Stepping Closer to the EU's Common Market

HOW WILL BUILDING THE BRAND: SAYING THE EU DEAL GOODBYE TO IMPACT THE AN INTERVIEW WITH SHEVARDNADZE REGION? SOSO GALUMASHVILI

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

ISSUE 40 AUG.-SEPT. 2014

Stepping Closer to the EU’s Common Market

AUGUST-SEPTEMBER/2014 • Investor.ge | 3 Investor.ge CONTENT

6 STEM Education for Girls in Georgia A visualization by JumpStart Georgia

7 Investment News A brief list of major investments in Georgia as reported by Georgian media.

10 Regional Implications of the Georgian-EU 10 Association Agreement Georgia ratified its Association Agreement with the EU on July 18. Investor.ge asked Richard Giragosian, the director of the Regional Studies Center (RSC), to analyze the potential impact.

16 Vato Lejava: Maximizing the Gain, Minimizing the Pain of the EU-Deal

17 Georgia: Preparing for NATO’s “Substantive Package” in Wales Investor.ge republishes Monica Ellena’sBNE magazine interview with Minister of Defense IrakliAlasania about the 17 up-coming NATO Summit in Wales, slated for September. 19 Tkemali: Introducing the world to Georgia’s tasty, tangy sauce

22 Sanctions Against Russia: An Overview

24 New Rules for Investment Funds: The Key to Developing Capital Markets in Georgia For years, direct investment has overshadowed portfolio investment in Georgia and hampered the development of the local capital market.

26 Building the Brand: an interview with Soso Galumashvili 20 Marketing and branding are a foregone conclusion in developed economies where perception about a product can be more important than the good itself.

30 Tbilisi’s Underground City: The Tunnels that Beria Built Lavrenty Beria, the Community Party’s secretary in Georgia from 1931-1938, is famous for his cruelty and his love of architecture. While his mark on Tbilisi’s skyline is well known, Beria’s legacy also includes a less well known system of tunnels under the city streets.

34 “I did nothing wrong:” A journalist reflects on the 30 late Georgian President Eduard Shevardnadze

46 NEWS ...... 36

4 | Investor.ge • JUNE-JULY/2014 AUGUST-SEPTEMBER/2014 • Investor.ge | 5

EU COMMITS TO €330-410 max and Post-Panamax ships. The Port will MILLION (780-970 MILLION GEL) be able to process more than 100 million Investment tons of mixed cargo. This is a really large IN ASSISTANCE scale and undoubtedly gives Anaklia the The EU has pledged to provide Geor- basis to become a crucial logistical hub gia with up to 970 million Lari from 2014- for Caucasia and Central Asia,” he said 2017 to help ﬁ nance the country’s demo- during the presentation. cratic reforms, Georgian media reported NEWS on July 18. The funds are part of two deals that were signed between Tbilisi and Brus- 34 HOUR CARGO TRANSPORT TO sels with Georgia to ratify the country’s AZERBAIJAN Association Agreement with the EU: Single A Poti-Baku cargo train route was A BRIEF LIST OF MAJOR Support Framework (SSF) 2014-2017 and restarted on July 15, Georgian media reported. The route, known as the Silk Bridge, INVESTMENTS IN GEORGIA The Financing Agreement for the Euro- pean Neighbourhood Program for Agri- will cut transport time for cargo from AS REPORTED BY culture and Rural Development (ENPARD), “several days” to just 34 hours, agenda. GEORGIAN MEDIA. IF YOU agenda.ge reported. ge reported on July 17. HAVE ANY INVESTMENT TIPS The train will operate on Tuesdays OR PROJECTS YOU WOULD GEORGIAN GOVERNMENT and Saturdays, agenda.ge quoted Levan LIKE TO INCLUDE IN THE LIST Jgarkava, the director of Trans Caucasus ANNOUNCES NEW ANAKLIA Terminals LLC, as saying. FOR THE NEXT ISSUE, PORT PROJECT The route, which will eventually extend PLEASE CONTACT Georgian Prime Minister Irakli Ghari- to Central Asia and China, will be oper- [email protected]. bashvili formally launched the state’s new ated by a German company through an program for developing Anaklia Port on agreement with Trans Caucasus Terminals July 10, Georgian media reported. and Azerbaijan Railways, the website said. “It is very important that the Anaklia Trans Caucasus Terminals is a part of Port is able to receive large sized Pana- Georgian Railway.

AUGUST-SEPTEMBER/2014 • Investor.ge | 7 Georgia

all, for the institutions of democracy, and for the law… “Your commitment over recent years, Ratifies under successive governments, to pursue ambitious reforms leaves no room for doubt,” Füle said. “Georgians know only too well that rewards come to those who put in the effort. But this is your choice, and EU Deal you can count on the European Union to support you in that choice… “I know that some Georgians fear that implementing the Association Agreement will prove costly. No one should be under On July 18, the Georgian Parliament ratified the country’s Association the illusion that these reforms will be easy. Investment will be needed to meet new Agreement with the European Union, paving the way for Georgia to implement regulatory standards, for example. But the reforms and obligations the country needs to fulfill to become closer to some benefi ts will quickly become ap- the European Union and its Common Market. The agreement is a huge step for parent.” Georgia, a step toward European standards for business, trade and economic EU AMBASSADOR TO GEORGIA policy – as well as for a higher level of democracy, human rights protection, PHILIP DIMITROV: and rule of law. The following is a collection of quotes from Georgian and “As for the recommendations, you have to fulfi ll the Association agenda. Of European politicians about the agreement, its potential impact on Georgia and course, the Association Agreement con- the road forward to implement it. siders that the Georgian market will enter the joint European market… “This process will have its stages, but Georgia will immediately receive the main benefi t. Of course, I do not mean that PRIME MINISTER IRAKLI peans have already existed for centuries. Georgian business will be given breakfast in bed, but the country will be provided GHARIBASHVILI, SPEAKING AT This is a relationship which has stood time… “The Association Agreement is an with modern resources and your effort PARLIAMENT ON JULY 18: action plan for our country’s moderniza- should be great to receive them.” congratulate, on this historic tion, Europeanization, and we should event, everyone for whom implement this plan thoroughly. This plan US AMBASSADOR RICHARD “I democratic values are pre- envisages commitment to democratic cious, as well as those who are committed NORLAND: principles and I believe that it will be the “The signing and ratifi cation [of the to European democratic ideals and who process of tireless work.” Association Agreement], following the see Georgia’s future within the large family ‘pause’ in the political season after the of European states… recent elections, represent an opportu- “I am confident that Georgia has EUROPEAN NEIGHBORHOOD nity for all Georgians to now focus on a already overcome its most critical time… POLICY, STEFAN FÜLE: future-oriented agenda that will enhance “June 27, 2014 was written in the “Using the Association Agreement political stability, improve the investment history of our homeland as a new date as its foundation, Georgia will introduce climate, expand economic growth, and of importance. The historic dream of all reforms which will progressively bring the create jobs… Georgians came true on this day. This country into the European mainstream – “While only Georgians can decide day has brought us closer to Europe – the economically, socially, and politically… their national priorities, the challenges of space which is so near and natural for us, “Given the difficult situation in the the moment call for all of Georgia’s ener- the space which our country had been wider region, I believe that Georgia’s pro- gies to be focused on the future, and the artifi cially kept apart from for hundreds European forces have a strong interest U.S. is committed to supporting that path.” of years, and the idea of unifi cation with in uniting. You have a common interest which has been brought to us by numerous in capitalizing on this great potential for generations of Georgians… unity,” Füle said. “I urge all of you to refl ect MP GIGLA AGULASHVILI: “Now we are standing on the verge of a spirit of unity and solidarity in the execu- “The ball is in our court and now it is fully this space. We should enter Europe as a tion of your responsibilities as Georgia’s up to us to use the opportunities provided country with an ancient history and unique leaders. by this agreement...With the ratifi cation of culture; a country which will make its con- Disagreement and debate are essen- this agreement we are carefully knocking tribution to the diverse European culture. tial in a healthy democracy, along with on the EU’s door… and we will keep on Our ideological links and those of Euro- respect for divergent views and, above knocking on this door.”

8 | Investor.ge • AUGUST-SEPTEMBER/2014 AUGUST-SEPTEMBER/2014 • Investor.ge | 9 Georgian Prime Minister Irakli Gharibashvili

REGIONAL IMPLICATIONS OF THE GEORGIAN-EU ASSOCIATION AGREEMENT

10 | Investor.ge • AUGUST-SEPTEMBER/2014 Armenian President Serzh Sargsyan Azeri President Ilham Aliyev

GEORGIA RATIFIED ITS ASSOCIATION AGREEMENT WITH THE EU ON JULY 18. INVESTOR.GE ASKED RICHARD GIRAGOSIAN, THE DIRECTOR OF THE REGIONAL STUDIES CENTER (RSC), AN INDEPENDENT THINK TANK IN YEREVAN, ARMENIA, TO ANALYZE THE POTENTIAL IMPACT OF TBILISI’S MOVE TOWARD EUROPE ON THE REST OF THE REGION.

