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Issue no: 866/38 • AUGUST 2 - 4, 2016 • PUBLISHED TWICE WEEKLY PRICE: GEL 2.50

In this week’s issue... NBG Decreases Refi nancing Rate by 25 Points PAGE 2 Construction on Rikoti Pass Highway Begins

PAGE 3 FOCUS ON VIEWS OF PROGRESS Foreign We spoke to management of Investment to PriceWaterhouseCoopers Develop Sports to see what expectations they have for the country this year PAGE 7 Tourism in Georgia ’s Luxurious Biltmore Hotel Opens PAGE 5 Electricity Market Watch in Former Soviet Institute Building GALT & TAGGART PAGE 9 US House Committee on BY TAMAR SVANIDZE Foreign Affairs Supports

he Soviet era Institute of Marx, Georgia’s Territorial Integrity, Engels and Lenin (IMELI) was offi cially turned into a luxurious We fi nd out Why hotel in the heart of Georgia’s capital city Tbilisi on Sunday. POLITICS PAGE 10 TThe USD 140 million, 214-room Biltmore Hotel Tbilisi offi cially opened to a lavish display of fi reworks and laser shows Sunday night. Dechert OnPoint: The 32-fl oor hotel is the fi rst hotel in Georgia to have a presidential suite, according to the Consumer Protection hotel’s fi nanciers, the UAE-based Arab Invest- ment Company. & the DCFTA Continued on page 2 PAGE 11

Prepared for Georgia Today Business by Markets Asof29ͲJulͲ2016 STOCKS Price w/w m/m BONDS Price w/w m/m BankofGeorgia(BGEOLN) GBP27.31 Ͳ0,2% +9,7% GEOROG04/21 104.13(YTM5.74%) Ͳ0,4% +0,4% GHG(GHGLN) GBP3.06 +1,3% +5,5% GEORG04/21 111.20(YTM4.22%) Ͳ0,2% +0,4% TBCBank(TBCBLI) US$13.20 Ͳ1,5% Ͳ GRAIL07/22 111.69(YTM5.42%) +0,2% +0,8% BGEOLN07/23 100.63(YTM5.89%) Ͳ0,2% na COMMODITIES Price w/w m/m CrudeOil,Brent(US$/bbl) 42,46 Ͳ7,1% Ͳ16,1% CURRENCIES Price w/w m/m GoldSpot(US$/OZ) 1351,28 +2,2% +2,4% GEL/USD 2,3510 +0,3% Ͳ0,2% GEL/EUR 2,6309 +2,1% +0,4% INDICES Price w/w m/m GEL/GBP 3,1099 +1,1% Ͳ1,7% FTSE100 6724,43 Ͳ0,1% +5,7% GEL/CHF 2,4222 +1,9% +1,0% FTSE250 17282,88 +1,8% +8,0% GEL/RUB 0,0356 Ͳ1,7% Ͳ4,3% DAX 10337,50 +1,9% +7,5% GEL/TRY 0,7869 +2,4% Ͳ3,4% DOWJONES 18432,24 Ͳ0,7% +4,2% GEL/AZN 1,4563 Ͳ1,5% Ͳ3,4% NASDAQ 5162,13 +1,2% +8,0% GEL/AMD 0,0049 ͲͲ MSCIEMEE 123,97 Ͳ1,1% +0,9% GEL/UAH 0,0948 +0,1% +0,3% MSCIEM 873,47 +0,5% +6,3% EUR/USD 0,8949 Ͳ1,8% Ͳ0,4% SP500 2173,60 Ͳ0,1% +5,0% GBP/USD 0,7560 Ͳ0,9% +1,5% MICEX 1944,62 +0,9% +3,0% CHF/USD 0,9695 Ͳ1,8% Ͳ1,0% MSCIFM 2567,05 Ͳ0,0% +1,7% RUB/USD 65,9445 +1,8% +3,5% GTIndex(GEL) 842,35 +0,1% Ͳ TRY/USD 2,9888 Ͳ2,5% +3,4% GTIndex(USD) 709,14 +0,2% +1,1% AZN/USD 1,6151 +1,2% +1,8% GEORGIA TODAY 2 BUSINESS AUGUST 2 - 4, 2016 Tbilisi’s Luxurious Biltmore Hotel Opens NBG Decreases in Former Soviet Refi nancing Rate Institute Building

