Issue no: 1164/187 • JULY 2 - 4, 2019 • PUBLISHED TWICE WEEKLY PRICE: GEL 2.50

In this week’s issue...

Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2 Georgian Wine Industry: Implications of a Russian Embargo BUSINESS PAGE 6 US Companies Sidestep Trump Regulations, Continue Cooperation with HUAWEI FOCUS BUSINESS PAGE 6 ON THE GEORGIAN Tbilisi Startup Bureau ECONOMY Takes Aim at Georgia’s Minister Turnava on the outlook for the tourism sector and GEL PAGE 5 Entrepreneurship Economy BUSINESS PAGE 8 May 2019: Average Georgian Wine Industry: Hotel Prices & Hotel Price Index in Georgia Implications of a Russian Embargo BUSINESS PAGE 10 Production of Electric Cars BY SIMON APPLEBY to be Launched in Kutaisi

ussia has certain economic leverage over Georgia, as last year BUSINESS PAGE 11 Georgian exports to Russia accounted for around 15% of total exports by value. A disproportionate amount of Georgian Gault&Millau Launches exports to Russia are wine, brandy, foodstuffs, and mineral water. The threat of a renewed trade embargo has people in Gastronomic Guide to Georgia’sR agriculture, beverage and food sectors worried. A review of export data reveals that, should a comprehensive embargo on Georgian wine exports to Russia be imposed, there will be winners and losers in Georgia this scenario. BUSINESS PAGE 11

Prepared for Georgia Today Business by Markets Asof28ͲJunͲ2019 STOCKS Price w/w m/m BONDS Price w/w m/m BankofGeorgia(BGEOLN) GBP14.98 Ͳ6,6% Ͳ12,9% GEOROG04/21 104.17(YTM4.33%) Ͳ0,6% +0,2% GeorgiaCapital(CGEOLN) GBP10.90 Ͳ1,8% +11,8% GEORG04/21 105.69(YTM3.54%) Ͳ0,5% Ͳ0,1% GHG(GHGLN) GBP2.42 Ͳ6,9% Ͳ1,6% GRAIL07/22 108.95(YTM4.55%) Ͳ0,4% +1,1% The imposition of “special controls” on eight Georgian wineries by the TBCBankGroup(TBCGLN) GBP15.88 Ͳ6,4% Ͳ5,3% GEBGG07/23 101.17(YTM5.67%) Ͳ0,8% Ͳ0,9% Russian Federation’s sanitary authorities is thought to be a “shot across COMMODITIES Price w/w m/m CURRENCIES Price w/w m/m CrudeOil,Brent(US$/bbl) 66,55 +2,1% Ͳ5,1% GEL/USD 2,8495 +2,7% +2,1% the bows,” to warn the Georgian government and Georgian people that GoldSpot(US$/OZ) 1409,55 +0,7% +10,2% GEL/EUR 3,2325 +2,5% +3,9% anti-Russian sentiment will have economic consequences. That the gov- GEL/GBP 3,6133 +2,2% +2,3% INDICES Price w/w m/m GEL/CHF 2,9143 +2,4% +5,2% ernment of the Russian Federation may have contributed to these nega- FTSE100 7425,63 +0,2% +2,2% GEL/RUB 0,0449 +2,0% +4,2% tive sentiments through its actions is beside the point; Russia has certain FTSE250 19462,10 +0,7% +1,3% GEL/TRY 0,4903 +6,5% +6,1% DAX 12398,80 +0,5% +3,1% GEL/AZN 1,6741 +2,3% +1,8% economic leverage over Georgia, as last year Georgian exports to Russia DOWJONES 26599,96 Ͳ0,4% +4,9% GEL/AMD 0,0059 +1,7% +1,7% NASDAQ 8006,24 Ͳ0,3% +5,2% GEL/UAH 0,1086 +2,3% +3,2% accounted for 15% of total exports by value. A disproportionate amount MSCIEMEE 181,99 +0,8% +8,4% EUR/USD 0,8793 Ͳ0,0% Ͳ1,9% of Georgian exports to Russia are wine, brandy, foodstuffs, and mineral MSCIEM 1054,86 +0,2% +6,7% GBP/USD 0,7875 +0,4% Ͳ0,4% SP500 2941,76 Ͳ0,3% +5,0% CHF/USD 0,9763 Ͳ0,0% Ͳ3,1% water. MSCIFM 2785,86 +0,0% +5,6% RUB/USD 63,2225 +0,3% Ͳ2,3% GTIndex(GEL) 1582,68 ͲͲTRY/USD 5,7937 Ͳ0,4% Ͳ3,9% Continued on page 6 GTIndex(USD) 1208,13 ͲͲAZN/USD 1,7001 +0,0% Ͳ GEORGIA TODAY 2 NEWS JULY 2 - 4, 2019 The World Is Entering a Climate Crisis – Georgia Needs to Act @entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the BY AMY JONES Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you: limate scientists warn that Mana has been producing tea in Saguramo village our planet is heating faster for two years. The enterprise was launched by Irakli than they previously pre- Ghurtchumelia, who states that the product is dicted. As earth heads distinguished with premium quality Georgian towards breaking point, materials for which it aims to create a strong CPhilip Alston, UN special rapporteur on presence on the market. Production started with extreme poverty and human rights, stated four tea varieties, which expanded to 12 different last week that the impacts of global heat- premium-quality teas, 10 tons of tea produced ing could undermine basic rights to life, annually, and four export destinations: the Czech water, food, and housing as well as Republic, Slovakia, Poland and Latvia. Black and democracy and the rule of law. Green tea with lemon were presented on the market Following the worldwide trend, Geor- Image source - Geocell by Mana this year. The company plans to diversify gia’s biodiversity and climate are also Paris Agreement, a UN framework on amounts of plastics: takeaway coffee markets and add other tea varieties to its offerings. changing. The International Union for climate change to deal with greenhouse- cups, plastic bags, straws. A report by Conservation of Nature Red List includes gas-emission mitigation. the EU in 2018 found that around 900,000 29 mammals, 35 birds, 11 reptiles, 2 Despite small steps by the government, tons of waste are generated annually in Agrokiziki has something new for healthy product- amphibians, 14 fi sh and 56 woody plant environmental protection measures in Georgia, of which more than 75% goes lovers. Launched by the Gonashvili family in 2011 with species on Georgia’s list of endangered Georgia remain limited in part due to a to landfi ls. To reduce the amount of an initial focus on animal food production, it now has a species. The UN has listed habitat loss lack of infrastructure. plastic that ends in landfi ll, take your brand shop in Tbilisi. Brothers Beka and Bidzina due to logging, water pollution and inten- For example, in June, Tbilisi City Hall own alternative with you such as reus- Gonashvili primarily aimed to promote its products by sive grazing, as well as the unsustainable installed recycling separation bins along able coffee cups, metal straws and canvas supplying to enterprises. The launch of Tserti (წერტი) use of biological resources as the main Rustaveli Avenue. Yet, with lacking infra- bags. comes as the result of cooperation with partner farmers danger to Georgia’s biodiversity structure and education, the waste is not where, along with meat, dairy and other Agrokiziki In addition, the average temperature necessarily recycled. GEORGIA TODAY Take public transport or walk products, it is possible to purchase the goods of partner in Tbilisi has increased by 0.7 degrees have witnessed waste disposal workers The pollution in Tbilisi caused by farmers, all of them Georgian and totally natural. over the past 50 years. throwing the separated recycling waste poorly maintained vehicles and conges- The Georgian government has imple- into a mixed general waste bin. tion could be minimized if more resi- AIGROUP is to start producing electric cars in mented some initiatives to protect bio- Europe experienced record tempera- dents choose to walk, cycle or take Georgia designed by Zviad Tsikolia, who was diversity, protect the environment and tures this weekend as a heatwave swept public transport. In addition, carpooling named among 50 courageous entrepreneurs in encourage sustainable development. In across the continent. Temperatures in could reduce the number of cars on the 2018. Tsikolia notes his passion for working on 2019, the state budget for biodiversity Montpellier in the south of France hit roads. Georgian production, particularly in transport. increased to 720,000 GEL, according to 45 degrees, the same as you would expect The industrial complex of AIGROUP is to be the UNDP. in the US’ Death Valley during August. Avoid meat launched on 100 hectares in Kutaisi. The On 28 June, the National Environment As the affects of climate change are being Although many Georgian dishes include electric car enterprise promises 300 Agency, the Ministry of Environment felt, it is beyond time for citizens and meat, Georgian cuisine can be easily workplaces for locals at the fi rst stage and will Protection, the Ministry of Agriculture governments to act. adapted to a vegetarian lifestyle. Lobio, have a fi nal capacity of 40,000 cars. The and the UNDP signed an agreement on khachapuri, ajapsandali, salads, and a project is implemented in partnership with the the fourth national climate change frame- HOW TO BE MORE number of other dishes are meat free. large Chinese corporation ‘Changan.’ work and second two-yearly report. ENVIRONMENTALLY In addition, Tbilisi has numerous veg- Follow the Entrepreneur Georgia Instagram page to get the latest updates from The agreement aims to tackle climate FRIENDLY IN GEORGIA etarian and vegan restaurants such as Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on change in Georgia on a national level, in Minimize plastic consumption Kiwi Vegan Cafe, Mama Terra, and Hum- [email protected] accordance with the requirements of the Many businesses in Georgia use large mus Bar. GEORGIA TODAY JULY 2 - 4, 2019 BUSINESS 3 Writers Boycott National Foundation of Georgian Literature