RICHARD GIRAGOSIAN*

AUGUST-SEPTEMBER/2014 • Investor.ge | 11 THE BROADER IMPACT a misguided decision to “mortgage” the hile the new Association country’s future in favor of submitting Agreement represented to Russia. Wan important success for Over the medium-term, however, Georgia, the move will also impact the Armenia may actually be able to salvage broader South Caucasus region in several its strategic future and avoid being drawn RICHARD GIRAGOSIAN IS THE ways. First, the Association Agreement into the Customs Union. As the repeated DIRECTOR OF THE REGIONAL not only brings Georgia closer to the EU, delays over its bid to join the emerging STUDIES CENTER (RSC), AN it also creates a new dividing line in the Eurasian Economic Union (EEU) have INDEPENDENT THINK TANK IN South Caucasus. And in this context, demonstrated, there are now serious YEREVAN, ARMENIA. there is a new disparity between Georgia doubts over Armenia’s possible membership in the Russian-dominated project. In a largely symbolic move, and its neighbors. the Georgian parliament At the same time, Georgia’s suc- Although the three member states of formally ratifi ed its Association cessful concluding of the Association Russia, Belarus and Kazakhstan have Agreement with the European Agreement effectively reaffi rms Geor- agreed to launch the EEU by January Union (EU) on July 18. The gia’s position as the “center of gravity” 2015, it is now increasingly unlikely agreement, which was for Western engagement in the South that Armenia will overcome resistance signed on June 27 in Brussels, from Kazakhstan and Belarus. Never- represented a crowning Caucasus. That prominence has waned achievement for Georgia and weakened in recent after several years of complex years, but with the con- negotiations, and elevated clusion of the Associa- While the new Association Georgia one step closer to tion Agreement, which Europe. neither Armenia nor Although the endorsement Agreement represented an was no surprise, the Georgian Azerbaijan has attained, government fulfi lled a key Georgia has once again important success for Georgia, tenet of the country’s strategic emerged as the regional bid to solidify its Western leader. the move will also impact orientation. Together with For Armenia, the Ukraine and Moldova, the Armenian president’s Association Agreement is also the broader South Caucasus an essential move towards surprise September strengthening Georgian 2013 decision to aban- region in several ways. statehood in the face of don its own Association looming Russian pressure. Agreement in favor of Beyond the strategic joining the Russian-led signifi cance, the agreement Customs Union not only damaged the theless, Armenia remains hindered by also offers Georgia concrete its own over-dependence on Russia, a benefi ts. It will grant country’s relationship with the West, “unfettered access” to the but also further deepened Armenia’s factor that has only helped to undermine large EU market, while also vulnerable position within the Russian Armenian independence and weaken its offering a serious reduction of orbit. Moreover, that sudden “U-turn” sovereignty. EU tariffs on Georgian imports. in policy was more than simply a For Azerbaijan, there was never any In turn, although Georgia will missed opportunity. Rather, the move real desire for an Association Agreement also be required to slash its with the EU. Rather, the policy priority own tariffs on EU imports, such effectively undermined the credibility a reduction will be imposed of the Armenian government, weakened for Baku has always been to avoid any on a more gradual basis, the course of reform, and sidelined the closer alignment to Brussels, and instead, allowing Tbilisi to “protect” its political standing of reformers within limit the relationship to energy coopera- own “strategic sectors” from the government. The decision was also tion. In this way, the Azeri government immediate competition. seen as a strategic blunder, representing was able to further weaken European

12 | Investor.ge • AUGUST-SEPTEMBER/2014

Georgian PM Irakli Gharibashvili, Parliament Speaker Davit Usupashvili, Energy Minister Kakha Kaladze and Georgian President Giorgi Margvelashvili celebrate the ratification of the EU agreement leverage over the country and mute EU deepen further, each country is entering ship in the Customs Union. For example, concerns over egregious violations of a new period of uncertainty. under each scenario, the tariff structure of human rights and serious shortcomings This uncertainty over the course of bilateral trade will be modiﬁ ed. in democratization and reform. bilateral relations stems from the direct For Georgia, this means that possible political and economic implications from Armenian membership in the Russian- COMING CHALLENGES both Georgia’s Association Agreement led trade bloc would require Armenia In light of the new division in the and from Armenia’s possible member- to impose significantly higher tariffs region, marked by the and duties on its imports. Georgian Association It may also be forced to Agreement, there are For the Georgian government, the challenge adopt additional barriers several signiﬁ cant trends stems from the combination of high to Armenian-Georgian now underway. trade because of the asso- First, although there expectations from the Georgian population, ciation agreements. And is a sincere recognition a likely result may be an on the part of both Ye- eager for immediate economic gain, and increase by Georgia of revan and Tbilisi that the imperative for real reform through the its transit fees for Arme- the future of Armenian- nian exports and imports Georgian relations must implementation phase of the EU agreement. through Georgian terri-

14 | Investor.ge • AUGUST-SEPTEMBER/2014 tory, which would directly impact over Moscow-inspired campaign to assault ereignty and threats to its statehood, the two-thirds of all Armenian foreign trade. and undermine European values. Such likelihood of a resurgent Russian attempt A second trend may be even more a Russian-directed campaign may seek to undermine Georgia, pressure Armenia serious. More specifi cally, the impact of to exploit more conservative elements and arm Azerbaijan has now become the EU Association Agreement on Rus- within Georgia, such as the Georgian a greater and more realistic concern. sian policy poses a signifi cant challenge Church, in a bid to misrepresent EU Moreover, in light of Russian complicity to not only Georgia or even the region ideals as a threat to Georgian “family in the downing of a civilian aircraft by as a whole, but also to the European values.” Such a scenario would require its own proxy force in eastern Ukraine, Union itself. greater efforts by the Georgian govern- Moscow may be even less deferential to For the Georgian government, the ment and society in defending its own deterrence or dissuasion. challenge stems from the combination tolerance and freedom. And fi nally, this new post-Associa- of high expectations from the Georgian More broadly, however, the danger tion Agreement period will be a serious population, eager for immediate eco- here is not coming from a Russia confi - test for the EU. This test of commit- nomic gain, and the imperative for real dent and secure in its power and infl uence ment and resolve will also not be easy, reform through the implementation phase in the region. Instead, the bigger threat especially judging by the inadequate of the EU agreement. comes from a weak and unpredictable response by the EU to the Ukrainian Although Georgia is much less vul- Russia that no longer pursues rational crisis to date. Thus, as much as the new nerable to Russian pressure, as Moscow policies based on any coherent cost- Georgian Association Agreement stands has fewer and more meager instru- benefi t analysis. And in the wake of as a strategic victory for Tbilisi, the more ments of leverage over Tbilisi, there are Russian aggression in Crimea and its diffi cult period of implementation is now already signs of concern over a fresh continued violation of Ukrainian sov- only just beginning.

ADVERTISEMENT car – quality and safety and so on. But you have to pay for it.” VATO LEJAVA: That cost will come in various forms and hit different areas of the economy in a variety of ways. For example, Lejava said, Georgian businesses could feel the impact of the reforms in the MAXIMIZING THE GAIN, new standards for inspections – which will span from food safety to labeling products that Georgia imports. “It is a global experience that the weaker the institutions, the MINIMIZING THE PAIN more painful the reforms are. We cannot claim that we have the best institutions in the world,” he said. “And institution building and strengthening, and market sur- OF THE EU-DEAL veillance and supervision should go hand in hand, which is not an easy task.” INVESTOR.GE SPOKE WITH VATO LEJAVA, THE Good reforms, he said, will include transparent rules for inspec- CHANCELLOR OF THE FREE UNIVERSITY OF tion, check lists for inspectors – and strict limits on their discretion. TBILISI AND FORMALLY A CHIEF ECONOMIC It will also include clear procedures for litigation if businesses ADVISOR FOR FORMER PRIME MINISTER disagree with the government’s assessment, and reasonable caps on fi nes. NIKA GILAURI, ABOUT GEORGIA’S NEW Lejava underscored that, while EU standards are tough, EU ASSOCIATION AGREEMENT AND ITS countries are offered some leeway in how they are rolled out POTENTIAL IMPACT ON THE ECONOMY. and implemented at home: for instance EU legislation does not defi ne the size of the fi nes that should apply in Georgia, so Tbilisi has the authority to make them “proportional” to Georgian reality. That also means the Georgian government has the power ore investment, more jobs, more trade, to apply other changes that Brussels requires to the reality on more contact with Europe – the Asso- the ground. So, for example, in agriculture – a sector that will be Mciation Agreement with the European sensitive to the cost of change – the government can exclude Union is casting high expectations for a better, “non-industrialized activities,” i.e. substance farmers in Imereti, stronger Georgian economy. from demanding regulations that are beyond their means. But along with the optimism, there has been “I think they [the Georgian government] need to very prudent- a slow but steady murmur about high costs, ly start analyzing the impact of implementing the new regulations heavy regulation and hurdles for Georgian busi- and trying to mitigate them as much as possible,” Lejava said. nesses and the Georgian government to turn the “The niche of EU regulations is that it is adopted by consensus potential of the EU deal into a reality at home. and because it is adopted by consensus, it always has enough One of the biggest concerns has been over room that, on the one hand you can comply with them, and, the cost of implementing EU-standard legislation, on the other hand, fi nd your own way of complying with them.” especially in Georgia’s struggling agriculture sector. There have also been worries about “NO LIMIT” ON NEW OPPORTUNITIES Georgia’s fl edgling institutions being up for the While Lejava said that the “pain” of the new regulations and mammoth task of administrating the new rules responsibilities the government has taken on is guaranteed, he and regulations that the country will be respon- also stressed that “there is no limit” as to how much the EU deal can sible for passing under the agreement. help the Georgian economy. Implemented well, the Association The key, said Vato Lejava, a former chief Agreement is an instrument for growth and prosperity. economic advisor for the Georgian government That means the chance for more exports and investment – under ex-Prime Minister Nika Gilauri, is to “off-set” and the potential for the creation of new sectors and completely any potential pain for the economy with legis- new businesses in Georgia. lation that comprehends the gap between EU “Nothing is limiting us to maximize the gain but also nothing standards and Georgian reality. is guaranteed on the minimal level either,” he said. “I think what has to improve most is public administration. If public administra- USING “GUARANTEED PAIN” TO tion improves, I again trust the talent and the intuition and the ACHIEVE GREAT GAINS knowledge of entrepreneurs that they will keep up.” “I would describe this agreement like a guar- Lejava noted, for instance, that by signing the Association anteed pain with no guaranteed gain. And the Agreement, Georgia has a more realistic chance of falling un- whole science of implementing this agreement der a Free Trade Deal with the US, since Washington is currently is to off-set the guaranteed pain by available or negotiating a US-EU trade agreement. feasible gain,” he said. “There will be new businesses created by this opportunity that “We need to adjust to the EU regulations, will relocate to Georgia,” he said. which are, to put it in a nutshell, the luxury of “So we are not talking about existing businesses; we should be a richer community. It is like a car. Of course talking about businesses which will be attracted to this opportunity everyone understands that Mercedes is a good [created by the Association Agreement].”

16 | Investor.ge • AUGUST-SEPTEMBER/2014 – to what the summit will bring to Tbilisi. In Georgia: Preparing for NATO’s late June, NATO foreign ministers decided to offer Georgia, as Secretary General Anders Fogh Rasmussen put it, a “substan- “Substantive Package” in Wales tive package” to help the country “come closer” to NATO. In early July, NATO’s special representative for the Caucasus and Central Asia, James Appathurai, held talks INVESTOR.GE REPUBLISHES MONICA ELLENA with the Georgian leadership to deﬁ ne MONICA ELLENA’S INTERVIEW what that means. “This summit will not talk about enlarge- WITH MINISTER OF DEFENSE rakli Alasania does not like war. Like most Georgians of his generation, ment, but clearly will talk about the open IRAKLI ALASANIA ABOUT I the energetic 40-year old Minister of door policy,” says Alasania in an interview THE UP-COMING NATO Defence has lived through enough of it. with BNE in his ofﬁ ce in downtown Tbilisi. SUMMIT IN WALES, SLATED But he knows that Georgia’s strategic “What I expect is the validation of Geor- FOR SEPTEMBER. THE ARTICLE position, at the crossroads between East gia’s achievements. Georgia is becoming ORIGINALLY APPEARED and West, means that the country needs a role model to follow in the region. We to be prepared, skilled, and equipped to are a country that reforms, that matures IN BUSINESS NEW EUROPE defend itself if necessary. its political system, and that contributes to MAGAZINE’S AUGUST As the North Atlantic Treaty Organiza- Euro-Atlantic security.” EDITION. tion (NATO) is gearing up for its next summit Alasania aims to increase Georgia’s www.bne.eu in Wales in early September, Georgia has interoperability with NATO and to beef shifted its focus from the improbable goal up the country’s self-defense capabilities, of securing MAP –the Membership Action such as air-defense, anti-mobile, and anti- Plan, the last step before full membership tank capabilities.”