Continued from page 1 took over the re-design of the building. A new project was developed by UK- by 25 Points Originally built in 1934-38 in the Sta- based Architectural fi rm Shankland Cox linist Gothic style by famed Soviet in 2012. BY EKA KARSAULIDZE architect Alexey Shchusev – the man The design immediately ran into con- who designed Lenin’s Mausoleum in troversy after architects, historical ’s – the building preservationists and civil society rep- materials were looted from the Arme- resentatives objected to the building of eorgia is starting to move nian Pantheon in Tbilisi after notorious a modern, glass skyscraper in the heart away from the tightened NKVD head Lavrenty Beria had the of Tbilisi’s historic center. monetary policy set by church and cemetery destroyed. As part of a negotiated settlement, the National Bank of Geor- Following the collapse of the Soviet Abu Dhabi Group agreed to restore the gia (NBG) in February Union, the building was used for gov- main building of the Soviet-era IMELI 2014,G with a decrease in the refi nancing ernment purposes and housed Georgia’s building and incorporate it into the rate from 7 to 6.75. fi rst independent government under hotel. The decision was made after a thor- controversial former President Zviad Georgia’s Prime Minister Giorgi Kviri- ough look into the country’s macro- Gamsakhurdia in 1991-92. kashvili and Minister of Culture and economic forecast. “According to cur- It later briefl y served as the Ministry Knowledge Development of United rent projections, it is expected that of Foreign Affairs, before being heavily Arab Emirates Sheikh Nahyan bin infl ation will be below the forecasted damaged in the civil wars that plagued Mubarak Al Nahyan attended Sunday’s fi gure in the coming quarters, which Georgia in the early 1990s. grand opening. makes it possible to reduce refi nancing Large parts of the interior were “This is Dhabi Group’s largest invest- rates,” said ’s destroyed by both shelling and looting, ment in Georgia. The opening of this President, Koba Gvenetadze. “Unless and the institute’s former Soviet-era high-class hotel once again proves that other factors affecting the economy library that was dedicated to Marxist- there is a comfortable environment for occur, the monetary policy rate will be Leninist theory was sacked. investment and doing business in Geor- around 6 percent in the midterm period.” In 2006, developers Kempinski and gia,” Kvirikashvili said. As a result of a lower refi nancing rate, Vostok Capital pledged to turn the build- Sheikh Mubarak Al Nahyan added that people with loans in foreign currencies Lari has remained steady at around 2.1 people in Georgia deposited 14.3 billion ing into a fi ve-star luxury hotel, with the hotel suits Georgia’s growing high- will have to pay less for their debt obli- GEL for every USD, however it peaked GEL into local banks but borrowed 16.4 an original design by Berlin-based archi- end tourism potential. gations. Last year there were more than this weekend at 2.34. “This fl uctuating billion GEL. The NBG reiterated that tects Christoph Kohl and Rob Krier but “Georgia and its capital are stable and 7,000 borrowers who had loans linked exchange rate has infl uenced the public further changes to the monetary policy after the 2008 fi ve-day war between secure places to invest in the region. to the refi nancing rate, reported the and the currency they choose to bor- will depend on the infl ation forecast, and Georgia, the original inves- This makes the country an ideal place NBG. row and save in,” said the NBG. factors affecting infl ation and the gen- tors pulled out and the Abu Dhabi Group for doing business,” Al Nahyan said. For the past few months the Georgian According to the fi gures, in June 2016 eral state of the economy. GEORGIA TODAY AUGUST 2 - 4, 2016 BUSINESS 3

TBILISI-BATUMI BATUMI-TBILISI Free One-Year Land Registration KUTAISI AIRPORT

TBILISI CENTRAL BATUMI CENTRAL 09:00, 12:00, 20:00, 01:00 09:00, 12:00, 19:00, 01:00 Program Launches in Georgia 2 Station Square TAMAR MEPE AVE. 595 99 00 00 www.eurobus.ge citizens. Minister of Justice Thea Tsu- the registration process, including in fi nan- BY EKA KARSAULIDZE lukiani stated that the population would cial instruments. Following the conclusion benefi t from this project for a year. “Dur- of the program we will have a much health- ing one year, everyone should register ier and complete picture,” he claimed, add- he Georgian Land Registra- land that they were unable to previously ing that it is also a social issue – more than Construction on Rikoti tion Law came into full as a result of various barriers,” she said. 50 percent of the population are still involved effect from August 1. Prime PM Kvirikashvili said that, to date, only in agriculture. As such, this is expected to Minister of Georgia Giorgi 25 percent of land is registered- a big be a very important project for the strength- Kvirikashvili estimated this problem for the private sector in par- ening of the rural population. Tissue as one of most important for the ticular because the population cannot Additionally, the Georgian Prime Min- Pass Highway Begins population, and one which will contrib- capitalize on land which is actually avail- ister has asked the Minister of Justice to ute to the development of agriculture able for possession and for full use in create a mechanism that will eliminate The Rikoti Pass highway. and the land market. economic activities. the risk of abuse of the law. “It is impor- Photo: Alexandre Suladze / panoramio.co According to the law, mediation, obtain- “It’s good the land registration system has tant to have a correct and transparent ing certifi cates or other notary services been simplifi ed,” the PM said. “The State mechanism during land registration,” will be completely free of charge for is signifi cantly helping the population in Kvirikashvili said.

spur of the Greater Caucasus, which BY EKA KARSAULIDZE divides Georgia into its western and eastern parts. Also known as Tbilisi- Kutaisi Highway, it connects Georgia’s onstruction of a 52-kilom- two main cities. eter, USD 40 million (93 “This is a top priority for us. There are million GEL) stretch of the no other similar projects like this in Rikoti Pass highway began Europe today,” Seturidze said. Friday, according to the Nearly 150 kilometers of the highway HeadC of Georgia’s Road Department has already built. Another 100 kilometers Giorgi Seturidze. are slated to be built in the coming years, The mountain highway lies in the with plans to link the road to Georgia’s southern portion of the Likhi Range, a Black Sea ports of Poti and Anaklia. GEORGIA TODAY 4 BUSINESS AUGUST 2 - 4, 2016 Alternative Energy on the Georgian Market

thanks to a USD 4.8 million grant from the Japanese BY EKA KARSAULIDZE government offered for the project in 2010. The local government named the decrease of carbon dioxide emissions as the main advantage eorgia appears to be heading for a of the project- at Tbilisi International Airport and gradual transition to alternative energy Ilia State University it is expected to reduce by 187 consumption, following last week’s tons and 16.6 tons a year, respectively, which equals announcement that a solar energy to about 569,000 m2 of forest. generation system has been set up at The Ministry of Energy of Georgia is currently Gthe Shota Rustaveli Tbilisi International Airport. strongly focused on this direction and recently The same system was also installed at Ilia State began construction of the Kartli wind power plants University. Moreover, in the surroundings of Gori which will have a 20 MW capacity. city, eastern Georgia, the active construction of “The energy is expected to provide for approxi- wind power plants is ongoing. mately 20,000 families,” said Tornike Kazarashvili, The solar energy generation system at Tbilisi Chairman of the Board of Kartli Wind Power. “After International Airport is capable of generating the pilot wind power plant begins operation next 337,000 kWh electricity a year, which covers 40 year, the Ministry of Energy will increase its capac- percent of the facility’s total consumption, while ity to 100 MW, with additional fi nancial resources Ilia State University’s solar energy generation sys- from investors and International Financial Institu- tem can generate 30,000 kWh electricity a year, tions.” which is enough to cover 15 percent of the build- The fi rst solar heating systems in Georgia were ing’s total use. installed in the mountainous Tusheti region, in the The project is the fi rst of its kind in the South east, in 2010. In future, the Georgian government Caucasus and aims to promote the use of clean is also planning to construct a large solar power energy in Georgia. Its construction was possible station in Gardabani district, eastern Georgia. Tbilisi Hosts 48th International Chemistry Olympiad

