agree that demand for apartments is high unless half of fi nances required for the small developers focused on local needs in the Tbilisi market. project is attracted via our own capital or who focus on one project at a time. For Lisi Development, a multi-phase other fi nancial institutions,” Burdiladze “You can hardly find a street in residential project near Tbilisi’s Lisi told Investor.ge. Tbilisi, either downtown or uptown, Lake, interest from potential buyers has Lomitashvili agreed, noting that without a new, small construction site,” been steadily increasing since construc- today consumers sign deals only when Lomitashvili says. “These are mainly tion started in 2011. construction is actually ongoing and small independent investments groups “In 2011 we already had real clients near to fi nish. who build small projects based on their for 30 percent of the residential places. “This speculative bubble when con- own fi nancial resources and sell them. And demand has signifi cantly increased sumer acquired new apartments by bank- There are, however, some big developer after the completion of the fi rst phase,” ing loans rather than their own savings companies like Bank of Georgia’s m2 the projects press department said via had to burst fi nally, and now consumer Real Estate still do well thanks to proper email. became wiser and the demand is rational management.” “We must say that almost for the and close to real purchase power,” noted Redix recently started the $31 million whole past year demand for the resi- Giorgi Abashishvili, a deputy dean at Ilia 164-room hotel Hilton Garden Inn proj- dential housing is steadily growing. We State Univesrity Business School. ect on Chachavadze Avenue, which is think that this tendency will be the same “Now the demand will go up at a scheduled to be completed by 2016. With at least for next three years.” reasonable pace close to the economic $18.8 million being covered by EBRD, With around three percent of the growth of the country and not without the project also includes residential hous- market in their portfolio, m2 Real Estate logic like the pre-crisis boom.”

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vate property were streamlined and re- Georgian Entrepreneurs: An moved. If new investors decide to come interview with Lasha Papashvili to the Georgian market they would fi nd “by far friendlier”business environment, he says. projects worth $15 million. Redix itself is taking advantage of Redix was launched in 2007, when these favorable conditions by expanding: construction and the overall economic currently the company is intensively de- growth of Georgia was booming. Al- veloping the HoReCa (Hotel/Restaurant/ though many competitors crumbled in Café) model. The company opened Hotel the face of the economic crisis and the Kabadoni in Signagi in 2012. A new real estate market crash, Redix refo- apartment-hotel in Batumi is scheduled cused, and sought out a niche: fi nished to open in May, and there is also a plan apartments. to open Hotel Samzeo in the mountain- In a market more accustomed to ous region of Tusheti. “Also, intensive black carcass and unfi nished apartment construction works are underway for a projects, Redix became one of the fi rst 165-room hotel on Chavchavadze Av- to offer ready to live modern residential enue in Tbilisi, which will be operated by Investor.ge has launched a series apartments and offi ce/commercial space Hilton Garden Inn of Hilton Worldwide,” of interviews exploring the biggest on the Georgian market. Home buyers Papashvili told Investor.ge. trends in Georgian business were offered apartments with kitchen Papashvili has also ventured into innovation and entrepreneurialism. furniture and equipment, central heating agriculture - process, he describes as In each issue, the best and brightest minds in Georgian and air conditioning. “difficult.” However, he adds, a new business will discuss their ideas, Today, Papashvili is optimistic the wine brand Kvarlis Maraniis already market trends, and the obstacles real estate sector is making a comeback. available on the market. “Last year we that face Georgian entrepreneurs “There is a clear vitalization on the opened a dairy farm Kvarlis Baga with a today. In the fourth interview of market and the situation is returning back daily capacity of three tons of milk which the series, Maia Edilashvili speaks to what was in the fi rst half of 2008,” he is fully sold on the local market. In total, with Lasha Papashvili, the general director of Redix, one of the said, predicting that both the demand and $10 million in investment has been put in largest development companies in supply is likely to surge in all directions these two projects,” he explained. Georgia. – residential, offi ce, commercial, and Even though the latest statistics for hospitality service. foreign direct investment does not show stable political and economic The challenge in the construction an upward trend - FDI was $ 217 mil- environment with a strong legal field, Papashvili believes, is issuing lion in the fourth quarter of 2013, an Asystem is vital for entrepre- permits without tough regulations since annual decline of 7% - the government neurialism and investment to fl ourish, there are no laws and standards. Another remains optimistic. According to the LashaPapashvilisaid in an interview with concern for him is that the country is offi cial prognosis, this year economic Investor.ge. not divided into special areas such as growth will accelerate and stand at 5%, A graduate of Ivane Javakhish- urban, industrial, agricultural, and rec- an increase from 3.2% in 2013. vili Tbilisi State University, Papashvili- reational or other types of zones. “Local For solid growth to take place, “a worked as the general director of Bank self-government agencies both in the long-term action plan with clear priori- Republic – Societe General Group in cities and villages have no development ties,” is needed, says Papashvili. Yet, in 1998-2004 and later until 2014, he served policy,” he complained. his view, equally important is main- as Chairman of the bank’s Supervisory On a positive note, however, Papash- taining a low crime rate. “If the state Board. Now General Director of Re- vili hailed the changes over the recent guarantees all of these, that will serve dix, his diversifi ed business portfolio years when bureaucratic requirements as a guarantor of attracting [more] FDI,” includes35 large and medium-sized from the procedures of registering pri- he noted.

34 APRIL-MAY 2014 Investor.ge

APRIL-MAY 2014 35 Investor.ge

Reforming Tax Appeals: An Overview of PwC Research on Best Practices for Tax Appeal Councils

Ambiguities over the interpretation Independence independence could be created inside the of the tax code and concerns over One of the key concerns about the current council structure, without formal its consistent application have council is that it operates inside the separation from the MoF. been among the biggest problems Ministry of Finance (MoF) and is largely Four main mechanisms were con- facing businesses in Georgia for many years. The Council of Tax made up of existing MoF employees. sidered as potential examples of best Appeals (hereinafter “the council”) PwC’s research showed that international practice for securing greater indepen- is crucial to giving businesses examples were of little help in clarifying dence and were tested by the survey. confidence in the tax system as, for best practice as dispute resolution struc- First, in Georgia the appointments to the many years, it has been one of the tures in other countries operate under a council are made for indefi nite terms, but primary mechanisms for resolving range of institutional structures, some PwC’s research found that in every case disputes between taxpayers and the government. An alternative to the of which closely align with the fi nance study, except Singapore, the members Council is to take disputes into the ministries and the tax authorities of those of the councils have fi xed terms. This is courts. However, in Georgia this respective countries. generally considered to create more in- was rarely used as the courts were However, businesses generally do dependence as it liberates members from not considered to be technically not like this operating arrangement. threat of dismissal. It was also supported competent to professionally Slightly over half of interviewees said by 85 percent of survey respondents with adjudicate disputes. In 2013, PwC conducted research that they did not believe that the current 28 percent wanting one year, 42 percent to investigate best practice and system allowed for independent deci- suggesting three years and 16 percent business opinions about the council. sion making and over 75 percent of that suggesting fi ve year terms. This research was funded by the group believed this was the result of their Second, in Georgia members have Open Society Georgia Foundation institutional affi liation with the MoF. other professional positions at the same and the EU, and supported by the Two-thirds of respondents said that the time as they work on the council. Re- Minister of Finance and AmCham, the Business Association of Georgia, Dispute Resolution Council should be stricting members of the council from the Georgian Small and Medium fully separate from the MoF. holding other positions was used by Cali- Enterprise Association and the Nonetheless, there are practical chal- fornia, Massachusetts and New Zealand Georgian Bankers Association. The lenges to securing independence of the as a mechanism for avoiding confl icts. research included an international council. First, the Georgian constitution Seventy-three percent of survey respon- comparison that looked at the way excludes an entirely institutionally sepa- dents believe that the council should be the systems for dispute resolution operated in other countries, an rate judicial or quasi-judicial “tax court.” the sole occupation of its members. This online survey of 142 companies Second, the MoF has clearly stated it could increase independence and could and semi-structured interviews with is not interested in this option. Finally, create a more clearly defi ned group for 23 companies. The full research starting an entirely new institution may training and professional development. can be provided on request from create bigger hurdles than creating Third, in all of the case studies, mem- AmCham or PwC. greater independence inside the MoF. bers of the council were protected from Therefore, PwC’s research also dismissal/prosecution when decisions looked at other ways in which greater were made in good faith.