AUGUST-SEPTEMBER/2014 • Investor.ge | 17 “Georgia is today a credible part- and explain where this money goes. The US, France, and Germany’s army colleges, ner.” he adds. “So I expect two baskets procurement system is totally transparent, so they know how to plan modern warfare. (from the summit): a political declaration with electronic tenders, so that everyone So this is transformational.” clearly identifying Georgia’s progress and can see what we are buying, unless it is Georgia is also looking forward to stating the next stage for integration into very secretive, and even then the pur- turning its training facilities into NATO the alliance, and a concrete package chase is scrutinized by a parliamentary training facilities. In fact, Georgia’s forces increasing NATO’s imprint and presence special committee,” Alasania explains. have so impressed Western offi cials that on Georgian soil.” “The Defense Ministry was the most secre- its troops have been certifi ed to join the tive institution in Georgia, now it is one of NATO response force—the alliance’s OPPORTUNITIES, PAST AND the most transparent.” 25,000-strong rapid reaction unit—in 2015 FUTURE The process hasn’t gone unnoticed through to 2017. Georgia’s long quest for NATO mem- in Brussels as a NATO assessment advised “On a military level, we are already a bership started with the meltdown of the the MoD to put together a team of institu- NATO member,” Alasania adds. Soviet Union. The 1990s opened a window tion building to share the experience with But there is still a lot to do. Developing of opportunity for Tbilisi to reach out to the other countries. robust capabilities in terms of command world beyond the former Iron Curtain. “We are now exporting our reforms,” and control, intelligence, surveillance and But Georgia failed to take it. “Instead he adds. reconnaissance, and logistics takes time, of consolidating ourselves, like the Baltic Georgian troops have also built up practice and money. Michael Cecire, states, we started shooting each other,” their combat experience. In 1999 Georgia Associate Scholar at the Foreign Policy Alasania recalls. “It was a great mistake. joined the NATO-led peacekeeping mis- Research Institute, highlights that “con- Back then we showed Georgia’s immatu- sion in Kosovo. Later, it sent troops to Iraq scription won’t be phased out for another rity to handle the state and state relations.” and Afghanistan, where, by May 2013, few years, the reserves system is still in the As a result, Georgia endured civil Georgia had 1,560 troops – the largest earlier stages of being reformed, and wars, the loss of 20 percent of its increased civilian control is a reality territory, and a quarter of a mil- “We think people understands that’s the but barely institutionalized.” lion internally displaced persons. It is a long-term process Alasania Nevertheless, full EU and NATO price to keep Georgia’s independence, there is aware of. “Many things have to membership became the foreign be strengthened, mainly logistical policy pillar of the Western-mind- is high support for the army. It is the most chains, which is one of the priorities ed leadership of the Rose Revolu- trusted state institution in the country after alongside infrastructure and military tion, which took power in 2003. education.” Despite making rapid progress the church.” on several fronts, Georgia missed THE RUSSIAN FACTOR out on MAP at the Bucharest summit in per-capita troop contributor and largest But the biggest unknown is Russia. April 2008. The subsequent war with Russia non-Nato force in the country. It has also Moscow strongly opposes closer ties be- over one of Georgia’s breakaway regions, suffered a high number of casualties – 29 tween Tbilisi and the Alliance, let alone South Ossetia, in August 2008 put NATO soldiers – as its troops are deployed in the full membership, and it has turned its rela- membership for Georgia off the table. But unstable Helmand province. tionship with the Northern Alliance into a the idea was revived a couple of years “It is a huge number for a small na- battle of wills. later at the summit in Lisbon. tion,” admits the Minister. “We think people “The path towards full integration with “Historic opportunities are opening understand that this is the price to keep NATO is irreversible, this is the choice of the up for Georgia again. That’s why we are Georgia’s independence- there is a lot of Georgian people,” stresses Alasania. “But acting like NATO country members: to support for the army: it is the most trusted we are defusing tension with Russia: our prepare ourselves for this window of op- state institution in the country after the foreign policy is to eventually normalize portunity. When it is next open, we’ll be church.” relations with the Russian Federation. We ready.” Moreover, Georgian troops are cur- know it will not be possible until Russia starts rently being deployed in the EU-led mis- to fulfi ll the six-point agreement signed af- REFORM, TRAIN, AND EQUIP sion with French command in the African ter the 2008 war. For now, we opened up Since his appointment in 2012, Ala- Central Republic. As a result, Georgia channels of negotiations with trade and sania has initiated deep structural re- today boasts some 12,000 soldiers whom culture, so we are not giving them any forms in the Ministry of Defense focused Alasania claims have been trained to the pretext, at all, to destabilize the country.” on transparency, accountability, and highest NATO and US standards. If the 2008 war was not enough, the training. He raised soldiers and offi cials’ “This exposure fundamentally annexation of Crimea and the violence salaries, conditions and benefi ts, abolished changed the perception and thinking in Eastern Ukraine are dire reminder of mandatory conscription, and increased of the Georgian military. The offi cers that the potential threat that Russia still poses civilian oversight and control, both at the went through Afghanistan, Iraq and Koso- for Georgia. parliamentary and NGO level. vo know exactly how to conduct modern “Georgia’s connection with the NATO “I personally have to report every pur- combat operations. Plus, 90 percent of my defense system is, hence, very relevant,” chase above GEL 2 million (EUR 415,000) top military leadership has gone through Alasania concludes.

18 | Investor.ge • AUGUST-SEPTEMBER/2014 Tkemali: Introducing the world to Georgia’s tasty, tangy sauce

ON JULY 18, THE GEORGIAN PARLIAMENT MARTA FERRER LUBECK RATIFIED THE COUNTRY’S ASSOCIATION Go to any Georgian restaurant, a friend’s dinner, a supra… you will fi nd it AGREEMENT WITH THE EUROPEAN UNION. there. Tkemali sauce is a staple of the THE AGREEMENT, AMONG OTHER BENEFITS, Georgian cuisine. In Georgia they say that just as Americans love ketchup, Georgians ALSO OPENS THE WAY FOR MORE GEORGIAN love tkemali sauce. And, from profi les in the New York Times to sales on Amazon. EXPORTS TO THE EUROPEAN UNION’S com, the rest of the world is also starting COMMON MARKET. WHILE GEORGIAN WINE to appreciate the tangy taste of tkemali. Geostat does not list exact numbers IS A WIDELY KNOWN COMMODITY, OTHER for tkemali exports. Exports of “sauces, GEORGIAN PRODUCTS – LIKE TKEMALI, THE and preparations therefore; mixed condiments and mixed seasonings” nearly TANGY OMNIPRESENT PLUM SAUCE POPULAR quadrupled from 2010 to 2011, however, mirroring efforts by local companies to sell WITH MEATS AND VEGETABLES – HAVE ALSO tkemali abroad. In the fi rst fi ve months of BEEN MAKING HEADWAY INTO FOREIGN, 2014, Georgia exported $434,400 worth of sauces, mixed condiments and seasonings NON-POST-SOVIET MARKETS. – putting it on track to meet or beat the $792,700 in exports in the same category last year.

