How Americans see In Georgia, the Pressess their country and is Sinking, but Laboror their democracy is at the Bottom See on p. 17 See on p. 8 MERAB PACHULIA, GORBI 9 July, 2018 News Making Money http://www.fi nchannel.com 3 Ways Marriage proposal Georgia’s growth has Digitalisation on the Moon for slowed down, IMF. Why? is Shaping 145 million dollars the Future of The FINANCIAL become an obstacle to growth. which supported the country’s While Georgians are highly net exports. “However, as the Taxation The FINANCIAL -- Starting The ApoteoSurprise agen- educated, they do not have gains from the fi rst wave of in 2022 it will be possible to cy, a French marriage pro- verage produc- the relevant skills demanded structural reforms declined The FINANCIAL -- Digital ask for the beloved’s hand in posal planner specialized in tivity growth by businesses, said IMF. and the external environment transformations and tech- marriage while fl ying over the creating extravagant propos- of Georgia de- Georgia climbed the rank- deteriorated after the 2008 nologies should be seen as lunar surface to the sound of als, introduces a whole new creased from ings of the Doing Business global fi nancial crisis, pro- an aid and not a hindrance Franck Sinatra’s “Fly Me to service for 145 million dollars around 5 percent Indicators reducing the dis- ductivity growth in Georgia to fair and efficient tax sys- the Moon”. The one-week in- which will allow 21st century Ain 2004-08 to 1.5 percent in tance to the frontier to about slowed down”, IMF said. tems, argued participants terplanetary fl ight will be car- handsome princes to propose 2011-15, according to IMF. 20 percent in 2017. At the at an international tax con- ried out using a self-contained while fl ying around the Moon. Business surveys indicate that same time, Georgia was aided ference in Munich, Ger- and autonomous spacecraft labor skills have increasingly by growth in trading partners, Continued on p. 4 many. allowing the two lovers to travel alone. Continued on p. 5 Continued on p. 8 How to Manage an Employee Global insurance premiums Who’s Having a Personal Crisis continued to rise in 2017 CURRENCIES veryone has life expect someone to be at July 7 June 30 events that distract their best at such times. But The FINANCIAL -- Global in- in 2017, while global non-life Western Europe were the them from work as a manager what can you surance premiums increased premiums rose 2.8%. main cause of drag on overall 1 USD 2.4460 2.4516 from time to time expect? 1.5% in real terms1 to nearly Growth in both the life and global premium growth. USD 5 trillion in 2017, after non-life sectors slowed. Fall- 1 EUR 2.8635 2.8537 — an ailing fam- 100 RUB 3.8692 3.9019 Eily member, a divorce, the rising 2.2% in 2016. Global ing life premiums in advanced death of a friend. You can’t Continued on p. 6 life premiums increased 0.5% markets such as the US and Continued on p. 11 1 TRY 0.5310 0.5348

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To be included in the list please contact distribution department at: temuri@fi nancial.ge CONTACT US Governments Around The World EDITOR-IN-CHIEF ZVIAD POCHKHUA E-MAIL: editor@fi nancial.ge editor@fi nchannel.com Must Rethink Their Structure In Phone: (+995 32) 2 252 275 HEAD OF MARKETING LALI JAVAKHIA E-MAIL: marketing@fi nancial.ge The Face of Disruption marketing@fi nchannel.com Phone: (+995 558) 03 03 03 CONSULTANT The FINANCIAL face with citizens. have significant connection MAMUKA POCHKHUA Rising Citizen “Remaking the government and overlap and are therefore E-MAIL: fi nance@fi nancial.ge Phone: (+995 599) 29 60 40 blueprint is a complex un- good candidates for combin- Expectations, owerful forces are dertaking,” says Christopher ing into priority clusters. HEAD OF DISTRIBUTION DEPARTMENT transforming societ- Daniel, a BCG partner and One group or entity must TEMUR TATISHVILI ies everywhere—but E-MAIL: temuri@fi nancial.ge Rapid coauthor of the report. “But drive the restructuring. In Phone: (+995 599) 64 77 76 the structure of most public-sector leaders don’t order to avoid potential con- Technological governments remains need to have all the answers flicts of interest, this group COPY EDITOR: Punchanged. The public sec- IONA MACLAREN to begin. They should start should be independent of any Change, and tor must move away from with some well-designed pi- existing government offices. COMMUNICATION MANAGER: its siloed design to create a lots, experiment, learn, and Governments need to get EKA BERIDZE more agile organization—or Phone: (+995 577) 57 57 89 Increasing adjust accordingly. We are started with some initial, risk a precipitous decline in past the time for discussion— high-impact changes. This can PHOTO REPORTER: Complexity Are effectiveness and legitimacy, we need action.” include the creation of a few KHATIA (JUDA) PSUTURI according to a new report priority clusters and pilots to MAILING ADDRESS: Putting Major by The Boston Consulting embed agile approaches—the 17 mtskheta Str. Group (BCG), a global man- Creating use of cross-functional teams Tbilisi, Georgia Pressure on agement consulting firm and to develop, test, and refine OFFICE # 4 PHONE: (+995 32) 2 252 275 the world’s leading advisor on Momentum For new programs or policies— (+995 32) 2 477 549 Government— business strategy. throughout the organization. FAX: (+95 32) 2 252 276 The report describes four Change “Governments today under- E-mail: info@fi nchannel.com important structural chang- on the web: www.fi nancial.ge and Making stand that they must deliver daily news: www.fi nchannel.com es for government: the cre- To begin the process of for their citizens,” says Vin- the Traditional ation of priority clusters that creating a new government cent Chin, coauthor and se- bring together policy areas blueprint, BCG has identi- nior partner at BCG. “Doing Hierarchical that have significant over- fied three important steps that requires a fundamental lap (such as education and that public-sector leaders can transformation of their exist- Public-Sector labor), the establishment of take: ing structures and systems. Intelligence Group ltd. 2018 functional accelerators to Governments need to cre- Pioneering governments have Member of Structure enhance government exper- ate a vision that articulates shown that citizen-centric tise in areas such as AI, the both a strong case for trans- programs are possible—but Dangerously adoption of agile ways of formation and the outlines of not without an overhaul of working, and the creation of the new structure. The vision their entire service delivery Outdated a single multichannel inter- should identify which areas system.” HEADLINE NEWS & ANALYSIS 3 FINCHANNEL.COM | 9 JULY, 2018 ppublicityublicity

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The FINANCIAL which are mostly concentrated in rural areas, also remain relatively high compared to regional com- verage productivity parators. Most of Georgia’s labor growth of Georgia de- resources are locked in low pro- creased from around 5 ductivity jobs, while a large share percent in 2004-08 to of youth with higher education is 1.5 percent in 2011-15, unemployed. Aaccording to IMF. Business sur- Business surveys indicate that la- veys indicate that labor skills have bor skills have increasingly become increasingly become an obstacle to an obstacle to growth. Comprehen- growth. While Georgians are highly sive education reform—including educated, they do not have the rele- improvements to early childhood, vant skills demanded by businesses, general, and higher education; en- said IMF. hanced vocational training; and up- Georgia climbed the rankings of grades to sector management—that the Doing Business Indicators re- is well integrated into the govern- ducing the distance to the frontier ment’s reform agenda would help to about 20 percent in 2017. At the produce a better-skilled workforce same time, Georgia was aided by and support more robust and inclu- growth in trading partners, which sive growth. supported the country’s net exports. “More supportive labor market “However, as the gains from the fi rst policies, including improved labor wave of structural reforms declined matching services and more fl exible and the external environment de- employment opportunities, would teriorated after the 2008 global fi - enhance job creation”, IMF said. nancial crisis, productivity growth in While Georgians are highly edu- Georgia slowed down”, IMF said. cated, they do not have the relevant The years of high TFP (mea- skills demanded by businesses. sured with total factor productivity “The World Bank’s 2015 STEP (TFP) growth were accompanied by survey highlights important differ- marked improvements in the busi- ences between labor demand and ness and regulatory environments supply. In particular, businesses as well as robust growth in trading demand mostly low and middle partners. technically skilled workers while However, Georgia has potential the majority of job seekers are uni- mentary elections, the governing fi nancing its spending. As a result, baseline level, IMF said. for higher growth, IMF believes. versity graduates. This may refl ect coalition has united around a ro- real GDP increases by 3 percent in “Georgia’s economic reforms There is an opportunity to increase a lack of information about labor bust reform agenda—the so-called the new steady state. In converg- have led to robust growth, but the productivity, given that (1) the pro- market demands or social pres- 4-Point Plan. This is composed of ing to the new steady state, GDP benefi ts have not been broadly duction and export base can be sures to pursue higher education, an improvement in tax administra- growth increases by about 0.4 per- shared. Georgia’s growth has re- broadened; (2) unemployment is irrespective of relevance of the fi eld tion and the tax system to enhance centage point in the medium term. sulted in meager employment high and employment is concentrat- of study. The survey also shows that the role of private sector activity; In the long run, the growth of the gains, and unemployment, under- ed in low-productivity sectors; and employers have had diffi culties fi ll- an increase in infrastructure invest- economy remains driven by pro- employment, poverty, and income (3) the business environment can be ing job vacancies due to a lack of ments to leverage Georgia’s strategic ductivity and population growth”. inequalities remain high”. further improved. Additionally, the required skills”. quality and stock of human capital position; improvement in govern- “The lower tax burden on fi rms Poverty incidence and inequality, can be further improved, and physi- ment effi ciency to enhance the busi- generates higher private invest- cal capital can be increased to fully ness environment; and education ment.10 Private investment in- exploit the country’s comparative reform that addresses the skill mis- crease steadily both in levels and advantage as a platform for markets matches in the labor market.” ”The as a share of GDP, and in the new and as a tourist destination in the government has made clear its plans steady state investment share to region. and has already taken some actions output ends up being about 1 per- Luxembourg - most Improving education and skill toward the implementation of its centage point of GDP higher than in matching is key to increasing growth reform agenda. To improve govern- the baseline. The dynamics are fur- potential, IMF belives. “As a small ment effi ciency and the business en- ther helped, at least temporarily, by cars per inhabitant open economy, Georgia needs to ful- vironment, the government plans to a moderate decrease in the cost of ly reap the benefi ts of tighter global set up a Business House to provide a borrowed funds”. integration and competitiveness”, one-stop shop for public services to “Because higher consumption in the EU report said. enterprises; introduce International taxes do not fully cover higher gov- Financial Reporting Standards for ernment spending and the revenue “Improving key infrastructure is The FINANCIAL -- In 2016, the EU had on average 505 cars per 1 000 crucial to leveraging Georgia’s stra- corporations; and reform insol- losses from lower capital taxes, vency law. To increase the stock of public debt initially goes up”. inhabitants. Amongst the Member States, Luxembourg topped the list tegic position as a logistic hub for with 662 cars per 1 000 inhabitants, followed by Italy (625 cars), Malta the region. Enhancing the business human capital, the government has “The public debt-to-GDP ratio embarked on a path to implement increases by about 3 percentage (615 cars), Finland (604 cars) and Cyprus (595 cars). environment will help attract private At the other end of the scale, the lowest number of cars were recorded in capital and will strengthen the role comprehensive education reform points with respect to the baseline, that includes curriculum standards, and then progressively declines Romania (261 cars: 2015 data), Hungary (338 cars), Latvia (341 cars) and of the private sector in generating Croatia (374 cars). sustainable and inclusive growth. the introduction of a new framework back to 45 percent of GDP in the Finally, bolstering the quality of hu- for teachers, vocational training, new steady state—it is assumed man capital will support the diver- and adult learning. However, more that the government does not want sifi cation of production and exports must be done in terms of upgrading to increase its debt-to-GDP ratio. toward more complex and higher the quality of early childhood educa- As government investment pro- value-added goods”. tion, improving learning outcomes, gressively declines to a level only Improving education and skill enhancing vocational training, and slightly higher than in the base- matching is key to increasing growth strengthening education in science line and current spending remains potential. and technology”. contained, the fi scal balance dete- According to the Global Competi- “Finally, to improve the stock of riorates only mildly in the medium tiveness Report, an “inadequately physical capital, the government run. Moreover, higher consump- educated workforce” is generally aims at scaling-up infrastructure tion taxes—together with a higher ranked as among the most problem- spending to transform Georgia into tax base—support the fi scal adjust- atic issues for businesses. In Geor- a transport and logistics hub con- ment”. gia, the quality of education must necting Europe and Asia”. The increase in real wages puts be improved, especially in rural ar- upward pressure on prices of do- eas where educational outcomes are mestically produced goods, and the particularly bad, which contributes central bank moderately increases to high unemployment. Enrolment Fiscal Policy the policy rate, according to IMF in universities is about 50 percent report. of Georgian students, lower than The increase in the interest rate is 60 percent in Central and Eastern Package consistent with the initial apprecia- Europe and 70 percent in Western tion of the lari. The appreciation of Europe—and vocational training is The government’s fi scal package the lari, as well as the import com- not popular. As a result, there is con- has positive effects on GDP and ponent of demand (also from high- siderable skill mismatch in the labor growth, according to IMF report. er government and private invest- market, and businesses lament the “The scaling up in productive pub- ment), temporarily deteriorates the lack of technical specialists in vari- lic investments and public capital current account—which worsens by ous fi elds, from agriculture to engi- stock allows for higher productivity a maximum of 1.5 percent of GDP. neering. in private fi rms. Moreover, by re- However, as higher productivity al- ”Addressing all these challenges placing taxes on capital with taxes lows for lower prices, the real effec- requires a comprehensive reform on consumption, the government tive exchange rate depreciates, and package. 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Research your company’s policies before you offer time off or alterna- tive work arrangements. Treat similar situations among employees differently. Employees will note — and resent — the incon- sistency. Case Study #1: Set realistic work goals with the Carolyn O’HARA Harvard BUSINESS SCHOOL employee and