36 APRIL-MAY 2014 Investor.ge

Fourth, in Georgia, appointment to taxpayers) and the other half said that the council is done by the government. release should be subject to approval on While there is no consistency of inter- the part of the taxpayer. national best practice on this issue, 99 Recommendation: Decisions should percent of surveyed companies did not be public, but personal and commercial agree that sole government appointment data should be private. was the best method for appointments, with 65 percent of respondents express- Efficiency ing the view that the business commu- On the issue of effi ciency, PwC’s nity and government should together be survey results were positive. Eighty-nine responsible for appointments. percent of those surveyed said that there Recommendation: As a result of all was no formal problem with their ap- of this analysis, PwC recommended that plications, although some said that they full institutional independence from the had diffi culty presenting full evidence. MoF was not necessary. However, it felt One-third complained about the execu- that adopting fi xed-term, sole-position tion of decisions. There was still space appointments, with protection from dis- for improvement and the project as a missal and business involvement in ap- whole recommends a range of techni- pointments, could dramatically increase cal modifi cations to improve effi ciency independence. and equity, including the use of a faster/ simpler process for small claims and the Transparency/Predictability use of expert witnesses. Lack of predictability in interpreta- Recommendation: The system should tion of the tax code has been a consis- be simplifi ed for small claims and ease of tent problem of Georgia’s tax system providing evidence should be improved. for years. It is not only a problem for Following its analysis, PwC has business planning but has also left the presented its fi ndings to the Ministry concern that the tax code might be se- of Finance, and all of their major rec- lectively applied. ommendations have been accepted. One problem that makes predict- AmCham and Investor.ge magazine will ability and consistency of interpretation keep track of reforms moving forward. diffi cult is the lack of published guidance This report is made possible by on the tax code, and particularly the lack the generous support of the Ameri- of published guidance that is binding on can people through the United States future interpretation. Agency for International Development One way in which the council could (USAID), EWMI and EPF, within the help this situation, and improve the Judicial Independence and Legal Em- practicality and predictability of tax code powerment Project. The report’s con- interpretations would be to publish deci- tents are the responsibility of AmCham sions and make past decisions binding and do not necessarily refl ect the views for the future. There was no consistent of USAID, the United States Govern- international best practice on publication ment, EWMI or EPF. of results. Some kind of publication was However, as mentioned earlier in the generally popular with businesses. Fifty article, the research itself described in percent of survey respondents said that the report was carried out by PwC under decisions should be made public gener- grants from the EU and Open Society ally (with protection of the identity of Georgia Foundation (OSGF)

APRIL-MAY 2014 37 Investor.ge

are eager or willing to return to teach in teaching. The support for the Return- Brain their home countries. Besides providing ing Scholars also meant direct support a scholarship to the individual, the pro- to several departments at Tbilisi State gram also acknowledges the importance University, Ilia State University and Drain: of continuous professional development the Georgian Medical University and and the need for a broader assistance also led to the creation of new academic Bringing on curriculum reform to the academic centers and departments. departments of the returnees. These What are the benefi ts of studying are addressed through different types abroad? To what extent are those Back the of support. The Academic Fellowship benefi ts recognized by employers in Program’sProfessional Development countries like Georgia? Best Fund ensures that fellows can participate Being a student at a university in a and network in high caliber international different country, especially in Western events or can effectively enhance their Europe or the U.S., brings important ben- Investor.ge continues its series on brain drain in Georgia through professional profile. The Academic efi ts when it comes to looking for a job. interviews with Georgians studying Fellowship Program’s International Undertaking your MA or PhD program or working abroad and the Scholars Fellowship Program invites abroad means not only new competitive organizations that are trying to high-profi le academics from renowned knowledge and skills but also becoming create the means to bring them universities around the world to provide a better expert within your fi eld. The back home. In this issue, Investor.ge direct assistance to departments and their improvement of one’s professional and interviewed the program manager of Open Society Foundations’ entire faculty where Returning Scholars language skills brings many benefits Academic Fellowship Program, are placed. when it comes to engaging in the labor Eniko Kovacs. It is well known that in developing market. Such well-qualifi ed profession- countries well trained academics tend als should be highly valued by employers to leave for what are considered devel- in all countries, including Georgia. This oped countries. However, this is not the is a benefi t for the employer as it gets an only danger to consider since the brain excellent labor force. On the other hand, drain from academia to other sectors in it might be a loss to academia in some- the labor market is also a real danger. one’s home country, which can seem a There is a need for good education fi rst less attractive sector for many to work in. in order to build up good and successful What should local employers/busi- economies. Our program targeted return ness associations/policy makers do to and retention in academia and through encourage students to go back and use this the enhancement of the quality of their new skills at home? ow does the Open Society education provided by the partner de- First of all, it is worth emphasizing Foundation Academy Fel- partments/ universities. Such a scheme that in Georgia, as in many other coun- Hlowship Program help pre- offers assistance for individuals but also tries, local employers may lack a clear dict brain drain? How big of a problem takes into account the need to boost the vision regarding the skills and potential is brain drain in transitional countries milieu where the individual is placed. of Georgians outside Georgia. The main like Georgia? This proved to be effective in countries recruitment market remains the narrow The main mission of the Open Soci- where the Academic Fellowship Program pool of professionals who live and study ety Foundations’ Academic Fellowship operated as this addressed return but also in Georgia. A well-structured strategy Program is to prevent brain drain from retention at the same time. Throughout is needed by businesses and employers academia by supporting the return and the years in Georgia we supported almost concerning what human capital needs retention of young and promising aca- 100 returning scholars for several years there are and how the skills of Georgians demics (Returning Scholars) who have and were happy to learn that most of our that live/study abroad could be utilized earned a graduate degree abroad and alumni are still in the country and still to meet those needs. In the ideal scenario

38 APRIL-MAY 2014 Investor.ge

the strategy should also involve a way to enrolled in the world’s leading universi- Chevening Scholarship, giving money keep track of scholars who go abroad and ties. However, the condition was that to distinguished students to continue to start career counseling and to inform they had to come back after their studies graduate studies at one of UK’s leading them about opportunities at home at an and be employed in state structures for a universities. early stage, for example, one year before minimum of two years. On one hand this Offering special schemes to make they fi nish their degrees. was a very reasonable condition, but on people return, especially to academia, As for incentives, it is clear that the other hand there turned out to be a does not happen systematically. The besides the fi nancial motivation there is mismatch between supply and demand main reason, in my opinion, is that a need to offer opportunities for further since senior positions are very limited education usually is not the number professional development. This is also in state structures and the state literally one priority of a state and neither is it true for academia since a university that didn’t have space to offer interesting a priority for businesses. At this stage, doesn’t offer space or time (because of positions to all returning people. As a advocacy initiatives are needed to raise an extremely high teaching load) for aca- result, some of those who returned, who awareness among businesses on the need demics for academic research and other were graduates of prestigious universi- and the possible benefi ts of their more professional development would not be ties, were offered weak positions in state intense involvement in education sector’s perceived as a welcoming environment. structures. Obviously, this caused dis- development. In order to change this there is a need for satisfaction for these people and many Why is that important for the real collaboration and consensus of both of them tried to fi nd different ways to economy? policy makers and employers. avoid that obligation. Brain drain in academia could be How successful has Georgia been at According to our information, the a real danger. Having knowledgeable, bringing its expats back home? business sector doesn’t have a systematic highly skilled academics teaching at There have been some steps taken in contribution to bringing expats home universities is indispensable for shaping order to prevent the brain drain from the either. Businesses mainly do charity the future generation’s critical thinkers country and at the same time to support or one-time activities. However, there and reformers. studies and professional development are a few good examples of business This is indespensable for any coun- abroad. This is a very sensitive issue as involvement in education. For example, try’s economy. And it should not be the Georgian education system is still we were recently informed that the Bank forgotten that academics returning from in the process of transformation, and of Georgia has established a sub-unit for different international universities may therefore it may not yet be able to provide dealing with the non-commercial/social- also be a leading force of a countinous Georgian youth with adequate skills and responsibility initiatives. They have de- educational (but not only) reform in knowledge. veloped their strategy and are working on a country. Through their international A presidential fund was developed fundraising in other institutions. For the experience and networks, they can be to finance those young people who fi rst time in Georgia a local business es- an asset for much more than a country’s have excelled and succeeding in getting tablishment became a co-sponsor of the education sector.