AUGUST-SEPTEMBER/2014 • Investor.ge | 19 TKEMALI SAUCE EXPORTS sauce rather than preparing it themselves, it with a dab of tkemali,” he noted. Kula, one of the brands of Gori Feeding so [our] sales are concentrated on the Irene Makhatatze, the wife of the for- Cannery Kula, a leading tkemali sauce ex- local market.” mer Greek Ambassador to Georgia, would porter, has been exporting tkemali sauce Asked about producing tkemali sauce, probably agree. since around 2010 and now sells to over Gaprindashvili notes, “The main goal of Like many Georgians, she learned to 20 countries—some in the former Soviet producing green tkemali is to capture the make tkemali sauce from her mother but bloc, as well as to Canada, USA, Germany, taste of spring.” after living in various countries where tke- Poland, Czech Republic, Iran and France. “Local farmers are involved in gather- mali is less well known, she has developed Vano Goglidze, the director and co- ing the fruit in west Georgia, and delivery a knack for tracking it down. founder of Kula, says that the company of the fruit is organized by around 10 dif- “In Russia, tkemali sauce is easy to produces 12 kinds of tkemali sauce, be- ferent suppliers. We buy over 500 tons of fi nd. In Greece, I would fi nd it in Armenian tween 1 and 1.5 million bottles of sauce tkemali and we produce over one million stores, while in the US I would fi nd it in Rus- per year, including the red, green and bottles.” sian grocery markets,” says Makhatatze. yellow varieties. She estimates that 150 employees All ingredients used are fresh and are work at Marneuli in the spring, the highest WHAT IS TKEMALI? grown in Georgia, adds Goglidze, and production time of the year. The main ingredient of this piquant up to 60 percent of what Kula produces Soso Kobakhidze, the agribusiness di- sauce is the tkemali, a sour plum in season is exported. “The local market includes rector for Georgia’s Export Development in the spring and summer. The tkemali fruit supermarkets and restaurants, and Kula Association, noted that several other com- is relished by Georgians because of its produces tkemali sauce for the Georgian panies are also exporting tkemali, includ- nutritional value—it is high in antioxidants— Army,” states Goglidze. ing LTD Georgian National Product and and for its many uses. Maya Katsiashvili, Asked if there is a particular strategy LTD Aroma Product. These companies, chef and lecturer at the Georgian Culinary he said, are “100 percent Academy, says “We buy about 20 kilos of export- oriented.” tkemali each spring. You can fi nd the fruit Beyond Georgia, tkemali sauce is better known “Mostly,” he wrote in at your local market or at the supermar- an email interview, “it is ket,” though she points out that buying at in former Soviet countries. But that is changing. exported to Soviet coun- the local market is better. From sales on Amazon.com ($7.99 plus shipping) to tries or in the case of other Katsiashvili explains that tkemali is also countries (USA, EU, etc), an essential ingredient of chakapuli, a dish detailed recipes for the sauce in a New York Times’ the distribution is mostly to generally consumed in the spring and article on international barbeque, Georgia’s humble Russian shops, Georgian cooked with lamb or beef, tkemali and plum sauce is gaining fans around the globe. restaurants, etc, which work fresh green herbs. Tkemali is also used in for communities from post- lobio, the Georgian bean dish, and borsh, Soviet countries.” and she adds, “At the Academy, we like to Beyond Georgia, tke- experiment with new dishes. One example for a larger market, Goglidze says “The mali sauce is better known in former Soviet is our dish of stuffed fi sh with tkemali and production of tkemali sauce existed during countries. But that is changing. From sales tarragon.” the Soviet period, so people know these on Amazon.com ($7.99 plus shipping) to As for the sauce, Katsiashvili affi rms that products. Kula is sold in countries where detailed recipes for the sauce in a New at the Academy you can learn the rela- there are many Russians, who recognize York Times’ article on international bar- tively easy method of preparing tkemali tkemali sauce.” In any case, he notes, beque, Georgia’s humble plum sauce is sauce. The basic ingredients are: tkemali, all bottles have the English-language gaining fans around the globe. garlic, dill, coriander, salt, pepper and label ‘Plum Sauce’ to make them easily “In the Caucasus Mountains, the pennyroyal—a sort of wild mint. recognizable. Moreover, Kula has partici- mythical birthplace of fire, barbecue First, the tkemali is boiled in water until pated in numerous food exhibits in Dubai, sauce means tkemali, a piquant puree it is soft and the seed can be easily re- Germany, Moscow, Kiev, and in October of sour plums or rhubarb, with garlic, dill moved. It is then put through a colander, the company will participate in the SAIL and cilantro. and the remaining mass is mixed with the exhibit in Paris. This is not as strange as it may seem: other ingredients and cooked slightly until Another company active in the ex- after all, many Americans add apple a thick consistency is obtained. port market is Marneuli Food Factory. The or pineapple to their barbecue sauces. Once cool, the sauce is placed in company’s director, Irina Gaprindashvili, You don’t need to journey as far as the airtight containers and the product can explains that sales outside Georgia are Republic of Georgia, for tkemali turns up last as long as two or three years if prop- concentrated in “former CIS countries, at Georgian restaurants in Brighton Beach, erly stored. Katsiashvili further notes that where tkemali sauce is well known.” Brooklyn, like the colorful Primorski,” Steven “Once you have tkemali sauce you can Marneuli has also started exporting green Raichlen wrote for the Times in his 1999 enjoy it with meat and chicken dishes, and red tkemali sauce to the UK, the fi rst “Barbecuing With a World Full of Accents.” as well as new potatoes. You just can- try for an expat market outside CIS.” How- “As for the appropriate meat, well, you not buy new potatoes without buying ever, Gaprindashvili indicates, “People in haven’t fully savored grilled lamb, pork, tkemali sauce to go with them- they are Georgia are increasingly buying tkemali sausage or salmon until you have tasted inseparable!”

20 | Investor.ge • AUGUST-SEPTEMBER/2014

US SANCTIONS AGAINST RUSSIA The United States has passed a series of sanctions against individuals, companies and economic sectors since Russia annexed Crimea in March of this year. While Washington – and the White House – was criticized for the perceived weakness of the fi rst round of sanctions, the restrictions have become steadily stronger and wide-ranging. Today, the US sanctions target both individuals involved in the destabiliza- tion of Ukraine, as well as specifi c businesses and commercial entities in Russia. The US Treasury Department defi nes the latest wave of sanctions, passed on July 16, as “a broad-based package of sanctions on entities in the financial SANCTIONS AGAINST services, energy, and arms or related materiel sectors of Russia, and on those undermining Ukraine’s sovereignty or misappropriating Ukrainian property.” RUSSIA: AN OVERVIEW THE LIST, AS PUBLISHED ON THE US TREASURY WEBSITE: Treasury designated four Russian measures against the Russian economy, Treasury imposed sanctions that government offi cials, including Sergey largely because the EU economy has prohibit U.S. persons from providing Beseda, a senior Russian Federal Secu- stronger trade ties with Russia. new fi nancing to two major Russian fi - rity Service offi cial. The bombing of fl ight MH17, howev- nancial institutions (Gazprombank OAO er, has been a turning point. In a show of and VEB) and two Russian energy fi rms “These actions do more than build support for the Netherlands – the country (OAO Novatek and Rosneft), limiting upon previous steps to impose costs on that suffered the most from the tragedy – their access to U.S. capital markets; separatists and the Russian government,” EU countries are rallying around stronger Treasury designated eight Russian the statement on the US Treasury website sanctions against Russia. arms fi rms, which are responsible for reads. The EU widened the sanctions in the production of a range of materiel “By imposing sanctions on entities a meeting on July 25, so currently 87 that includes small arms, mortar shells, within the fi nancial services and energy individuals and 20 entities in Ukraine and tanks; sectors, Treasury has increased the cost and Russia are affected, according to Treasury designated the “Luhansk of economic isolation for key Russian media reports. People’s Republic” and the “Donetsk fi rms that value their access to medium- The list now targets Russian intel- People’s Republic,” which have asserted and long-term U.S. sources of fi nancing. ligence offi cers: Alexander Bortnikov, governmental authority over parts of By designating firms in the arms or head of the Russian Federal Security Ukraine without the authorization of the related materiel sector, Treasury has cut Service (FSB), and Sergei Beseda, head Government of Ukraine; and Aleksandr- these fi rms off from the U.S. fi nancial of the FSB department that oversees Borodai, the self-declared “prime min- system and the U.S. economy.” international operations and intelligence ister” of the Donetsk People’s Republic, activity, were both added to the EU sanc- for threatening the peace, security, stabil- EU SANCTIONS tions list. ity, sovereignty, and territorial integrity The European Union (EU) has also In a letter to EU heads of state on of Ukraine; passed limited sanctions against specifi c July 25, EU Council President Herman Treasury designated Feodosiya individuals it deems responsible for the van Rompuy called for more restrictive Enterprises, a key shipping facility in growing confl ict in Ukraine. Until the measures against the Russian economy. the Crimean peninsula, because it is downing of the Malaysian Air flight Brussels Blog on the Financial Times complicit in the misappropriation of state MH17 over Ukraine, however, Brussels website, quoted the letter as saying: assets of Ukraine; and was hesitant to invoke more restrictive “On 24 July, the Committee of Per-

22 | Investor.ge • AUGUST-SEPTEMBER/2014 notably in the fi eld of arms trade and restrictions on access to capital markets; The measures in the fi eld of sensitive technologies will only affect the oil sector in view of the need to preserve EU energy security; The prohibition of dual- use technology exports will be limited at this stage to military end-users.” A fi nal decision on the EU sanctions is expected by the end of July.

RUSSIA’S RESPONSE Moscow responded to the initial wave of sanctions by publishing a re- ciprocal list of individuals banned from travel to Russia. As the sanctions have FOR THE PAST SEVERAL MONTHS, GOVERNMENTS AROUND THE picked up speed, however, Moscow has GLOBE – FROM CANADA AND THE UNITED STATES TO JAPAN AND THE yet to fully respond. EUROPEAN UNION – HAVE BEEN IMPOSING A GROWING NUMBER Media reports have speculated that OF SANCTIONS AGAINST RUSSIA AND COMPANIES WITH TIES TO THE Russia could be preparing to roll out its CONFLICT IN THE UKRAINE. INVESTOR.GE HAS COMPLIED A BASIC LIST own measures against the US and EU. OF THE SANCTIONS AS PUBLISHED ON GOVERNMENT WEBSITES AND BY In the meantime, however, Moscow THE MEDIA. has started implementing sanctions against Moldova and Ukraine, two manent Representatives (COREPER) tive measures related to access to capital countries that signed the Association agreed to list 33 further entities and markets, defence, dual use goods, and Agreement with the EU in June, together persons. It also expanded the legal basis sensitive technologies on 24 July. My with Georgia. of the restrictive measures so as to target assessment is that this package strikes On July 25, Russia announced sanc- individuals or entities actively providing the right balance when it comes to cost/ tions against Ukrainian milk products; material or fi nancial support to or benefi t- benefi t ratio and scalability/reversibility similar bans have already started against ing from the Russian decision makers over time. It should have a strong impact Moldovan fruit and other goods. responsible for the annexation of Crimea on Russia’s economy while keeping a To date, however, Russia has not or the destabilisation of Eastern-Ukraine. moderate effect on EU economies.” implemented any new measures against “A Trade and Investment ban for In the letter, the EU Council president Georgia. Moscow banned all Georgian Crimea and Sevastopolas well as an ad- stresses the need to keep a “balance” goods in a wide range of sanctions ditional list of entities and individuals across all sectors and “preserve EU en- in 2006; over the past year, the two both under the current and the expanded ergy security.” countries have been working together criteria will be ready for adoption by “The overall balance will be main- to reinstate trade. Russian officials, COREPER on 28 July. tained across sectors and across Member however, have warned that Moscow “As requested by the Foreign Affairs States,” the letter reads, as republished could impose restrictions “to protect” Council, the Commission and the Euro- by the blog. the Russian economy if it feels that the pean External Action Service (EEAS) “The principle of non-retroactivity EU Association Agreement poses a risk presented to COREPER a set of restric- will apply across all targeted sectors, to Russian interests.