Photo: Writers' House/Facebook responsible for their position, condemns the uni- BY ANA DUMBADZE fi cation of the "Writers’ House" and "Georgian National Book Center" as one organization and boycotts the newly established “National Founda- eorgian writers, translators, and pub- tion of Georgian Literature”, reads the statement lishers have boycotted the newly released by Georgian writers. established organization “National Georgian authors note that in recent times they Foundation of Georgian Literature” have seen the "unbelievable process" of ignoring and rejected the decision of the gov- writers and their opinions. Gernment and the Minister of Education, Science, According to them, at this stage, the need for Culture, and Sport of Georgia whereby LEPL “Geor- preparation for the Paris 2021 Book Fair are being gian National Book Center” and LEPL "Writers' completely ignored. Additionally, they say, the House" were merged and LEPL “National Founda- meetings they are invited to by representatives of tion of Georgian Literature” was established. state or the sphere, are "an attempt to obtain writ- The Order on the Establishment of the National ers' consent for a picture created by them". Foundation of Georgian Literature was released "In recent years, we have the impression that on June 18 and came into force on June 20. The people who work in our sphere are punished for “Georgian National Book Center” and the “Writ- their honest service to our country. But Georgian ers’ House” were thereafter abolished. writers, as a unity of artists, among them individ- Writers, translators, publishers and former employ- ual artists, do not recognize the right of the author- ees of the abolished organizations are demanding ities, such as ministers and their deputies, to change the restoration of the abolished organizations and our working environment”, reads the statement the abolishment of a newly established entity released by writers, translators and publishers, instead. which is being signed by representatives of the "Our boycott will be comprehensive and noisy. sphere. The international writer’s community will be The information regarding the abolishment of involved in it and we will seek alternative ways to the “Georgian National Book Center” and the “Writ- publish our books - this will be a temporary meas- ers’ House” and establishment of a new, large-scale ure before our full victory, until the restoration of organization was spread on May 3. Many writers the status quo in the fi eld and before returning to immediately claimed that the decision was politi- the full working process. This is the individual cal. They also noted that it was the revenge of the protest of writers. Every subscriber is personally government for the writers’ "disobedience." Youth Employment Festival to Be Held in Tbilisi

BY MARIAM MERABISHVILI

he Social Service Agency will hold a festival to support the employment of young people in the exhibition center ‘ExpoGeorgia’ on July 5. About 60 companies will offer more Tthan 1000 vacancies to festival attendees. Jobs will be offered in the insurance, banking, consumer- trade, pharmacy, energy and railway spheres. Ado- lescents will also be able to join internships and state subsidy programs. Youth aged 18 to 36 and students and graduates of higher and vocational schools can participate in the Employment Festival. During the festival, job seekers and employers will be able to communicate quickly and easily. The aim of the festival is to help young people meet company representatives and Source: Social Service Agency to encourage those offering internships and sub- Georgia and will last three hours. sequent employment. Information about the festival will be forwarded Representatives of the Social Service Agency will to adolescents looking for jobs who are registered also introduce attendees to state programs and at worknet.gov.ge, the labor market management services promoting employment. The one-day fes- information system. Attendees should bring along tival will start at 12 PM in the 3rd pavilion of Expo- their ID card and ideally an up-to-date CV. GEORGIA TODAY 4 BUSINESS JULY 2 - 4, 2019

June 2019 Agri Review he share of the rural popu- to the change in total CPI. The main Figure 2. Exports and imports of potatoes of total agriculture export income for lation in the total popula- drivers were price fl uctuations in the the country in 2019 so far, but like Geor- tion decreased slightly, from following sub-groups: vegetables (+8.1%), gian wine, its prime destination is Rus- 42.6% in 2015 to 41.3% in fruit and grapes (+7.1%) and milk, cheese, sia (in value terms, 46% of mineral water the beginning of 2019. The and eggs (-5.7%) exports was directed to Russia in 2018). Tshare of agriculture in total GDP has From an annual perspective (May 2019 For detailed monthly dynamics of HHI also declined, from 9.1% in 2015 to 7.7% vs. May 2018), the prices of food and in Georgia’s agriculture exports by coun- in 2018. While production fi gures have non-alcoholic beverages increased by tries, see the Figure 3 below. gone up, there was a 6.4% increase in 7.9%, contributing 2.43 percentage points POLICY WATCH Figure 1. Self suffi ciency ratios in 2018 and 2017 (%) Georgia joins the International Olive Council Under the auspices of a working visit to the Kingdom of Morocco, the Minis- ter of Environmental Protection and Source: MoF, 2019 Agriculture of Georgia, Levan Davitash- 0.2 mln. USD). (Figure 2). 2018 to February 2019. The biggest vili attended a session of the International Meanwhile, annual publication of Agri- importer of Georgia’s agriculture pro- Olive Council held in the city of Mar- culture of Georgia 2018 (GeoStat, 2019) duce has been Russia, who accounted rakech. The council brings together 20 suggests that the domestic production of for slightly less than one third of the leading olive oil-producing countries potatoes in 2018 increased by 32% from country’s annual agriculture exports (in around the world. At the session, Geor- 180.1 thousand tons to 237.5 thousand tons the June 2017-May 2018 period), but this gia was accepted as a member of the compared to 2017. It appears that the average increased by 3 percentage points International Olive Council. increase in domestic production led to a in the last 12 months’ (June 2018-May For more information follow the link: decrease in imports of potatoes and an 2019), leading to the change in total index. http://mepa.gov.ge/Ge/News/ increase in exports resulting in a supply The concentration rose gradually in Details/9537 shortage. This shortage is likely to be the terms of product concentration since Source: GeoStat, 2019 major cause of the increase in prices. the end of 2017 too (HHI=0.11 in Decem- New Project worth two million EUR As to international prices, starting from ber 2017 versus HHI=0.18 in May 2019) starts in order to support Georgia’s rural agricultural production in 2018 compared to the change in total CPI. January 2019, international prices have and the decline in hazelnut exports is to and agricultural development to the previous year. Production in the In May 2019, the sharpest price changes been increasing for fi ve consecutive blame. Citrus, the production of which, A new project for rural and agricultural plant-growing sector increased by 10.9%, on an annual basis were observed within months. In May 2019, the Food Price like the hazelnut, was affected by the development has been launched by the and animal production experienced an the following subgroups: vegetables Index, measured by the Food and Agri- stink-bug invasion, also lost part of its Ministry of Environmental Protection and increase of 2.1% compared to 2017. Look- (+33.7%), fi sh (+13.5%) and fruit and culture Organization (FAO), increased share in Georgia’s total agriculture Agriculture of Georgia and the United ing at the self-suffi ciency ratio, the high- grapes (-19.9%). by 1.2% compared to April 2019. From exports, but the change is more moder- Nations Food and Agriculture Organiza- est decrease was for grapes, followed by an annual perspective, we still observe ate. Parallel to these negative changes, tion (FAO). Austrian Development Coop- vegetables, and the highest increase was POTATOES - IN THE SPOTLIGHT a downward trend in world prices: the Georgian wine enjoyed record exports eration (ADC) will allocate two million for meat, followed by maize (Figure 1). In May 2019, prices in the category of FAO Food Price Index decreased by 1.9%, in 2018 (approximately 200 mln. USD), euros to fi nance the project, which aims Revenue from the sales of agricultural vegetables increased by 8.1% compared compared to May 2018. the importance of which rose in the to develop rural development policy in products in 2018 has increased compared to the previous month. On an annual Annual price decreases were observed country’s agriculture exports, and its Georgia, improve value chain, sustainable to the 2014-2017 period, both in percent- basis, prices in this group experienced for vegetable oil (-15.4%) and cereal (-6.0%), average share in 2019’s agriculture exports use of natural resources, and support envi- age and absolute terms. Increased produc- a signifi cant 33.7% increase. According while prices for meat (0.9%) and sugar exceeds the 30% margin. As far as the ronmentally friendly agricultural activities. tion is the most likely reason for this result. to GeoStat data, annual prices increased (0.4%) remained almost unchanged com- second biggest item in Georgia’s list of For more information follow the link: Another possible explanation would be mostly for potatoes (67%), onion (64%), pared to the corresponding month last agriculture exports is concerned, mineral http://mepa.gov.ge/En/News/ that other sources of income aside from cabbage (60%), cucumber (57%), and year. Meanwhile, dairy prices are close waters have generated roughly one fi fth Details/9532/ selling agricultural products contributed pepper (56%). to the fi ve-year maximum since 2013. In to households’ income, but since there According to trade statistics, the import May 2019, annual prices for dairy increased Figure 3. HHI of Agriculture Exports of Georgia by Countries were no signifi cant structural changes value and quantity of potatoes during by 5.1% refl ecting increased import demand observed in the country in recent years, January-May 2019 decreased on an annual in anticipation of a tightening in export increased production is most likely respon- basis. In January-May 2019, the quantity availability from Oceania due to declined sible for the increased sales revenue. of imported potatoes decreased by 47%, production. Concerns over milk produc- from 15.9 thousand tons to 8.3 thousand tion in Europe put additional upward PRICES tons. Within the same period, the import pressure on dairy prices. On a monthly basis, the country’s price value amounted to 1.5 mln. USD, 82% levels barely changed. The Consumer lower than the 8.1 mln. USD of January TRADE HIGHLIGHTS Price Index (CPI) in May 2019 was 0.5% - May 2018. On the other hand, the quan- Georgia’s agricultural export has been higher than the previous month. While tity of exported potatoes in January-May fairly diversifi ed in terms of destination in comparison to May 2018, CPI experi- 2019 almost tripled from 0.4 thousand for the past years (Herfi ndahl-Hirschman enced a signifi cant 4.7% increase. For tons to 1.1 thousand tons compared to Index (HHI) with a value less than 0.2, food and non-alcoholic beverages, the the same period of the previous year. which is considered a sign of a high month-over-month prices increased by The corresponding increase in export diversifi cation), but the concentration 1.2%, contributing 0.37 percentage points value was 39% (from 0.15 mln. USD to has increased markedly from October Source: GeoStat, 2019 SUBSCRIBE!