and Education Minister Aleksandre Jejelava, attended BY THEA MORRISON the closing ceremony of the Olympiad to award the winners in various categories. The PM noted that it was great honor for Georgia n July 31, the eight-day 48th Interna- to host such an important event, which it did this tional Chemistry Olympiad (IChO) year for the very fi rst time, and said he wished the came to a close in Tbilisi, having seen participants of the Olympiad many more scientifi c around 300 students from 75 coun- achievements and discoveries. tries arrive in Georgia with their “Olympiads, along with science popularization, Omentors to participate. promote friendship and cooperation between stu- According to the Education Ministry, for the fi rst dents, enabling young researchers to establish close time in history, a member of the Georgian national contacts and share practices,” he said. team won the bronze medal. Saba Tavdgiridze, Georgia joined the International Chemistry Olym- 11th grader of the Physics and Mathematics N199 piad just two years ago, with a four-member Geor- Public School of Tbilisi, was declared third place gian team competing in the 46th Olympiad in Hanoi, winner. Vietnam. The Ministry says such events contribute to Geor- "I am sure that memories of this Olympiad will gia’s involvement in international scientifi c and last a lifetime and your days in Tbilisi will help you academic processes and strengthen academic and build new friendships and an even deeper passion educational cooperation between countries. and love for science," the PM told the young par- Georgia’s Prime Minister, , ticipants.

75 countries participated in the Chemistry Olympiad. Source: Prime Minister’s Press Offi ce GEORGIA TODAY AUGUST 2 - 4, 2016 BUSINESS 5 TBC Bank Wins Multiple Awards for Corporate and Consumer Digital Banking from Global Finance Magazine Foreign Investment

BC Bank is delighted to this year’s awards are those banks that to receive such important recognition announce that it has understand that both corporate and retail from Global Finance Magazine. These to Develop Sports received the “Best Inte- clients expect their fi nancial partners to prestigious awards are validation of the grated Corporate Bank Site provide easy access to a suite of fi nancial Bank’s efforts to develop exceptional in Central & Eastern Europe products and tools that are fully-integrated multichannel capabilities with a special T2016” award by Global Finance Magazine into their broader digital life.” focus on digital channels,” said Vakhtang Tourism in Georgia for the fourth year running. At the same According to the editorial press release Butskhrikidze, CEO of TBC Bank. time, TBC Bank was once again named of the publication, the winning banks were the “Best Consumer and Corporate selected based on the following criteria: About Global Finance 2016 World’s Best Digital Bank in Georgia 2016”. “strength of strategy for attracting and Digital Bank Awards “The most successful retail and corpo- servicing digital customers; success in This is the 17th year Global Finance rate banks in the world are those that have getting clients to use digital offerings; has named the World’s Best Digital Banks effectively transformed themselves into growth of digital customers; breadth of and details on all First Round winners fully-integrated digital banks, with a strong product offering; evidence of tangible will be published in its September issue. focus on user experience,” says Joseph D. benefi ts gained from digital initiatives; and Additional information on Global Finance Giarraputo, Publisher and Editorial Direc- web/mobile site design and functionality.” Best Digital Bank Awards 2016 can be tor of Global Finance. “The winners of “We are extremely proud to continue found on the publication’s website.

He noted the importance of foreign BY EKA KARSAULIDZE partnership and asked the country’s Minister of Sports and Youth Affairs to launch a public-private partnership rime Minister of Georgia model that would best support the Giorgi Kvirikashvili has high- Canadian and Slovakian investment. lighted the need to support “The State shall not compete with the and develop sports tourism existing infrastructure and the best in the country and noted that partnership model should be found to PCanada and Slovakia are injecting USD avoid damaging a competitive environ- 65 million (150 million GEL) into Geor- ment. This service should be available gia to build new sporting infrastructure for wider society and we should not to develop the country’s ability to host become the managers of this infrastruc- top sporting events. ture in the long-term,” said Kvirikashvili. “Over the past four years, the govern- Minister of Sports and Youth Affairs, ment has spent more than USD 213 mil- Tariel Khechikashvili, said that Georgia lion (about 500 million GEL) on a vari- is preparing to host a number of sport- ety of sports infrastructure and ing events in 2017, such as the World activities. This overriding support for Rugby U20 Championship. The Minis- the development of Georgian sport has ter claimed that due to the development given the right results, with Georgia of sports infrastructure, these events becoming something of a regional hub would be held at the highest level, which in terms of sporting events,” the PM will contribute to the development of said. sports tourism overall. GEORGIA TODAY 6 BUSINESS AUGUST 2 - 4, 2016 New Georgian EUR 100 Million Wine Center Investment and SME Opens in China Support from EIB