FOR MORE DETAILED INFORMATION ABOUT THE SANCTIONS, PLEASE VISIT THE FOLLOWING WEBSITES: http://www.treasury.gov/press-center/press-releases/Pages/jl2572.aspx; http://en.wikipedia.org/wiki/List_of_individuals_sanctioned_during_the_2014_pro-Russian_unrest_in_Ukraine; http://eeas.europa.eu/delegations/russia/press_corner/all_news/news/2014/20140725_3_en.htm; http://blogs.ft.com/brusselsblog/2014/07/25/van-rompuys-letter-on-russia-the-complete-text/ http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/135804.pdf http://blogs.ft.com/brusselsblog/2014/07/24/leaked-russia-sanctions-memo-the-details/ http://edition.cnn.com/2014/07/24/world/europe/russia-sanctions-explainer/

AUGUST-SEPTEMBER/2014 • Investor.ge | 23 NEW RULES FOR LEVAN KOKAIA BACKGROUND Prior to July 2013, Georgia’s capital markets were regulated INVESTMENT through the sixth chapter of one prima in the Law on Securities Markets. Last year, however, Parliament adopted a new Law on Investment Funds, which provided the means to develop FUNDS: THE KEY TO co-investment companies – and created the base for capital markets in Georgia to develop. The previous legislation was too narrow to foster the develop- DEVELOPING CAPITAL ment of investment funds, mainly because it limited its deﬁ nition of investment funds to one type, the “experienced investors’ MARKETS IN GEORGIA investment fund.” This limited investors and did not allow them to make the best use of opportunities in the market. In addition, weak administrative procedures created chaotic circumstances for investment funds to open and operate. FOR YEARS, DIRECT INVESTMENT HAS OVERSHADOWED PORTFOLIO INVESTMENT IN GEORGIA AND HAMPERED BENEFITS UNDER THE NEW LAW THE DEVELOPMENT OF THE LOCAL CAPITAL MARKET. THE Generally, the new investment funds law, and the order from NEW LAW ON INVESTMENT FUNDS, HOWEVER, COULD the National Bank of Georgia president on “the rules and cir- PROVIDE A STIMULUS TO CHANGE THAT. LEVAN KOKAIA, cumstances of registering investment funds in the National Bank A GUEST LECTURER AT THE GEORGIAN INSTITUTE OF of Georgia” are favorable mechanisms for developing capital PUBLIC AFFAIRS SCHOOL OF SOCIAL SCIENCES OUTLINES markets in Georgia. THE DIFFERENCES UNDER THE NEW LAW AND ITS POSSIBLE The main difference between the previous regulation and the IMPLICATIONS FOR GEORGIA’S CAPITAL MARKETS. new one is the detailed categorization of four types of investment

ADVERTISEMENT fund: 1. The Pension Investment Fund, which may be open, kept for better legal conditions for managing the fund’s investment policy. an interval and closed; 2. The Experienced Investors’ Investment Fund; 3. The Share Investment Fund (including venture capital or LATEST AMENDMENTS TO THE LAW private capital investment funds); 4. Other Types of investment Unlike the previous regulation, the new law describes more funds, as regulated by Georgian legislation. complex requirements for registering investment funds. This rule One very important legislative innovation is the existence of ensures more stability and safety for existing and potential investors non-entrepreneurial and entrepreneurial investment funds, such who are creating and managing investment funds. In addition, it as an open joint stock company which opens opportunities and also simplifi es administrative procedures to better supervise funds. tools to trade on the free markets along with incentives for stock One oversight of the fi rst version of the law, passed in July and exchange markets in Georgia. 2013, was that it failed to defi ne the government body that would In contrast to the previous legislation, the new law offers differ- regulate investment funds. On November 20, 2013, however, ent types of unique direct and portfolio investment opportunities Parliament amended the law and announced that the National to make decisions. Among the categories, the most important Bank of Georgia would regulate investment funds until March 1, aspect is the defi nition of open joint stock companies as the most 2014. Parliament later extended the National Bank’s supervisory signifi cant player of capital market processes. power until January 1, 2015.

MORE TRANSPARENT, BETTER MANAGEMENT CONCLUSION The new regulation also includes additional obligations for in- The new law on investment funds provides the opportunity and vestment funds which increase transparency and accountability. stimulus for joint stock companies to become open and account- For example, investor services now have to be published as public able and to create investment within one of many different types information – which is the responsibility of the fund’s supervisory of fund. In addition, the improved administration and supervisory body, and must be submitted to the head of the fund on a regular mechanisms provide important incentives for securities traditions basis as stipulated in the law. and could attract different sources of portfolio investment inside In addition, the law now spells out the requirements and func- Georgia. These factors will undoubtedly play a very positive role tions of the asset management company, which serves to provide in developing Georgian ﬁ nancial and capital markets. MAIA EDILASHVILI

Building the Brand: arketing, PR and communication strategy are the hall- Mmarks of success for major an interview with brands around the world. Starbucks, Coca-cola, Apple… major brands invest Soso Galumashvili major resources in building consumer loyalty and brand awareness. While Georgian companies used to MARKETING AND BRANDING ARE doubt the power of good branding and A FOREGONE CONCLUSION IN the value of investing in a long term DEVELOPED ECONOMIES WHERE PERCEPTION ABOUT A PRODUCT CAN BE marketing strategy, that has changed MORE IMPORTANT THAN THE GOOD over the past several years, noted Soso ITSELF. BUT FOR GEORGIAN Galumashvili, managing partner and COMPANIES, LEARNING HOW senior consultant at the consulting group TO BRAND THEMSELVES AND GePRA and one of the creators of the CULTIVATING A LOYAL Tbilisi PR School at the Georgian Ameri- FOLLOWING HAS BEEN A CHALLENGE. can University. INVESTOR. Georgia, he said, “has come a long GE’S MAIA way” in developing competition between EDILASHVILI brands – and marketing personalities. SPOKE WITH Galumashvili declined to compare ONE OF speciﬁ c Georgian brands or marketing GEORGIA’S PREMIER strategies, but he noted that today Geor- SPECIALISTS gian PR specialists are being recruited ON MARKETING by clients in developing economies. AND PR “For instance, in Kyrgyzstan there are STRATEGY, SOSO many international clients who invite GALUMASHVILI, specialists from Georgia- the field is ABOUT BUILDING A BRAND IN GEORGIA. developing so dynamically in Georgia that we can even export our knowledge and skills,” he said. For Galumashvili, the most outstand- ing current trend is the change in business mentality with regards to marketing and PR. “Originally, many companies in Georgia had a misconception that spend- “Originally, many ing on PR and communications was futile companies in Georgia and a pointless burden. Now, as they come for consultancy, they even have had a misconception their own ideas what they need and they that spending on PR and already see the costs as an investment in communications was their future success,” he noted. futile and a pointless Another interesting trend on the market, according to Galumashvili, is that, burden.” previously, companies asked for advice

26 | Investor.ge • AUGUST-SEPTEMBER/2014 “In the past companies had ‘customers.’ Now they on the short-term planning are called ‘followers,’ which and tolerant,” he added. of communications strate- Being innovative trumps gies but now they are hom- means there should be cost for companies seeking ing in on the importance of marketing consultants, ac- long-term strategies to build a permanent stream of cording to a survey conducted brands and cultivate loyal information for them to by the Peritus Group of 200 customers. Georgian PR managers about Galumashvili noted that follow.” the criteria they use to select the most sophisticated com- consulting companies. munications and branding Galumashvili stressed strategies are in banking and mashvili, is that businesses are “still” that businesses shouldn’t fear insurance, two of the fastest growing afraid of being innovative and bold in innovation – or stop communicating ﬁ elds in the Georgian market. “As these their decisions. “I would welcome more with their consumers. He noted that the fields are developing in a stable and creative communication,” he said, adding market is full of brands that were once consistent manner, it creates the need to that when some companies offered the successful but “died” once they stopped communicate their messages. So, due public unexpected communication strate- innovating and reaching out. to this growing experience, high qual- gies, they tended to be widely accepted “In the past companies had ‘custom- ity professionals are emerging in these in the market. ers,’” Galumashvili said. “Now they are segments of the market,” he explained. “Georgian consumers are strict, but if called ‘followers,’ which means there The biggest challenge facing this your communication with them is stable should be a permanent stream of infor- market at present, according to Galu- and friendly, they can be understanding mation for them to follow.”

AUGUST-SEPTEMBER/2014 • Investor.ge | 27 28 | Investor.ge • AUGUST-SEPTEMBER/2014 AUGUST-SEPTEMBER/2014 • Investor.ge | 29 Tbilisi’s Underground City:

THE TUNNELS THAT BERIA BUILT

30 | Investor.ge • AUGUST-SEPTEMBER/2014 Stairs leading down to one of the known tunnels built by Beria in Sololaki near his former residence on Machabeli Street

LAVRENTY BERIA, THE COMMUNITY PARTY’S SECRETARY IN GEORGIA FROM 1931-1938, IS FAMOUS FOR HIS CRUELTY AND HIS LOVE OF ARCHITECTURE. WHILE HIS MARK ON TBILISI’S SKYLINE IS WELL KNOWN, BERIA’S LEGACY ALSO INCLUDES A LESS WELL KNOWN SYSTEM OF TUNNELS UNDER THE CITY STREETS.

EMIL AVDALIANI

AUGUST-SEPTEMBER/2014 • Investor.ge | 31 of what appears to be a tunnel leading lation that it once connected to tunnels in from a prison under the building to the the center of the city. Since Beria’s time, Mtkvari River. it has been used alternately as a secret A tunnel is also rumored to exist laboratory under the Soviets as well as a under the former parliament building short-lived night club. It is now closed. (which once served as the Communist Party’s headquarters) – legend has it FOR SAFETY OR REPRESSION? that even former Georgian President One of the longest tunnels Khatoevi ZviadGamsakhurdia made use of it dur- has documented on his site reportedly ing the last pitched days leading to his wraps around behind the Rustaveli un- overthrow - and what is believed to be the derground station for an estimated 2,500- collapsed remains of a tunnel, which was 3000 meters. Another tunnel winds under ery little is known about the locked closed, in the courtyard of Beria’s the city for nearly a kilometer and links tunnels Lavrenty Beria is cred- former house (now Georgia’s Olympic the former NKVD offi ce on Constitution Vited with building: today there Committee). Street to the Tbilisi are more legends and crumbling walls A professional Central Railway Sta- than documented facts for historians to excavator, Roma There is virtually no tion. study. Khatoevi (known information about Beria’s With no men- Beria is well known for his role in among in the exca- tion of the tunnels the atrocities perpetrated on Stalin’s or- vator’s society by underground projects in in the archives, his- ders – as well as his heavy hand in city the nickname Fa- torians and scholars planning for Tbilisi. Under his watch, the bian), the founder the state archives, and can only speculate city circus and post offi ce were built, as of Tbilisi urban no indication of them about why Beria and well as the former parliament building exploration web- his comrades built on Rustaveli Avenue. He is also credited site Fabi.ge, has on large-scale Soviet- the tunnels and what with overseeing major infrastructure extensively re- purpose they served. projects like the construction of the Right searched various era maps of Tbilisi. For instance, it is be- and Left banks along the Mtkvari River, tunnels built under lieved that the tunnel cultivating a veritable forest from Tskneti Beria’s rule. The evidence of the leading to the train to Mtatsminda Park, and creating the On his site, tunnels that does exist, station could have city’s sewage system. Khatoevi maps out been used to secretly a tunnel stretch- however, mirrors some transport prisoners TUNNELS CROSSING THE CITY ing from the Cir- out of the city. It is in the sewage system that faint cus building on of Beria’s pet building Beria’s own traces of his lesser known project can Heroes’ Square in sites. reputation as the still be seen: a system of tunnels that Saburtalo to the ruthless head of the transversed the city underground. left embankment purges in the SoSouthuth There is virtually no information of the Mtkvari river, somewhere in Caucasus addss credence to that theortheory:y: about Beria’s underground projects in the neighborhood of Aghmashenebeli there was not enoughnough room in tthehe ppris-ris- the state archives, and no indication of Avenue. ons in Tbilisi to hohouseuse ththee huhundredsundrer ds ooff them on large-scale Soviet-era maps of Another tunnel, in the Tbilisi Bo- people jailed, tortured,rtured, andanndd killedkilllel d in Tbilisi. The evidence of the tunnels that tanical garden, indicates Beria was well years spanning the ccyclesycles off rrepressioneepprreessssiioon does exist, however, mirrors some of acquainted with the city’s underground in the 1930s. So it iss naturnatural,al, rereasoningeasasoonnining Beria’s pet building sites. architecture and built onto existing tun- goes, that the governmentment neneededededd a wwayaayy For example, under the former In- nels as needed. The tunnel in the garden to quietly move prisonersers anandd cocorpses.rppsees.s stitute of Marxist-Leninism (now being was fi rst built during Nicholas II’s reign Another theory, however,wever, isis thatthhaatt thethhee rebuilt as a hotel), there are remnants and later enlarged. There has been specu- tunnels were part of a safety/contingencyty/contingeennccy