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APRIL-MAY 2014 39 Investor.ge

Yalta, the Intourist hotel area, showing the Soviet era cable cart ride. I am going home

Journalist Helene Bedwell writes am going home!, I want the the vote was widely condemned by the about the Crimea – and what Soviet Union!!”- a pleasant government in Kiev, the European Union happens when the Soviet Union’s and the U.S. But it’s unlikely that Russia untidy past sweeps into the present. “Ilooking woman clutching a Bedwell was in Crimea to cover bottle of beer was shouting as spectacular will end its actions there, the land which the March 16 referendum for fi reworks display illuminated the main it said historically belongs to it thanks to Bloomberg. government building on the night of the 1794 Empress Catherine II’s victory joining Russia after the referendum in over the Ottoman Turks, Russia’s plans Simferopol, Crimea. go deeper than childhood memories of She could be right. Crimea and how it was given away by It doesn’t matter about the legality. Nikita Khrushchev to Ukraine. Crimea is now a part of Russia, while the Crimea was taken by Russia without old Soviet glory city of Sevastopol fol- a gunshot. As a kid, I remember my fa- lows the trend as an independent subject ther trying his best to avoid sending us to within the Russian Federation. While Crimea pioneer camps, such as Artek and almost 97 percent of voters in this hast- pupil summer schools, let alone the holi- ily arranged referendum backed leaving days in the luxurious and Soviet comfort Ukraine and becoming part of Russia, hotels in Yalta, Alushta and Sudak. My

40 APRIL-MAY 2014 Investor.ge

grandmothers, like most elderly Soviet democracy values, like releasing the masked Russian soldiers with unidenti- citizens, were often offered the health former premier accused of corruption fi ed badges, Cossacks, who came for sanatorium passes to Crimea, which is Yulia Timoshenko. These people blame help and the local police who had shifted also known for the longest trolleybus the world for the collapse of the Soviet sides. And suddenly from this alarming line in the World, between Yalta and Sim- Union and will support any crazy idea of checkpoint, which looked like something feropol. Let’s also not forget about Yalta, Vladimir Putin, who is trying to return from war movies, I found myself inside the location where Stalin, Roosevelt and the glory of the old empire. the military base, where unarmed Ukrai- Churchill met during World War II. Svante Cornell, research director at nian soldiers are under psychologically It’s something very warm, personal the Central Asia-Caucasus Institute and pressure by the blockade. They never and empowering to think of the holidays Silk Road Studies Program in Stock- fi red that shot Svante Cornell was talking in Crimea, if you are a Russian who holm, said that the small part of the story about earlier; now it’s Russia who owns remembers the Soviet Union system could really be whether Russia reclaims Crimea. Soldiers like Nikolay tell me that and especially from now more Russian its lost land but the big part lies inside they need a corridor to get away, that they tourists will fl ood the place. Before as the plans to restore former Soviet control. will never serve Russia. many as 60 percent of the tourists were This was the opportunity provided by Going back to that night of the vic- Ukrainians. the revolution in Kiev, and of course it tory rally, where the Russian fl ags and A lawyer who works for one of the was the capacity of the Russian military, even the Soviet Union fl ags were waived oldest hotels in Yalta, theOreanda, told which basically saw that they could take by the populous who were drunk with me exactly that, saying that Yalta won’t Crimea without a shot and nothing would happiness and vodka, I walked through feel the pinch by declining numbers of happen because Kiev was not going them and also shouted “Russia, Russia” Ukrainian tourists. Or foreigners for that to do anything since at the time it was simply to blend in. They do hate Geor- matter, because now they would need disorganized. gians with British citizenship who work Russian visas to arrive to these resorts. When I visited the Belbek military for the Western media. “Hey we are not Safari you know, base, Lubimkovo, it was still under Helene Bedwell reports for Bloom- it’s Yalta, people come here for the back Ukrainian control, I passed the heavily berg. She is based out of Tbilisi, Geor- of the memories and old glory,” Valdy- armed and monitored checkpoint with gia. mir Bondarenko, who was increasingly afraid of the Kiev revolutionaries, told me in an interview this month. Once again, he could be right. I remember very well the euphoria of overthrowing the statues of Lenin and others like him in Georgia and elsewhere in the former Soviet Union countries. When the Russian tanks rolled in the streets of Tbilisi, many people, especial- ly the young, died for freedom, and the total collapse of the system came soon after. But here in Crimea time stands still. For the people who live on the street of Proletarskaya, or go to study or work on the street of Oktabrskaya, passing the huge statues of Lenin every day, maybe have a good drink or two on the Ulitsa Karl Marx, it’s practically unimaginable to support the Kiev Meidan, to feel even Large posters across Crimea campaigning for joining Russia option in referendum on March 16. Poster says Together with Russia. Tatars, who represent 12 percent of Crimea’s population, an ounce of compassion for the western largely boycotted the vote.

APRIL-MAY 2014 41 Investor.ge

Ananuri 24 Hours Out of Tbilisi

Looking for something to do this ussian poet Alexander Pushkin just one example of how Georgians his- Sunday? Investor.ge’s Monica Ellena reportedly enjoyed soaking torically located fortresses and churches offers three options close enough in Tifl is’ thermal waters. But in the most beautiful locations. to Tbilisi to see in a day trip, but far R idling about in Abanotubani may not be Situated along the winding Georgian enough away for an adventure. the only reason why the revered bard Military Highway, the Ananuri com- called the Georgian capital “the fabulous pound is perched on an indigo-colored land” - the bohemian vibe, the ornate reservoir with a magnifi cent mountain buildings, and secret courtyard gardens backdrop. Within the 13th-century for- still catch people’s imaginations. But tress, there are two churches dating to there is so much more to offer within the 17th century. two hours’ drive of Tbilisi. Georgia’s The larger, the Assumption Church, spectacular countryside hosts ruined for- boasts a stone carved façade with lions, tresses, ancient churches, and archeologi- vines, and Georgian writing. A short cal sites, making it possible to mix hiking climb up the tallest of the fortress’ tow- and cultural excursions at the same time. ers, at the top end of the complex, offers a fantastic view over Bazeleti Lake. Bazeleti Lake and Ananuri After Ananuri, you have a choice: The splendid Ananuri complex, either drive further to Pasanauri to eat which lies about 60 km from Tbilisi, is the best khinkali in Georgia, or make

