Investor.A MAGAZINE OF THE AMERICAN CHAMBER OF COMMERCE IN GEORGIA ge ISSUE 35 OCT.-NOV. 2013 Georgia Is Number The Comeback Kid: Georgian Wine Outperforming Expectations in Russian Market Georgian Ski Resorts Receive A Major Upgrade Why the Georgian Economy May be in Better Shape Than You Realize Impact of Agricultural For Ease Amendment on Investment Of Doing Business Investor.ge OCTOBER-NOVEMBER 2013 3 Investor.ge Investor.ge CONTENT AmCham Executive Director 6 Investment in Brief 32 Independence of the Judiciary Amy Denman A brief synopsis of new investments in Georgia: Trends and and business news. Challenges Editor in Chief BGI’s Otar Kakhidze looks at Molly Corso 6 New Millennium Challenge changes and challenges for the Compact to Bridge Work-Skill judiciary in an editorial. Copy Editor Alexander Melin Gap 34 The Direction of Georgia’s Marketing & Promotion 7 The Comeback Kid: Georgian EU Policy: What November’s Sophia Chakvetadze Wine Outperforming Eastern Partnership Summit Expectations in Russian Means for Georgia Promotional Design Market Levan Baratashvili 37 New Restrictions on Foreigner 8 ISET: The future of Georgia’s Ownership of Agricultural Magazine Design and Layout and hospitality industry Land Negatively Impacting Giorgi Megrelishvili An analysis of the tourism Investors Writers sector based on the tourism and Eva Anderson, Emil Avdaliani, Molly hospitality industry chapter in the 39 Georgia’s Per-Diem and Corso, Maia Edilashvili, Rusudan ISET Policy Institute’s Georgian Reimbursement- Cost Kemularia, Eric Livny, Alexander Melin, National Competitiveness Report Framework A Strong Rati Morchiladze, Nelson Petrosyan, 2011-12. Candidate for Reform CordeliaPonczek, Andrei Sarychev, IrakliSokolovski, George Welton 12 ISET: Georgian Ski Resorts 40 Protection of Information Receive A Major Upgrade Assets: A Work in Progress Photographs Levan Baratashvili, Molly Corso 14 Urban Renewal Program 42 The Tax Dispute Resolution Special thanks to the AmCham Editorial Offers New Life for Villages, System In Georgia Board and the AmCham staff, especially Soviet-era Resorts the CLT and AgriBusiness Committees, 44 Restitution and Justice: for their helpand EPRC and ISET for 18 EPRC: The Price of the State The Process Of Addressing their submissions. Property Rights 20 Why the Georgian Economy May be in Better Shape than 46 Representational Expenses in © The American Chamber of You Realize Georgia Commerce in Georgia, 2011 All rights reserved. No part of this magazine 24 Unbundling Labor: A 48 Singer Georgia: A Touch may be re-printed, or reproduced or utilized Snapshot of Georgia’s of the West in the Russian in any form or by electronic, mechanical or other means now known or hereafter invented, Workforce Empire including photocopying and recording, or in any information storage or retrieval system without 26 Georgian Entrepreneurs: An 50 MY CITY, TBILISI: Reviving the permission. Interview with Wissol Group’s Georgian Stage The opinions expressed in this magazine do not Samson Pkhakadze refl ect the opinion of the American Chamber of Commerce in Georgia nor its Board Members or 28 Mapping the Middle Class staff, unless otherwise stated. AmCham Georgia neither endorses, nor can be held liable for any eventuality arising from the use of any product or 31 Georgia Named One of Top service advertised within the pages of this issue. Ten Countries For Doing Investor.ge is printed by CEZANNE Business ...... 52 AmCham Georgia 36a Lado Asatiani Street, 3rd fl oor AmCham Georgia Patron Members: Tel: 2 22-69-07 [email protected] [email protected], www.amcham.ge www.investor.ge 4 OCTOBER-NOVEMBERJUNE-JULY 2013 2013 Investor.ge OCTOBER-NOVEMBER 2013 5 Investor.ge Wendy’s Franchise Opens in million loan to the Georgian real estate Investment Tbilisi group Redix. The 247-room Hilton Ba- Wissol Group, the Wendy’s franchise tumi includes plans for retail shopping, in Brief holder in Georgia since 2012, opened a casino and a health club. the fi rst Wendy’s restaurant in Tbilisi on September 12 on Rustaveli Avenue, at Renovated Kazbegi Border the former Georgian Post Offi ce location. Crossing with Russia Opens Approximately fi fteen Wendy’s restau- Offi cials claim the new, modernized rants will be opened across the country border crossing will be able to process Gebrüder Weiss, Tegeta Motors over the next fi ve years, according to the nearly three times as many people, ac- Open Logistics Center in Tbilisi Wissol Group. cording to the Finance Ministry. A Gebrüder Weiss groupage-freight The Wendy’s on Rustaveli Avenue is The new, 9-million-lari border cross- service has already been in operation one of the largest Wendy’s restaurants in ing opened on September 10. Civil.ge since the start of 2012 on the Passau – the world, with 1,000 square meters of reported there were 329,601 entries via Tbilisi line, according to the company’s dining and entertainment space. Wissol this border-crossing point in the fi rst six press service. The 10,500 square meter Group is working with OPIC to fi nance months of the year, more than half of center was built by Gebrüder Weiss