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[email protected] +995 32 229 59 19   Tel: (995 32) 2 45 08 08 10 Galaktion Street E-mail: [email protected] GEORGIA TODAY JULY 2 - 4, 2019 BUSINESS 5 Turnava Meets with Banks & Hotels Amidst Tourism Crisis Continuing her plan to keep the tour- BY SAMANTHA GUTHRIE ism-reliant economy moving during the high summer season, Turnava met on Wednesday with representatives of two inister of Economy and industries that interact intensively with Sustainable Develop- tourists from Russia: hotels and banking ment Natia Turnava is services. moving quickly to pre- Meeting with representatives from vent an economic crisis international brand-name hotels, Tur- Mand avoid the collapse of one of Georgia’s nava discussed how the new challenges biggest industries, tourism, in the midst in the sector can be overcome, and how of Russian bans on fl ights to Georgia and the ministry can support the private sec- anti-Georgian fearmongering in Russia. tor. After the meeting, she told reporters, Last week, Turnava announced that “We discussed with the representatives the government was working on a pack- of the brand hotels how we can help age of fi nancial assistance for companies them in logistics – it might be new fl ights, operating in the tourism sector as part charter fl ights, fi nancing of certain trans- of their anti-crisis plan. fers, some fi nancial support and using Moscow’s fl ight ban, which will begin the existing fi nancial mechanisms we on July 8, will leave an estimated 155,000 have. It is important that the fi eld is bal- Russians unable to use tickets they already anced in evaluating the process since it purchased. 3,500 people who booked is about revealing new opportunities for tours to Georgia with travel agencies in attracting tourists from different mar- Russia have already had their trips can- kets, as well as about maintaining the celled. The ban is expected to hit the traditional market and the Russian mar- Ajara region particularly hard. ket as well.” The Ministry of Economy “No matter how diversifi ed our market says the meeting aimed to help businesses Image source: Ministry of Economy and Sustainable Development is, the share of Russian tourists is high, “fi nd ways of softening the negative effect After meeting with representatives of overcome the challenges we face at this “Representatives of the commercial at 25%. Therefore, we cannot say that [of the fl ight bans] that is a challenge to commercial banks, Turnava explained point. Very soon, we will be ready to banks positively assessed the initiative this is not a problem. We expect the loss the tourism industry.” that “We are talking about the challenges offer our tourism industry a certain plan.” of the Minister... confi rmed their active of around $750 million of income. But Turnava also declared Georgia an “open, that our tourism industry faces...It is They also discussed a planned initia- support, and expressed hope that the now we are working on ways to reduce hospitable country, a safe tourist desti- possible to fi nd various fi nancial support tive to reduce the negative impacts of directions of the tourism sector will be the expected impact,” said Turnava last nation and an open market for Russian schemes and fi nancial products, includ- the fl ight ban, focused on small and soon established via joint efforts,” week. tourists.” ing credit-guarantee mechanisms, to medium-sized enterprises. reported the Ministry of Economy. Minister Turnava: Further GEL Devaluation Not Expected BY THEA MORRISON

eorgia’s Minister of Econ- omy and Sustainable Devel- opment, Natia Turnava, It is about fi nding says that the Georgian national currency GEL new opportunities G(Lari) is not expected to further devalu- ate against the US Dollar and Euro, in for attracting the long-term perspective. The Minister explained that the factors tourists from that impact the Lari exchange rate can be divided into two groups: macroeco- different markets, nomic and expectation. She says the macroeconomic parameter shows that as well as the GEL rate will not depreciate in the long-term perspective. keeping the However, she stressed that after Russia banned fl ights to Georgia, which will Russian market directly affect tourism, the largest sector of foreign currency infl ow in Georgia, this economic growth will remain the same negatively refl ected on the exchange rate. in the next months,” she noted. “Of course, political processes refl ected Ivane Matchavariani, Minister of on the currency, but we will work on Finance, also spoke about the GEL rate, this so that the problem is neutralized,” Photo source: agora.ge noting the situation on the local currency she said. market is the refl ection of recent devel- Following the Russian embargo imposed on June 21, Turnava met with the repre- soon we will be ready to offer our tour- tic Product (GDP) growth rate in May opments and negative expectations seen by the Russian President Vladimir Putin sentatives of all commercial banks oper- ism industry a certain plan,” she said. 2019 equaled 4.7% and the average esti- countrywide in the past week. ating in Georgia. Moreover, ways of overcoming the mated real GDP growth equaled 4.9% “The expectations are certainly heavy. The Minister discussed with the bank- challenges in tourism were discussed for the fi rst fi ve months of 2019. I hope these expectations will not come ing sector the establishment of a plan with the representatives of brand hotels. Geostat says that in May 2019, the esti- true in the full scale. What happens to that will reduce negative impacts on the “It is important that the fi eld is bal- mated real growth compared to the same the GEL today is unambiguously a refl ec- economy and particularly on the small anced in evaluating the process since period of the previous year was posted tion of the given expectations,” he said. and medium (SME) segment in the tour- it is about revealing new opportunities in the following activities: real estate, Matchavariani also noted that the ism sector. for attracting tourists from different renting and business activities, trade, National Bank of Georgia (NBG) is doing We'll soon be “We are talking about the challenges markets, as well as about maintaining hotels and restaurants. A decrease was its best in this regard. that our tourism industry faces with the traditional (Russian) market,” she registered in manufacturing and con- “I hope radicalism and hysteria will ready to offer our commercial banks. It is possible to fi nd said. struction. decrease soon, though there are grounds various fi nancial support schemes and Georgia’s National Statistics Offi ce has Minister Turnava said the provided for them currently,” he added. tourism industry a fi nancial products, including credit- released rapid estimates of the economic statistics are quite good, adding that so At present, according to the National guarantee mechanisms, to overcome the growth of January-May 2019, according far the economic growth is high. Bank rate, one US Dollar equals GEL plan challenges we face at this point. Very to which the estimated real Gross Domes- “However, we cannot predict if the 2.8687 while one Euro costs GEL 3.2657. GEORGIA TODAY 6 BUSINESS JULY 2 - 4, 2019