veryone has life events that delegate some distract them from work from time to time — an ail- of their work ing family member, a di- vorce, the death of a friend. Alicia Shankland, a senior HR ex- EYou can’t expect someone to be at ecutive with more than 20 years of their best at such times. But as a experience, managed two different manager what can you expect? How women through the intensely stress- can you support the person to take ful, emotional months of fertility care of themselves emotionally while treatment. In both cases, the treat- also making sure they are doing their ments continued for nearly a year, work (or as much of it as they are so the women were away from work able to)? frequently for medical appointments ployee may feel compelled to tell you thing to your employee. Explain that situations will be open-ended and and procedures. They also experi- more than they’re comfortable with. you need to check what’s possible in those cases, you can set interim enced severe ups and downs from “You want to build a caring relation- before you both commit to an ar- deadlines when you get together to the hormone drugs and the emo- What the ship with employees, not a friendly rangement. check in on how things are going tional devastation of miscarriages. relationship,” says Hill. Many man- If the employee needs counseling and make adjustments as necessary. What’s more, the schedule of fer- Experts Say agers make the mistake of confus- or drug or alcohol services, there Whatever arrangements you make, tility treatments didn’t fi t neatly ing being liked with being trusted or may be resources provided by your be crystal clear about your expec- into any of the existing standard HR Managing an employee who is respected. A good manager “has the company’s medical insurance that tations during this time period. Be leave policies. “There was no way to going through a stressful period is ability to read and understand other you can recommend. But investi- realistic about what they can accom- make a 30-60-90 day plan to accom- “one of the real challenges all bosses people’s needs and concerns,” says gate the quality of those resources plish and set goals they can meet. modate all the unknowns,” Shank- face,” says Linda Hill, professor at McKee, while still keeping everyone fi rst. “The last thing you want to do “For this to be useful,” says McKee, land said. Harvard Business School and au- focused on the major task at hand: is send a suffering employee to avail “it’s got to be specifi c and it has be In each case, she endeavored to thor of Being the Boss. Most of us accomplishing work. themselves of a program or suppos- grounded in reality.” make as many allowances as pos- try to keep work and home separate, edly helpful people who then fall sible, and the women used sick but “we all have situations in which short,” says McKee. time, fl ex time, and personal days. our personal and professional lives Listen first, Be transparent She worked with each of them to set collide,” and how you handle these concrete, realistic work goals that situations with your employees is suggest second Check in and consistent allowed them to focus on the most often a test of your leadership. You critical deliverables while delegating need to be empathetic and compas- other duties, and teammates pitched sionate while also being professional When you speak to an employee regularly to Be conscious of the fact that other about their current struggles, “lis- employees will take note of how you in to make sure duties weren’t ne- and keeping your team productive. glected or dropped. “We managed It’s a fi ne line to maintain, says An- ten fi rst instead of immediately ad- treat the struggling colleague and vocating for some particular course make sure will likely expect similar consider- through it as a tight-knit team,” she nie McKee, a senior fellow at the says. University of Pennsylvania Gradu- of action,” says Hill. They may just ation if they too run into diffi cult want a sounding board about the dif- they’re doing times in the future. “If you want to A happy outcome was that the ate School of Education and author team was well prepared to cover of How to Be Happy at Work. Here’s fi culties of caring for a sick relative get productive work out of people, or an opportunity to explain why a ok they need to trust you and believe for the maternity leaves that were how to manage an employee going eventually taken by each woman. “It through a personal crisis. divorce has affected their attention that you’ll treat them fairly,” says span. If you immediately suggest Whether you’ve settled on a solu- Hill. Remember that policies may be actually showed us all that we could they take a leave of absence or adjust tion yet or not, check in with your precedent-setting. Every situation play multiple roles,” Shankland says. their schedule, they may be put off employee occasionally by dropping will be unique, but you want to be When the women returned from Make yourself if that’s not what they were think- by their desk (keeping their privacy comfortable with policies in case you their respective maternity leaves, ing. Instead, ask what both of you in mind) or sending a brief email. are called to apply them again. Keep they were both at “110 percent.” available can do together to address the issue Not only will your employee appre- in mind that solutions could apply Each had “exceptionally success- of performance during the diffi cult ciate that you care, you’ll get a better to “the next person and the next and ful years at the company that more “People don’t always feel comfort- period. “Try to use the word ‘we,’” sense of how they are coping. “You the next after that,” says McKee. than made up for the time when able telling their boss” that a parent advises Hill, as in “How can we sup- can simply ask, ‘Do you feel like they needed extra hands to make it is gravely ill or that they feel stressed port you?” The employee may have you’ve got a handle on it?,’” says Hill. through.” out in the wake of a crumbling rela- an idea for a temporary arrangement “And if they do, you can say, ‘Let’s Principles to tionship, says McKee. They may be — some time off, handing off a proj- just keep in touch so neither one of too overwhelmed, or embarrassed ect to a colleague, or a more fl exible us has too many surprises. Or if you Case Study that it is causing them to be late re- schedule for a few weeks — that is get a little over your head, I hope Remember peatedly or to miss deadlines. Often amenable to you. you’ll feel free to come to me and 2: Act with a manager’s fi rst challenge is simply we can do some more problem solv- Do: # recognizing the warning signs that ing and make further adjustments if an employee is going through a dif- Know what you necessary.’” Set a tone of compassion in the compassion fi cult time. Invest time in building offi ce. It will not only give your em- good relationships with employees ployees confi dence to approach you and offer so you’ll be able to detect any prob- can offer Consider with struggles, but also give you the lems early on. If you maintain an ability to spot warnings signs. atmosphere of compassion in the You may be more than willing to Be creative with solutions. A fl ex- flexibility if offi ce, people are more likely to pro- give a grieving employee several workload ible schedule may allow a person to actively come to you when they’re weeks of leave, or to offer a woman maintain their output without much possible going through a tough period. with a high-risk pregnancy the abil- You also have to consider whether disruption. ity to work from home. But the deci- prolonged absences will adversely Check in from time to time, both When David, a professional at a sion isn’t always yours to make. “You affect clients or team members. If to reassure the employee and to fi nancial services fi rm, heard that may be very compassionate but you so, mitigate those risks by easing the make sure that further adjustments the husband of one of his team Don’t pry may be in a company where that’s person’s workload. If there are peo- or accommodations aren’t needed. members had been diagnosed with not the way it works,” says Hill. Of ple who are willing and able to take terminal brain cancer, he knew it As a leader, you need to be able to course, if you have the leeway to get on some of the individual’s projects, was going to be a long and emo- show empathy and care, but you also creative with a fl exible schedule, an you can do that temporarily. Just be tional roller coaster for her. Within must avoid becoming an employee’s adjusted workload, or a temporary sure to reward the people who are Don’t: weeks of the initial, grave diagno- personal confi dante. After all, your work-from-home arrangement, do stepping in. And then set timelines sis, doctors suggested that the can- job as manager is not to be the of- what you think is best. But also be for any adjustments you make. If the Act more like a therapist than a cer may not be spreading as fast as fi ce shrink. So don’t ask a bunch sure you understand your company’s person knows that their situation manager. Your heart may be in the initially thought, and that the hus- of questions about the employee’s restrictions on short- and long-term will last for 6-8 weeks, set a deadline right place, but don’t get involved in problems. As the person with more leave, and what, if any, bureaucratic for you to meet and discuss what your employee’s personal problems. power in the relationship, the em- hurdles exist before promising any- will happen next. Of course, many Make promises you can’t keep. Continued on p. 13 HEADLINE NEWS & ANALYSIS 7 FINCHANNEL.COM | 9 JULY, 2018 ppublicityublicity