42 APRIL-MAY 2014 Investor.ge

your way to Tbilisi and stop for a picnic Monument to the Battle of Did- ing and camping. Didgoroba, an annual at Bazeleti Lake. Legend has it that a gori festival held every September, still cel- golden-haired child is lying in a golden Dozens of gargantuan swords pushed ebrates the victory. crib at the bottom of Bazeleti, and that into the ground and posing like crosses; the water came from the mother’s tears. colossal cement blocks arranged like Dmanisi Archeological Site orderly coffi ns; enormous sculptures of Skull 5 is like an old relative –about Birtvisi Canyon and Fortress dismembered bodies of warriors: by any 1.8 million years old, in fact. It is one Set in scenery reminiscent of the Lord standard, the monument to the Battle of of fi ve early human skulls unearthed by of the Rings, the maze of Birtvisi Canyon Didgori is dramatic.40 km west of Tbili- anthropologists in Dmanisi, a medieval is one of the most spectacular hikes in the si, the monument is on Mount Didgori, hilltop village overlooking the confl u- vicinity of the capital. in the eastern part of the Trialeti Range, ence of two rivers about 93 km southwest Birtvisi is a natural rocky fortress of part of the Lesser Caucasus. of Tbilisi. 1 km², secured by walls and towers. This Built in the early 1990s, it glorifi es Despite the uninspiring name of the natural shelter was discovered by a local King David IV, The Builder, whose Homo Georgicus’ skulls, researchers prince in the 9th century, who ordered a army of 56,000 soldiers beat an army of claim that the discovery forced a rethink hidden city to be built there. 500,000 from the Great Seljuk Empire on of the story of early human evolution. The complex became one of the most August 12, 1121. The dzlevaysakvirveli Although not all scientists agree, the protected fortress-cities in the Eastern (miraculous victory) paved the way fo so-called Dmanisi collection represents Georgian Kingdom, from where its rulers rthe re-conquest of Tbilisi in 1122, so the earliest evidence of primitive humans could control the entire strategic Algeti that the city could become, according outside Africa and is the biggest col- gorge. In 1403, Tamerlane conquered to a Georgian chronicle, “forever an lection of well-preserved early human it – but only on his eighth attempt, after arsenal and capital for his sons.” It was remains anywhere in the world. deceiving the Georgians. the beginning of the Georgian medieval Nearby stands the BolnisiSioni For a day in the canyon and its evoca- golden age. Church, a square stone basilica with three tive forest, drive to the village of Tbisito The battlefi eld extends for several naves dating from the fi fth century, built start a one-hour walk to the entrance of kilometers and is covered by subalpine with green tuff stone. The wall scripts are the canyon. meadows, making a great place for hik- regarded as the oldestin Georgian.

APRIL-MAY 2014 43 Investor.ge

My City, Tbilisi

EMIL AVDALIANI

uring two empires and for nearly 100 years, a shop on Da Rustaveli Avenue was the home of one of Georgia’s most famous brands: Laghidze Waters. Created by Mitrophane Laghidze, a Georgian from Imereti, Laghidze Waters was once as famous as Borjomi and Saperavi, a Georgian bubbly sugar drink served to royalty and heads of state, including Winston Churchill, Joseph Stalin, and Harry S. Truman.

Successful Start-Up and the Birth of a Brand Laghidze, born in 1869 in Cholevi village (Imereti), was just 14 when his family sent him to learn the pharmacy trade in Kutaisi. His mentor, Polish im- migrant Cezar Ivanovski, also dabbled in carbonated sweet drinks, known as lemonade, and Laghidze took over the business when Ivanovski died in 1886. By 1887 Laghidze had already created a Mitrophane special lemonade receipe made up from various fruits and herbs, and established Laghidze a cooperative for the lemonade produc- tion. One bottle cost one shauri, or 10 grams of copper. and the Lemonade was a common beverage, created by bottlers in villages and towns Tale of His all over Georgia. Laghidze, however, sought something more. In 1902, he traveled to France and Germany to per- Famous fect his technique, returning to Tbilisi in 1905 with a new recipe using fruit syrup Laghidze instead of herbs. Laghidze also worked to turn his business into a brand: each Waters bottle carried a label with a picture of a

44 APRIL-MAY 2014 Investor.ge

woman in traditional dress – believed to ade, Laghidze’s factory also served as a impressed, mentioning the lemonade be his mother – and the slogan “Avoid conduit between Russian revolutionaries in his memories about the 1943 Tehran fraud, demand everywhere.” living abroad and radical groups operat- Conference. In 1952, then U.S. Presi- Laghidze based his production at 24 ing in Georgia. dent Harry Truman sent 1,000 bottles Golovin (nowadays Rustaveli) Avenue, of Coca-Cola to Stalin, who responded and the fi rst “Laghidze Waters” shop Lemonade in the Age of the by summoning Laghidze to the Kremlin opened in 1906. Soviets and dispatching a shipment of Laghidze He created a supply chain, bringing in Laghidze Waters fell on rough times Waters to Washington. Despite requests fresh apples from Gori, strawberries from immediately following the 1917 Revolu- to export Laghidze Waters to the U.S,, Bakuriani, oranges and lemons from Ab- tion: a massive fi re put the factory out of Stalin refused to allow it to be traded khazia, for his all natural Georgian fi zzy work from 1921 to 1927. But, Laghidze outside the Soviet Union. He did, how- drinks which, by that time, were sold rebuilt and, by the 1930s, production was ever, appoint Laghidze (then aged 83) as throughout the Russian Empire. back to its pre-1917 levels. a commissar of USSR beverage produc- His recipe, a tightly held secret, Within the Soviet Union, Laghidze’s tion. “Laghidze Waters”’ branches were gained fame within the empire and popularity soared. By 1934 he had been opened in Kiev and Moscow (on Arbat abroad: Laghidze Waters won awards in invited to Kiev, Moscow and Leningrad Street). Vienna in 1913 and in St. Petersburg the (St, Petersburg), as well as to Iran and Laghidze died in 1960, aged 91. His following year. Before the 1917 Russian Egypt, to explore options to expand fac- statute was built in the courtyard of the Revolution, Laghidze sold his lemonade tories outside of Tbilisi but he decided factory (which unfortunately does not to the Tsar Nicholas and his court – it to stay in Georgia. exist today) on Klara Zetkin Street. was even rumored to be a favorite of the Laghidze’s lemonade was also re- After the dissolution of the Soviet Iranian shahs, who imported it to Iran. portedly popular with the Americans who Union, Laghidze Waters continued its had a chance to try it: after sampling a existence at Rustaveli 24 till the Rose Politics and Fizzy Water Laghidze Waters during the 1944 Yalta Revolution of 2003 when the shop was In addition to being one of the most Conference, then U.S. President Franklin closed and the place sold. However, after innovative entrepreneurs of his day, Roosevelt reportedly asked for 2,000 several years it reopened on Melikishvili Laghidze was a progressive thinker. His bottles of the lemonade to take with him. Street and is still owned by the members factory was one of the fi rst enterprises Winston Churchill was equally of the family. to introduce an eight-hour day in the Caucasus, and Laghidze served as a patron of literature, publishing many poems and verses by famous Georgian writers including Ilia Chavchavadze, Akaki Tsereteli, and Vakhtang Orbeliani. Despite his fame and good standing in the Tsar’s court, Laghidze was not above suspicion in the heady days before the revolution: as an active member of the “Society for the Spread of Literacy among the Georgians,” he made the Rus- sians ruling Georgia nervous, especially since his brother, Mikheil, had been exiled on suspicion of belonging to a radical group. In fact, there is some evidence in the Georgian archives that indicates, in addition to producing his famous lemon-

APRIL-MAY 2014 45 CONTENT

47 AmChamMeets Foreign Minister Maia Panjikidze

47 AmCham Meets with Foreign 50 CLT Committee, Agriculture 51 Membership Profile: Gebrüder Minister Maia Panjikidze Committee Discusses Weiss Amendments to Agriculture 48 AmCham President Speaks at Land Law 52 Membership Profile: Business US Embassy Roundtable on Information Agency Women in Business 50 AmCham HR & Training Committee Prepare Road Map 54 Membership Directory 48 BP Launches Southern for 2014 Corridor Project in Georgia 56 Social: an overview of major 50 Launch of AmCham Energy, events for members over the 49 Red Bull: Run, Raise Mining, and Utilities past two months Awareness for Spinal Cord Committee Injuries