In July, the EIB also announced its deci- ers would be required to meet the cur- BY EKA KARSAULIDZE sion to provide fi nancial support for rent stringent conditions required to small and medium-sized businesses gain initial capital. (SMEs) in Georgia from September via According to offi cial sources, the banks eorgia is to receive an local commercial banks. The EIB agreed that will be involved in the fi nancing additional EUR 100 mil- to actively take part in the fi nancing of include Bank Republic, TBC Bank, Pro- lion from the European local SMEs, but said that business own- Credit Bank and the Bank of Georgia. Investment Bank (EIB) to be spent on the develop- mentG of municipal infrastructure in The new 4,000 m2 Georgia, from building new roads to boutique is the 40th of its kind to open in renovating schools. China in the last two A meeting was held between Munici- years. Source: pal Development Fund (MDF) Executive Georgian Ministry Director, Juansher Burchuladze, mem- of Agriculture bers of the Donors Relations and Projects Management Unit, and EIB representa- tives Ionas Bistrom, Georgia Koutsiana Georgian Dream coalition. and Aleksandra Vilkom. BY EKA KARSAULIDZE Cooperation between the Chinese Com- During the meeting, the MDF and EIB munist Party and the Georgian govern- discussed those projects carried out with ment, including a Sino-Georgian inter- their cooperation during the past year, new Georgian wine boutique governmental commission on trade and and future goals were set, amongst which has opened in the capital of economic cooperation, has signifi cantly one of the most important programs is China’s southeast Jiangxi contributed to increased trade and stronger the Urban Reconstruction and Develop- Province, Nanchang. economic relations. ment Program. The new 4,000 m2 bou- China became one of the leading import- Last week, the EIB, together with the tiqueA is the 40th of its kind to open in ers of Georgian wine in 2016, with only European Union, allocated a EUR 5 mil- China in the last two years. The center Russia and buying more bottles lion (11 million GEL) loan to Georgia to includes an exhibition hall, tasting room, than the Chinese. rehabilitate the central water system in museum and Georgian restaurant. Between January and June, more than Tsnori village in Georgia’s Kakheti region Developing robust political, economic 1.9 million bottles of Georgian wine was to enable its 5,500 residents to have 24 and cultural relations with China has been exported to China, a 148 percent year-on- hour access to a clean, reliable water one of the top priorities of the ruling year increase from 2015. supply. GEORGIA TODAY AUGUST 2 - 4, 2016 BUSINESS 7 EXCLUSIVE PwC on What’s Ahead for Georgia

BY KATIE RUTH DAVIES

EORGIA TODAY got the chance to sit down with Altaf Tapia, Country Man- aging Partner, PriceWater- houseCoopers (PwC) GGeorgia & Armenia, and Simon Parsons, PwC Manager of Tax & Legal Services, to get their take on Georgia, links to the UK and the progress it is making in the lead up to the next election. PwC offers a global network of skills and expertise in accounting, tax, legal and advisory services and has been in Georgia for 11 years helping both busi- nesses and government organizations to get ahead. “In the last few years, PwC Georgia has had close cooperation with the UK, both in terms of our fi rm and clients. One example is TBC Bank being listed on the London Stock Exchange- PwC helped with the Initial Public Offer- ing in 2014 and the Premium Listing process this year,” Simon told us. “Georgia’s success in the 2015 rugby world cup in the UK, and British news- Altaf Tapia, Country Managing papers calling Qvevri wine the latest Partner, PwC Georgia & Armenia, trend, means that Georgia is getting more and Simon Parsons, PwC Manager press attention in the UK than ever,” of Tax & Legal Services Simon told us. “Our partnering with the British Georgian Chamber of Commerce, which recently opened an offi ce in Tbi- “Progress naturally slowed in the 2007- things progress as they are. It’s just a India, the US, and the Cauca- lisi, having been based solely in London 2009 period due to political infl uence. question of time.” sus. before that, recognizes these growing Further, Georgia is in a political geo- Simon Parsons is a Chartered Accountant connections.” graphical area whereby it can be depend- Altaf Tapia is a qualifi ed Chartered Account- with the Institute of Chartered Accountants ent on the actions of neighboring coun- ant and a Fellow member of the Institute of Scotland and Chartered Accountant with the GEORGIAN REFORM Further targeted tries when making its own decisions,” Chartered Accountants of India. He has over Chartered Institute of Taxation (UK). He has WITH UK SUPPORT Altaf said, pointing out that over the past 30 years of professional practice experience over fi ve years of professional practice expe- Altaf added, “Apart from this, we have initiatives are four years the pace of development and providing Assurance services to a variety of rience, advising multinational companies on more Georgia-UK ties because of the growth in business confi dence has been industries including FMCGs, Oil and Gas, their tax affairs, previously in the UK, Germany British government’s Good Governance needed to prevent uneven and the authorities need to con- Mining, Telecom and Financial services in and Singapore. Fund (GGF).” Managed by PwC UK tinue to try “to get it right”. He expressed together with PwC Georgia and the Tbi- brain drain and hope that the next parliament will pro- lisi consultancy, Policy and Management vide a stable platform - “to take the Consulting Group (PMCG), the British up Georgia’s country forward faster.” government set up the GGF to provide technical assistance to Georgia and four basic vocational THE EU & GEORGIA others (Ukraine, Serbia, Bosnia and Her- Altaf thinks that with present times in zegovina and Moldova) so that they training capacities and around Europe, Georgia is closer become more resilient to political and but still quite far from being eligible to economic shocks, and have further growth tries in the CIS region, Altaf said he join the European Union. “The initial and stability. found the Soviet mentality can be “very expectations given to Georgia were Georgia’s public authorities identify ingrained” but that in Georgia, “in both unfortunately high and could have been priority areas where they would like to politics and the minds of the general better managed,” Altaf said strengthen governance capacities - public, there is little value still placed Investors are key to progressing eco- whether by benchmarking performance, on the Soviet regime or styles” and that improving working processes, increasing the “desire to be a part of Europe” is transparency or developing new policy distinctly clear. and legislation. “This means we’re on As for the development, the assessment the ground to discuss and advise on top- was positive. But Altaf suggests further ics they [the government] want to reform,” targeted initiatives are needed to prevent Altaf said. brain drain and to up Georgia’s basic The GGF team then design reform vocational training capacities. “Account- A core of assistance projects, which the British ants, lawyers and consultants are well Embassy in Georgia then assesses and catered for [here], but there needs to be expertise needs to approves, before the right people from more impetus for new graduates to build a range of international experts are cho- careers more broadly.” be built from sen to carry out the project. “Georgia seriously lacks expertise in some key areas,” he said. “The techno- schools and THE RIGHT MIND-SET crats of Soviet times are no longer around. Reform is very much on the agenda in Now, for example, large companies are colleges Georgia. When looking to other coun- fi nding it hard to get qualifi ed engineers nomically, Altaf believes, and links [here].” between the UK and the EU and Georgia He added that more encouragement is only serve to boost that side of affairs. necessary in addition to the steps already And with the ex-Soviet countries hav- being taken (such as the focus on STEM ing the tourism and investment potential in universities, the current PM’s priority of Georgia regularly touted at them, now project, or the Produce in Georgia pro- is the “right time to put Georgia and its gram) This should kick start progress businesses out there.” In Georgia the soon and should be the beginning. The next step, Altaf added, is to encour- “A core of expertise needs to be built age more investment and grow exports. desire to be a from schools and colleges. But educa- “Georgian products need to be visible tion and awareness are key- people need in the EU markets, be tested, tried, and part of Europe is to be open to going into new fi elds and valued for quality. Such access to Euro- distinctly clear also have the skills to do so.” pean markets is vital. It will happen if GEORGIA TODAY 8 BUSINESS AUGUST 2 - 4, 2016 Georgia Recognizes China as One of its Main Trade Partners