Advertiser: m2. Contact FINANCIAL Ad Dep at marketing@fi nchannel.com 8 HEADLINE NEWS & ANALYSIS ssurveysurveys & aanalysisnalysis 9 JULY, 2018 | FINCHANNEL.COM MERAB PACHULIA, GORBI In Georgia, the Press is Sinking, but Labor is at the Bottom

fter 29 years in the sur- Graph 1. Confi dence in Press and Trade Unions (%) ironically, daily circulation is below receive and watch the news on their vey business with access 3,000 but weekly copies for one or phones. But as in most developed to rich data archives, two items exceeds 30,000, still a democracies, print media still exists I can confi dently de- meager amount for a population of and in some countries (Australia is scribe the dynamics of 3.7 million. the good example) circulations are AGeorgian society in numbers and Under Soviet rule, Georgia had even recovering. I do not see a bright speculate about trends. In previous a few newspapers, which were future for print media in Georgia; columns, I wrote about the evolu- very well distributed, had a huge it feels like no one needs them and tion of positive attitudes towards the circulation and were very cheap, most efforts are now in the digital Georgian armed forces and how trust cheaper than the propaganda they realm. We already have a few suc- in political parties has dramatically were preaching. After the fi rst two cess stories of newly-established in- declined over the last two decades. decades following independence, ternet-based magazines and it seems In this column I will present trust Georgian print press had some ups they have some prospects. curves of two other important insti- but overall, the newspaper business As for TUs, I believe they have a fu- tutions: the press and trade unions. is down and on its way out. Despite ture and should soon become stron- Why the press and trade unions in huge efforts from the international ger and more involved in generating the same column? Simply because community, independent print form employment and economic growth. both are important pillars in any did not manage to transition to the After all, the small but still present modern society that can sometimes digital era and failed to be competi- labor class needs a lot of support, be very useful in improving quality of tive. The extinction of newspapers education on workers’ rights and life. And, you can see the drastic de- is well refl ected in survey fi ndings: organization to defend itself, as in clines of both by glancing at Chart 1. 23 years ago, a majority (59%) of any normal environment. But they Source: GORBI, European Values Survey, 2018 and 2008; World Values Trade Unions (TU) have a long surveyed respondents had trust in will certainly need a lot of help from Survey, 1995. history in Georgia. Until 1990, they the press. By 2018, this number had Georgia’s friends to catch up with used to be important instruments for dropped to 21%, and the saga con- the new realities and adequately ad- managing the working class and were been collected during the previous was a low 26%. Today, it’s even low- tinues. dress current challenges. I wonder if much glorifi ed during colorful May 70 years. The same happened with er – only 17% of surveyed respon- Based on the same data, respon- TUs will be the next target of the do- Day parades. Since Georgia’s inde- the Communist Party and the Young dents have confi dence in the insti- dents’ education and age is highly nor community or if selected NGOs pendence, their only major achieve- Komsomol Union, leaders and other tution. It is not surprising given the correlated with confi dence in the will remain the privileged partners. ment was getting Georgia to join the “smart” people. They pocketed the very rare appearance of TU leaders press. While 34% of those with in- International Labor Organization money and, in some cases, later in- in the media to discuss their initia- complete education have “a great Note: I would like to extend special and ratify basic labor rights conven- vested it back in banking or infra- tives, and successful cases where deal” or “quit a lot” of confi dence appreciation to Ani Lortkipanidze tions. Well, to be fair, in recent times structural projects. they bargained with investors or lo- in the press, the same is true with who assisted with the analysis and they have also attempted to bargain I cannot recall any true TU cal businesses. only 2% of those with PhD degrees. charts featured in this article for increases in salaries and safety for achievements, but I do remember Press is way older than the con- Whereas almost every third (30%) GORBI is an exclusive member of coal miners and metro drivers. cases when employees were fi red cept of TUs in Georgia. The coun- elderly respondent (aged 65 or over) the Gallup International research After the collapse of the Soviet sys- from large businesses such as banks try’s fi rst newspaper “Sakartvelos is confi dent in the press, among network and has more than two tem, Georgian TUs began “privatiz- and GSM companies during Saa- Gazeti” (Georgia’s Newspaper) was the youngest group of respondents decades of experience in survey ing” inherited state assets at a fren- kashvili’s regime because they had published in 1819, containing sto- (18-24-year-olds) only 13% share research (gorbi.com) zied pace, and the interests of the attended opposition rallies. Business ries about governments decrees, such confi dence. workers were largely confi ned to the owners could not resist the “advice” articles, news from Russia, etc. At Overall, this sharp decline in con- dustbin. During this period of wild of the security services and TUs were fi rst, only about 200 copies were fi dence in the press and TUs is not capitalism, TUs effectively operated not in the position to back them up. printed, probably because of the low good news. Yes, the internet will as regular criminal organizations, In 1995, when GORBI fi rst mea- literacy rate and absence of distri- soon be universally-accessible in stealing property and cash that had sured trust towards TUs, the fi gure bution services at the time. Today, Georgia, and everyone will be able to 3 Ways Digitalisation is Shaping the Future of Taxation

The FINANCIAL -- Digital transfor- tackle underreporting, evasion or importance of intangible assets, such mations and technologies should be fraud. Data recording software ad- as intellectual property, and data. seen as an aid and not a hindrance to opted by several tax administrations fair and effi cient tax systems, argued that notes sales data at the time of participants at an international tax a transaction—and can be submit- A global approach conference in Munich, Germany. ted directly to tax authorities—has Tax authorities around the world already increased some countries’ is needed to adopt are publicly grappling with the chal- value-added tax (VAT) revenues by lenge of adapting revenue collection up to 20%. tax rules to the models to a global economy that is continually reshaped through trans- digitalised world formative digital technologies, ac- Digital business cording to ICC. The European Commission pro- In March, the European Commis- models are posals include the introduction of an sion released two legislative pro- interim turnover-based tax (equali- posals for taxing of digital fi rms. A transformative, sation levy), where businesses would host of other countries, including be taxed based on revenue as op- India, Brazil, Colombia and Viet- but also pervasive posed to profi ts. The OECD report nam are also planning or proposed also discusses such interim mea- new taxes on the digital economy. The way we work has already digi- sures and identifi es the constraints A recent report from the Organisa- talised to such an extent that it is they present, but specifi cally does tion for Economic Cooperation and misleading to ‘ring-fence’ the digital not recommend them. Development (OECD) noted that economy from the economy at large. At the event, private sector par- more than 110 countries will work to 95% of businesses in OECD countries ticipants were united in stating their build a consensus on digital tax by benefi t from a high-speed Internet concerns over the drawbacks of such 2020 within the OECD/G20 Inclu- connection and the volume of data short-term measures, such as the sive Framework on base erosion and created across the globe is expected expected risk of double taxation and profi t-shifting (BEPS). to double each year. The emergence increased compliance and adminis- Last Friday, private sector repre- of new business models made pos- trative costs, as well as the arbitrary sentatives joined with policy mak- sible through digital technologies, thresholds for being subject to the ers and academics to discuss how though, is compelling tax authori- proposed interim tax. shows how digitalisation has already ties to adapt their tax administrative While digitalisation presents new digitalisation is shaping the future gains for tax had a threefold positive impact on tax of taxation at a conference organised systems as well as their approach to challenges and opportunities, par- administration: enhancing the effec- taxation of digitalised businesses. ticipants agreed that the principles by ICC, Business at OECD (BIAC) administrations tiveness of tax compliance, improving and BusinessEurope in Munich. The Internet enables companies to of a fair tax system— consistency, taxpayer services and reducing tax scale across global markets without predictability, neutrality —are just Here are three main takeaways: While often perceived as a threat or compliance burdens. a signifi cant physical presence—a as relevant as ever for both public challenge to the collection of tax rev- For instance, greater amounts of feature that is notably helping small authorities and business and that enue, participants agreed that digital third-party data available to tax au- businesses to export to an unprec- a global approach to taxing a glo- Digitalisation technologies also have the potential to thorities allows more reporting to be edented degree. Digitalisation is also balised digital economy is what all revolutionise compliance and enquiry automated, saving both sides time often accompanied by the growing stakeholders are aiming for. holds huge work. The OECD, in their 2018 report, and money, and can also be used to HEADLINE NEWS & ANALYSIS 9 FINCHANNEL.COM | 9 JULY, 2018 ppublicityublicity

Continued on p. 12 Advertiser: ProCredit Bank. Contact FINANCIAL Ad Dep at marketing@fi nchannel.com 10 HEADLINE NEWS & ANALYSIS fi nancialnancial nnewsews 9 JULY, 2018 | FINCHANNEL.COM Armenia Charges Inflation Rate in Ex-President’s Georgia, June 2018 Brother In Financial The FINANCIAL – In June 2018 the personal transport equipment (1.5 and other fuels: prices went up by monthly infl ation rate amounted to percent). Meanwhile, the prices 5.2 percent, contributing 0.43 per- Crime Probe -0.6 percent. Compared to the same were lower for the subgroup of pur- centage points to the annual infl a- month of the previous year the Con- chase of vehicles (-2.1 percent); tion. The prices were higher for the sumer Price Index change (annual Alcoholic beverages and tobacco: subgroups of water supply and mis- infl ation rate) posted a 2.2 percent prices in the group were up by 1.1 cellaneous services relating to the increase. percent, with a relevant contribu- dwelling (7.7 percent) and electric- The following table shows per- tion of 0.08 percentage points to the ity, gas and other fuels (5.8 percent); centage changes in prices for the monthly infl ation. Prices increased Health: prices increased by 5.1 commodity groups of the consumer for the subgroup of tobacco (1.6 per- percent, with a relevant contribution basket as well as the relevant contri- cent). of 0.43 percentage points to the an- butions to the overall monthly infl a- The following table shows per- nual index change. Within the group tion rate. centage changes in prices for the prices were higher for the following The monthly infl ation rate was commodity groups of the consumer subgroups: medical products, appli- mainly infl uenced by price changes basket, as well as the relevant con- ances and equipment (9.2 percent), for the following groups: tributions to the overall annual infl a- out-patient services (3.4 percent) Food and non-alcoholic bever- tion rate in June 2018. and hospital services (2.4 percent); ages: prices in the group decreased The annual infl ation rate was Alcoholic beverages and tobacco: by 2.6 percent, contributing -0.79 mainly infl uenced by price changes prices in the group increased by 4.9 percentage points to the overall CPI for the following groups: percent, contributing 0.34 percent- The FINANCIAL -- Armenian au- Sarkisian, who had been president change. Prices decreased for the fol- Transport: prices in the group age points to the annual infl ation. thorities say they have formally for 10 years, moved to the newly lowing subgroups: fruit and grapes were higher by 4.6 percent, with a Prices were higher for the subgroup brought fi nancial-crime charges powerful post of prime minister in (-14.6 percent), vegetables (-13.9 relevant contribution of 0.63 per- of tobacco (8.9 percent); against the brother of former Presi- mid-April but stepped down after percent), milk, cheese and eggs (-2.3 centage points to the overall index Clothing and footwear: prices dent Serzh Sarkisian, one of a series weeks of peaceful street protests led percent), oils and fats (-0.8 per- growth. Prices within the group in- decreased by 7.7 percent, which re- of high-profi le actions by law en- by Pashinian, then an opposition cent). In the meantime, the prices creased for operation of personal sulted in a -0.29 percentage point forcement agencies against the ex- lawmaker. increased for meat (0.9 percent); transport equipment (8.3 percent). contribution to the overall infl ation. leader’s close relatives. Since then, Armenian authori- Transport: prices went up by 0.8 Meanwhile, prices were lower for Prices went down both for clothing Armenia’s Special Investigation ties have launched criminal probes percent, contributing 0.1 percentage the subgroup of purchase of vehicles (-7.9 percent) and footwear (-6.8 Service (SIS) said in a July 7 state- against two nephews of Sarkisian, points to the overall index change. (-10.8 percent); percent). ment that Levon Sarkisian, his son the sons of a controversial brother Prices increased for operation of Housing, water, electricity, gas Narek, and his daughter Ani have of the ex-president, Aleksandr Sarki- been charged with conducting illegal sian. business activity. In an interview with RFE/RL’s Both Levon and Ani Sarkisian face Armenian Service on July 6, Pash- forgery charges as well, according to inian denied that Sarkisian’s family the SIS, which said a court had is- is being selectively targeted by au- sued an arrest warrant for the father. thorities, saying the cases against his The court also ordered a search for relatives are being pursued on their Ani Sarkisian but ruled that she and legal merits and are not “political” in her brother would be allowed to sign nature. a pledge not to leave the country in Armenia’s State Revenue Com- lieu of being held in pretrial deten- mittee opened a corruption-related tion, the SIS said. criminal probe against Levon Sarki- Armenian Prime Minister Nikol sian and his two children late last Pashinian announced a crackdown month after authorities said they on corruption after being elected discovered nearly $7 million they prime minister on May 8. allegedly held in an Armenian bank His election came after Serzh and did not properly declare. Switzerland: medicine – main product traded with the EU The FINANCIAL -- In 2017, Switzer- manufactured goods” dominated land was EU’s fourth largest partner in 2017. Together these manufac- for imports (6 % of total extra-EU tured goods accounted for 78 % of imports) and third largest for EU ex- EU exports to and 83 % of imports ports (8 % of total extra-EU exports). from Switzerland. At a more detailed Low Quality Healthcare Is From 2008 to 2017, the EU ran level, “medicaments” was the most a trade surplus (meaning that they traded product between the EU and exported more than they imported) Switzerland. with Switzerland, reaching a surplus Among the Member States, Ger- Increasing the Burden of Illness of EUR 40 billion in 2017. many (EUR 43 billion) was the larg- For both EU exports and imports est importer from Switzerland and with Switzerland, “machinery and also the main exporter (EUR 54 mil- and Health Costs Globally vehicles”, “chemicals” and “other lion) in 2017.