49 EBRD Invests 1.9 Million Euros in Georgia

46 APRIL-MAY 2014 the Prime Minister MrGaribashvili, dur- AmCham members’ meeting ing his visit to the U.S., focused on the with Minister of Foreign Affairs positive factors in the future of Georgian economic and business development, Maia Panjikidze namely, on the positive ratings of inter- national organizations and independent On March 19 Georgian Foreign untapped potential to further deepen agencies on various aspects of economic MinisterMaia Panjikidzespoke about PM business and economic ties; alongside and business environment, as well as IrakliGharibashvili’s trip to the United state-to-state cooperation, businesses too on the establishment of the Georgian States and relations between Tbilisi and should be in the vanguard of this mutu- Co-investment Fund (GCF), which is to Washington during an open and frank ally benefi cial endeavor,” Panjikidze was provide additional funding to projects in discussion with AmCham members. The quoted as saying by the ministry press all priority sectors and attract new For- meeting was attended by more than 70 department. eign Direct Investment into the country. representatives of the U.S., international According to Panjikidze, a high level “We expect that new opportuni- and Georgian companies and diplomatic dialogue with the U.S. on the trade and ties will be grasped by investments in corps at the Sheraton Metechi Palace economic issues is intended to explore export-oriented manufacturing sectors, Hotel. a range of options for increasing bilat- for which access to our market would The Minister reaffi rmed that this visit eral trade and investment and expressed be attractive. was yet another confi rmation of strate- readiness to work to arrange discussions Therefore, together with the in- gic and partner co-operation between between technical experts and to reach ternational and local experts, we are Georgia and the U.S., during which the out to private sector stakeholders for undertaking an in-depth analysis of both sides expressed their readiness to input on priority issues. competitive sectors in order to fi nd ways enhance trade and economic relations The Minister stressed the need to how to stimulate investment infl ows, to between the two countries. sign the Association Agreement with the attract new technology and know-how “Georgia and the U.S. do have a good European Union, including the DCFTA, and create high value-added production record of cooperation in a wide range of which will provide the businessmen with in Georgia,”Panjikidze was quoted as economic issues, but there is far more new opportunities; and underlined that saying by the ministry press department.

APRIL-MAY 2014 47 AmCham President Speaks at Embassy

AmCham President Sarah William- son Speaks at US Embassy Roundtable on Women in Business. Williamson, together with Deputy Director of Sakpatenti (National Intel- lectual Property Center of Georgia) Eka Egutia, Deputy CEO of the Partnership Fund Natia Turnava, and Deputy Head of Legal Department of the National Bank of Georgia Tamar Goderdzishvili, spoke on a panel about women’s contributions to Georgia’s economic development, according to a US Embassy statement about the event. The panel discussion, held in celebra- tion of Women’s History Month, was opened by Ambassador Richard Norland.

BP Launches the Southern Corridor Project in Georgia

BP in Georgia offi cially launched the South Caucasus Pipeline Expansion Proj- ect (SCPX), a $2 billion investment that should create 2000 jobs, at the Radisson hotel on February 28. “The new Southern Corridor is designed to link the Caspian resources directly with European gas markets. Not only will it bring increased gas supplies and energy diversity to Europe but also bring benefi ts to all countries along the corridor,” Gordon Birrell, AGT Regional President, said in his speech. “It is expected to bring the largest single foreign investment of approxi- mately $2 billion to Georgia contributing to the country’s economic development.” The other benefits expected from Energy Minister KakhaKaladze and Chris Schlueter, the new Head of Country and Area Operating Manager for BP in Georgia. the project for Georgia include approxi- mately $400 million expenditure on local longer term. to make 62km pipeline looping from goods and services and 2000 direct jobs Within the framework of SCPX on the Azerbaijan border and 2km pipeline at the peak of construction, with approxi- the territory of Georgia, it is planned to looping at the Turkish border and to build mately 125 individuals employed in the construct two giant compressor stations, a metering station at the Turkish border.

48 APRIL-MAY 2014 Red Bull: Run, Raise Awareness EBRD Invests for Spinal Cord Injuries 1.9 Million

skeptical about this project, but now Euros in more and more people are asking ques- tions about spinal cord injury the clinical Georgia: trials and successes of Wing For Life spinal cord foundation. We think that Roundtable this project will play a big role for rising meeting awareness, especially for people in the wheelchairs, as we do not have proper infrastructure and accommodation for Victoria Taylor, Chief of Political them,” she said. and Economic Affairs Offi ce at the “We really hope that this project will US Embassy in Georgia provided a somehow provoke interest towards mak- candid overview of Prime Minister ing a better life for people who suffer Gharibashvili’s visit to the US where from spinal cord injury. We have around he met with President Obama, Vice 15 000 to 18 000 people in the wheel- President Biden, and other members chairs because of spinal cord injury.” of the Executive, Congress and Think- The event, which is being organized tanks during the monthly AmCham by Red Bull Caucasus in Georgia and meeting for members on March 10 at AmCham Georgia is supporting Red supported by many organizations, in- the Tbilisi Marriott. Taylor spoke about Bull Georgia’s efforts to organize Wings cluding AmCham Georgia, is unique events in Ukraine and took questions for Life, the biggest sporting event ever because it is a global race that occurs at from members. in Georgia on May 4. The race, which exactly the same time all over the world AmCham members also heard will raise funds and awareness about and has no fi nish line. a presentation by Bruno Balvanera, spinal cord injuries, will take place at ex- At the end of the world run, 2 global EBRD’s Director for Caucasus, Mol- actly the same time around the world. On winners (one man and one woman) will dova and Belarus who briefed mem- May 4, runners from around the world be named, who will be awarded with bers on EBRD’s activities in Georgia will start on a race with no fi nish line. an exclusive tour around the world. As and the region emphasizing that as NatiaAmiridze, the communications for the local winner (one man and one of January 2014 EBRD has invested manager for Red Bull Caucasus, said woman) they will have the opportunity a total of about 1.9 million Euros in the event and how it can make a differ- to choose the location where they will Georgia in various sectors. According ence in the lives of tens of thousands of participate in Wings for Life World Run to Balvanera, ICA - industry, com- Georgians. in 2015. The event is initiated by Wings merce and agribusiness - are areas “Wings For Life World Run will be for Life Foundation, which finances where the potential for investment is the biggest event held in the Georgian cutting-edge spinal cord research around there, but the realization has not yet history of sport. By holding the event the globe (around 90 until now), with the taken place. He also mentioned that we would like to raise more money and goal of fi nding ways to cure all people bonds worth 50 million lari will be awareness for spinal cord injury,” she affected by this dreadful injury.” issued soon. Balvanera also answered said in an email interview. Wings for Life was founded by Red questions about the position of EBRD Amiridze said that 100 percent of the Bull owner Dietrich Mateschitz. For with relation to the Ukraine crisis. entry fee – 20 lari – will go to research more information, please contact Am- Paul Clark, the president of TBSC and raising awareness for spinal cord Cham Georgia, [email protected], Consulting – AmCham’s news Patron injuries. or visit the Wings for Life website, www. Member - also gave a presentation “At fi rst Georgian people were very wingsforlifeworldrun.com. on the fi rm.

APRIL-MAY 2014 49 AmCham CLT Committee, Agriculture Committee Discusses Amendments to Agricultural Land Law change. Additionally, both committees will remain actively engaged in promot- ing a repeal of the ban and in developing a pro-investment state policy regarding the ownership of agricultural land.