Georgian Wine Industry: Implications of a Russian Embargo Continued from page 1 absorbing much of the lower end of shown much growth in the past fi ve Georgian wine output, as indicated by years, but weak currencies (and war in The Georgian wine industry’s vulner- average price per liter. It is also interest- Ukraine) have not been helpful. ability to trade embargo by Russia stems ing to note that prices into the East Asian The EU market is showing slow and from several issues: market have softened in the past fi ve steady growth, mostly in the Baltic States, • Despite 13 years of urging by two years, but most wine-exporting countries Poland, and Germany. That trend should government administrations to aggres- to China have noticed this trend, with continue. From a very low base, the US sively diversify markets, many wineries the exception of New Zealand and Aus- market is accepting more and more have opted to “pick the low hanging tralia. Georgian wine, and a Free Trade Agree- fruit” and reactivate their old trading On the bright side, the East Asia mar- ment with the USA should assist that networks in Russia, and excessively rely ket for Georgian wine has quadrupled process. on a single market. in dollar terms in only fi ve years. That It is to be hoped that the current intim- • The brand recognition of Georgian is not an unusual growth curve when a idation of Georgian exporters by a key wine in general, and individual brands, product is well-promoted, and priced export country’s government does not outside the former Soviet Union, is still RU= Russia, ROW = Rest of World, EU = EU + EEA , EA = East Asia, CISER = CIS, and positioned correctly in that part of persist and that normal trading can con- rather weak (although this is improving Ex-Russia the world. Given that the East Asia wine tinue. Should an embargo eventuate, steadily). Source Data: UN Comtrade market (ex-Japan) is still growing quite there will be a substantial disruption of • Georgian wines are rather expensive fast, and presuming that investment in the industry for 5 years or more as Rus- compared to rival products. This is a brand recognition and distributor search sia-dependent wineries struggle to place feature of the fragmented supply chain, continues to be effective, the East Asia the product in non-traditional markets. lack of vineyard mechanization and hence market for Georgian wine could conceiv- More prudent operators with existing high production cost of grape, fragmented ably quadruple again in another fi ve diversifi ed markets will be in a position processing base, and poor economies of years. That would account for about $100 to capture underutilized grape supply scale. million in exports, almost the same as chain at a more reasonable cost and to • Chaos in foreign land ownership what Russia accounts for now. I am acquire distressed or bankrupt wineries regulation has driven potential foreign familiar with one respected large-scale and vineyards to expand their business equity investors out of the estate winery winery owner who claims he could sell and improve their economies of scale. segment. Estate winery owners seeking his entire output several times over in If faced with a crisis, the National Wine to expand have had to rely on govern- China, as his brand is well-developed Agency will have to prioritize its mar- ment grants and bank debt, instead of there, and he has been turning down keting activities based on the fastest equity investors. quite lucrative Chinese offers for his return on investment. Activities in Europe • Without access to foreign capital, entire output for some years in order to and CIS-ex Russia may have to be de- consolidation in the industry has stag- CISER = CIS ex-Russia, EA = East Asia, EU = EU+ EEA, ROW = Rest of World, RU = maintain his presence in Europe and emphasized in favor of faster-growing Russia nated, with a knock-on effect on econo- Source Data: UN Comtrade some other markets. Companies like his markets. Investment in brand develop- mies of scale. are well-positioned to survive and thrive ment and recognition, distributor search In 2018, 245,000 tons of grape were money. Most small-scale wineries have wine shop in Urumqi, Xinjiang Uyghur in the wake of a Russia embargo. and in-country promotional events in processed by 292 winemaking compa- little capability to invest in brand devel- Autonomous Region, China. Large win- One note of gloom is that a substantial East Asian markets, with both govern- nies; for a country with a tiny domestic opment and distributor search outside ery Tblvino for some years maintain that proportion of Georgia’s wine output is ment and private companies covering consumption base, that is a lot of winer- Georgia, other than basic social media Russia is only a modest part of their total of rather basic quality table wine des- the costs, should balance supply and ies. By comparison, La Rioja in Spain presence and participation in wine fairs turnover. Boutique negociants like tined for Russia, which is not competi- demand faster than pursuing market has 600 wineries drawing grape from with government co-funding. Formation Mukado have established their own tive with French, Spanish or Italian table share in mature markets with a surfeit 12,000 growers and 45,000 ha of vineyard, of marketing co-operatives amongst online wine trading platforms in Japan wines which deliver well on the price/ of their own quality, inexpensive wine. but it is at the heart of an enthusiastic clusters of small wineries has not yet- and China with local partners, and cou- quality spectrum. The sanctions Russia wine-drinking country of 47 million been very successful. pled with substantial in-country promo- had imposed on EU wine exporters left About the author: people with huge loyalty to that appel- On the bright side, quite a number of tions, are making satisfactory progress Georgia in a privileged position in this Simon Appleby is an Australian veterinary lation. The availability of various grants wineries owned by prudent business- in those markets. segment of the Russian market, and these scientist and agronomist, and has been oper- and subsidized loans over the past fi ve people have turned down relatively easy Analysis of the past fi ve years’ export types of wines may have trouble fi nding ating Hong Kong-based agribusiness group years has enticed many urban profes- money in the Russian market since 2013 data is sobering. The reliance on the Rus- a home in another market, especially as Yu Feng Nong Holdings since 1997. His sionals to mortgage their urban proper- and invested heavily in expanding in sian market for absorbing Georgian wine they are mostly white (East Asian mar- companies are engaged in M&A con- ties and engage in their dream of owning non-traditional markets. Mid-sized win- production is substantial, over 60% in 2018. kets are predominantly red). sulting, agricultural engineering, farm and a small winery or vineyard with borrowed ery Giuaani from Manavi has its own It is apparent also that Russia has been The CIS-ex Russia market has not asset management. US Companies Sidestep Trump Regulations, Continue Cooperation with HUAWEI

China. One of the most striking exam- Against the backdrop of US companies BY MARIAM MERABISHVILI ples is that of the largest US memory protesting Trump's prohibitions, HUA- card maker, Micron Technology, which WEI’s founder and executive director was one of the fi rst to publicly prove Ren Zhengfei spoke about the contribu- merican companies are still its right to resume business relations tion of American companies to the com- selling millions of dollars with HUAWEI. pany’s development during a meeting of products to HUAWEI, "The company was forced to stop sup- with media. “Partnership with them is despite a Trump adminis- plying products to HUAWEI, but two very important for us, and this coopera- tration ban on the sale of weeks ago the process was renewed after tion counts already 30 years. Conse- AAmerican technology to the Chinese close investigation of the relevant laws. quently, the relationship and partnership telecommunications giant. We found ways to continue our partner- between the two parties are above poli- Such decisions help HUAWEI to con- ship within the law," said Micron Exec- tics.” tinue to sell strategic products such as utive Director Sanjay Mehrotra. HUAWEI products and services are smartphones and servers. In addition, These issues were addressed by law available in more than 170 countries and this fact emphasizes that even for Trump’s fi rm Akin Gump's Partner Kevin Wolf, are used by a third of the world's popu- Administration, it is not easy to restrict who said American companies are free lation. There are 16 research and devel- companies that are labeled as being a to keep cooperating with HUAWEI if opment centers operating worldwide in “national threat.” their products are not manufactured in the USA, Germany, Sweden, Russia, India The fi rst wave of prohibitions was the US. “A memory card can still be and China. HUAWEI Consumer BG is misleading for many suppliers of HUA- delivered to HUAWEI if its production one of HUAWEI's three business units, WEI because at that point they were is made outside the US and does not mainly focusing on Smartphones, per- not well-aware of US trade controls, contain technology that threatens national sonal computers, tablets and cloud ser- and the transportation of products was security,” he said. tant business partner. That is why some leading companies, such as INTEL who vices. HUAWEI Global Network is based suspended on this basis. Later, when American companies are not the only companies are considering transferring have also found a way for their products on 20 years’ experience in the telecom- the involved parties better understood source of important technologies, but production to other countries in order not to be classifi ed as American. How- munications business and serves to pro- the legal details, they were able to deter- within the new regulations, they them- to shirk existing regulations. ever, INTEL has yet to make an offi cial vide innovative technologies to custom- mine which products could be sold in selves are in danger of losing an impor- Micron's decision was joined by other statement on this issue. ers around the world. GEORGIA TODAY JULY 2 - 4, 2019 BUSINESS 7 EU & 6 EP Countries Set Action Plans to Protect Environment Image source - Spend your summer in Georgia