WASHINGTON, July 5, 2018 -- Poor time, one in ten patients is harmed ately impacts the poor, which is not quality health services are holding during medical treatment in high in- only morally reprehensible, it is eco- back progress on improving health come countries. nomically unsustainable for families Rising proportion in countries at all income levels, ac- These are just some of the high- and entire countries.” cording to a new joint report by the lights from Delivering Quality “At WHO we are committed to World Health Organization (WHO), Health Services – a Global Impera- ensuring that people everywhere of single person Organisation for Economic Co-op- tive for Universal Health Cover- can obtain health services when and eration and Development (OECD), age. The report also highlights that where they need them,” said WHO and the World Bank Group. sickness associated with poor qual- Director-General Dr Tedros Adha- households in the EU Today, inaccurate diagnosis, ity health care imposes additional nom Ghebreyesus. “We are equally medication errors, inappropriate or expenditure on families and health committed to ensuring that those unnecessary treatment, inadequate systems. services are good quality. Quite The FINANCIAL -- The latest sta- or unsafe clinical facilities or prac- There has been some progress in honestly, there can be no univer- tistics on household size in the EU of single person tices, or providers who lack adequate improving quality, for example in sal health coverage without quality show that in 2017 around one third training and expertise prevail in all survival rates for cancer and cardio- care.” of households in the EU comprised households countries. vascular disease. Even so, the broad- “Without quality health services, single adults without children. The fi gures also show that since The situation is worst in low and er economic and social costs of poor universal health coverage will re- The fi gures are from the EU la- 2010, when the proportion of house- middle-income countries where 10 quality care, including long-term main an empty promise,” said OECD bour force survey, which also reveals holds with just one person was 31%, percent of hospitalized patients can disability, impairment and lost pro- Secretary-General Ángel Gurría. the differences across EU Member there has been a gradual rise of 2.4 expect to acquire an infection during ductivity, are estimated to amount to “The economic and social benefi ts States. The proportion varies from percentage points to 34% in 2017 in their stay, as compared to seven per- trillions of dollars each year. are clear and we need to see a much just under 20% in Malta, 22% in the EU. In some countries the rise cent in high income countries. This “Good health is the foundation stronger focus on investing in and Portugal and Slovakia to 43% in has been particularly noticeable. In is despite hospital acquired infec- of a country’s human capital, and improving quality to create trust in Lithuania, 44% in Denmark and 51% Latvia, for example, the proportion tions being easily avoided through no country can afford low-quality health services and give everyone ac- in Sweden. of households with a single person better hygiene, improved infection or unsafe healthcare,” World Bank cess to high-quality, people-centred increased from 25% in 2010 to 35% control practices and appropriate Group President Jim Yong Kim said. health services.” in 2017. use of antimicrobials. At the same “Low-quality care disproportion- Graph: proportion HEADLINE NEWS & ANALYSIS 11 FINCHANNEL.COM | 9 JULY, 2018 fi nancialnancial nnewsews Global insurance premiums continued to rise in 2017 The FINANCIAL -- Global insur- growth. China continued to be ance premiums increased 1.5% in among the world’s fastest growing real terms1 to nearly USD 5 trillion insurance markets, particularly in in 2017, after rising 2.2% in 2016. life. Global life premiums increased 0.5% in 2017, while global non-life premi- ums rose 2.8%. Emerging markets Growth in both the life and non- life sectors slowed. Falling life pre- premium growth miums in advanced markets such as the US and Western Europe were continues the main cause of drag on overall global premium growth. Emerging In emerging markets, life and markets, especially China, contin- non-life premiums increased 14% ued to drive growth. The Swiss Re and 6.1% respectively in 2017. In the Institute expects global non-life non-life sector, growth in 2017 has premiums to rise, led by the US, slowed but still remained robust. where the economy is strengthen- The slowdown in emerging markets ing. It also predicts that global life was largely driven by China, where insurance premiums will improve the speed of expansion halved to a over the next few years, driven by still solid 10%. The insurance mar- strong growth in China, according kets in emerging countries have out- to Swiss Re. performed the corresponding econo- The annually published “world mies for decades, given the current insurance” sigma report on pre- low levels of insurance penetration. mium volumes and growth trends In these markets, incomes, revenues reveals that the expansion of global and assets of individuals and com- premiums has slowed to 1.5% from panies are growing, which in turn 2.2% in 2016. Global life premiums boosts the demand for insurance. increased to roughly USD 2.7 trillion China continued to be the main in 2017, while global non-life premi- growth engine in emerging markets. ums rose to approximately USD 2.2 Compared to 2016, growth slowed in trillion. Growth in both the life and the region but remained robust. The non-life sectors slowed. Chinese life market grew by 21% in Falling life premiums in advanced 2017, well above its ten year average markets such as the US or Western of 14%. China is now the second larg- Europe were the main cause of drag est life market globally after the US on life premium growth. Slower, but and accounts for more than half of still solid growth in emerging mar- SINCE THE GLOBAL FINANCIAL CRISIS OF 2008/2009, EMERGING emerging market life insurance pre- kets led to the slowdown in the non- ASIA, LED BY CHINA, HAS BECOME THE LARGEST SOURCE OF miums written, or 11% of the world life sector. total. Nevertheless, emerging markets, GROWTH IN THE GLOBAL INSURANCE MARKETS especially China, remain an im- portant driver of global premium Continued on p. 13

MR. TADAHARU UEHARA, AMBASSADOR OF JAPAN TO GEORGIA TALKED TO THE FINANCIAL AT TOYOTA CENTER TEGETA ABOUT GEORGIA, JAPAN TECHNOLOGIES AND POTENTIALS FOR FUTURE COOPERATION. IN SECOND PART OF THE VIDEO, IRAKLI PAPIASHVILI, DIRECTOR OF TOYOTA CENTER TEGETA EXPLAINED POPULARITY OF JAPAN BRAND TOYOTA AND INTRODUCED NEW CAR BY TOYOTA.