The CLT committee also discussed the MOU that was recently signed with AmCham Georgia, Business Associa- tion of Georgia, International Chamber of Commerce, Association of Banks of Georgia, Employers’ Association and other business associations. The com- AmCham CLT committee met jointly Subsidiaries of microfinance organi- mittee agreed to stay strongly engaged with the Agriculture committee on March zations and banks; International and in a joint tax group that will be offi cially 5 to discuss the recent amendment to the sovereign fi nancial institutions; Private formed next week to address the follow- law on ownership of agricultural land international fi nancial institutions and the ing issues: Partial de-criminalization and which has already entered into force. The transfer of shares in Georgian companies differentiation of tax-related offences, recent amendment exempts commercial that owned agricultural land as of the Reform of the investigation department banks. AmChamhas proposed a draft law enactment of the suspension (June 2013) of the Ministry of Finance, Development that adds to the exemption for Georgian The committee is agreeing on the ex- of effective mechanisms for the review banks several other fi nancial institutions, act wording of our proposal and will take of tax disputes and Improvement of the including: Microfi nance organizations; all necessary steps to advocate for this mechanism of tax inspection. AmCham HR & Training Launch of Amcham Energy Committee Prepares Plans for 2014 Committee

AmCham HR/Training committee AmCham’s very fi rst energy commit- committee is already working closely Chaired by GAU’s MishaChkhenkeli, tee met March 5 to discuss the composi- with the Economic Council inter-agency met on March 21 to discuss the stra- tion, mission and scope of work of the working group under the Prime Minister tegic direction the committee should committee. to address these specifi c issues. choose in 2014 and beyond. Several In its initial stage the committee will The meeting was attended by Fron- project were discussed to include youth focus on addressing issues related to tera Resources Georgia, BOT, CanArgo engagement, cooperation with MCA VAT issues involving subcontractors of Georgia, BP, Statoil, and several other Georgia, skills needs assessment, and companies operating under a PSA; regis- energy related members who agreed to HR & Training professional develop- tration and easement of oil and gas assets expand the committee to include min- ment opportunities. The Committee and equipment on state owned property; ing and utilities companies as well as members identifi ed HR as one of the sending a positive and realistic message midstream and downstream industry main areas the committee should focus of oil and gas resources in Georgia; iden- companies. on. The committee discussed the pos- tifying legislation that needs clarifi cation If you are interested in becoming a sibility of adding a Co-Chair with ex- or improvement to support current and member of this committee, please contact pertise in the fi eld of Human Resources. new investors in the energy sector. The the AmCham offi ces.

50 APRIL-MAY 2014 Gebrüder Weiss in Georgia: World Class Services Tailored to Customers‘ Needs

Starting out in our home markets tomers around the clock – on land, on together with Logistics Solutions and in the Alp-Danube region and Eastern water or in the air. However, our range various projects, are: Land, Air & Sea Europe, today we move all kinds of of services goes beyond the provision of shipments. freight. Safely and punctually, from simple transportation: for us, intelligent Gebrüder Weiss LLC offers it’s continent to continent. Gebrüder Weiss logistics always begins with analysis, clients consolidations services from all has its own individual approach: we do procurement and distribution processes, main origins in Europe, Asia & United not present ourselves to our customers as and ends with optimal coordination of States. The optimization of the transpor- “system logisticians”, but rather, based all traffi c carriers. Just like clockwork tation processes ensures fast transit times on our worldwide network, we develop – where one cog in the wheel seam- and high quality customer service. services that are tailored to the respec- lessly intersects with the next – we take tive customer’s specifi c requirements. advantage of existing synergies and The foundation for this are our more increase economic viability as well as than 162 locations, thousands of routes, the sustainability of transport solutions. and of course more than 6,000 GW em- Find out more about our comprehensive ployees, who seemlessly combine your range of services! production, business and transportation In September 2013 Gebrüder Weiss processes. For you this means: greater had an official opening of it’s world transparency, greater effi ciency – and a class logistics center in Tbilisi, which partner on whom you can always rely. has become a decisive connection point We are anchored locally, at home between Europe, Caucasus & Central globally and are available for our cus- Asia.Main activities of the company,

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52 APRIL-MAY 2014 Business Information Agency

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www.bia.ge www.bcat.ge 47/57 M.Kostava str. 0179, Tbilisi, Georgia Tel: (+995 32) 219 55 55 E-mail: [email protected] AmCham Company Members as of April 2014