32 | Investor.ge • AUGUST-SEPTEMBER/2014 plan Beria created in ccasease hhee neneedededed to escape from the city.y. FForor iinstance,nstance, Tbilisi’s metro system wwasas cconceivedonceived aass part of a wider strategy toto sheltershelter peoplepeople from the NATO attack MMoscowoscow fefearedared would take place once Turkeyurkey jjoinedoined ththehe military alliance in 1952.2. But the tunnels that hhaveave bebeenen ddis-is- covered so far are believedved ttoo ddateate bbackack to the 1930s, making themhem totooo eaearlyrly to be part of the Soviet government’svernment’s CColdolld War strategy. Regardless of why thehe tutunnelsnnels wewwerere built or what purpose ththeyey sservederved foforor the Communist elite aandnd tthehe ststate’sata e’s secret police, Beria apparentlyarently totookok ttheheh experience to heart: in ththee ddarkestarkest dadaysaysy of World War II for thee SoSovietviet UUnion,niniono , when Stalin feared the governmentovernment mightmiighht fall to Hitler’s army, hee cocommissionedmmissionedd Beria to build vast bunkersunkers inin citiescitiees around Russia. Few still exist. However,ever, iinn SSaratov,aratovv, one of Beria’s tunnels remainsremains intact.inttact. Writing for Pravda.ru, YuYuryry SuSuprunenkopruneenkko noted that the undergroundund bbunkerunker BeBeriaerriia built is strong enough too survsurviveive a twtwo-o- ton bomb and uses systemsstems similarsimilar too those on submarines to pproviderovide eelectric-lecttrric-- ity and air conditioning. The Tbilisi tunnels ddoo nnotot aappearppeaar to be as well fortiﬁ ed. ButBut asas longlongg asas construction continues ttoo ununcovercover momoreoree pieces of the city’s past, thethe chancechance thatththatt someday Tbilisi will resolvesolve tthehe llegacyeggaccy of Beria’s tunnels still exists.xists.

AUGUST-SEPTEMBER/2014 • Investor.ge | 33 country; a sunny region which was a left- over of the careless soviet system, which, just like its sister republics, turned into a run-down civil-war state almost overnight following the fall of communism in 1991. Shevardnadze continued to try to improve the struggling war-torn independent republic, but organized crime syndicates were extremely powerful and he was often left standing alone in his struggle. He bro- kered deals to bring oil pipelines through the country and these actions gradually led to the population receiving, sporadi- cally, gas and oil. However, this was not enough for the population and he made a digniﬁ ed resignation following the bloodless Rose Revolution, bringing to power a very pro-western government led by Mikheil Saakashvili. Indeed, from 2003, Shevardnadze was all but stranded at home in his Krtsanisi residence, one of the most popular green areas of the capital, Tbilisi. The former president remained a popular person to visit for foreign visitors and reporters who wanted to hear his words of wisdom, alongside well-wishers who remembered his acts of kindness. It was Marina who organized those meetings for him. I was glad I managed to see him just a few years ago. He appeared weaker and frailer than ever as I took the last pictures, but it was always pleasing to see the man who had reshaped the history of the world- for better or worse, depend- ing on one’s point of view.

SHEVARDNADZE’S LEGACY “I DID NOTHING WRONG:” “I don’t think there would be a free Georgia today had it not been for Eduard Shevardnadze and Mikhail Gorbachev, A JOURNALIST REFLECTS ON because these two men refused to use force to keep the Soviet Union together,” Former United States Secretary of State, THE LATE GEORGIAN PRESIDENT James Baker said when visiting Tbilisi to attend the funeral of his friend. He added that forces against perestroika and glast- EDUARD SHEVARDNADZE nost were very strong in the Soviet Union in those days. Shevardnadze began his career in HELENA BEDWELL Gorbachev and the outside world for the 1970s as a Communist Party boss in years, to check if the bad news about his Georgia, which was then a Soviet republic. SHEVARDNADZE: A POLARIZING death was real. In 1985, as Gorbachev’s surprise choice POLITICIAN “Helena, its true,” Marina wept. “It’s for the post of foreign minister, he helped On a hot Monday noon I made a call true this time- he died at 12 today.” lead policy initiatives that would end the to a lady who was a bridge between Shevardnadze was 86 and his death Cold War. Eduard Shevardnadze, the foreign minis- ended what was, for many Georgians, a In our last interview, he told me that ter during the era of Soviet leader Mikhail bad period for Georgia; a small Caucasus Gorbachev wanted nothing but “Social-

34 | Investor.ge • AUGUST-SEPTEMBER/2014 elected president Zviad Gam- summer 1995, when Shevardnadze’s Shevardnadze was 86 sakhurdia, was not an easy escort was leaving his offi ce, recalled his task. Gamsakhurdia was re- former bodyguard, who did not want to moved after a coup d’e tat be named, in an interview in June 2011. and his death ended and devastating civil war. The second attempt in 1997 was more Shevardnadze led the like a “military operation” rather than just state for 11 years after the an assassination, he said. Shevardnadze’s what was, for many civil war. His rule was far from escort was driving him home when a peaceful, however, and he group of militants fi red several anti-tank was constantly being remind- missiles at his bullet-proof Mercedes and Georgians, a bad period ed of that lawless period in opened fi re, killing two of Shevardnadze’s the early 1990s which many bodyguards. believed to be a sin Shevard- for Georgia. nadze committed against GEORGIA’S SILVER FOX, OR BABU Georgia. Gamsakhurdia sup- In our last interview we talked about porters, led by the late presi- Russia and the worsened relations be- ism with a human face” but nevertheless dent’s wife Manana Archvadze, always tween the two neighbors. Shevardnadze he helped to dismantle the once powerful condemned Shevardnadze as the evil disliked Saakashvili and blamed him for empire. Shevadnadze noted, with a laugh, which brought the country to its knees this. However, he believed that Russia that “Sometimes, it was hard with Gor- by killing the chosen president and losing had already made a huge mistake by bachev; he did not always listen to me.” territories to Russia. recognizing Abkhazia and South Ossetia He resigned as foreign minister in 1990, Scores of Gamsakhurdia supporters, following the 2008 armed confl ict. saying in his now-famous speech that he mostly women, religiously shouted abusive “Why did they do it? It’s a huge failure believed that a dictatorship lay ahead. names outside his residence even after he for them. What about the Chechens? Eight months later, in August 1991, a group resigned and decided to spend his time What about the Tatars? What about the of Soviet hard-liners staged a coup against next to his beloved wife’s grave, writing other nations that may outnumber Ab- Gorbachev, but it failed, triggering the books and his memoirs. khazians and South Ossetians?” he said, breakup of both the Communist Party and The day that Shevardnadze died shrugging his shoulders, in 2011. the Soviet Union. people came to pay their respects. Mem- I was never particularly fond of his Without a doubt Shevardnadze shook bers of the current Georgian government, most popular world-known nickname, the the world’s politics- not only did world priests, and close relatives poured in to “Silver Fox,” and preferred more his home leaders like Baker, Reagan, and Gor- pay tribute. name “Babu-” with its accompanying im- bachev bow down to his abilities, the Others were not so polite and groups age of a sweet granddad. Berlin wall was demolished…and then in of emotional women spoke out that they “Ì did nothing wrong.” These were his 1987 a truly unimaginable fact; thanks to still believed he was a Kremlin-managed last words to me on the question how did him, Georgian director Tengiz Abuladze stooge who orchestrated the end of the he feel about the demise of the Soviet released a scandalous fi lm exposing the real Georgian state and that he is guilty Union, and everything else he did. tyranny of Stalin-era labor camps. even in death. “It was unavoidable, it was the cor- Baker stood in church at his funeral, “He is a criminal, he should never have rect step, and how could it have stayed weeping. Earlier he told me that when, as been left as a free man- he and his allies like that? So many different people,” the United States Secretary of State, he must be tried for the crimes they commit- Shevardnadze said. “It was an empire. fi rst met the Foreign Minister of the Soviet ted by overthrowing the legal government Every empire collapses sooner or later, Union, the Cold War was in full bloom. in 1991 and then killing Gamsakhurdia,” but, to be honest, it collapsed sooner than Over the course of the next four years the women shouted outside his residence. I expected!” they were able to bring our countries from While he signed the historic energy confrontation into cooperation, and in the route agreement with process they became not only friends but Azerbaijan, at home he affectionate friends. failed to fi ght corruption I was never particularly fond of Yet Shevardnadze was nothing but a or heal the wounds from failure at home. For many, like Zurab Gu- the Abkhazia and South his most popular world-known ruli, MD, PhD, who fl ed the country in the Ossetia confl icts. 1990s, Shevardnadze will be remembered Then there was the up- as a Soviet statesman, fanatic communist, rising in western Georgia, nickname, the “Silver Fox,” and ruthless ruler and someone who invited the this time by Gamsakhurd- Russian military army into Georgia - the ian loyalists. preferred more his home name author of the notorious phrase: “The sun Following that were rises from the north.” two assassination at- “Babu-” with its accompanying Shevardnadze’s return to his home- tempts against him. The land after the fall of the fi rst post-Soviet first was carried out in image of a sweet granddad.