able Development of Georgia conducted a business BY EKA KARSAULIDZE visit to China to establish the Trading and Invest- ment Council. The business trip opened with the China-Georgia hinese entrepreneurs are increasingly Investment Forum, where the Georgian side pre- investing in Georgia’s economy. To sented a USD 7 billion investment portfolio. The coordinate efforts to attract invest- Minister of Economy, Dimitry Kumsishvili, claimed ment and intensify trade relations that these projects should be interesting for many between the two countries, repre- of the 100 Chinese companies gathered at the Forum. sentativesC of the Ministry of Economy and Sustain- “Chinese companies have been successfully oper-

ating in different sectors in Georgia such as con- there will be the Dugladze Wine Company, which struction, roads and infrastructure, energy, the will initially export 300,000 bottles of wine for banking sector and more. China is Georgia’s fourth online purchase. largest trade partner and second largest in terms The idea to make Georgian wine available online of export. China takes nine percent of Georgia’s was supported by the Silk Road Chamber of Inter- entire exports,” stated the Minister. national Commerce, which is an international non- Among recent joint projects between China and governmental organization that aims to promote Georgia, Kumsishvili named the Free Trade talks the renaissance of the Silk Road and enable busi- among the most important, which started in 2015 ness participation in the investment and trade with a deal expected to come into force in late opportunities it offers. 2016. He also discussed establishing a joint Trade The Minister held a meeting with CEFC China and Investment Council to facilitate the exchange Chairman, Ye Jianming. CEFC China generates of information about entrepreneurs, attract inves- most of its revenue from oil and gas (60 percent) tors, and develop trade, as well as to develop the and fi nancial services (25 percent), but operates ‘One Belt, One Road’ initiative that aims to offer also in a wide range of other sectors like transport many new opportunities to countries along the infrastructure, forestry, asset management, hotel Silk Road. management, warehousing services, real estate The issue of import was also a priority during development and logistics services. the Minister's visit, as China recently became lead- Regarding Georgia, CEFC China has shown read- ing importers of Georgian wine, with only Russia iness to open a regional offi ce in Georgia to cover and Ukraine buying more bottles than the Chinese. the region and Eastern Europe. Moreover, the com- In recent months Georgia has strongly focused on pany is interested in making investments in the expanding its wine exports to China and has opened banking sector, power system and tourism business several Wine Houses to raise awareness of Geor- of Georgia. gian wine. During the visit, Kumsishvili also held other offi - During the business visit, the Minister of Economy cial meetings and visited the port and Industrial not only attended the opening of the new Georgian Zone in Shanghai. He further took part in an even- wine boutique in the capital of China’s southeast ing of Georgian wine and other cultural events, Jiangxi Province, Nanchang (see page 6), but signed organized by the National Wine Agency of Georgia an agreement to sell wines on the E-SilkRoad web- and the Chinese Silk Road Chamber of Interna- site. The fi rst Georgian company to sell its wine tional Commerce. GEORGIA TODAY AUGUST 2 - 4, 2016 BUSINESS 9