PATRON MEMBERS CGS Group Greco Group SEAF Management LLC 4 Freedom Sq. 1 Nutsubidze St. 7, Niko Nikoladze St. II Floor. BP Exploration Georgia Tel: 2433410 Tel: 2393138; Fax: 2311107 Tel: 2998115; Fax: 2923533 38 Saburtalo St. www.cgsgroup.ge www.greco.ge www.seaf.ge Tel: 2593400; Fax: 2593488 CH2M Hill Sheraton Metechi Palace Hotel www.bp.com Gryphon - FK 5th Floor, GMT Plaza, Freedom 20 Telavi St. 8603 Westwood Dr. Suite 310 Square Tel: 2772020; Fax: 2772120 Exxon Azerbaijan Ltd Vienna, Va 22182, USA Tel: 2474040; Fax: 2470210 www.sheraton.com/tbilisi Landmark Suite 300, 95 Nizami St., Tel: 1 703 992 8664 Baku, AZ1010 Azerbaijan www.ch2m.com www.gryphonairlines.com T&K Restaurants (McDonald’s Tel: (994-12) 4982460; Fax: (994-12) Chemonics International Georgia) 4982472 6a N. Ramishvili St., 0179 1 Dzmebi Kakabadze St. www.exxonmobil.com GT Group Tel: 2234311; Fax: 2234309 48 B. Cholokashvili St. Tel: 2921246; Fax: 2251422 www.chemonics.com www.mcdonalds.ge PricewaterhouseCoopers Tel: 2740740 Dechert Georgia LLC www.gtgroup.ge 7 Bambis Rigi St., 0105 TBC Group 7th fl oor, Pixel building, Tel: 2508050; Fax: 2508060 7 Marjanishvili St. 34 Chavchavadze avenue www.pwc.com/ge GULF Georgia Tel: 2272727; Fax: 2228503 Tel: 2334719 by Sun Petrolium Georgia LLC www.tbc.com.ge TBSC Consulting www.dechert.com Pixel Business Center, 34 Chavchavadze Ave. 3, Rapiel Eristavi Street, IV Floor Deloitte TMC Global Professional Tel/Fax: 2496444 Tel: 2959019; Fax: 2420215 36a, L. Asatiani St., 0105 Services www.gulf.ge www.tbsc.ge Tel: 2244566; Fax: 2244569 6001 Indian School Road NE, Suite www.deloitte.ge 190, Albuquerque, NM 87110, USA UGT Iberia Refreshments, JSC Tel: (1 505) 8723146 17a Chavchavadze Ave., 7th fl oor Diplomat Georgia Tetri Khevi Hesi District, Orkhevi www.tmcservices.com Tel: 2220211; Fax: 2220206 65, Kakheti Highway Tel: 2241091; Fax: 2241090 www.ugt.ge Tel: 2984950 www.pepsi.ge www.diplomat.ge CORPORATE B MEMBERS Aliance Georgia Ltd DLA Piper Georgia LP KPMG Georgia LLC CORPORATE A MEMBERS 33 Samurzakano St. 10 Melikishvili St. 3rd Floor, Besiki Business Center, Tel: 2243773 Alliance Group Holding, JSC Tel: 2509300; Fax: 2509301 4 Besiki St., 0108 www.groupaliance.com 47/57 M. Kostava St., 0179 www.dlapiper.com Tel: 2935713; Fax: 2982276 Tel: 2424181; Fax: 2998112 www.kpmg.ge www.agh.ge Economic Prosperity Initiative Assecco Georgia (EPI) 21 I. Mosashvili St., 3rd Floor Maersk Georgia LLC Auto Service Caucasus 6 Samghebro St. Tel: 2720901 6 Khetagurov St. 5 Shalikashvili St. Tel: 2438924 www.assecco.ge Tel: 2200800; Fax: 2200815 Tel: 2208080 www.epigeorgia.com www.maerskline.com www.precisiontune.com Aversi Pharma EY Georgia 148/2 Aghmashenebeli Ave. Avon Cosmetics Georgia LLC 44 Kote Abkhazi St. Magticom Tel: 2987860 117 Tsereteli Ave. Tel: 2439375; Fax: 2439376 5 Politkovskaya St. www.aversi.ge Tel: 2226805; Fax: 2226806 www.ge.ey.com Tel: 2171717; Fax: 2171171 www.avon.com FINCA Georgia www.magticom.ge Bagebey City Group 71 Vazha-Pshavela Ave. 3rd fl . 49b Chavchavadze Ave. F H Bertling Georgia Ltd. Tel: 2207410 Marriott Hotels, Resorts & Suites Tel: 2913152; Fax: 2290169 10 Shevchenko St. www.fi nca.ge 13 Rustaveli Ave. www.bagebeycity.com Tel: 2252287 Tel: 2779200; Fax: 2779210 www.bertling.com Frontera Resources Georgia www.marriott.com Baker Tilly Georgia Ltd. 12 Paliashvili St. Meidan Palace, 44 Kote Abkhazi St. Betsy’s Hotel / Prosperos Books Tel: 2252412 Tel: 2505353; Fax: 2505353 Microsoft Georgia LLC 32/34 Makashvili St. / 34 Rustaveli www.fronteraresources.com www.bakertillyinternational.com 34 Chavchavadze Ave. Ave. Georgian American Alloys, Inc. Tel: 2970123 Tel: 2987624, Fax: 2923592 Bank Constanta 200 S Biscayne Blvd Suite 5500, www.microsoft.com www.betsyshotel.com 139 Tsereteli Ave. Miami FL 33131 USA Tel: 2401401 Tel: (1)3053757560 Booz Allen Hamilton, Inc. NRC www.bankconstanta.ge www.gaalloys.com 4 Freedom Sq. 9 Khvichia St. 0160 Tel: 2244141, 2382825 Tel: 2481348; Fax: 2481349 Georgian American University Bank of Georgia www.nrccintl.com www.boozallen.com 8 Aleksidze St. 3 Pushkin St. Tel: 2206520; Fax: 2206519 Tel: 2444134; Fax: 2983269 British American Tobacco www.gau.ge Pfi zer Luxembourg SARL www.bog.com.ge 71 Vazha Pshavela Ave. Representation Offi ce in Georgia Tel: 2157500/01/02; Fax: 2157503 Georgian Audit & Consulting 58 I. Abashidze St. Bank Republic www.bat.com Company Tel: 2252986 2 Gr. Abashidze St. Axis Business Pl, 2 Gamrekeli St. www.pfi zer.com Tel: 2925555; Fax: 2925544 Catoni & Co. Georgia Tel: 2904522; Fax: 2904523 www.republic.ge www.gacc.com.ge 7 Dzmebi Zubalashvilebi St. Philip Morris Apt.22/23 1 Tabidze St. Basis Bank JSC Tel: 2989230; Fax: 2922264 GMT Group 1 Ketevan Tsamebuli Ave. 4 Freedom Square Tel: 2439001; Fax: 2439005 www.hapag-lloyd.com www.philipmorrisinternational.com Tel: 2922922; Fax: 2986548 Tel: 2988988; Fax: 2988910 www.basisbank.ge Caucasia Trading www.gmt.ge Apt 11, Bld 7, 16 Krtsanisi St. ProCredit Bank Batumi Oil Terminal Gosselin Moving Georgia 154 Agmashenebeli Ave. Tel: 14433050083; Fax: 3 M/D, Didi Digomi GMT Plaza, 4 Freedom Sq. 14433788388 Tel: 2202222; Fax: 2202222-2226 Tel: 2241818; Fax: 2241817 Tel: 2596601/02/03; Fax: 2596600 www.procreditbank.ge www.caucasiatrading.com www.moving.gosselingroup.eu www.batumiport.com Caucasus University Grant Thornton LLC Radisson BLU Iveria Hotel BDO LLC 77 Kostava St., Bld.6, 4th fl . 61 D. Aghmashenebeli Ave. 1 Rose Revolution Sq. Pixel Center 8th fl oor Tel: 2377777; Fax: 2313226 Tel: 2604406 Tel: 2402200; Fax: 2402201 Tel: 2545845; Fax: 2399204 www.cu.edu.ge www.grantthornton.ge www.radissonblu.com www.bdo.ge