SCAN QR CODE TO WATCH IN YOUR MOBILE 12 HEADLINE NEWS & ANALYSIS FFactCheckactCheck 9 JULY, 2018 | FINCHANNEL.COM Fitch Rates Georgian MFO Swiss Capital ‘B-’; Koba Gvenetadze: Outlook Stable The FINANCIAL – Fitch Rat- expansion in 2014-2017 (43% charges were a moderate 23% ings has assigned JSC Microfi - average loan growth).” of pre-impairment profi t (4% nance Organization Swiss Capi- “Swiss Capital at end-2017 of average loans), but would tal a Long-Term Issuer Default reported a 15% non-perform- increase to over 50% should the Rating of ‘B-’. The Outlook is ing loans ratio (NPLs, loans company fully provide for the Stable. Fitch has also assigned overdue over 90 days to gross new NPLs generated in 2017. the company’s proposed local loans), while reserve coverage Fitch expects Swiss Capital’s bond an expected senior unse- of NPLs was low at 44% (11% profi tability to moderate due to “Interest rates are decreasing cured ‘B-(EXP)’, aligned with and 51% at end-2016, respec- recent regulatory initiatives to the IDR. tively). The unreserved portion cap the interest rate for micro- “The ratings of Swiss Capi- of problem loans was 14.5% of fi nance organisations at 50% for loans issued to legal tal refl ect its business focus on equity at end-2017, which is (2017 interest yield amounted consumer and micro lending moderate in Fitch’s view. At the to 49.6% of average portfolio). in the high-risk Georgian op- same time, the NPL origination “The main funding sources entities and individuals and erating environment, its rapid ratio (defi ned as net increase for Swiss Capital are concen- recent growth, and market and in NPLs plus write-offs divided trated and short-term with the refi nancing risks resulting from by average performing loans) main sources being secured the interest rate spread is a concentrated funding profi le was 10% in 2017, up from 3% bank loans (39% of total fund- with a high share of foreign cur- in 2016. ing at end-2017), unsecured rency”, agency said. “The rat- “Positively, the majority of promissory notes and other also shrinking.” ings also refl ect the company’s loans are secured either with loans (38%) and related-party high risk appetite, which has vehicles (64% of the total) or funding (23%). Regulator-im- resulted in large credit losses. with real estate (20%). Loans in posed limitations on promisso- Such losses are being com- foreign currency, which Fitch ry notes restricting individuals Valeri KVARATSKHELIA compared to the difference in individuals rather than legal pensated by wide interest rate views as higher-risk composed to hold less than GEL100,000. operations made by individu- entities. FactChek spreads, while capitalisation is 20% of end-2017 total loans but Swiss Capital therefore needs als in the national currency Of note is that in parallel seen as a strength and should this portfolio is in run-off mode to refi nance GEL3.7 million of and by legal entities in any with the decrease in the in- support future rapid growth”. due to regulatory restrictions. promissory notes (12% of end- currency. terest rate for loans issued in “The ratings are constrained “Swiss Capital demonstrates 2017 funding). Management VERDICT: a foreign currency, a short- by Swiss Capital’s mono-line strong, albeit rather volatile, plans to refi nance those with a ANALYSIS: term increase in loans issued business model, as the com- profi tability, with the pre-tax debut issue of local bonds and/ FactCheck concludes that in GEL has been visible since pany is focused on consumer profi t-to-average assets ratio at or bank fi nancing. Short-term Koba Gvenetadze’s statement The President of the Na- 2015. This is stipulated by the and micro lending in Georgia. 12% in 2017, down from 30% in funding (maturing in 2018) is is TRUE. tional Bank of Georgia, Koba Gvenetadze, in his speech at increased demand for loans The franchise is narrow as the 2016. Wide interest rate mar- a signifi cant 48% of total debt, company accounts for a low 5% gin (45% in 2017) was driving making Swiss Capital reliant on the Parliament of Georgia, issued in GEL which in turn RESUME: of total microfi nance sector as- the bottom-line results. Due to refi nancing and new borrow- stated that interest rates for was caused by the following sets, despite signifi cant lending these wide margins impairment ings”. In parallel to the develop- loans issued to both legal reasons: the sharp deprecia- ment of the banking sector, entities and individuals are tion of GEL and the service market interest rates for loans characterised by a tendency of of debts issued in a foreign in Georgia have been charac- decrease. The same applies to currency becoming more ex- terised with a clear tendency the interest rate spread. pensive alongside fl uctuating of decrease between 2002 As illustrated by the graph, expectations. However, the and 2018. At the same time, the interest rates for loans in interest rate for loans denom- interest rates are decreasing Georgia have a general ten- inated in GEL still continued TBC Bank Criticised at a slower pace for loans to dency of decrease. However, to decrease following a short- individuals denominated in differences are still visible if term growth. the national currency as com- we take a look at borrower As illustrated in the graph, pared to loans to individuals and loan currency. Specifi - the interest rate spread has for Lack of Females denominated in a foreign cur- cally, the pace of decrease a clear tendency of decrease rency or loans issued to legal for loan interest rates issued similar to the interest rate. entities. to individuals in the national Therefore, the interest rate The interest spread, which currency is much slower as for loans is getting closer to is the difference between in- compared to the interest rate the interest rate for deposits. in the Boardroom terest rates on loans and in- decrease in loans issued in the An analysis of borrower and terest rates on deposits, also national currency or to the in- loan currency demonstrates The FINANCIAL -- FTSE 350 Women hold 29% of the Labor MP Rachel Reeves companies are falling short boardroom positions in said that the ten companies has a clear tendency of de- terest rate decrease in loans that the interest rate spread of their targets for female ap- FTSE 100 companies, which with all-male boards must crease. As with interest rates in any currency issued to legal decreases slower in the case pointments in the boardroom. puts them on track to meet drag themselves out of the for loans, the pace of the de- entities. At the same time, the of individuals making opera- For them to meet the 2020 the government targets by dark ages. She said that crease for the interest spread interest rate change ampli- tions in the national currency government-backed targets 2020, according to Share- women bring a more diverse is also slower for operations tude (the difference between and the spread itself is rela- they will have to make more prices.com The FTSE 350 and valuable perspective to made by individuals in the tively high. The fi gure is the the highest and the lowest than 40% of their appoint- though is lagging far behind. the running of a business, national currency. The fi gure points during a certain period lowest in operations made by ments over the next two years The ten companies that still compared to the old boys’ itself is substantially higher as of time) is higher in regard to legal entities in GEL. go to women. are yet to appoint any wom- network. Many of the big- According to fi gures re- en since the introduction of gest companies still have a Graph 1: Loan Interest Rate Change Tendency in Georgia leased by the Hampton-Alex- the target are Sports Direct, long way to go with regard to ander review on Wednesday, Baillie Gifford Japan Trust, the 2020 goals, and progress companies are still far away Herald Investment Trust, has so far been at a snail’s from achieving the long-term Stobart Group, JP Morgan pace, with too few women goal of having 33% female Japanese Investment Trust, taking the helm of big com- boardrooms. There are still Daejan Holdings, On the panies. There is no excuse, ten fi rms which have boards Beach Group, Ti Fluid Sys- today, for having an all male that are entirely male. tems and TBC Bank. board. Golden Brand Company Source: National Bank of Georgia XS Toys to Launch Graph 2: Changes in Interest Rate Spread Online Store in 2018 The FINANCIAL -- Children’s shopping centres in Georgia’s fi ve are in the capital Tbilisi toy store chain in Georgia ‘XS capital Tbilisi and one store in and one in the Black Sea re- Toys’ is going to launch an the Black Sea resort town of sort town of Batumi. Tbilisi’s online store this year, where Batumi. branches are located in Tbilisi customers will be able to buy XS Toys offers top quality Mall shopping centre (on the all their top quality toys on- products, presenting them in second fl oor); shopping gal- line. Giorgi Benashvili, Sales a friendly and modern envi- lery Merani at 42, Rustaveli and Marketing Manager at ronment designed and devel- Ave (third fl oor); City Mall XS Toys, believes that the new oped in-house. Particular at- shopping centre at 1, Kavta- online store will make it easi- tention is given to the TV and radze Str (second fl oor); East er for customers to access the online content-based char- Point shopping centre (fi rst full range on offer at XS Toys. acters and exclusive XS Toys fl oor); and Galleria Tbilisi “We also plan to open new product lines. Over 20,000 shopping centre (fourth stores in Georgia in the fu- sorts of toys are sold at XS fl oor). In Batumi XS Toys is ture,” said Benashvili. Toys stores. located on Era Square at the As of today there are fi ve XS There are six branches of crossroads of Gamsakhurdia Source: National Bank of Georgia Toys stores located in the key XS Toys in Georgia, of which and Abashidze streets. HEADLINE NEWS & ANALYSIS 13 FINCHANNEL.COM | 9 JULY, 2018 FFactCheckactCheck For the first time, U.S. resettles fewer refugees Koba than the rest of the world Gvenetadze: The FINANCIAL -- Cana- dian Border Services Offi cer PRIME MINISTER OF GEORGIA Boakye-Cotie processes a Syr- ian refugee family at Toronto Pearson International Airport in December 2015. Non-U.S. countries resettled more than “International reserves increased by USD twice as many refugees as the U.S. in 2017. 282 million in 2017 and now constitute The number of refugees re- settled in the United States USD 3 billion whilst the reserve adequacy decreased more than in any other country in 2017, accord- ing to a Pew Research Center level is getting closer to 90%” analysis of new data from the United Nations High Commis- Valeri KVARATSKHELIA stituted USD 3 billion. Mr Gvene- foreign debt (USD 272 mln). sioner for Refugees (UNHCR). tadze also claimed that in terms of However, the absolute fi gures This represents the fi rst time Non-U.S. countries reset- (27,000), Australia (15,000) FactChek adequacy, the level of reserves was for international reserves do not since the adoption of the 1980 tled more than twice as many and the United Kingdom close to the 90% mark. contain complete information U.S. Refugee Act that the U.S. refugees as the U.S. in 2017 – (6,000). Sweden, Germany, Having suffi cient offi cial in- because when considering the resettled fewer refugees than 69,000 – even though refugee Norway and France each re- VERDICT: ternational reserve volumes is characteristics of an economy, a the rest of the world. resettlement in these nations settled about 3,000 refugees. one of the indicators of a coun- certain volume of international The U.S. has historically led was down from 92,000 in Per capita, Canada led the FactCheck concludes that try’s economic stability. The es- reserves might be considered sential function of international high for one country but could the world in refugee resettle- 2016. world by resettling 725 refu- Koba Gvenetadze’s statement is TRUE. reserves is to ensure liquidity in be extremely low for another. ment. Since 1980, the U.S. has Previously, the closest the gees per 1 million residents, the economy during the periods Therefore, specifi c indicators taken in 3 million of the more rest of the world had come to followed by Australia (618) of crisis. At the same time, re- have been elaborated in order than 4 million refugees reset- surpassing the U.S. on this and Norway (528). The U.S. RESUME: serves are a form of guarantee to assess reserve adequacy. To tled worldwide. measure was 2003, when the resettled 102 refugees per 1 The offi cial reserves of the Na- that a country is able to serve its this end, the International Mon- Number of refugees reset- U.S. resettled about 28,000 million U.S. residents. tional Bank of Georgia increased external obligations and make etary Fund (IMF) developed the tled in the U.S. falls below to- refugees and the rest of the Overall, the world resettled by USD 283 million over the payments in foreign currency ARA methodology. The IMF tal from the rest of the world world resettled about 27,000. 103,000 refugees in 2017, course of 2017 and constituted without hindrance. Reserves put Georgia’s international re- can consist of monetary gold, serve adequacy level at 86% at for the fi rst time in 2017But Many top nations reset- down from 189,000 in 2016. USD 3.04 billion by the end of the year. Similar to the previ- foreign currency, special draw- the end of 2017 according to in 2017, the U.S. resettled tling refugees saw decreases The broad-based decline in- ing rights(SDR) and any other the ARA methodology. The ARA in 2017Despite a sharp single- cluded decreases in other lead- ous period, the National Bank’s 33,000 refugees, the country’s interventions on the currency assets as defi ned by the Organic Metric, whose ratio is used to lowest total since the years fol- year decline in refugee reset- ing countries in refugee reset- market, received foreign grants Law on the National Bank of assess reserve adequacy, is cal- lowing the Sept. 11 terrorist tlement, the U.S. still resettled tlement, such as Canada and and loans as well as the Govern- Georgia. Most(90%) of Georgia’s culated by the following formula attacks and a steep drop from more refugees (33,000) than Australia, though the drops ment of Georgia’s operations de- international reserves comprise for countries with fl oating ex- 2016, when it resettled about any other one country. Fol- in these countries were more nominated in foreign currency reserves in foreign currency. change rates: ARA Metric = 5% 97,000. lowing the U.S. were Canada modest than those in the U.S. comprise a set of factors affect- The offi cial reserves of the Na- x Exports + 5% x Broad Money + ing changes in the reserves. tional Bank of Georgia were con- 30% x Short-term Debt + 15% x The reserve adequacy index stantly growing in the period of Other Liabilities. In accordance was 86% for Georgia in 2017. 2004-2012 and increased from with this methodology, this fi g- This index assesses the level of USD 196 million (2003) to USD ure should be within the range suffi ciency of existing reserves 2.87 billion. In light of the 2014- of 100%-150%. Therefore, Geor- for a country’s service of certain 2015 currency crisis, the inter- gia cannot yet meet the reserve obligations as well as its needs national reserves dropped to adequacy requirements. That Global insurance premiums alongside its abilities to make USD 2.52 billion. In light of the requirement was met in 2006- payments if certain short-term relatively stable GEL exchange 2007, 2010-2011 and in 2013. diffi culties arise (force majeure, rate at a new equilibrium, the Apart from the aforemen- crisis). In accordance with the reverse process to fi ll up the re- tioned ratio, another indicator continued to rise in 2017 serves has started. to assess reserve volumes is the International Monetary Fund’s methodology, the adequacy in- At the end of 2017, Georgia’s import coverage ratio. In ac- dex fi gure should be within the international reserves increased cordance with this approach, a The North American life mar- Asia has been an impor- by USD 283 million as com- country’s international reserves Continued from p. 6 ket declined by 3.5%, driven tant contributor to premium margins of 100%-150%. There- fore, Georgia’s offi cial reserves pared to the same period of the should exceed the estimated by supply side factors, as growth on two occasions did not meet the established re- previous year and constituted volumes of imports for the next players exited the retirement since 1960. In the late 1970s quirements last year. USD 3.04 billion. Throughout three months (the ratio should Premiums savings business, including and early 1980s, life insur- 2017, the primary factors affect- exceed 3). As of 2017, the import variable annuities. Among ad- ance in Japan was in high de- ANALYSIS ing the volumes of international coverage ratio for Georgia was in advanced vanced Asian markets, which mand due to the soaring lev- reserves were the NBG’s inter- 3.6; that is, Georgia’s interna- were down 2.1%, expectations els of household saving and The President of the National ventions on the currency mar- tional reserves were suffi cient markets face Bank of Georgia, Koba Gvenetadze, ket (net purchases of USD 129.8 as of 2017 to cover the value of of lower mortality rates have the country’s less developed mln), foreign grants and loans imports for the next 3.6 months. delayed life insurance pur- social security system for old in his speech at the Parliament of headwinds Georgia, stated that the country’s (USD 497 mln), the Government chases in Japan. age provision. Since the global international reserves increased by of Georgia’s currency expenses 1. 2018 fi gures are as of 31 The life sector in advanced fi nancial crisis of 2008/2009, USD 282 million in 2017 and con- (USD 230 mln) and service of May. Non-life premium growth in markets has failed to recover Emerging Asia, led by China, advanced markets remained from the 2008 fi nancial cri- has become the largest source broadly stable in 2017 at 1.9%. sis. Well documented factors, of growth in the global in- Graph 1: Offi cial International Reserves1 (USD Billion) In the US, the non-life indus- such as the depressed eco- surance markets, although try benefi tted from higher nomic environment, stagnant penetration levels have been rates in motor business, while wages combined with low gradually increasing across prices in commercial lines re- interest rates and changing all regions. The regional mained under pressure. solvency regimes made tradi- structure of global insurance Life premiums in advanced tional savings products with markets has shifted from Eu- markets, which fell 2.7% in interest rate guarantees both rope and North America to 2017, were the primary cause unattractive for consumers Advanced and Emerging Asia of the drag on global growth. and life insurers. since 1960. How to Manage an Employee Who’s Having a Personal Crisis Source: National Bank of Georgia woman more fl exibility, a nosis, she was still with the Continued from p. 6 shift she happily embraced. company in the modifi ed ar- Graph 2: Reserve Adequacy (IMF ARA Methodology) The management team re- rangement. “You have to act band may have months to structured her job away from with compassion,” said David, live, rather than mere weeks. her responsibilities in client “while also being responsible That did little to lessen the services, which demanded to clients and other employ- emotional devastation. “It high close rates and availabil- ees.” Critical to the fi rm’s was so diffi cult to predict,” he ity, to duties that weren’t as success? Making sure they said. It’s such an emotional time sensitive. “This provided could continue to be fl exible. time, and “you can’t ask for a our team with less reliance “Sometimes you just don’t timeframe. She wants to have on her and also gave her the know how a situation will a diagnosis and she wants to freedom to focus on her im- end,” David said. “You need be able to maintain a regular portant family matters that to keep an open mind.” work schedule. But she just were the priority,” he said. doesn’t know.” From a man- She also agreed to switch her Carolyn O’Hara is a ager’s standpoint, he said, compensation from salaried writer and editor based “you have to take that burden to hourly, which allowed the in New York City. She’s off the employee.” fi rm the fl exibility to carry on worked at The Week, PBS David recognized that it the arrangement indefi nitely. NewsHour, and Foreign would be better to offer the Ten months after the diag- Policy Source: International Monetary Fund 14 HEADLINE NEWS & ANALYSIS fi nancialnancial nnewsews 9 JULY, 2018 | FINCHANNEL.COM ICC Looks to Establish a Branch of ICC International Arbitration Court in Georgia