AUGUST-SEPTEMBER/2014 • Investor.ge | 35 NEWS

CONTENT

AmCham Georgia Celebrates its 46 Annual Fourth of July Picnic

38 Georgia’s New Immigration and Visa Laws: an 43 NEW! Member Feature: TBC Bank Looks to the overview Future AmCham presents a new section of the magazine, 40 AmCham representatives brief US Congressional Member Features, where AmCham member companies Staff Delegation are interviewed by the magazine about new products, programs, and developments in their businesses and sectors. For more information or to participate, please 41 AmCham Hosts BENS and the US European contact [email protected] Command 44 Member profile: Diplomat Georgia 41 Center for Strategic and International Studies (CSIS) on US policy towards Russia and the role of 46 AmCham Georgia Celebrates its Annual Fourth of Georgia in the changing geo-political climate July Picnic

42 Commercial Law and Tax Committee discusses Ag 50 AmCham Hosts BENS Land ruling and changes to the tax code.

36 | Investor.ge • AUGUST-SEPTEMBER/2014 NEWS

AUGUST-SEPTEMBER/2014 • Investor.ge | 37 NEWS

to 90 days, during which a foreigner can permit to stay in Georgia for over 90 enter the country for tourist purposes. days, a foreigner must apply at the Geor- Georgian visas will no longer be gian Consulate in his/her home country. issued at the Georgian border (in excep- For investors: From September 1, tional cases, visas can be issued at the investors (including persons who have border by the Ministry of the Interior). entered the country for tourist purposes) Foreigners who currently have who decide to invest a least 300,000 a 360 visa free entrance, can continue Lari in Georgia can apply directly for using these 360 days until their current an investment residence permit without Giorgi Jashi, the executive secretary of the State Commission on Immigration Issues visa expires. In case such a person leaves leaving Georgia. For example: an inves- within the Public Service Development Georgia before or after September 1 and tor (or tourist) can enter Georgia under Agency returns to Georgia after September 1, the 90-day visa free rule, decide to make GEORGIA’S NEW the new visa regulation system will ap- an investment, and apply for an invest- ply upon his/her return to Georgia. For ment residence permit directly while in IMMIGRATION AND example: if a foreigner wants to work in Georgia. Georgia, he/she should apply for a work Foreigners who already have VISA LAWS: AN visa in the consulate of Georgia in his/her residence permits (temporary or perma- OVERVIEW home country (or at the consulate of the nent) will not be directly affected by the country located in his/her country, which September 1 deadline. If the temporary On July 7, AmCham organized a covers Georgia, or at the nearest Geor- permit expires after September1st, they meeting between Chamber members and gian consulate if there is not a consulate can apply for the same permit here. For the Public Service Development Agency in his/her home country). Following this, example: a student who has been granted at the Courtyard Marriott about Georgia’s the person comes to Georgia, starts work- a temporary residence permit before new law on legal status for foreigners ing - and before the visa expires - he/ September 1st for study purposes can ap- and stateless persons. The government she can apply for a work permit without ply for a study residence permit. In case degree that will regulate certain aspects leaving the country (the specifi c details this person decides to work, however, on issuing visas and residence permits in relation to this issue will be fi nally he/she will need to leave Georgia, get has not been issued yet, so some details regulated upon approval of the relevant a work visa at the Georgian consulate are subject to change. Below, however, governmental decree). in his/her home country, and then come is a basic outline of what changes are At present there are two types of back to Georgia to work. If a foreigner expected and how they could affect for- residence permit – temporary and per- holds a temporary residence permit for eigners’ status in Georgia. For updates manent. Both types of permit include the work purposes and this permit expires and additional information, please visit right to work in Georgia. From Septem- after September 1st, he/she can apply for http://tinyurl.com/oygp8ww or contact ber 1, however, residence permits will a work residence permit here, without IrakliGelovani at i.gelovani@amcham. be divided into the following categories: leaving the country (as in the case of ge. Work residence permit; students, described above). AmCham recommends to all eligible Study residence permit; If a foreigner acquires a perma- persons currently working and living in Residence permit for the purpose of nent residence permit, his/her family Georgia to apply for a temporary or per- family reunifi cation; member(s) can obtain a temporary resi- manent residence permit soon – before Residence permit for a former citizen dence permit(s). the September 1 deadline. We understand of Georgia; To receive a residence permit, it takes 30 days to process. The residence Residence permit for a stateless the applicant should submit the proper card (based on approval of the permit) person; paperwork at least 40 days prior to the is available within 10 days; the applica- Special residence permit; expiration of his/her visa (including work tion can be found at http://tinyurl.com/ Permanent residence permit; visa) to the Public Service Development n5p6zk9. Investment residence permit. Agency (PSDA), at its offi ce or at any 360 free visa entrance is reduced Generally, to receive the relevant Public Service Hall in the country.

38 | Investor.ge • AUGUST-SEPTEMBER/2014

NEWS

AmCham representatives brief US Congressional Staff Delegation

Private sector representatives from AmCham met with senior level staff members of US Congress on July 1. The Congressional Staff Del- egation to Georgia was part of the U.S. Georgia Educa- tional and Cultural exchange program and included high level staffers from the House Subcommittee on Europe, Eur- asia, and Emerging Threats, Committee on Transportation and Infrastructure, and others. As part of the November 2013 AmCham delegation trip to Washington DC, we invited many representatives to visit Georgia for a close up look on how we can continue to expand the US-Georgia strategic partnership. During this meeting, Am- Cham and representatives of BAG briefed the delegation on the current investment climate, areas of opportunity, the expansion of the energy corridor and the importance of Georgia as a strategic trade and transport hub for the region.

40 | Investor.ge • AUGUST-SEPTEMBER/2014 NEWS

AMCHAM HOSTS BENS AND CENTER FOR STRATEGIC AND THE US EUROPEAN COMMAND INTERNATIONAL STUDIES (CSIS) ON US POLICY TOWARDS RUSSIA On July 17, AmCham Georgia hosted a high level meeting AND THE ROLE OF GEORGIA IN of its membership with a delegation of business executives THE CHANGING GEO-POLITICAL from the Business Executives for National Security (BENS) and CLIMATE United States European Command who are visiting Georgia on a mission to further promote business opportunities and expand Center for Strategic and International Studies the United States-Georgia trade and economic relationship. As (CSIS) speaks to AmCham on US policy towards Georgia aims to be a key logistical hub along the trade routes Russia and the role of Georgia in the changing linking Asia and Europe, the BENS visit will provide insights geo-political climate during the June 17 members to Georgia’s public and private sectors on opportunities for roundtable at the Sheraton Metechi Palace hotel. expanded economic development within the Caucasus Transit Dr. Andrew C. Kuchins, Director of the CSIS Corridor from Baku to Poti. Russia and Eurasia Program and Senior Fellow at The meeting featured two panel discussions with participa- CSIS; and Dr Jeffrey Mankoff, Deputy Director tion of BENS delegates on Private Sector as a Catalyst for Build- of the Russia and Eurasia Program and Fellow ing Economic Security and Global Trends and Developments provided a candid and charismatic speech about in Investing in Emerging Markets. The meeting was attended the place for Georgia vis-à-vis US policy on Rus- by nearly 80 AmCham member business representatives who sia and Eurasia. The presentation and subsequent had an opportunity to network and engage with the delegates. discussion revolved around issues of high interest The group of top executives - headed by President and CEO including NATO membership and MAP, options of BENS, General Norton Schwartz USAF (Ret) – represent and opinions on US and EU support for Georgia, internationally renowned companies and investment funds. predictions on future economic changes in the The American Chamber of Commerce in Georgia supported Russian economy and ideas for the strengthening the delegation not only by hosting a lunch meeting with the pri- of Georgia’s economic growth. vate sector, but also by arranging a welcome dinner on July 15. Sarah Williamson opened the meeting with Founded in 1982, BENS is a U.S.-based, private sector an internal AmCham presentation on important organization comprised of American business leaders who updates on activities and projects of AmCham voluntarily contribute their special experience and talents to including advocacy initiatives, legislative efforts, recommend creative, business-minded approaches to national current projects and organizational development security issues. issues.

AUGUST-SEPTEMBER/2014 • Investor.ge | 41 NEWS

Commercial Law and Tax Committee discusses Ag Land ruling and changes to the tax code

Committee members discussed the proposed changes in the Tax Code in legal implications of the Constitutional relation to VAT. Tax working group Court decision, and further litigation experts informed that the changes are a strategies. They also agreed to continue requirement under the EU Association to engage with the Government and Agreement. The committee members Parliament on ag land policy work. Com- expressed their support to the working The executive director of Transpar- mittee reps will schedule a meeting with group. ency International Georgia, Eka Gigauri the Chair of the Agrarian Committee in At the end of the meeting the Rule of spoke on the recent decision of the Parliament. The AmCham committee Law team presented activities within the Constitutional Court of Georgia, which will continue to oppose overbroad re- ﬁ nal stage of the project. They underlined declared the current ban on foreigners to strictions on ownership and development the main achievements and were con- acquire agricultural land as unconstitu- of Ag land as detrimental to the develop- gratulated by the entire committee for tional, during a meeting of the Commeri- ment of this vital sector of the economy. their successful work. George Welton in cal Law and Tax Committee on July 2 at Members also discussed the meet- particular was recognized for his leader- the AmCham ofﬁ ce. ing of tax group experts regarding ship in carrying out the project.