Image source: EU n 27-28 June, the European Union, porting the countries to transition towards greener, Armenia, Azerbaijan, Belarus, Georgia, more effi cient and sustainable economies, as well the Republic of Moldova and Ukraine as to addressing environmental challenges. Com- met to defi ne priorities, targets, and plementary measures will be implemented under specifi c actions to work together and EU4Climate program. Ofurther protect the environment and actively use EU4Environment builds on the achievements of opportunities for greener development. Under the past EU-funded programs, which brought impor- EU-funded ‘European Union for Environment’ tant policy changes and enterprise-level measures. (EU4Environment) program, high-level represent- For example, previous work has contributed to the atives from Eastern Partnership (EP) countries, adoption of new laws on the environmental assess- European Union Member States, European Union ment of strategies, plans and investment projects institutions, international partners (OECD, UNECE, in Azerbaijan, Belarus, Georgia, Moldova and UN Environment, UNIDO, and the World Bank), Ukraine. More than 400 enterprises received expert took part in an inaugural event in Brussels. advice to identify green solutions that result in The event provided the opportunity for all part- annual savings of some EUR 10 million. The six ners to agree on country-specifi c work plans to EPs also identifi ed additional nature conservation improve and implement policies that can spur areas four times the size of Belgium. environmentally friendly economic growth, and EU4Environment is a project funded by the EU enhance societies’ resilience and citizens’ well- with EUR 20 million, to support Armenia, Azer- being. baijan, Belarus, Georgia, the Republic of Moldova “Our cooperation on environment with the East- and Ukraine to implement the Paris Agreement on ern Partner countries is stronger than ever and is Climate Change, improving climate policies and already bringing tangible benefi ts to the daily lives legislation, and reducing the impact of climate of citizens across the region,” said Katarína Math- change on people’s lives. EU4Environment is work- ernová, Deputy Director-General for Neighborhood ing with the six countries to preserve and better and Enlargement Negotiations at the European use their natural capital, increase people's envi- Commission. “Together the EU, its six Eastern ronmental well-being, and grasp new development Partners are working to increase our joint ambi- opportunities. For example, businesses, particularly tion to tackle environmental protection and climate small and medium-sized enterprises, are being challenges. There is no time to lose. Today's meet- supported to save energy, water and materials. ing has brought all partner together to agree on Leading international experts are also advising the next steps forward.” national administrations on better environmental Armenia, Azerbaijan, Belarus, Georgia, the Repub- governance, such as assurance of compliance with lic of Moldova and Ukraine are committed to laws, effective use of public fi nance and building actively implementing the Sustainable Develop- of administrative capacity. ment Goals and other international commitments, including those tackling climate change under the For more information on EU4Environment: Paris Agreement. In addition, within the framework https://www.euneighbours.eu/en/east/stay-informed/ of the Eastern Partnership, the European Union projects/eu4environment together with all partners have also agreed to cer- About the EU4Environment Regional Assembly meeting: tain targets under the ‘20 Deliverables for 2020’. In http://www.oecd.org/environment/outreach/inaugural- this context, the EU4Environment program is sup- eu4environment-regional-assembly.htm Paragraph Resort & Spa Shekvetili Awarded 'Hotel of the Year' by Marriott Int'l Skumsrud, Vice President Operations Franchise TRANSLATED BY KETEVAN KVARATSKEHLIYA Europe at Marriott International. According to the offi cial results of 2018, Marriott International named Paragraph Resort & Spa Shek- arriott International has awarded vetili the fi rst amongst other European hotels of Hotel Paragraph Resort & Spa, the Autograph Collection, nearly a year after its located in Georgia’s seaside resort launch. The status was measured according to the Shekvetili, with the Top Franchise customer-satisfaction index, with Paragraph main- Hotels Award 2018. Paragraph has taining leading position before hotels in London, Mbeen selected among the best 300 hotels in Europe. Milan, Barcelona and other European cities. The annual award ceremony was held on June 26 Paragraph Resort & Spa Shekvetili is the fi rst yet in London. very successful project in the portfolio of the Geor- "There are nearly 300 franchise hotels across gian Co-Investment Fund in the hospitality and Europe, and winning in this nomination indicates real estate direction. The 220-room hotel integrates that the attitude of our team towards the hotel, its a 1600 sq.m aquarium, 115-meter long swimming guests and the brands of Marriot of Autograph pool built into the sea, children’s playgrounds, a satisfi es all the demands of the clientele and even winter garden, large-scale conference halls and exceeds the expectations due to Marriott network restaurants. The total investment value of the pro- services and Georgian hospitality," stated Morten ject exceeds $100 million. GEORGIA TODAY 8 BUSINESS JULY 2 - 4, 2019 Tbilisi Startup Bureau Takes Aim at Georgia’s Entrepreneurship Economy

Startup Bureau is a private company that aims to develop the startup ecosystem in Georgia by supporting other private companies to get off the ground, encour- aging entrepreneurship, and launching conversations between established busi- ness leaders and new businesses. Asriyants, 33, is originally from Yere- van. After working in the telecommuni- cations industry for several years, and being active in organizing and hosting entrepreneurship related events in Arme- nia, he moved to Tbilisi in 2011. In his words, it’s “a classic story...I came here as a tourist, fell in love with the city and the country, and decided to stay.” It “felt natural,” he says, to cross the border and BY SAMANTHA GUTHRIE bring these entrepreneurship-focused programs with him, to engage a new audience. he Tbilisi Startup Bureau The other half of the team, Koiava, is is not, as the name suggests, 30 years old, from Tbilisi. An MBA from a government agency, but Riga Business School and an early career is in fact itself a startup, at a Youth NGO in Latvia and the Geor- founded by two young men gian National Tourism Administration Twith the goal of supporting the develop- as leisure, travel and tourism professional Image source: Tbilisi Startup Bureau ment of entrepreneurship in Georgia prepared him to reach out to an inter- with a focus on technology. The Bureau national audience and lead marketing gian Innovation and Technology Agency, losophy, Asriyants explains that they original idea, a business accelerator. is yet another example of active Geor- and sales efforts. After bringing several and Tbilisi City Hall. believe in cooperation: “it’s not a zero- Musing on why Georgia has a lack of gian residents seeing a gap in the eco- large-scale music festivals to Georgia, They have organized several hack- sum game.” The team, though, does entrepreneurship in the fi rst place, Asri- nomic and social fabric of the country, Koiava sought out a new challenge, to athons, including the worldwide 48-hour believe that private businesses can do a yants and Koiava say that people are, of and taking the initiative to fi ll it. Instead push himself into a more engaging, self- NASA Space Apps Challenge. Last Octo- better job of guiding and supporting course, risk-averse. They want to do of waiting for government policies to led environment.Tbilisi Startup Bureau ber, Tbilisi Startup Bureau brought a entrepreneurs than the parade of non- what they know already works, perhaps support entrepreneurship to have an now runs several programs, aimed at a group of young people to Abastumani governmental organizations that are shedding light on the phenomenon of effect, Hayk Asriyants and Guri Koiava variety of audiences. Their most popu- to tap into the trend of space science, currently active in the fi eld, particularly copy-cat businessessuch as hair salons, decided to chart their own course through lar program is ‘Fuckup Nights Tbilisi,’ and think critically about how NASA’s in rural areas. “Non-governmental organ- second clothing shops and dentists lin- the at times cut-throat, at times coop- an edutainment-type event that draws a open data can be used to solve problems izations don’t understand the struggle ing the same street. “Part of it is culture...a erative world of startups in Georgia. mixed crowd, both from the startup com- here on earth, from wildfi res and water of entrepreneurship, of starting a busi- conservative mentality,” says Asriyants. GEORGIA TODAY sat down with the munity and those interested in hearing shortages to how internally displaced ness,” they explain. While they have not yet landed on the founders to discuss what they are doing, stories of failures and recovery from persons and ecological migrant affect Tbilisi Startup Bureau has its fi ngers perfect formula for convincing someone their vision for their company, and why successful business people from around the environment. The Night Economy in many pies and they plan to expand to take the risk, to become an entrepre- everyone should be paying attention to the region. Their latest event, last Thurs- Hackathon, sponsored by Tbilisi City further. They want to equip people with neur, they say a good place to start is the South Caucasus entrepreneurship day, was part of an occasional English- Hall, invited participants to contribute the hard skills they need to start a busi- focusing on youth and those “startups scene. language series, and featured one of ideas to grow Tbilisi’s after-hours busi- ness and encourage them to take the risk, who want to disrupt an industry, who Asriyants and Koiava began toying with Georgia’s biggest celebrities, basketball ness potential. The Future Agro Chal- they want to reach out to rural areas and want to innovate, who have big ideas.” the idea of creating their own business player and entrepreneur Zaza Pachulia, lenge event in May focused on issues of underprivileged communities that don’t Women are also a target group: “We in the autumn of 2017, and by April 2018, and Turkey’s Ambassador to Georgia, food waste, hunger, and how agriculture have access to infrastructure or even a believe in the economic empowerment they had established Tbilisi Startup Fatma Ceren Yazgan. can be attractive to young people, intro- reliable internet connection, they want of women, we want them to start busi- Bureau. The pair’s initial idea was to They partner with governmental and ducing modern technologies. They have to be active in every part of the startup nesses…. we believe that one of the prob- create a business accelerator, but real- non-governmental organizations, includ- also organized a PechaKucha Night in ecosystem, from developing and archi- lems of Georgia is that women are not ized that before an accelerator could ing Enterprise Georgia, the Ministry of Georgia: an event series that began in tecting the social and economic infra- engaged.” really be viable as a private, standalone Environmental Protection and Agricul- Japan to encourage creators and artists structure to advocating for public sup- Asriyants enthuses, smiling, “We want entity, they needed to strengthen Geor- ture, Georgian Farmers’ Association, to be more entrepreneurial. port for underdeveloped components. to make entrepreneurship attractive to gia’s startup industry. Today, Tbilisi Young Farmers’ Association, the Geor- When asked about their business phi- Eventually, they plan to give life to their everyone!” HUAWEI Founder: We Are Cooperating with US Partners Again