The FINANCIAL -- The and of both The Financial and backbone of the economy. International Chamber of Global Idea,” said Asly. Young people have very good busi- Commerce (ICC) Georgia, “The Golden Brand Awards has ness ideas; the limiting factor though which is referred to as the ‘voice become the most prestigious remains access to fi nance. of business’ in the country, is event for the business community We have noticed that the Govern- focusing on pushing for the in Georgia and soon to be outside ment is well aware of this issue and establishment of a branch of the Georgia as well,” he added. is working on a strategy to ensure ICC International Arbitration the fi nancing of smaller and start-up Court in Georgia. Q. What are the most inter- businesses. Q. In general, how has Geor- “If this happens it will result esting fi elds of the Georgian economy currently for inves- gia’s business society been in a major improvement of the changing year after year? business climate in the country tors? A. Currently tourism, the hospi- A. The business society today is considering that the Judiciary is very different from what it was twen- still perceived by investors and tality business, real estate develop- ment and small industries are the ty years ago; businesses have learned businesses to be unreliable,” said international business practices and Fady Asly, Chairman of ICC. major focus of investors, and we are witnessing a global interest in Geor- have adjusted to those standards. The ICC was offi cially established gia and especially from neighbour- The notion of fair competition is in 2002 as the Georgian chapter ing countries and the GCC coun- developing, and business-people of the International Chamber of tries. understand now that competition Commerce. Since taking offi ce Georgia has become a very serious requires cost-cutting, high level ser- in early 2008, ICC Georgia’s destination for investors. As Chair- vices, and highly performing staff; of selected board of directors man of Channel Georgia Consult- course this is benefi ting businesses has been extremely active and ing, a fi rm based in the UAE, I am and consumers alike and is resulting dedicated to improving the in daily contact with investors from in an effi cient economy. business and investment climate the GCC and I am amazed by the in- Q. The number of foreign in- in the country. credible interest of Arab investors in vestors/companies is also in- The Georgian National Georgia. creasing in Georgia. Are there equal conditions for any for- Committee of the ICC is the Q. The Government is trying to foster entrepreneurial spirit eign company in the country? largest and most vocal global Or which of them face the most business association. It includes among the young generation FADY ASLY, President of International Chamber of Commerce and encourage the creation of challenges? over 350 corporate and youth A. I believe that there is a level members and 27 business new businesses. We see new start-up businesses are ap- playing fi eld in Georgia for all busi- associations. nesses whether foreign or local; of Today ICC Georgia unites pearing in the country. How the policy makers in a dialogue business-oriented projects optimistic are you about these course Georgian businesses will al- leading companies and business including the President of and initiatives, among them new businesses? Will this new ways be at an advantage consider- associations within Georgia. A Georgia, Speaker of Parliament, Golden Brand – one of the most generation of business soci- ing that they know who is who, they dynamic and energetic business Prime Minister and cabinet of infl uential and prestigious ety bring new developments know the rules and the mentality, organisation in the country ministers, opposition leaders, business awards in Georgia. to Georgia’s business environ- but this is very normal for local busi- represents a wide array of members of diplomatic missions “Like every year, ICC worked ment? nesses in any country. business sectors and partner and international fi nancial in close cooperation with The A. The Government is very sup- organisations. institutions. Financial and Global Idea portive of start-up businesses; let’s Having said that, under the law ICC Georgia has had the ICC continues to support regarding Golden Brand. ICC is not forget that small and medium everyone is equal and that’s why Georgia is moving forward so fast. opportunity to engage many of businesses in Georgia and also a staunch supporter of the event size businesses have to become the

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Advertiser: GPH. Contact FINANCIAL Ad Dep at marketing@fi nchannel.com HEADLINE NEWS & ANALYSIS 15 FINCHANNEL.COM | 9 JULY, 2018 fi nancialnancial nnewsews The most important intelligence isn’t artificial… A new report offers a glimpse into the future of a career in banking, predicting six surprising new types of jobs and how the digital revolution will evolve the role of people in the workforce The FINANCIAL

onsensus is growing that mixed, or augmented reality (MR/AR) will be our primary interface to the digital world in the Cfuture, research commissioned by HSBC, Human Advantage: The Pow- er of People, analyses the challenges Machines have become progres- voice, or in augmented or virtual as they combine service and infor- Key skills: Gateway Controllers and opportunities facing the bank- sively more human in their inter- reality. As mixed reality becomes mation components from multiple will balance technical knowledge of ing industry. Paper says designing actions over the years. Chatbots the main interface between people sources. A digital process engineer the digital interfaces with an under- complex three-dimensional interfac- are already used in banking to and machines, highly skilled ser- analyses, assembles and optimises standing of security and risk man- es and making them slick and intui- answer simple queries and gath- vice agents, empowered to sup- these workflows, adjusting them agement. Communications skills tive will be a major new employment er information. Where instruc- port customers across a variety constantly to maximise throughput for partner engagement will also be area for the future, requiring skills in tions used to be complex strings of products, will be able to switch and minimise friction. highly valued. aesthetic design, branding, user ex- of code, we can now speak to our seamlessly between virtual and Key skills: The digital process perience and 3D mechanics. machines and they will interpret physical environments from any- engineer will need great discovery “Many of the roles and job titles our needs. Conversational inter- where anytime to meet customer skills, to understand large and inter- Core skills – of tomorrow are unknown to us to- face design is an emerging skill needs. connected workfl ows and diagnose day,” said Josh Bottomley, Global to help us take best advantage of Key skills: Critical skills for to- problems and bottlenecks, and cre- Head of Digital, Retail Banking & voice and text chatbots, and one morrow’s customer advisor are a ative skills to help them to prototype the three C’s Wealth Management, HSBC “One that will only grow in importance combination of product and domain and test solutions. thing is certain, however - artifi cial as the technology becomes more knowledge with excellent customer Examining the six future roles, a intelligence will not replace human mainstream. communication and empathy. This common set of transferable skills intelligence. Blending the best tech- Key skills: Building natural, low- will require a level of comfort with Partnership emerge; it is these skills that will nology with the power of people will friction interfaces that go beyond the key communications technolo- continue to differentiate humans be the difference between good and solving immediate challenges to sur- gies, including performing in a vir- from machines in the workforce. great when it comes to customer ex- prise and delight customers requires tual environment. Gateway The report terms them the ‘Three perience.” a mixture of creative, linguistic, and Cs’: Curiosity, Creativity and Com- anthropological skills. Enabler munication. Co-author of the report, Applied Digital Process In an increasingly networked Futurist, Tom Cheesewright, com- Algorithm business world, the digital rela- ments: “The role of humans and Universal Engineer tionships with banking partners, robots in tomorrow’s workforce has Mechanic like fi ntechs and global technology been hotly debated the world over, Service Many banking customer in- companies, will need careful moni- but the positive impacts of automa- A rising proportion of decision- teractions – from onboarding toring, maintenance, and negotia- tion have largely been overlooked. making is made by algorithms, fed Advisor to replacing a lost card – follow tion. With both cash and customer Whilst machines will continue to on a variety of input data to reach standardised flows that balance data potentially fl owing between take on the more robotic processes, rapid conclusions. However, these The separation between digital, security and regulatory require- organisations, someone will need increased emphasis will be placed on algorithms operate in a fast-chang- physical and remote service en- ments with the desire for a slick to keep a watchful eye on utilisa- our ‘most human’ resources; quali- ing environment of shifting regula- vironments is breaking down. At customer experience. The rate of tion and conduct, as well as ensur- ties like curiosity, creativity and em- tions, new information, and evolving any moment a customer may want change of these processes is likely ing performance and regulatory pathy will continue to set us apart products. Constantly tuning these serving in a branch, via chat app, to increase, as is their complexity, compliance. from machines.” algorithms to optimise banking cus- tomer experience, and avoid ‘com- puter says no’ moments, will be a skill in growing demand, research paper said. “As we shift to a low-code/no- code environment for technology operation, this role will require skills in risk management, service design, and fi nancial literacy, rather than technological profi ciency”. Conversational Interface Designer 16 HEADLINE NEWS & ANALYSIS fi nancialnancial nnewsews 9 JULY, 2018 | FINCHANNEL.COM