The Galt & Taggart Research team comprises Georgian and Azerbaijani fi nance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fi xed income corporate research. For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at [email protected]. Electricity Market Watch submitted bids for the 433MW Namakh- fi gures, with GM’s consumption up 14.3% GEORGIA AND TURKEY FOR GEORGIA TODAY BY DOMESTIC CONSUMPTION vani HPP cascade project. The Expres- y/y. Total domestic usage was up 7.3% The market clearing price in Turkey TAMARA KURDADZE NEEDS WERE FULLY MET BY sion of Interest stage lasted six months, y/y, with DNO consumption (+6.3% y/y) DOMESTIC HYDROGENATION was up 11.0% y/y in US$ terms in June. with 26 companies present at the initial a major driver. Growth was concentrated Total generation was up 8.7% y/y. The Turkish electricity prices have posted site visit and basic design presentation. on the greater Tbilisi area (+13.4% y/y). main contributor to the growth was increases on an annual basis for three ector research is one of the The Ministry of Energy will select the Usage of Energo-Pro subscribers was up Enguri and Vardnili generation, which consecutive months, albeit from very key directions of Galt & Tag- winner within six months; the key cri- 3.4% y/y. Consumption of the Abkhazian reached a six-year high. TPP genera- low bases. Wholesale prices are on gart Research. We currently terion in the selection process is the region was up 14.8% y/y, after three con- tion in June 2016 was negligible, but the rise in Georgia as well - the June provide coverage of Energy, average per kWh price proposed by the secutive months of fl at or negative growth the TPPs remained on stand-by to sup- 2016 price for balancing electricity Healthcare, Tourism, Agricul- investor. fi gures. port system capacity. Notably, Garda- was USc 4.9/kWh, up 37.0% y/y. A Sture, Wine, and Real Estate sectors in bani CCPP was on stand-by for only mere 2.3% of total electricity supplied Georgia. As part of our energy sector DIRECT CONSUMPTION BACK STRONG EXPORT GROWTH eight days, leading to a 57.4% m/m to the grid was traded through the coverage, we produce a monthly Elec- ON TRACK AS GM RESUMES IN JUNE WITH TURKEY decline in the guaranteed capacity fee. market operator. The rest of the trade tricity Market Watch, adapted here for MINING OPERATIONS THE MAJOR DRIVER Electricity imports in June 2016 were occurred through bilateral contracts. Georgia Today’s readers. Previous reports Direct consumption was up 6.4% y/y in Exports were up 14.6% y/y in June 2016. negligible. The average export price of Georgian on the sector can be found on Galt & June 2016, after Georgian Manganese 50.2% of exports were directed to Turkey electricity was USc 3.9/kWh, with Taggart’s website - gtresearch.ge. (GM) resumed mining operations in (+23.1% y/y), 29.2% to Russia (-5.6% y/y) ELECTRICITY MARKET PRICES over half of the exports going to Tur- The Ministry of Energy announced in May. The full effect was seen in the June and the rest to Armenia (+32.4% y/y). ON THE RISE BOTH IN key. May 2016 that it would reevaluate the existing PPA policy as per IMF’s recom- mendation. The evaluation process has been completed and the ministry has announced one major change to the policy – investors in the energy sector will no longer be granted 12-month take- or-pay PPAs; the guarantee period will be limited to 8 months. Since 12-month PPAs were only granted in exceptional cases, such as Khudoni HPP, Nenskra HPP, and Tkibuli TPP, this change will not affect the majority of potential inves- tors. The purchase price is expected to remain at USc 6/kWh on average, accord- ing to the ministry. Notably, the change in the PPA policy will not affect existing MoUs.

THREE INVESTORS HAVE EXPRESSED INTEREST IN BUILDING, OWNING AND OPERATING THE NAMAKHVANI HPP CASCADE PowerChina Resources LTD (CHN), Clean Energy Group Georgia LLC (NOR), and General Development LLC (GEO, AUT) are the three companies who have

ROUTING FLIGHT NUMBER WEEK DAYS DEPARTURE ARRIVAL TK 379 02:35 04:05 TBILISI - ISTANBUL ATATURK AIRPORT TK 387EVERYDAY 06:35 08:05 TK 383 22:55 00:30+1 TK 386 01:40 04:55 ISTANBUL ATATURK AIRPORT - TBILISI TK 382EVERYDAY 18:10 21:30 TK 378 21:15 00:30+1 TK 381 1/2/4/5/6/7 04:25 05:50 TBILISI - ISTANBUL SABIHA GOKCEN AIRPORT TK 381 3 05:05 06:30 ISTANBUL SABIHA GOKCEN AIRPORT - TBILISI TK 380 EVERYDAY 19:40 22:55 TK 391 1/2/4/6/7 10:35 11:40 BATUMI - ISTANBUL TK 393 1/3/4/5/7 20:15 21:20 TK 390 1/2/4/6/7 06:25 09:20 ISTANBUL - BATUMI TK 392 1/3/4/5/7 16:20 19:20 Tel: (995 32) 2 45 08 08 10 Galaktion Street E-mail: [email protected]

TIFLIS 7.5x6cm ING.indd 1 13/06/16 15:16 GEORGIA TODAY 10 POLITICS AUGUST 2 - 4, 2016

Source:www.washingtontimes.com

US House Committee on Foreign Affairs Supports Georgia’s Territorial Integrity, We Find out Why

pose of the resolution is to get the Russians to BY NINO SAJAIA, VOICE OF back off, and refrain from taking over Georgian AMERICA GEORGIAN SERVICE territories. Territorial integrity is inextricably linked to the sovereignty of the nation. It is also important because of the close strategic relation- efore going on a recess in July this year, ship between the US and Georgia- we share a the US House of Representative’s Com- value system, we share a world view, we share mittee on Foreign Affairs passed H. strategic interest, and that is why I think this Res.660 which expressed the desire of resolution is so important. the House of Representatives to sup- Bport the territorial integrity of Georgia. In summary, HOW POSSIBLE IS IT THAT THE the Resolution introduced on 03/23/2016 supports OBAMA ADMINISTRATION WILL the US Stimson Doctrine to not recognize territo- ACT ON THE MAJOR STATEMENTS rial changes effected by force, affi rming that this INSIDE THE RESOLUTION? policy should continue to guide US foreign policy; It is hard to predict what is likely to happen in the and condemns Russia's military intervention and waning days of the Obama Administration. But it occupation of Georgia and its continuous illegal is important for the co-equal branch of the govern- activities along the occupation line in Abkhazia ment -US Congress- to tell to the American people, and Tskhinvali region/South Ossetia. Furthermore, the Administration and their friends in Georgia it calls upon Moscow to withdraw its recognition that we believe territorial integrity matters; it mat- of Georgia's territories of Abkhazia and the Tskh- ters that Georgia-South Ossetia and Abkhazia invali region/South Ossetia as independent coun- should not be taken over by the Russians; that tries, and refrain from acts and policies that under- things should be named for what they are. This is mine Georgia's sovereignty and territorial integrity. aggression and that aggression should be recog- Additionally, the Resolution urges the United States nized as aggression before it can be redeemed and to declare that it will not recognize Russian de jure replaced. or de facto sovereignty over any part of Georgia, including Abkhazia and the Tskhinvali region and, ARE THERE OTHER MECHANISMS among other points, to deepen cooperation with TO HAVE MOSCOW DE-OCCUPY Georgia, including Georgia's advancement towards OR REVERSE THE RECOGNITION OF Euro-Atlantic integration. ABKHAZIA AND SOUTH OSSETIA? We spoke to one of its co-sponsors, Illinois Rep- I think Russia has numerous challenges and diffi - resentative Peter Roskam, to evaluate its impor- culties. They have bitten off more than they can tance and discuss the major points. chew with what they are doing in Ukraine and Georgia, plus the nature of their involvement in WHY DID YOU SUPPORT Syria. I hope they will come to say, “Let's be good RESOLUTION-H.RES 660 ON GEORGIA neighbors. Let’s aim for good relations with our AND WHAT IS ITS PURPOSE? neighbors so they look to us for help, and feel This is a very important resolution and the pur- esteem as opposed to fear and loathing.” Georgia’s Intelligence Service Arrests Pankisi Resident for Suspected Terror Sympathies

