Hungarian PM: Georgia Is a Stable, Reliable Country for Business

Issue no: 940/75

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ISET PAGE 4

NEWS PAGE 2

PAGE 6

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• • APRIL 25 - 27, 2017 • PUBLISHED TWICE WEEKLY PRICE: GEL 2.50

In this week’s issue...

Continued on page 2

Prepared for Georgia Today Business by

POLITICS PAGE 10

POLITICS PAGE 11

Working Together For A Bigger Pie

Bryza: Turkish Democracy is Not Dead

Ukraine’s Foreign Minister Visits Occupation Line in Georgia

Dimitry Kumsishvili Meets with Heads of Int’l Financial Institutions

FOCUS ON GROWING AGRICULTUREThe annual Tea Fest celebrates the growing tea industry in Georgia and ISET discusses how farmers need to link up for a "Bigger Pie" PAGE 4&5

Georgia’s Kvirikashvili & Iranian Offi cials Discuss Deeper TiesBY THEA MORRISON

Hungarian Prime Minister Viktor Orban called on Hungarian inves-tors to become more interested in Georgia in his speech at the Georgia-Hungary Joint Business Forum held

in Tbilisi on April 21.“Hungarian businessmen, please consider Geor-

gia as a stable, reliable foreign policy and business country, despite the dispute between Georgia and Russia,” Orban said, adding that the Government of Georgia is implementing a number of reforms to reduce bureaucracy and reform the educational system.

Hungarian Prime Minister Viktor Orban

Sergei Mikhailovich Prokudin-Gorskii

GEORGIA TODAY APRIL 25 - 27, 20172 NEWS

Hungarian PM: Georgia Is a Stable, Reliable Country for Business

Continued from page 1

He also discussed Georgia-Hungary relations and emphasized the traditional friendly and close cultural ties between the two countries.

“I would like to encourage again and again the Hungarian business commu-nity to use the possibilities that are here,” Orban added.

The Prime Minister of Georgia also addressed the forum participants.

“Hungary is one of Georgia's key trade and economic partners, and the political and economic relations between the two countries will only deepen and grow stronger,” he said.

Kvirikashvili also commended the growing interest of the European busi-ness community in Georgia, emphasiz-ing the dynamic development of relations between the two countries and pointing out the importance of deeper economic cooperation.

“Georgia is strategically located at the crossroads between Europe and Asia. By signing the Association Agreement with the EU (including the DCFTA) in 2014, we took a major step towards our European goal. We have made steady progress in establishing European regu-lations and standards in Georgia,” he claimed.

Kvirikashvili added that Georgia has one of the most liberal foreign trade policies in the world which implies facilitated foreign trade regimes and

customs procedures, low import tariffs and minimal non-tariff regulations.

Moreover, the Hungarian Minister of Foreign Affairs and Trade, Peter Siarto, stated that Georgia is one of the most important political and trade partners of Hungary in the region.

“It is time for the business and eco-nomic cooperation to be brought to the next level. We are signing an investment protection agreement and opening an €85 million credit line for Georgia,” Siarto announced.

Following the Business Forum, Geor-gia’s Economy Minister Giorgi Gakharia and Hungary’s Minister of National Economy Mihaly Varga signed said investment protection agreement.

The agreement guarantees that invest-ments will not be lost and that they will be protected from fraud.

The Georgian and Hungarian PMs also held a face-to-face meeting during which the Prime Minister of Georgia underlined the successful cooperation in the fi eld of education, enabling Georgian students to study in Hungary's leading schools of higher education.

The officials discussed Georgia's achievements on its path to European integration and Kvirikashvili thanked Hungary for its support in this process.

The Prime Minister of Hungary con-cluded by reassuring his Georgian coun-terpart of Hungary's strong support for Georgia's sovereignty and territorial integrity.

BY NINO GUGUNISHVILI

Dimitry Kumsishvili, Min-ister of Finance and First Vice Premier of Georgia, Koba Gvenetadze, Presi-dent of the National Bank

of Georgia and David Bakradze, Ambas-sador of Georgia to the US, met with international fi nancial organization rep-resentatives while on a working visit to the US.