security“ - noted Zhengfei. BY MARIAM MERABISHVILI He also touched upon intellectual prop- erty issues and noted how important it is for a company’s development to respect UAWEI founder and exec- ethical standards. utive director Ren Zheng- “HUAWEI has always operated with fei spoke with international appropriate ethical standards, even when Internet edition CNBC it was a small company. Simply put, HUA- about HUAWEI's future WEI could not be what it is today without developmentH and relations with Ameri- strong business ethics,” he told CNBC. can partners. Speaking about the development of the In the interview, Zhengfei emphasized sector and the sphere, Ren Zhengfei the contribution of American companies emphasized one of the main directions to the development of HUAWEI: „Part- that will be further developed in the com- nership with them is very important for ing years. "Artifi cial intelligence (AI) will us, and this cooperation counts already be the main driving force for people over 30 years. The relationship and partner- the next 20-30 years. AI strengthens ship between the two parties are above human capabilities but does not change the politics“. them. Society is getting more and more During the interview, the HUAWEI complex; challenges are more serious, executive director paid special attention and in the future, some tasks will be to Google, noting that if HUAWEI does directly regulated by AI. We need to be not use an Android operating system, tolerant towards innovations. AI is not Google will lose 700-800 million users, something negative: it's a continuation which is a huge loss. Consequently, con- of people's capabilities,” the HUAWEI tinuation of their partnership is in the founder said. interest of both companies. To close, he touched on HUAWEI's „HUAWEI orders chips from American smartphone sales forecasts. “Initially, sales suppliers. Our partners are doing their The HUAWEI founder also noted that expected that in the near future, the com- fei noted that years of experience have fell by about 40%, but this process was best to fulfi ll their obligations and seek such radical actions and attacks were not pany will return to growth rates and offer proved the company's credibility. quickly regulated, and the indicator has to obtain a permit from Offi cial Wash- expected from the US government, yet even better services to society. „On the „HUAWEI is responsible for providing already decreased to 20%. So the situation ington. If there is agreement, HUAWEI the company was able to prepare for a background of current developments, I'm connectivity between 3 billion people, will improve little by little. Do we have will continue purchasing American chips. hard time. According to Zhengfei, in the amazed by the efforts of our staff: they connecting banks, business and govern- another way of development? To tell the Even if HUAWEI does not get enough next few years, the volume of production have become more energetic and work ment. Over the past 30 years, 170 countries truth, I have not thought of such a thing products from its partners, the company may be reduced and the income from sales more than ever. We will together do our have been given access to HUAWEI ser- yet. We believe in only one road and fol- in any case has its own resources to pro- may be less than the expected fi gure in best to win this sanctions battle“, he stated. vices and this link has never been violated, low it step-by-step - we will not stop until duce them itself“, said Zhengfei. 2019 - up to $30 billion less. However, it is Speaking about cyber security, Zheng- which makes it very clear for network we reach the peak of our industry!” GEORGIA TODAY JULY 2 - 4, 2019 BUSINESS 9 On Georgia’s Dependence on Wheat Import from Russia 3. United States: $5.4 billion (13.6%) BY THEA MORRISON 4. France: $4.1 billion (10.3%) 5. Australia: $3.1 billion (7.7%) 6. Argentina: $2.5 billion (6.2%) n January-May 2019, 171 tons of 7. Ukraine: $2.4 billion (5.9%) wheat and meslin, a mixture of 8. Romania: $1.2 billion (3.1%) rye and wheat, was imported into 9. Germany: $1.2 billion (2.9%) Georgia. 10. Kazakhstan: $965.4 million (2.4%) Based on the offi cial statistics Iof the Georgia’s National Statistics Offi ce, Relations between Russia and Georgia out of total 171,000 tons of wheat, 117,000 have become tense again following the were imported from Russia and 54,000 large-scale anti-Russian rallies launched tons from Kazakhstan. So far this year, in Tbilisi, and later in the regions, on Georgia has not imported wheat from June 20. The protests were sparked fol- any other country. lowing the arrival of a delegation of Rus- The data of the fi rst fi ve months of the sian MPs in the Tbilisi parliament build- year read that out of 117,000 tons of wheat ing to attend the Inter-parliamentary and mesin imported from Russia, 44,422.3 Assembly on Orthodoxy (IAO). When tons were imported by sea, 46,772.7 tons the president of the Russian delegation by motor transport and 25,875.3 tons by used the Parliament Speaker’s chair to rail. address the audience, opposition MPs To note, in 2018, 575 thousand tons of and protesters forced the IAO session wheat and meslin were imported to to be relocated to Radisson Blu Hotel, Georgia: 482,000 tons from Russia, 88,865 after which a decision taken to wrap up tons from Kazakhstan and only a small the session and for the Russian delega- part from Ukraine and Turkey. tion to leave the country. That evening Since 2014, the largest share of wheat riots, during which protestors tried to import in Georgia comes from Russia. force their way into the parliament build- Some economic experts believe that after ing, 240 people were injured and more the travel ban with Georgia imposed by than 300 were detained. Russian President Vladimir Putin on The next day, Vladimir Putin issued a June 21, and tightening of the Georgian Image source: Word Grain decree banning fl ights to Georgia and a wine export to Russia, wheat export to day after that the Russian Federal Ser- Georgia might also face a threat. when issuing documents. This will be point,” she specifi ed. countries they will tighten the proce- vice for Surveillance on Consumer Rights Ketevan Kublashvili, Director General very bad as the citizens of Georgia will Levan Silagava, Head of the Associa- dures and postpone this to several days, Protection and Human Wellbeing of Agricom Company, which is the main be affected if it happens,” she said. tion of Wheat Groups, also spoke about which is too long. We talked to our busi- released a negative statement against wheat importer in Georgia, says that Kublashvili says the risks are real, as the danger of Russia closing the wheat ness partners in Russia and they say this Georgian wine, saying the quality of wine today there is a real risk that Russia will Russia knows Georgia is nearly 100% market. possibility is a hot topic there. So there and other alcoholic beverages imported also place an embargo on imports of dependent on its wheat. Silagava believes that the main lever- exist real risks,” he said. from Georgia “is deteriorating by the wheat, not only on imports by truck, but “Especially during the last 3-4 years, age Russia could employ is complicating Below are the top 10 wheat exporter year,” forcing them to “tighten control by railway and sea too. we have become completely dependent the procedures for document procure- countries in 2019: on Georgian products.” Eight specifi c “However, this will not be done openly. on Russian wheat. Practically 60% of ment when exporting wheat. 1. Russia: US$8.4 billion (21.1% of total Georgian wine companies were men- They [Russia] will just make export pro- imported wheat from Russia comes via “Where these documents are usually wheat exports) tioned as “not meeting the mandatory cedures harder and create problems truck through the Zemo Larsi check- prepared in a day and a half, for some 2. Canada: $5.7 billion (14.2%) requirements.” TBC Bank Prices $125 mln Inaugural World Bank Additional Tier 1 Capital Notes Appoints New Regional Director for the South Caucasus