Advertiser: The FINANCIAL. Contact FINANCIAL Ad Dep at marketing@fi nchannel.com HEADLINE NEWS & ANALYSIS 17 FINCHANNEL.COM | 9 JULY, 2018 fi nancialnancial nnewsews How Americans see their country and their democracy

Abigail GEIGER Pew RESEARCH CENTER AMERICA

n the Fourth of July, Americans celebrate the birth of the na- tion and the values that have sustained Othe country and its democracy in the nearly 250 years since the adoption of the Declaration of Independence. Americans’ views vary when it comes to how they see the Unit- ed States’ standing in the world and the state of its democracy. Here are key findings from Pew Research Center surveys: A majority of Americans be- lieve the U.S. is one of the great- est nations in the world. More than eight-in-ten (85%) said in a June 2017 survey that the U.S. either “stands above all other countries in the world” (29%) or that it is “one of the greatest countries, along with some oth- ers” (56%). While large shares in all adult generations say Amer- ica is among the greatest coun- tries, those in the Silent Genera- tion (ages 73 to 90 in 2018) are the most likely to say the U.S. “stands above” all others (46%), while Millennials are the least likely to say this (18%). At the same time, nearly seven-in-ten Americans (68%) say the U.S. is less respected abroad than it was in the past. There have been considerable changes in how Republicans and Democrats view the global level is working somewhat (40%) or or are on their way to achieving About two-thirds of Ameri- A majority of Americans say of respect for the U.S., accord- very well (18%), according to a it. Just 17% of Americans say cans say the country’s openness the U.S. is a better place to live ing to a survey conducted last spring 2018 survey. But many the American dream is “out of to people from around the world as a result of its growing ra- year. Last fall, 42% of Repub- Americans see the country fall- reach” for their family, accord- is “essential to who we are as cial and ethnic diversity. Just licans and Republican-leaning ing short when it comes to some ing to an August 2017 survey. a nation.” Just 29% say that if 9% of Americans say grow- independents said the U.S. is of the core elements of democra- The American dream has dif- America is too open to people ing racial and ethnic diversity less respected than it was in the cy. While 84% of the public says ferent meanings for Ameri- from other countries, “we risk makes the country a worse past, the lowest share saying this it is very important that “the cans. Majorities say “freedom losing our identity as a nation,” place to live, according to a in more than a decade. In com- rights and freedoms of all peo- of choice in how to live” (77%), according to a summer 2017 sur- survey conducted this spring. parison, 87% of Democrats and ple are respected” in the U.S., having a good family life (70%) vey. Eight-in-ten Millennials say Partisans differ in their views: Democratic leaners said the U.S. just 47% say this describes the and the ability to retire comfort- America’s openness is key to the While seven-in-ten Democrats is less respected than it was in country very or somewhat well. ably (60%) are essential to their nation’s identity, compared with and Democratic-leaning in- the past, an increase from 58% When asked to compare the U.S. view of the American dream. 68% of Gen Xers, 61% of Boom- dependents say the growing in 2016. political system with others in About half or fewer Americans ers and 54% of Silents. Demo- diversity in the U.S. makes it Americans generally agree developed countries, only about say making valuable community crats and Democratic-leaning a better country to live, 47% that democracy is working at four-in-ten Americans (41%) say contributions, owning a home independents are more likely of Republicans and Repub- least somewhat well in America, it is “best in the world” or “above and having a successful career than Republicans and Repub- lican leaners say the same. but many say that “significant average,” while 57% say it is “av- are essential to the American lican leaners to say that Amer- More highly educated adults changes” to the political sys- erage” or “below average.” dream. And just 11% say becom- ica’s openness is essential to are more likely to embrace the tem are needed. Nearly six-in- Most Americans say they have ing wealthy is key to their view the country’s identity (84% vs. effect of growing diversity on ten Americans say democracy achieved the “American dream” of the American dream. 47%). the country. Mothers who follow fi ve healthy habits may reduce risk of obesity in children

TThehe FINANCIALFINANCIAL – CChildrenhildren andand aagedged 6-196-19 havehave obesity,obesity, puttingputting tthehe GrowingGrowing UpUp TodayToday StudyStudy whowho ddividually.ividually. ChildrenChildren ofof womenwomen ssearchersearchers couldcould notnot determinedetermine thethe aadolescentsdolescents whosewhose mothersmothers fol-fol- tthemhem atat riskrisk ofof diabetes,diabetes, heartheart wwereere bornborn toto 16,94516,945 womenwomen en-en- wwhoho maintainedmaintained a healthyhealthy bodybody aassociationssociation betweenbetween heavyheavy useuse ofof llowow fi veve healthyhealthy habits—eatinghabits—eating a ddisease,isease, andand otherother metabolicmetabolic con-con- rrolledolled inin thethe Nurses’Nurses’ HealthHealth StudyStudy wweighteight (body(body massmass indexindex 18.5-18.5- aalcohollcohol hadhad thethe riskrisk ofof obesityobesity inin hhealthyealthy diet,diet, exercisingexercising regularly,regularly, dditionsitions laterlater inin life.life. WhileWhile itit isis III.I. 224.9)4.9) hhadad a 556%6% lowerlower riskrisk ofof cchildren.hildren. kkeepingeeping a healthyhealthy bodybody weight,weight, kknownnown tthathat geneticsgenetics playplay a rolerole inin TThehe researchersresearchers foundfound thatthat oobesitybesity comparedcompared withwith childrenchildren TToo thethe surprisesurprise ofof thethe research-research- ddrinkingrinking aalcohollcohol inin moderation,moderation, oobesity,besity, thethe rapidrapid increaseincrease ofof thethe 11,282,282 ooff tthehe children,children, oror 5.3%,5.3%, dde-e- ooff womenwomen whowho diddid notnot maintainmaintain a eers,rs, mmothers’others’ dietarydietary patternspatterns aandnd notnot smoking—aresmoking—are 75%75% lessless ddiseaseisease inin recentrecent yearsyears isis likelylikely vvelopedeloped obesityobesity duringduring a medianmedian hhealthyealthy weight,weight, whilewhile childrenchildren ofof wwereere notnot associatedassociated withwith obesityobesity llikelyikely toto becomebecome obeseobese whenwhen com-com- ddueue toto changeschanges inin lifestylelifestyle andand fi ve-yearve-year follow-upfollow-up period.period. Mater-Mater- mmothersothers whowho diddid notnot smokesmoke hadhad iinn theirtheir children,children, possiblypossibly becausebecause pparedared withwith childrenchildren ofof mothersmothers ddiet,iet, indicatingindicating thatthat “nurture”“nurture” nnalal oobesity,besity, smoking,smoking, andand physicalphysical a 31%31% lowerlower riskrisk ofof obesityobesity com-com- cchildren’shildren’s dietsdiets areare ininfl uenceduenced byby wwhoho diddid notnot followfollow anyany suchsuch hab-hab- mmoreore thanthan “nature”“nature” isis fuelingfueling thethe iinactivitynactivity werewere stronglystrongly associatedassociated pparedared withwith childrenchildren ofof mothersmothers mmanyany factors,factors, includingincluding schoolschool iits,ts, accordingaccording toto a newnew studystudy ledled byby ccurrenturrent obesityobesity epidemic,epidemic, accord-accord- wwithith obesityobesity amongamong childrenchildren andand wwhoho smoked.smoked. llunchesunches andand availableavailable foodfood optionsoptions HHarvardarvard TT.H..H. CChanhan SSchoolchool ooff PPub-ub- iingng toto HSPH.HSPH. aadolescents.dolescents. TThehe riskrisk ooff obesityobesity waswas alsoalso low-low- iinn ttheirheir neighborhoods.neighborhoods. llicic Health.Health. FForor thisthis study,study, researchersresearchers fo-fo- WWhilehile thethe greatestgreatest dropdrop inin eerr amongamong childrenchildren ofof mothersmothers whowho TThehe fi ndingsndings ofof thisthis studystudy high-high- WWhenhen bbothoth mothermother andand childchild ccusedused onon thethe associationassociation betweenbetween oobesitybesity riskrisk waswas seenseen whenwhen cconsumedonsumed lowlow oror moderatemoderate levelslevels llightight thethe crucialcrucial rolerole a mother’smother’s aadhereddhered toto thesethese habits,habits, thethe riskrisk ofof a mother’smother’s lifestylelifestyle andand thethe riskrisk mmothersothers andand childrenchildren followedfollowed ooff alcoholalcohol comparedcompared withwith childrenchildren llifestyleifestyle choiceschoices cancan havehave onon theirtheir oobesitybesity waswas 82%82% lowerlower comparedcompared ooff obesityobesity amongamong theirtheir childrenchildren hhealthyealthy lifestylelifestyle habits,habits, manymany ofof ooff mothersmothers whowho abstainedabstained fromfrom al-al- cchildren’shildren’s healthhealth andand bolsterbolster sup-sup- wwithith mothermother andand childrenchildren whowho diddid aandnd adolescentsadolescents betweenbetween 9 andand 1818 tthehe healthyhealthy habitshabits hadhad a notice-notice- ccohol.ohol. BecauseBecause soso fewfew mothersmothers inin pportort forfor family-family- oror parent-basedparent-based nnot.ot. yyearsears ofof age.age. TheyThey examinedexamined datadata aableble impactimpact onon thethe riskrisk ofof child-child- tthehe Nurses’Nurses’ HealthHealth StudyStudy IIII werewere iinterventionntervention strategiesstrategies forfor reduc-reduc- OOnene inin fi veve childrenchildren inin thethe U.SU.S ffromrom 24,28924,289 cchildrenhildren eenrollednrolled inin hhoodood obesityobesity whenwhen assessedassessed in-in- cconsideredonsidered heavyheavy drinkers,drinkers, thethe re-re- iingng childhoodchildhood obesityobesity risk.risk. 18 HEADLINE NEWS & ANALYSIS ppublicityublicity 9 JULY, 2018 | FINCHANNEL.COM