42 | Investor.ge • AUGUST-SEPTEMBER/2014 NEWS

second bank in Georgia to offer stocks noted. via the LSE, was the largest off-index “We usually launch a few, several international IPO to come out of the new products per year…we will continue Europe, Middle East and Africa (EMEA) to be an innovator in the market, con- region, TBC Bank’s Closer magazine tinue launching products and services,” reported. he said. The offering has brought in over 400 “We have about 23 per cent in retail million lari in capital from public sales, – we are number one in retail deposits in the magazine said, and has gained the the market, we are number one or number attention of over 100 investment funds two in most of the other sectors. We are – which are already buying and trading a large bank in the Georgian reality so the stock. we need to continuously innovate and For the bank’s over one million cus- offer new products and services to keep tomers at home, the IPO will help “the ourselves in shape for customers.” Member Feature: bank to grow and increase its loan book The capital injection for the bank, as well as deploy other offerings and he noted, provides a “pretty signifi cant products and solutions to its customers,” growth opportunity in terms of loans, in TBC Bank CFO Giorgi Shagidze said. terms of other products.” TBC Bank “I think we see IPO as kind of ac- Looking forward, Shagidze said the cess to capital funding which we just bankwill continue “to follow our cus- Looks to the authorized and which we did quite suc- tomers’ needs and when they see certain cessfully. Going forward we see that needs for certain products, we are here it will help us fi nance our growth and to offer them.” Future sustain our growth targets,” he added in an interview with Investor.ge chose TBC Bank as the Investor.ge. fi rst member company to interview as The funds will part of the magazine’s new feature be- also help the bank cause, after its successful launch of an continue to provide IPO in London, we were curious about innovative services what comes next for the bank. TBC and offerings to its Bank’s Chief Financial Offi cer Giorgi customers – and Shagidze spoke to us about the IPO and help the bank grow the bank’s plans for the future. and build on its po- On June 11, TBC Bank officially sition as the largest launched its IPO on the London Stock retail bank in the Exchange. The move, which made it the country, Shagidze

AMCHAM GEORGIA INTRODUCES NEW FEATURE FOR MEMBERS

Recently AmCham Georgia asked its members for sug- making based on the responses we received: more informa- gestions and feedback about Investor.ge. Thank you to all the tion about member companies. In every issue, we will publish members who took time to respond! Your comments, criticism, interviews with member companies. We hope to publish at and insights were invaluable and will help us make changes least two or three per issue. To participate, please contact as we move forward. This page is the ﬁ rst improvement we are [email protected].

AUGUST-SEPTEMBER/2014 • Investor.ge | 43 NEWS

DIPLOMAT GEORGIA

Diplomat (the mother company succeeding in partnership with require temperature control. The of Diplomat Georgia) originated in another huge global supplier, warehouse is the tallest in Georgia 1963 as a private label razorblade Nestle, in 2012. At present, at 13 m. It has electricity, a modern factory in the Galilee city of Upper Diplomat Georgia employs fi re-fi ghting system, and ventilation. Nazareth. From 1968 Diplomat up to 400 employees and is The central surveillance system- started to distribute the locally directly covering more than 6000 with 34 cameras installed in the produced razorblades along with customers (from large to medium warehouse -ensures the safety of imported personal care products hypermarket chains,to pharmacies the products being stored there. throughout Israel. Gradually, and small retailers)throughout the The full fl ow of inbound and Diplomat expanded its operations whole country via presales and outbound processes are supported and became the leading van sales. The company has two by the computerized warehouse distributor of fast moving consumer separate distribution centers: one management system (WMS) under goods, and cosmetics in Israel in Tbilisi in the eastern part of the which Full FEFO (fi rst expired, fi rst (P&G, Mondeles, Kikkomen, Heinz country, and one in Samtredia to out) rules are applied- superior Lotus, and many others, detailed the west. The company also has productivity and effi ciency is information at -http://www. four representative offi ces and achieved, while accurate picking diplomat-global.com/). cross dock centers throughout and stock control is ensured. In 2008, Diplomat turned into Georgia- Telavi, Gori, Batumi and The offi cial opening of the a global concern, the rapid and Poti -which ensures fl exibility and distribution center is already successful expansion of which the ability to reach customers. planned for October 20th, to was facilitated by Procter & The long-term vision of the which many current and potential Gamble’s invitation to partner company in general is proven customers of Diplomat Georgia will with them to operate in Georgia, by the huge investment which be invited. followed by South Africa in 2010 Diplomat Group made in building The key success factor for and Cyprus in 2011- managed by an advanced A-class distribution Diplomat is its aim to succeed Diplomat Group. In each of these center in the Orkhevi area, near with customers through offering countries Diplomat has built solid Tbilisi airport. For the building of valuable solutions, global infrastructures and developed the modern distribution center in operations and organizational strong teams of dedicated Georgia, Diplomat leveraged the excellence. professionals and staff, adapted Diplomat Group’s knowledge and With such high quality, to each market’s unique structure experience which counts more effi cient operations, advanced and needs. Each began as the than half a century. technologies and organizational offi cial and exclusive distributor The new and modern excellence, Diplomat constantly for P&G, and they have all have warehouse, with the capacity of strives to improve its service. The succeeded in expanding into 6,250 pallets and ability of picking uncompromising commitment to other categories of Fast Moving more that 1000SKUs, allows the service, long-term growth, and Consumer Goods. company the possibility to further continuous improvement in all Today, Diplomat Georgia is expand its operations. As with spheres of activity makes Diplomat the leading sales and distribution Diplomat Israel, with the newly highly regarded throughout the company in the country, which built distribution center Diplomat industry for excellence in logistics, started its operations by distributing Georgia will be able to provide sales and marketing, as well as for P&G’s most well known global a full range of services to third being an ideal model of successful brands from beauty to home parties. The new distribution center integration. This approach has care (Ariel, Tide, Fairy, H&S, Wash has 5,800 sq. meter storage place, brought Diplomat to its leading &Go, Pampers, Comet, Wellaton, with a separate temperature position and has contributed to etc.). Later, Diplomat Georgia controled area- offering storage the on-going signifi cant expansion expanded into food categories, services for such products that of its operations.

44 | Investor.ge • AUGUST-SEPTEMBER/2014 NEWS

AUGUST-SEPTEMBER/2014 • Investor.ge | 45 NEWS 12TH AMCHAM US INDE

ON JUNE 28, AMCHAM GEORGIA, JOINTLY WITH THE U.S. EMBASSY IN GEORGIA, HOSTED A FAMILY PICNIC CELEBRATING THE 238TH ANNIVERSARY OF THE SIGNING OF THE U.S. DECLARATION OF INDEPENDENCE. AMERICAN, GEORGIAN AND INTERNATIONAL FAMILIES ENJOYED AN AMERICAN- STYLE PICNIC WITH A GIANT BAR-B-QUE, LIVE BANDS, AND TOYS FOR THE CHILDREN. THE PICNIC ALSO FEATURED A LARGE VARIETY OF FAMILY FUN ACTIVITIES INCLUDING BEAN BAG TOSS, TUG OF WAR, AND TWO LEGGED RACE. KIDS HAD GREAT FUN WITH FACE-PAINTING AND CLOWNS. EVERYONE GOT THE CHANCE TO TRY RIDING A RODEO AND TO GET PAINTED BY FAMOUS CARICATURISTS ZALIKO AND KEMO WHO PROVIDED FANTASTIC MEMENTOS FOR GUESTS TO TAKE HOME. THE EVENT CLOSED WITH A BRILLIANT DISPLAY OF FIREWORKS. U.S. AMBASSADOR TO GEORGIA RICHARD NORLAND AND AMCHAM GEORGIA PRESIDENT SARAH WILLIAMSON WELCOMED NEARLY 1,000 GUESTS, FOLLOWED BY A SINGING OF THE AMERICAN NATIONAL ANTHEM AND A SURPRISE FLASH MOB.

46 | Investor.ge • AUGUST-SEPTEMBER/2014 NEWS PENDENCE DAY PICNIC

AUGUST-SEPTEMBER/2014 • Investor.ge | 47 NEWS 12TH AMCHAM US INDE

48 | Investor.ge • AUGUST-SEPTEMBER/2014 NEWS PENDENCE DAY PICNIC

AUGUST-SEPTEMBER/2014 • Investor.ge | 49 NEWS

ON JULY 15, AMCHAM GEORGIA HOSTED A DINNER FOR A DELEGATION OF BUSINESS EXECUTIVES FROM THE BUSINESS EXECUTIVES FOR NATIONAL SECURITY (BENS) AND UNITED STATES EUROPEAN COMMAND WHO ARE VISITING GEORGIA ON A MISSION TO FURTHER PROMOTE BUSINESS OPPORTUNITIES AND EXPAND THE UNITED STATES-GEORGIA TRADE AND ECONOMIC RELATIONSHIP. THE DINNER INCLUDED A TRADITIONAL GEORGIAN SUPRA, MUSIC AND DANCE AT PURIS SAKHLI RESTAURANT IN TBILISI.

50 | Investor.ge • AUGUST-SEPTEMBER/2014 NEWS

AUGUST-SEPTEMBER/2014 • Investor.ge | 51 NEWS

Board Of Directors 2014

SARAH WILLIAMSON PRESIDENT

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

LASHA GOGIBERIDZE BADRI JAPARIDZE STEVE JOHNSON DIRECTOR DIRECTOR DIRECTOR

AmCham Executive Director Writers Amy Denman Emil Avdaliani, Helene Bedwell, Maia Edilashvili, Monica Ellena, Richard Gira- gosian, JumpStart Georgia, Levan Kokaia, Marta Ferrer Lubeck Copy Editor Katie Davies Photographs Davit Khizanishvili, Vladimir Valishvili Marketing & Promotion Sophia Chakvetadze Special thanks to the AmCham Staff, the editorial board, JumpStart Georgia, and all of our contributors. This magazine would not be possible without you. Promotional Design Levan Baratashvili

Magazine Design and Layout Giorgi Megrelishvili 52 | Investor.ge • AUGUST-SEPTEMBER/2014 NEWS

TED JONAS KETTI KVARTSKHAVA ROBIN MCCONE DIRECTOR DIRECTOR DIRECTOR

DAVID LEE BETSY HASKELL, K.G. MOORE CHAIRMAN EMERITUS FOUNDING ADVISOR EX-OFFICIO MEMBER

AMY DENMAN EXEC. DIRECTOR

AmCham Georgia Patron Members:

© The American Chamber of Commerce in Georgia, 2014 arising from the use of any product or service advertised within All rights reserved. No part of this magazine may be re-printed, or the pages of this issue. reproduced or utilized in any form or by electronic, mechanical Investor.ge is printed by CEZANNE or other means now known or hereafter invented, including AmCham Georgia: photocopying and recording, or in any information storage or rd retrieval system without permission. 36a Lado Asatiani Street, 3 ﬂ oor. Tel: 2 22-69-07 The opinions expressed in this magazine do not reﬂ ect the opinion [email protected] of the American Chamber of Commerce in Georgia nor its Board [email protected] │ www.amcham.ge Members or staff, unless otherwise stated. AmCham Georgia neither endorses, nor can be held liable for any eventuality www.investor.ge AUGUST-SEPTEMBER/2014 • Investor.ge | 53

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DLA Piper Georgia LP, 10, Melikishvili Street, Tbilisi 0179, Georgia | T +(995)32 2509 300 | F +(995)32 2509 301 DLA Piper is a global law firm operating through various separate and distinct legal entities. A list of offices and regulatory information can be found at www.dlapiper.com JUL14 | 2775182