ebastian Molineus has been appointed World Bank Regional Director for the South Caucasus effective July 1, 2019. In this position, Mr. Molineus will oversee the Bank’s program in the three countries, Armenia, Azer- baijan, Georgia, and will lead the development and implementation of the Bank’s Country Partnership Strategies in these countries in coordi- Snation with development partners and civil society. Mr. Molineus will be based in Tbilisi, which hosts the Bank’s Regional Offi ce for the South Caucasus. Mr. Molineus, a German national, joined the World Bank Group in 2002 as Pro- ject Manager in IFC’s Moscow offi ce. He has since held positions both at IFC and the World Bank with a focus on corporate governance, capital markets, as well as fi nancial and private sector development. He is currently Director in the Finance, Competitiveness & Innovation Global Practice. In his new position, Mr. Molineus’ n Wednesday, 26 June JSC international offering of senior unsecured successfully completing this month. Total top three priorities will be to: (i) lead the Bank’s engagement with governments, TBC Bank (the "Bank"), Additional Tier 1 Capital Notes from Geor- amount raised through the two issuances stakeholders, and partners in all three South Caucasus countries; (ii) oversee the the largest bank in Georgia gia. J.P. Morgan, Renaissance Capital and will equal USD 425 million, and the funds delivery and implementation of the Bank’s fi nancial, advisory, and convening ser- by all key metrics, success- UBS Investment Bank are acting as Joint will be allocated toward the further vices , and guide the future direction of the programs, including formulation of fully priced a debut US$125 Bookrunners and Joint Lead Managers for development of the Georgian economy. Strategic Country Diagnostics and Coun- Omillion 10.75% yield Additional Tier 1 the Notes, and TBC Capital is acting as TBC Bank’s corporate, retail and SME try Partnership Frameworks; and (iii) Capital Perpetual Subordinated Notes Joint Lead Manager. Baker & McKenzie clients will benefi t from the increased work with the International Finance issue (the "Notes") off an orderbook which LLP and Dentons Georgia LLC are acting opportunity to continue fi nancing their Corporation (IFC) and Multilateral peaked at over USD230mn, and repre- as legal advisors to the Bank, while Latham household and business activities.” Investment Guarantee Agency sents the largest and lowest yield Addi- & Watkins LLP and BGI Advisory Services (MIGA) to strengthen World tional Tier 1 issue ever to have been priced Georgia LLC are acting as legal advisors This announcement is not intended to be a Bank Group delivery. by a Georgian issuer. The Notes are being to the Joint Bookrunners. public offer or advertisement of securities in Mr. Molineus was selected to offered and sold in accordance with Rule Vakhtang Butskhrikidze, Chief Execu- Georgia, and is not intended to be an offer, this position through the Bank- 144A and Regulation S. tive Offi cer of TBC Bank commented: " or an invitation to make offers, to purchase, wide competitive managerial The Notes are expected to be listed on Yesterday we have priced the fi rst ever sell, exchange or transfer any securities in a selection process. He will suc- the regulated market of Euronext Dublin U.S.$ 125million Additional Tier 1 Capi- public offering in Georgia, and must not be ceed Ms. Mercy Tembon, who on or about 03 July 2019 and to be rated tal Notes in our history. We are very passed on to third parties or otherwise made successfully served as the Regional B- by Fitch. An application may be made proud to see continued interest from the publicly available in Georgia. Any failure to Director for the South Caucasus from to list the Notes on JSC Georgian Stock international investors towards TBC comply with this restriction may constitute a September 2015 to Exchange, making it the fi rst dual-listed Bank. This is the second issuance we are violation of Georgian securities law. June 2019. GEORGIA TODAY 10 BUSINESS JULY 2 - 4, 2019

May 2019: Average Hotel Prices & Hotel Price Index in Georgia

trips in Georgia increased by 14.2%, and among the international travelers, the proportion who stayed in Georgia for 24 hours or more (classifi ed as tourists) increased by 18%.

PURPOSE OF VISITS AND MOST VISITED REGIONS BY INTERNATIONAL TRAVELERS IN GEORGIA In the fi rst quarter of 2019, the main pur- pose of visits made by international travelers in Georgia was holiday, leisure and recreation (35.8%), this was followed by the purpose of visiting friends and Graph 1: In the graph, average prices for standard double rooms in 3 and 4-star relatives (21.6), while the least share of hotels and guesthouses are given by region. 5-star hotel prices are provided above visits were made with purpose of health and medical care (3.2%). These shares Graph2: visited regions by international travelers n Georgia, the average cost of a HOTEL PRICE INDEX are almost the same as in the fi rst quar- room1 in a 3-star hotel was 128 In May 2019, in Georgia the hotel price ter of 2018. Kartli (17.4%), Adjara (16.1%) and with the fi rst quarter of previous year GEL per night in May 2019. While index3 increased by 6.7% compared to In the fi rst quarter of 2019, the major- Mtskheta-Mtianeti (13.4%). While in (2018), the share of visits made in Tbi- the average cost of a room in a April 2019. The 3-star, 4-star and 5-star ity of visits made by international trave- other seven regions of Georgia only 10.4% lisi and Kvemo Kartli increased, while 4-star hotel in Georgia was 219 hotel price index increased by 4.1%, while lers in Georgia was made in Tbilisi of visits were made. the shares of visits in other regions GELI per night and the average cost of a for guesthouses, the price index increased (42.7%), this was followed by Kvemo To compare the fi rst quarter of 2019 decreased5. room in a guesthouse2 was 76 GEL per by 11.4%. night. In May 2019, compared to April 2019, The average cost of a room in a 5-star the number of international travelers hotel in Georgia in May 2019 was 494 trips in Georgia increased by 12%, while GEL per night. In Tbilisi, the average among the international travelers, the price was 612 GEL, followed by Adjara proportion who stayed in Georgia for 24 – 479 GEL, Samtskhe-Javakheti - 375 GEL, hours or more (classifi ed as tourists) and Kakheti - 375 GEL. increased by 21.8%4. In May 2019, according to the booking. In May 2019, compared to May 2018, com website, the prices of registered hotel prices in Georgia increased by accommodation in Georgia are mainly 3.4%, this was mainly due to the prices between 1-150 GEL range - 71% of regis- of guesthouses. The prices of 3*, 4*, 5* tered accommodation. While the prices hotels decreased by 2.5%, while the prices of 22% of registered accommodation are of guesthouses increased by 15.9%. between 150-300 GEL, 4% - 300-460 GEL, In May 2019, compared to May 2018, 2% - 460-610 GEL, 1% - 610 GEL and the number of international travelers more.

1 The results are based on the surveying of standard double hotel room prices of 3, 4, 5-star hotels and guesthouses in 10 regions of Georgia. Hotels were chosen arbitrarily according to random sampling principle. The study contains 71% (312) of all 3, 4 and 5-star hotels and 25% (456 guesthouses) of all guesthouses registered on www.booking.com The 3, 4 and 5-star hotel price data was collected by contacting hotels individually, while the prices of guesthouses were taken from booking.com. The average prices are arithmetic mean of standard double hotel room prices. 2 Guesthouse: a type of accommodation that is characterized by having a small number of rooms and services are usually offered by the resident family. 3 The calculation of the hotel price index is based on the recommendations given by the International Monetary Fund (IMF). The elementary aggregate price index is calculated by Jevons index (Consumer Price Index Manual-Theory and Practice (2004), Practical Guide to Producing Consumer Price Indices (2009)). 4 Source: GNTA Table 1: Percentage change of prices in May 2019 5 Source: Geostat over April 2019 and over May 2018 6 * Preliminary results