additional Wendy’s restaurants across those by Russian citizens. and Tegeta Motors, its partner in the Georgia. Caucasus. The center currently employs Poti Sea Port Plans to Expand 50 people. Hilton Announces Expansion ICT GEZE into Georgia APM Terminals announced plans to Ivanishvili’s Private Equity Hilton Hotels & Resorts, together expand ICT GEZE to seventeen hectares Fund Opens with local partners, plans to open two ho- by July 14, which will allow the facil- Prime Minister Bidzina Ivanish- tels in Georgia starting in 2016. The fi rst ity to handle all the containers coming vililaunched his $6 billion Georgian property, the Hilton Garden Inn Tbilisi through the port. Co-Investment Fund on September 30. Chavchavadze, will be fourteen stories Currently just nine hectares, the facil- The fund, which will fi nance projects in and have 165 rooms. The European Bank ity will also be connected to Poti by a 2.5 priority areas, will include $1 billion of for Reconstruction and Development kilometer rail link, and a 1.4 kilometer Ivanishvili’s personal wealth. is fi nancing the project with an $18.7 road linking it to the port. New Millennium Challenge Compact to Bridge Work-Skill Gap he $140 million grant, Georgia’s pact will allocate $140 million to three MCC grant, which focused largely on second compact, will target edu- specific areas: improving the quality infrastructure. Tcation and human capital to help of elementary education, modernizing The 2013 agreement, noted MCC Georgians compete in the 21st-century vocational education to meet market de- CEO Daniel W. Yohannes, refl ects Geor- workplace. mands, and partnering a U.S. university gia’s desire to create a modern, competi- Georgia is focused on curtailing with local partners to provide students tive workforce. brain drain and improving labor market with international-standard degrees in “[What the government] determined skills in the country’s second compact science, technology, engineering, and is that education is a critical sector for with the U.S. government’s Millennium math. economic growth and the proposed Challenge Compact (MCC). The new compact is a strong de- compact would help the country become Signed on July 26, the new com- parture from Georgia’s original 2005 more competitive in the global market — 6 OCTOBER-NOVEMBER 2013 Investor.ge I think it is expected to increase wages and it is also designed to prepare the The Comeback Kid: next-generation work force,” he said in an interview. Georgian Wine Outperforming “That is going to help the country Expectations in Russian Market compete in the global market… The program of science, technology, math, Russian demand for Georgian fter seven years of em- engineering — that will meet the de- wine has exceeded predictions, bargo, Russian wine mand of this country’s market needs in creating an exciting potential for Adrinkers welcomed the future.” Georgian exports returning to the Georgian wine with open arms, Yohannes, who was in Tbilisi in July market for the first time since the purchasing seven times more 2006 embargo. Investor.ge spoke for the offi cial compact signing, noted wine since the market reopened to Château Mukhrani, Georgian that the new compact’s programs will Wines & Spirits Company and in June than anticipated, accord- marry top-rated education with inter- Teliani Valley about their sales to ing wine producers like Château national-standard accreditation. MCC the Russian market and how it will Mukhrani and Georgian Wines is already in discussion with shortlisted influence future production. & Spirits Company. American universities who are interested The Ministry of Agriculture in partnering with a local school to create reported that Georgia exported 1.7 million bottles of wine to Russia in just an American degree program. Prestigious the fi rst month after the embargo was lifted; 65 wine companies and four American universities like San Diego mineral water producers received permission from Moscow to export their State University and Michigan State products to the Russian market. University have expressed interest; a “[T]he conclusions of the fi rst months are that the Russian consumer has fi nal decision is expected in 2014. not forgotten the Georgian wine, but on the contrary rushed to the shops to The compact is also working closely buy the fi rst wines imported from Georgia leaving our distributors in a dif- with the business community in Georgia fi cult situation to fi ll up the shelves in Russian shops,” noted Jacques Fleury, to make sure new programs match cur- CEO of GWS/ Georgian Wines & Spirits Company. rent — and projected — needs in the “All Russian importers are presently trying to originate more wines than market. By closing the gap between skills they expected from Georgia.” and demand, and providing Georgians Tea Kikvadze, the marketing executive at Teliani Valley, said currently with better tools to compete in the labor 10 percent of the company’s production is going to Russia but, based on market, Yohannes noted, brain drain the demand, 15 percent will be earmarked for the Russian market next year.