the username – Dau Levsky. The Counterterrorism BY TAMAR SVANIDZE Center, under the direction of the State Security Service of Georgia, immediately launched an inves- tigation into the incident. If found guilty, the sus- eorgia’s Counterterrorism Center pect could face up to 11 years in prison,” the Secu- announced on Saturday that it had rity Service said Iin an offi cial statement released arrested a young Georgian citizen for to the media. posting threatening message on Face- According to Security Services, Khangoshvili’s book using a fake account. vehicle and fl at have been searched, though no GAccording the State Security Service, 23-year-old information has been released regarding their fi nd- Vakhtang Khangoshvili was detained on Friday ings. after posting a message on a social media that alleg- Pankisi, home to more than 10,000 ethnic Chech- edly threatened a terrorist attack in Tbilisi. Khango- ens living in a scattering of isolated mountain vil- shvili is a resident of Duisi, a village in the isolated lages in Georgia’s eastern Akhmeta district, has Pankisi Gorge inhabited by Muslim Chechens. been a stronghold of age-old mountain traditions Located on the border between Georgia and Rus- associated with the Chechen clans known as teips. sia’s restive republic of Chechnya, the Pankisi Gorge After Russia waged two brutal wars to end has in recent years become known as the home of Chechnya’s drive for independence in the 1990s, several prominent ISIS fi ghters. The most notable thousands of Chechen refugees were resettled in was the ginger-bearded Tarkhan Batirashvili, who Pankisi with their ethnic and religious kin. gained international attention as ISIS’ top fi eld com- The bleak situation in the valley has led to a rise mander under his Arabic nom de guerre, Omar al- of radical Islamist movements among its younger Shishani - Abu Omar the Chechen. After leading ISIS population, particularly in the number of those to several stunning battlefi eld victories, Shishani was who reject the Chechens’ traditional moderate killed in a massive American drone strike in March. form of Sufi sm in favor of an extremist brand of In a post that appeared on Facebook under the Saudi Arabian-style Salafi sm. pseudonym Dau Levsky, the user posted an image As fundamentalist Islamic teachings have gained of a massive explosion with a short message in traction among Pankisi’s youth, militant fi ghters Russian saying, “Tomorrow at 12:30, in Tbilisi will like Shishani have become local heroes. be fi reworks”. The user also posted an image of The shift away from the traditional Chechen brand Contact: www.edelbrand.ge Batirashvili alongside the explosion. of Sufi sm – seen by most in the population as par- “Following our investigation, on July 29 the amount to their national identity – has caused a Phone: 599 461908 detainee attempted to distribute information that major rift with the community’s elders and religious contained terrorist threats though Facebook under leaders. GEORGIA TODAY AUGUST 2 - 4, 2016 BUSINESS 11 Dechert OnPoint: Consumer Protection & the DCFTA