Georgia's Foreign Debt Increases

$7.4 billion (20.0 billion GEL), account- March 31, 2019, accounting for 64.4% of BY MARIAM MERABISHVILI ing for 45.9% of GDP, from which the GDP in the last four quarters. Of this, debt of governmental sector is $5.4 bil- the net foreign debt of the state sector lion (14.4 billion GEL, 33.1% of GDP). is $3.9 billion (10.6 billion GEL), which ccording to the National The National Bank's commitments is 24.2% of the GDP. Bank of Georgia, the coun- amounted ot $376.4 million (1.0 billion In the fi rst quarter of 2019, the external try's total external debt GEL, 2.3% of GDP) and state enterprise debt of the National Bank of Georgia amounted to 17.8 billion US bonds and loans, respectively, amounted increased by $7.2 million. Due to opera- dollars (48.0 billion GEL) to $810.3 million (2.2 billion GEL, 5.0% tional changes, foreign liabilities of the Aas of 31 March 2019, which is 110.1% of of GDP) and $886.2 million (2.4 billion National Bank increased by $8.0 million, the last four quarters of the GDP. GEL, 5.5% of GDP). while due to the exchange rate, saw debt In the fi rst quarter of 2019, Georgia's The external debt of the banking sec- reduced by $0.8 million. At the end of gross external debt increased by $10.2 tor amounted to $4.2 billion (11.4 billion the fi rst quarter of 2019, the total liabil- million. Of this, due to operational GEL, 26.2% of GDP), external debt of ities of the National Bank constituted changes, foreign debt was 5.6 million, other sectors $5.4 billion (14.7 billion $376.4 million. Of this, $200.2 million is due to changes in price $50.2 million and GEL, 33.6% of GDP) and intercompany a special right of assigning debt (NSU) due to other changes it increased by debt $2.4 billion (6.5 billion GEL, 14.9% which does not have a term of repay- $23.6 million. At the same time, due to of GDP). 89.7% of the total external debt ment and practically no obligation to the debt change, debt was decreased by is denominated by foreign currencies. pay for it will come until Georgia is a $69.1 million . Georgia's net external debt amounted member of the International Monetary The state external debt amounted to to $10.4 billion (28.1 billion GEL) as of Source: National Bank of Georgia Fund. GEORGIA TODAY JULY 2 - 4, 2019 BUSINESS 11 Production of Electric Cars to be Launched in Kutaisi n June 26, Georgian Indus- employed, and the capacity of the enter- where doing green business and the trial Holding Aigroup held prise will be 40,000 electric cars. creation of alternative sources of energy an offi cial presentation in “At the beginning of 2020, the world are priorities. Aigroup is the fi rst indus- Kutaisi, within the frame- will see the fi rst electric cars manufac- trial group in Georgia to develop a global work of which the attend- tured in Georgia. At the fi rst stage we approach towards the challenges of the Oees found out more about the electric will employ 300 local residents, expand- 21st century, and a vocational college car manufacturing factory to be built in ing to 3,000 people countrywide,” founded by Aigroup will prepare and Kutaisi, western Georgia. Guledani noted. train staff for further employment. At the beginning of the event, a multi- At the fi rst stage, four models of elec- “Ecology is our priority. We are intro- media show was arranged, followed by tric car will be produced in the factory. ducing world tendencies in Georgia,” speeches delivered by the Minister of Electric cars with the inscription ‘Made said Giorgi Khurodze, the Director Gen- Economy Natia Turnava, Chairman of in Georgia’ will be distributed to the eral of the company Aicar. “The estab- the Board of Directors of the company markets of EU countries, becoming lishment of a healthy, environmentally Airgroup Kakha Guledani, other repre- Georgia’s main product for export to the clean business is the main direction of sentatives of the company, as well as EU market. all the companies united under the name industrial and transport designer Zviad Aigroup announced that 18 months ‘Aigroup.’ The fi rst part of construction Tsikolia. after the factory becomes operational, will be completed in 2019, from which “Some time ago, Georgia's Prime Min- it will have 5,000 electric cars on the we will manufacture the fi rst electric ister Mamuka Bakhtadze promised Geor- market. cars. Next, painting, welding and other gia that we would be the fi rst electric With this project, Kutaisi is regaining factories will be added to the complex. car manufacturer in the region. Today, its old status as a machine-building We also plan to create a factory for car I am honored to announce this project capital, soon to become the 8th city in batteries. The aim of the project is to and say that we are fulfi lling the promise. the world where the service of sharing prepare Georgian production quickly Georgian Company Aigroup, with the electric cars will be available. With prices and get it on foreign markets.” tion is the choice of the new generation various industries,” Perini said. help of the leader of the industry in the of electric cars needing to be affordable Industrial and transport designer Zviad and modern states. If you look at tre- A Memorandum of Understanding was region, Chinese company ‘Changan,’ are for the local segment, social and public Tsikolia will be working on the design mendous investments in the leading signed in May 2019 between Aigroup starting construction of the fi rst electric leasing services will be offered. of the fi rst Georgian electric cars. industries around the world, from Ger- and the Changan Corporation, which is car manufacturing factory in the region,” Besides an electric car factory, the new “It was a dream of mine for Georgia to many to China, we really have to expect of Chinese origin with a track record of Minister Turnava told the gathered industrial complex will also include a produce electric cars. I’ll be working on that in future, more and more modern 157 years in the industry. The memoran- attendees, among them representatives factory for solar panels and other high- the design of cars that will be sold not technology and related systems and dum was signed by the Minister of of governmental agencies, local author- tech factories, making it the most impor- only in Georgia but worldwide,” the infrastructure will be improved and Economy and Sustainable Development ities, diplomatic corps accredited in tant hub in the region. designer said. developed. Great opportunities for Natia Turnava, Chair of the LEPL National Georgia, business and media. The main goal of the ambitious project According to renowned Italian expert employment will be created in Georgia, Agency of State Property of the Ministry Aigroup is to construct an industrial is Georgia’s energy independence. Within and industrial designer Giancarlo Perini, especially considering that the country of Economy and Sustainable Develop- complex on 100 hectares in Kutaisi. The the framework of the program, projects who visited Kutaisi and accessed the has many creative and talented people, ment Giorgi Dugladze, representatives fi rst project is an electric car factory of the future will be implemented, which project, the project is set for success. designers and engineers who will defi - of Georgian company Aigroup and Chi- where about 300 local residents will be will make Georgia equal to countries “Development of electric car produc- nitely contribute to the development of nese company Changan. Gault&Millau Launches Gastronomic Guide to Georgia The event was attended by represent- cessful gastronomic dinner organized in Itsik Moshe, President of the Israel- atives of the diplomatic corps, tourism Paris, tries to attract the attention of Georgia Chamber of Business and founder and culinary sectors. GT spoke with a people with its gastronomy, because and Chair of Israeli House, noted that few of them to grab their impressions while people like to travel for different such initiatives can help to fi nd a new on the release of the fi rst Gault&Millau reasons, they also enjoy beautiful scen- shape for the local cuisine to make it even gastronomic guide about Georgia. ery and good food,” he told us. more attractive for foreign travelers. “It is very important that Gault&Millau Marianne Lecerf, the Head of the “I welcome the initiative of today’s has been established here in Georgia,” International Group of Gault&Millau, event. I believe that now we will fi nd a said former Swiss Ambassador to Geor- was very enthused during the launch new “shape” for Georgian cuisine, a gia Lukas Beglinger. “It shows the qual- event. shape which is exciting for many for- ity of Georgian cuisine, which, of course, “I’m very proud that Gault&Millau is eigners. Interest in Georgia and its cui- is popular with those who know it but being celebrated this way tonight in this sine is growing and such activities as a mystery yet to be discovered for many fabulous location. I see that people [here] [this guide] are important for the coun- tourists. Gault&Millau stands for quality are interested in gastronomy, and this is try's tourism development. This is just and it is very important for Georgia to very good news for us. Gault&Millau a beginning for the tourism sector: the become more famous worldwide. We’ve want to evaluate the gastronomy in Geor- country has much more to show the astronomy and tourism are international team of Gault&Millau. The had wonderful dinners here in Georgia gia and let the world know that some- world and such initiatives will further very closely linked and book was released in collaboration with and thanks to Gault&Millau, we will thing is happening [here]. People now contribute to the development of its having good gastronomic Georgia Today Group and will be avail- have more opportunities to do so. It is have a new book describing the best potential.” traditions, something able in 15 countries, so that food lovers also very important to know which res- chefs in the country: we will publish it, Gault&Millau is a well-known French which Georgia can clearly and travelers worldwide will have a taurants are especially good, which a we will spread it around the world, and restaurant guide founded by two restau- Gboast, plays a signifi cant role in tourism wonderful opportunity to discover the little bit less so, so it this a big success we will let everyone know what Geor- rant critics, Henri Gault and Christian development. Now, through the renowned Georgian cuisine through and big progress.” gian chefs are doing for global gastron- Millau, in 1965. Gault&Millau rates on a Gault&Millau Georgia guide, the world comprehensive and trustworthy infor- French Ambassador to Georgia Pascal omy!” she said. scale of 1 to 20, with 20 being the highest. will come to know more about the coun- mation about the must-visit restaurants Meunier was also among the honorable “The fact that Gault&Millau’s guide has Restaurants given below 10 points are try’s unbelievably delicious cuisine, dis- in the country. guests at the event. been published in Georgia is very impor- rarely listed. The points are awarded tinguished restaurants and celebrated The presentation of Gault&Millau’s “Gastronomy is linked with high-qual- tant, as it represents one of the best plat- based on the quality of the food, with chefs. fi rst book about Georgia was held in a ity tourism. France is a country which forms for the country to integrate its comments about service, price or the On June 27, the presentation of the warm and friendly atmosphere. In addi- attracts many tourists for its beautiful cuisine with world gastronomy,” said atmosphere of the restaurant given sep- Georgia-based version of the world’s tion to relaxing live music, a delicious landscapes and cultural heritage, but David Songhulashvili, MP of Gurjaani, arately. Based on this rating, high-ranking most prestigious and infl uential gastro- dinner was hosted by celebrated chefs gastronomy also brings a lot of people. Kakheti region. “This sector is the main restaurants may display one to four toques. nomic guide ‘Gault&Millau’ was held at featured in Gault&Millau Georgia, giv- I’m very happy to see that Georgia, which basis for the development of tourism and Since 2017, Gault&Millau has reviewed Wyndham Grand Hotel Tbilisi. ing guests the chance to personally sam- is considered a cradle of wine and which the establishment of such platforms will dozens of restaurants in Tbilisi and is The guide includes the best restaurants ple dishes prepared with rare fantasy was the guest country of the fi rst exhibi- further contribute to the development of still looking for new restaurants to dis- and chefs in Georgia, evaluated by the and professionalism. tion in Bordeaux and which had a suc- tourism in Georgia,” he said. cover.

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