 
 

 

 
  
 

 

  



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Key macro indicators Key macro indicators International ranking, 2017 ECONOMY 1H18 2017 2016 Georgia sovereign credit ratings 1H18 2017 2016 GDP (% change) 6.1%(1) 5.0% 2.8% GDP (% change) 6.1%(1) 5.0% 2.8% Ease of Doing Business Tourist GDP per capita (ppp) … 10,644 10,043 GDP per capita (ppp) … 10,644 10,043 arrivals up GDP per capita (US$) … 4,068 3,857 s# 9(Top 10) GDP per capita (US$) … 4,068 3,857 Population (mn) 3.7 3.7 3.7 20.7% y/y in Population (mn) 3.7 3.7 3.7 Economic Freedom Index nflation (eop) 2.2% 6.7% 1.8% BBͲ Ba2 BBͲ June 2018 Inflation (eop) 2.2% 6.7% 1.8% Gross reserves (US$ bn) 3.0 3.0 2.8 Stable Stable Positive # 16 (mostly free) Gross reserves (US$ bn) 3.0 3.0 2.8 CAD (% of GDP) 11.6%(2) 8.7 12.8% Affirmed Affirmed Affirmed Total international visitors (2) CAD (% of GDP) 11.6% 8.7 12.8% MayͲ2017 SepͲ2017 MarͲ2018 Global Competitiveness Index to Georgia increased 14.2% Fiscal deficit (% of GDP) …3.9%4.1% Fiscal deficit (% of GDP) …3.9%4.1%  # 59 (improving trend) y/y to 0.61mn visitors in Total public debt (% of GDP) … 44.6% 44.4% Total public debt (% of GDP) … 44.6% 44.4% June 2018, according to the Ministry of Internal Source: O௻ cial data, IMF Source: GeoStat Source: Rating agencies Source: World Bank, Heritage Foundaition Aɣ airs. A 20.7% y/y growth 1) As of 1Q18 Note: Rapid estimate for 4Q17 and World Economic Forum in tourist arrivals (0.40mn 2) As of 5M18 trips, 65.9% of total) drove from Russia (+27.5% y/y), Annual CPI inflation driver of monthly inflation the international visitors’ Azerbaijan (+10.0% y/y) and InÀ ation -0.6% m/m was 2.2% in June 2018 dynamics. growth. Out of top countries Turkey (+14.7% y/y). While down from 2.5% in by visitors, in June 2018, visitors were down from was 2.2% in June May 2018, according to international visitors Armenia (-5.5% y/y) and Iran GeoStat. Core inflation International continued to increase (-5.4% y/y). y/y and 2018 was down to 1.6% from reserves up 1.8% in previous month. Annual price changes were 1.6% y/y in Annual CPI inflation (% change, y/y) Monthly CPI inflation (% change, m/m) Nominal Effective Exchange Rate and Real Effective Exchange Rate Nominal Effective Exchange Rate and Real Effective Exchange Rate driven by price increases in transport (+4.6% y/y, June 2018 +0.63ppts), housing, water, electricity, gas and Gross international other fuels (+5.2% y/y, reserves were up 1.6% +0.43ppts), healthcare y/y to US$ 3.0bn in June (+5.1% y/y, +0.43ppts) 2018, while reserves and alcoholic beverages were down 0.3% m/m, and tobacco (+4.9% y/y, according to NBG. NBG +0.34ppts) categories. On Purchased US$ 30mn on a monthly basis, there was auctions held throughout 0.6% deflation in June June, 2018. Change in 2018. Price decrease in reserves was attributed Source: NBG food and non-alcoholic to government FX Note: Index growth means appreciation of exchange rate, beverages (-2.6% m/m, operations and/or asset Source: GeoStat decline means depreciation of exchange rate. -0.79ppts) was the major revaluation.

FIXED Georgia Eurobonds, YTM (%) EQUITIES TBC Bank Group (TBCG LN) Georgia Healthcare Group (GHG LN) INCOME BGEO Group PLC (BGEO LN) Corporate Eurobonds: Bank of Georgia Group Eurobonds (GEBGG) closed at 6.1% yield, trading at 99.7 (-0.2% w/w). Bank of Georgia GEL-de- nominated Eurobonds (GEBGG) were trading at 100.5 (+0.5% w/w), yield- ing 10.7%. Georgia Capital Eurobonds (GEOCAP) were trading at 94.2 (-0.1% w/w), yielding 7.4%. GOGC Eurobonds (GEOROG) were trading at 101.0 (+0.2% w/w), Source: Bloomberg Source: Bloomberg yielding 6.3%. Georgian Railway Euro- bonds (GRAIL) traded at a premium at ume of BGEO shares traded was at hands in the range of GBP 17.08 105.5 (+0.3% w/w), yielding 6.2%. Source: Bloomberg Georgian Sovereign Eurobonds Source: Bloomberg 0.66% of its capitalization. – 17.68/share. Average daily trad- (GEORG) closed at 106.7 (+0.1% w/w) Georgia Capital (CGEO LN) ed volume was 42k in the last 4 at 4.2% yield to maturity. Bank of Georgia Group shares closed at GBP 10.15/share weeks. Georgia Healthcare Group (BGEO LN) shares closed at GBP (-1.44% w/w and -7.71% m/m). Local bonds Eurobonds More than 261k shares traded in (GHG LN) shares closed at GBP 17.99/share (-4.56% w/w and 2.73/share (+8.55% w/w and GWP M2RE Nikora GLC GEOCAP GEBGG GEOROG BGEOLN GEORG GRAIL the range of GBP 10.15 – 10.51/ -12.86% m/m). More than 323k share. The volume of CGEO shares +1.87% m/m). More than 83k 12/21 10/19 06/19 08/20 03/24 06/20 04/21 07/23 04/21 07/22 shares traded in the range of GBP Amount, US$ traded was at 0.67% of its capital- shares were traded in the range of 30* 25.0 10.0 10.0 300 500* 250 350 500 500 mn 17.87 – 19.05/share. Average daily ization. GBP 2.51 – 2.80/share. Average Issue date 12/16 10/16 08/17 8/17 03-18 06-17 04/16 07/16 04/11 07/12 traded volume was 107k in the last TBC Bank Group (TBCG daily traded volume was 23k in the 4 weeks. FTSE 250 Index, of which Maturity date 12/21 10/19 06/19 8/20 03-24 06-20 04/21 07/23 04/21 07/22 LN) closed the week at GBP 17.32 last 4 weeks. The volume of GHG BGEO is a constituent, lost 1.02% (-0.8% w/w and +0.81% m/m). shares traded was at 0.06% of its Coupon, % 10.50** 7.5 9.0 7.00 6.125% 11.0 6.750 6.000 6.875 7.750 w/w and lost 2.61% m/m. The vol- More than 97k shares changed capitalization. Fitch/S&P/ BB-/BB- BB-/-/- -/-/- -/-/- n/a -/B+/B2 BB-/-/Ba2 BB-/B+/- BB-/-/B2 B+/B /- Moody's /Ba2 + Mid price, US$ n/a 102.5 101.3 102.05 94.2 100.5 101.2 99.7 106.7 105.6 40.0mn (US$ 16.4mn) T-Bills of Ministry of Finance were Mid yield, % n/a 5.5% 3.8% 6.00% 7.4 10.7 6.3 6.1 4.3 6.1 MONEY MARKET sold at the auction held at NBG on July 4, 2018. The weight- Z-spread, bps n/a n/a n/a n/a 451.2 346.1 341.1 319.6 141.1 326.0 ed average yield was ¿ xed at 7.364%. The nearest treasury Re¿ nancing loans: National Bank of Georgia (NBG) is- security auction is scheduled for July 11, 2018, where GEL * Source: Bloomberg *GWP 12/21 bonds and GEBGG 06/20 bonds are in Georgian lari sued 7-day re¿ nancing loans of GEL 780mn (US$ 318.7mn). 40mn nominal value 2-year Benchmark bonds and GEL **Coupon rate 3.5% over the NBG’s re¿ nancing rate Ministry of Finance Treasury Bills: 1-year GEL 20mn nominal value 182-days T-bills will be sold.

T-bills / T-notes, yield curve Monetary policy rate Eastern European sovereign 10-year bond performance Amount, Ratings Issuer Coupon, % Maturity date Mid yield, % US$ mn (Fitch/S&P/Moody) Georgia 500 6.875% 12/04/2021 BB-/BB-/Ba2 4.3 Azerbaijan 1,250 4.750% 18/03/2024 BB+/BB+/Ba2 4.8 Bulgaria 323 5.000% 19/07/2021 BBB-/BB+/Baa2 0.0 Croatia 1,250 3.875% 30/05/2022 BB/BB/Ba2 1.0 Hungary 3,000 6.375% 29/03/2021 BBB-/BBB-/Baa3 3.6 Romania 2,250 6.750% 07/02/2022 BBB-/BBB-/Baa3 3.9 Russia 3,500 5.000% 29/04/2020 BBB-/BBB-/Ba1 3.4 Turkey 2,000 5.625% 30/03/2021 BB+/BB/Ba2 5.6 Source: NBG Source: NBG Source: Bloomberg *Note: As of latest auction.

WEEKLY MARKET WATCH EXCLUSIVELY PROVIDED TO THE FINANCIAL BY GALT & TAGGART Investments (or any short-term transactions) in emerging markets involve signi¿ - GALT & TAGGART cant risk and volatility and may not be suitable for everyone. The readers of this document must make their own investment decisions as they believe appropri- Address: 79 D. Agmashenebeli Avenue, Tbilisi 0102, Georgia ate based on their speci¿ c objectives and ¿ nancial situation. When doing so, such Tel: + (995) 32 2401 111 recipients should be sure to make their own assessment of the risks inherent in Email: [email protected] emerging market investments, including potential political and economic instabil- ity, other political risks including without limitation changes to laws and tariɣ s, and nationalization of assets, and currency exchange risk. 20 HEADLINE NEWS & ANALYSIS ppublicityublicity 9 JULY, 2018 | FINCHANNEL.COM  YEARS ON THE MARKET

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