echert Georgia, through mandate is enshrined under the techni- within the set timeframe. The DCFTA the contribution of part- cal regulations for consumer protection also encompasses many other guaran- ners Archil Giorgadze and in the fi eld of electronic communications. tees regarding product safety and Nicola Mariani, joined by The fi eld of electricity, gas and water specifi cations in different fi elds senior associates Ruslan supply is another example, under the that do not on the surface refer DAkhalaia and Irakli Sokolovski, as well supervision of the Georgian National to consumer protection but serve as Ana Kostava and Ana Kochiashvili, is Energy and Water Supply Regulatory the overall aim of improving the partnering with Georgia Today on a Commission (“GNERC”). The banking, quality of supplied goods and ser- regular section of the paper which will insurance and payments sector can also vices. For example, the NFSA is to provide updated information regarding be added to the limited list of industries implement 102 different technical signifi cant legal changes and develop- with specifi c consumer protection obli- regulations in the sphere of food safety, ments in Georgia. In particular, we will gations placed on business operators. 84 different regulations in the veteri- highlight signifi cant issues which may Additionally, the LEPL National Food nary fi eld and 85 other documents in impact businesses operating in Georgia. Safety Agency (“NFSA”) controls and plant protection, in order to comply with supervises food safety in Georgia. It is the obligations undertaken under the now involved in implementing a number DCFTA. On July 1, 2016, the Deep and Compre- of regulations which must be put in place hensive Free Trade Agreement (“DCFTA”) in the course of the DCFTA approxima- * * * between Georgia and the European Union tion process. Note: this article does not constitute (“EU”) entered into force. The EU is legal advice. You are responsible for Georgia’s main trade partner. Roughly DCFTA OBLIGATIONS consulting with your own professional 32.6 percent of Georgia’s trade is with REGARDING CONSUMER legal advisors concerning specifi c cir- the EU, followed by Turkey (17.2 percent) PROTECTION cumstances for your business. and Russia (8.1 percent). Therefore, the Georgia must approximate its legislation DCFTA imposes additional Dechert’s Tbilisi offi ce combines local entry into force of the DCFTA is a mat- to EU acts and international instruments obligations on Georgia in terms service and full corporate, tax and fi nance ter of utmost importance for the devel- in the fi eld of consumer protection, of consumer protection. support with the global knowledge that opment of both Georgia’s economy and according to the DCFTA. EU consumer Source: bpi.ge comes with being part of a worldwide the quality of its overall legal environ- protection policies shall be implemented legal practice. ment. in Georgia within the timeframes set by also become applicable, with the direc- years of the entry into force of the DCFTA. Dechert Georgia is the Tbilisi branch The DCFTA aims to deeper integrate the DCFTA itself. The following policies tive on package travel, package holidays Consumer protection enforcement of Dechert LLP, an international special- Georgia with the EU through reforms are notable: and package tours and the directive on mechanisms shall also be put in place ist Law fi rm that focuses on core trans- in trade-related areas. Being based on • With regards to product safety, Direc- the protection of consumers with regards within the framework of approximation actional and litigation practices, provid- the principles of the World Trade Organ- tive 2001/95/EC of the European Parlia- to certain aspects of timeshare, long- with EU law. Namely, the directive on ing world-class services to major ization (“WTO”), the DCFTA removes ment and of the Council of 3 December term holiday product, resale and exchange injunctions for the protection of con- corporations, fi nancial institutions and all import duties on goods and provides 2001 on general product safety shall be contracts to be implemented within fi ve sumers' interests shall be implemented private funds worldwide. With more for broad mutual access to trade in ser- implemented upon the entry into force years of the entry into force of the DCFTA; within fi ve years of the entry into force than 900 Lawyers in our global practice vices between EU and Georgia. It also of the DCFTA. Additionally, the direc- and of the DCFTA. groups working in 27 offi ces across provides the opportunity for EU and tive on the approximation of the laws of • The banking and fi nancial sector will Europe, the CIS, Asia, the Middle East Georgian companies to set up subsidiar- the Member States concerning products also be reshuffl ed with regards to con- CONCLUSIONS and the United States, Dechert has the ies or branch offi ces on a non-discrim- which, appearing to be other than they sumer protection laws. The directive The DCFTA approximation process will resources to deliver seamless, high qual- inatory basis, allowing Georgian com- are, endanger the health or safety of concerning the distance marketing of upgrade Georgia’s consumer protection ity legal services to clients worldwide. panies to enjoy the same treatment as consumers shall be implemented within consumer fi nancial services and the legislation from being virtually non- For more information, please visit www. domestic companies in the EU markets, two years of the entry into force of the directive on credit agreements for con- existent to on par with EU levels, once dechert.com or contact Nicola Mariani and vice versa. DCFTA; sumers shall be implemented within fi ve the approximation process is complete at [email protected]. However, open access to the EU single • Commission Decision 2006/502/EC market comes with certain stringent of 11 May 2006 requires Member States obligations, which require Georgia to to take measures to ensure that only modify its legal framework to make it lighters which are child-resistant are more compatible and harmonized with placed on the market, and to prohibit EU legislation. In the coming years, many the placing on the market of novelty different fi elds of law will fall under lighters. The decision shall be imple- scrutiny and be subject to amendment mented within two years of the entry in order for Georgia to fulfi ll DCFTA into force of DCFTA; obligations. This edition of OnPoint • In the sphere of contract law, the analyzes those legal aspects of the DCFTA directive on consumer protection in the which relate to consumer protection. indication of prices of products offered to consumers, as well as the directive EXISTING CONSUMER on unfair commercial practices, shall be PROTECTION LAWS IN GEORGIA implemented within fi ve years of the The existing legislative framework in entry into force of the DCFTA; the fi eld of consumer protection leaves • As for marketing, the directive con- a lot to be desired from the perspective cerning misleading and comparative of the consumer. There is no generic advertising, as well as the directive on legislation which guarantees the rights certain aspects of the sale of consumer of consumers of different products. Con- goods and associated guarantees, shall sumer protection norms, if they exist, be implemented within fi ve years of the are scattered among different regulatory entry into force of the DCFTA; documents in different fi elds. In general, • Additional contract law protections the consumer protection obligations are to be implemented include the directive industry-limited and apply mainly to on unfair terms in consumer contracts; regulated industries. the directive to protect the consumer Possibly the best developed consumer with regards to contracts negotiated protection practices in Georgia are to away from business premises; and the be found in the fi eld of electronic com- directive on the protection of consum- munications, where the Georgian National ers with regards to distance contracts, Communications Commission (“GNCC”) are to be implemented within fi ve years acts as a watchdog for the rights of dif- of the entry into force of the DCFTA; ferent network subscribers. The GNCC’s • Protections in the tourism sphere will

PUBLISHER & GM Journalists: Photographer: ADDRESS Reproducing material, photos George Sharashidze Tony Hanmer, Tamar Svanidze, Giorgi Pridonishvili 1 Melikishvili Str. and advertisements without Zviad Adzinbaia, Beqa Tbilisi, 0179, Georgia prior editorial permission is COMMERCIAL Kirtava, Meri Taliashvili, Eka Layout: strictly forbidden. DEPARTMENT Karsaulidze, Zaza Jgarkava, Misha Mchedlishvili Tel.: +995 32 229 59 19 The author is responsible for Commercial Director: Maka Bibilashvili, Karen E: [email protected] all material. Rights of authors Iva Merabishvili Tovmasyan, Dimitri Webmaster: F: GeorgiaToday are preserved. The newspaper Marketing Manager: Dolaberidze, Maka Sergey Gevenov is registered in Mtatsminda Mako Burduli Lomadze, Tim Ogden, ADVERTISING & district court. Ana Akhalaia, Robert Isaf, Circulation Managers: SUBSCRIPTION EDITORIAL DEPARTMENT: Joseph Larsen, Will Cathcart, David Kerdikashvili, +995 595 279997 GEORGIA TODAY Editor-In-Chief: Vazha Tavberidze, Nugzar B. David Djandjgava E-mail: marketing@ Reg. # 06/4-309 Katie Ruth Davies Ruhadze georgiatoday.ge