54 FEBRUARY-MARCH 2014 BGI Advisory Services Georgia Georgian Resources Company National Center for Dispute Teliani Valley JSC 18 Rustaveli Ave., II fl oor 3-5 Kazbegi St. Resolution 2 Marshal Gelovani Ave. Tel: 2997292; Fax: 2996615 Tel: 2936676 4/7 Rustaveli St., Rustavi Tel: 2313245; Fax: 2313249 www.bgi.ge www.georgianresources.com Tel: 2193406 www.telianivalley.com www.ncdr.ge BLB (Business Legal Bureau) Globalink Logistics Group Theco Ltd. 1 Shevchenko St, Apt.1 14-A Shartava St, 2nd fl , Suite 7 New School - Int-l House 16 Chikovani St. Tel: 2995797 Tel: 2253262; Fax: 2439002 35 Tskneti Highway, Bagebi Tel: 592107515 www.blb.ge www.globalinkllc.com Tel: 2231728 www.tbilisia.ru www.newschoolgeorgia.com BLC Law Offi ce Goodwill (G-Mart) 4 Gudiashvili Sq. 1 Parnavaz Mepe Ave. 0131 Thermarsenal Ltd. Tel: 2922491; Fax: 2934526 Tel: 2243673; Fax: 2243673 Nodia, Urumashvili & Parnters 101, Tsereteli Ave. www.blc.ge www.goodwill.ge Offi ce #28, IV Block, Tel: 2473112 71 Vazha-Pshavela Ave. www.arsenal.ge Canargo Georgia Gvinadze & Partners LLC Tel: 2207407 67 Aghmashenebeli Ave. 44 Kote Abkhazi St, Tbilisi 0105 www.nplaw.ge Tel: 2332527 VD Capital Tel: 2438970, Fax: 2438971 77 Kostava St., 0175 Capto Group www.gvinadzeandpartners.ge Orifl ame Georgia Tel: 2363672; Fax: 2364302 67 Aghmashenebeli Ave. 57 Uznadze St. Holiday Inn Tel: 2558899 Tel: 2911064; Fax: 2911068 Wimm-Bill-Dann Georgia Ltd 1, 26 May Sq., 0171 www.rsmcapto.ge www.orifl ame.ge Village Ponichala, Tbilisi 0165 Tel: 2300099 Tel: 2475290 www.hi-tbilisi.com Casino Adjara Overall Management Group www.wbd.ru 1, 26 May Sq. (OMG) Inc. Hualing International Special Tel: 2335519; Fax: 2334520 29 Marjanishvili St. Economic Zone Wings and Freeman Capital www.casinoadjara.com Tel: 2436052; Fax: 2436052 25 Apt. 34/36 Kobuleti St. Green Building, 6, Marjanishvili St. Caucasus Online LLC Tel: 591005900 Tel: 2940051; Fax: 2940053 71 Vazha-Pshavela Ave. www.hualing.cn Paine Stevens LLC www.wfcapital.ge Tel: 2480048; Fax: 2480048 1 Ivane Javakhishvili Sqr. www.caucasus.net Imedi TV Tel: 2903211, Fax: 2903291 Wissol Georgia 51 Ljubljana St. www.painestevens.com 74b Chavchavadze Ave. Channel Energy (Poti) Limited Tel: 2464646 Tel: 2915315; Fax: 2915615 Georgia LLC, By Petrocas Energy www.imedi.ge Policy and Management www.wissol.ge Group Consulting Group (PMCG) 52, David Agmashenebeli St., Poti Imperial Tobacco International 57 Uznadze St., 4th Floor Tel: (995493) 2-7-08-60 Limited Representative Offi ce in Tel: 2921171 www.petrocasenergy.com Georgia www..pmcg.ge NON-PROFIT ORGANIZATIONS 12 Dariali Turn, 0162 Château Mukhrani, J.S.C. Agricultural University of Tel: 2232438 Publicis Hepta III fl oor, Didube Plaza, Georgia www.imperial-tobacco.com 17 V. Jorbenadze St. 116 Tsereteli Ave. 140 David Aghmashenebeli Alley Tel: 2201878; Fax: 2201878; Tel: 2745672; Fax: 2745671 JTI Caucasus Tel: 2594901 www.mukhrani.com www.publicishepta.com VII Floor, Pixel Business Center, www.agruni.edu.ge 34 Chavchavadze Ave. City & Co. Rakeen Development LLC Tel: 2604111 American Friends of Georgia 4 Besiki St. Pixel Business Center, www.jti.com 77 Nutsubidze St. Tel: 2920921 34 Chavchavadze Ave. Tel: 2397174; Fax: 2388495 Tel: 2933393; Fax: 2933993 Crystal, MFO JSC Kordzahia, Jgenti Law Firm www.afgeorgia.org 72 Tamar Mepe St. Kutaisi, 4600 10 Petriashvili St. www.rakeen.ge Tel: 431253343 Tel: 2921878 CARE International in the www.crystal.ge www.kjlaw.ge Rustavi Azot Ltd. Caucasus 2 Mshvidoba St. Rustavi-3702 37 Tsagareli St., 0162 David Tvildiani Medical Univesity KSB Bank Tel: 995341270900 Tel: 2291941 2/6 Ljubljana St. 3 Ketevan Tsamebuli Ave. www.azot.ge www.care-caucasus.org.ge Tel: 2516898, Fax: 2527196 Tel: 2550000, Fax: 2507707 www.aieti.edu.ge www.ksb.ge Rustavi Steel LLC Eurasia Partnership Foundation 12 Y. Gagarin St., 3700 Rustavi 3 Kavsadze Str. Dika Ltd. Legal Partners Associated LLC Tel/Fax: 260 66 99 Tel: 2253942; Fax 2252763 (ext. 112) 40 Rustaveli Ave. Offi ce #203, Besiki Business Center, www.rmp.ge www.epfound.org Tel: 2990994; Fax: 2990994 4 Besiki St. 0108 Tel: 2200203; Fax: 2250458 Gebrüder Weiss LLC Sayali Ltd. www.lpa.ge Free University of Tbilisi Airport Adjacent Territory, 6 Ushangi Chkheidze St. 140 David Agmashenebeli Alley Kakheti Hwy Lemondo LLC Tel: 2951212; Tel: 2200901 Tel: 2710011 13 Dzotsenidze St. www.sayali.ge www.freeuni.edu.ge www.gw-world.com Tel: 2193377 GeoCapital Microfi nance www.lemondo.com Silknet Ltd. Georgian Wine Association Organization Ltd. 95 Tsinamdzgvrishvili St. 12 Mtatsminda St. 5 Tsereteli St, Kutaisi Liberty Bank JSC Tel: 2910345; Tel: 2505456 Tel: 431 267070 74 Chavchavadze Ave. www.silknet.com www.geocapital.ge Tel: 2555500; Fax: 2912269 QSI International School of www.libertybank.ge Simple as That LLC Georgia Geocell Pixel Business Center, Village Zurgovani, Tbilisi Luca Polare 3 Gotua St. 34 Chavchavadze Ave. Tel: 2537670; Fax: 2322607 54 Oniashvili St. Tel: 2770100, ext. 7435; Tel: 2945568 www.qsi.org Fax: 2770119 Tel: 2990399 www.simple-georgia.com www.geocell.ge www.lucapolare.com Salvation Army SRG Investments LLC 16 Ikalto St. GeoEngineering LLC Mina JSC 49a Chavchavadze Ave, 3rd fl oor Tel: 2333786; Fax: 2330227 15a Tamarashvili St. 4 Besiki St. Tel: 2253581 www.salvationarmy.org Tel: 2311788; Fax: 2311787 Tel: 2449981/82/83; Fax: 2449980 www.silkroad.ge www.geoengineering.ge www.mina.com.ge Transparency International Georgian Airways Mira-Group Ltd. Statoil Georgia 12 Rustaveli Ave. Brose Street Turn,Old Tbilisi GMT Plaza, 4 Freedom Sq. 26 Rustaveli Ave. 0108 Tel: 2999730; Fax: 2999660 Tel: 2242244/55/88 Tel: 2471002 Tel: 2932129 www.georgian-airways.com www.riverside.ge www.statoil.com www.transparency.ge

FEBRUARY-MARCH 2014 55 AMCHAM CELEBRATES

The U.S. Embassy honored International Women of Courage Award Winner Bishop Rusudan Gotsiridze at the annual Women’s History Month reception on March 19th.

UNDP Gender Equality Awards honor AmCham members on March 7th

Sheraton Metechi Palace Hotel’s Andreas Heidingsfelder bids a fare farewell Vincent McDonnell who was a loyal guest at the hotel for 15 years.

56 FEBRUARY-MARCH 2014 G

AMCHAM CELEBRATES

AmCham President Sarah Williamson hosted a farewell party for Board Member Neil Dunn at her home in March. Neil and his wife Michele, as well as many friends, attended the event.

On March 29, Sheraton Metechi Palace hosted its annual Earth Hour event. Guests, like GNTA Head Giorgi Sigua, celebrated the planet with an hour of darkness.

FEBRUARY-MARCH 2014 57 Board Of Directors 2014

Sarah Williamson, PRESIDENT R. Michael Cowgill, In Tbilisi since June 1998, Sarah Williamson is First Vice-President the co-owner and Vice President of United Global In his 15th year in Georgia, Michael Cowgill is the Presi- Technologies (UGT), the largest IT company in dent and co-founder of Georgian American University Georgia. (GAU) in Tbilisi, Georgia, with schools of business, law & social sciences, natural sciences & engineering and liberal arts & humanities. He also continues to develop international energy projects which he has done for the past 38 years in over 40 countries.

Irakli Baidashvili, Esben Emborg, Director Vice-President & Treasurer Esben Emborg has been in Georgia since 1999. He Irakli Baidashvili is the Senior Vice President of has worked a General Manager for Caucasus Region GMT Group. The company is one of the largest US for Cadbury Schweppes and Nestle until 2008. Now direct investments in Georgia, the owner of two he is working as Principal Partner for an Investment Marriott hotels, production facility SANTE and Fund (SEAF) that is currently managing a $30m several major real estate sites in Tbilisi . portfolio of investments all over Georgia.

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

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

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

David Lee, Chairman Emeritus K.G. Moore, Ex-Officio Member David Lee is the General Director of Magticom, the K.G. Moore is Deputy Chief of Political and Eco- largest telecommunications operator in Georgia and nomic Affairs and Senior Economic Offi cer at the took up his position March 2004. David is also the U.S. Embassy in Tbilisi. Prior to arriving in Tbilisi Chairman of the Eurasia Partnership Foundation he served as the Senior Georgia Desk Offi cer at the and is a Chartered Accountant with an MBA from Department of State in Washington and worked in Warwick Business School. A Russian speaker, he the Department’s Offi ce of United Nations Politi- has worked extensively in the former USSR and cal Affairs, which focuses on UN Security Council served as a Royal Naval Offi cer for 9 years. matters.

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

58 APRIL-MAY 2014