The economic trends of Georgia and current reforms were discussed during the meeting of Kumsishvili and Interna-tional Monetary Fund (IMF) Executive Director, Anthony De Lannoy, in Wash-ington, within the framework of the IMF and World Bank annual spring meetings.

The minister emphasized the impor-tance of ongoing reforms in the country which, in the mid-term period, are expected to create new employment opportunities and speed up economic growth in Georgia. It was also highlighted that the new three-year $285 million program of the IMF for Georgia, announced last week, is based on the priorities of the Georgian government’s Four Point Reform Plan.

De Lannoy expressed hope that the IMF’s program will successfully develop and continue in future.

“It was a pleasure to meet with the minister,” he said. “We talked about the International Monetary Fund’s new pro-gram for Georgia and the fact that the

Dimitry Kumsishvili Meets with Heads of Int’l Financial Institutions

board of executive directors approves the ongoing and future reforms. In gen-eral, positive dynamics are visible. The minister made an excellent overview of the reforms and activities, which I hope will be very successful”.

“We share your enthusiasm and sup-port you in the process of fi scal reforms,” said Jihad Azour, IMF’s Director of Mid-dle East and Central Asia Department at his meeting with Kumsishvili, follow-ing discussions about the spatial devel-opment reform and road infrastructure development plans.

“We had a constructive meeting with the Georgian delegation, headed by Min-ister Kumsishvili,” said Vitor Gaspar, Director of the Fiscal Affairs Department of the IMF. “The progress that Georgia has made is impressive indeed. The strategy of its fi scal policy is a distinct sign that the Georgian government will strengthen tax revenue mobilization in

the upcoming three years and more, which will have a positive effect on Georgia’s economic growth.”

Within his working visit to US, Dimitry Kumsishvili also met with Francis Malige, Managing Director Eastern Europe and the Caucasus, European Bank for Recon-struction and Development (EBRD), and talked about its strategy in Georgia, related to the Georgian government’s Four Point plan.

“The areas of our activity in Georgia are capital markets, infrastructure, and small and medium business develop-ment,” Malige said. “We also help com-panies to adapt to the European market. We have a large spectrum of constructive cooperation with Georgia, which will continue”.

The parties discussed the possibility of presenting Georgia’s investment potential at the EBRD annual meeting to be held in Cyprus.

First Vice Premier of Georgia Dimitry Kumsishvili and Anthony De Lannoy, Executive Director of International Monetary Fund

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GEORGIA TODAY APRIL 25 - 27, 20174

THE ISET ECONOMISTA BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS www.iset-pi.ge/blog

The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economicgrowth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists.

BUSINESS

Source: authors' own.

BY IRAKLI (RATI) KOCHLAMAZASHVILI, NINO KAKULIA AND PHATIMA MAMARDASHVILI

The village of Chkhakaura is located en-route to the famous Bakhmaro resort in the Gurian Moun-tains. This settlement is not only in a picturesque environment, but also the home of hard-working people, some of whom we introduced in our suc-cess story about the agricultural cooperative “Samegobro 2014”. Since their registration as a formal cooperative back in 2014, this group of fi sh farmers is becoming increasingly successful. The cooperative is well-linked to local markets, both with regards to purchasing equipment and inputs (a “backward” linkage), as well as with restaurants, hotels, wholesalers or local customers (a “forward” linkage).

As illustrated in a short documentary, the ENPARD-fi nanced cooperative “Samegobro 2014” is both contributing to and benefi ting from local market development as a result of forming their coopera-tive. The cooperative members started to become known by other actors of the value chain and form persistent links with them. As one member of the cooperative, Otar Giorgadze, said: “No one knew me... now, they know us, and the cooperative looks more reliable”. Today, the cooperative is regularly

Working Together For A Bigger Pie

selling trout to one of the most popular supermar-ket chains in Kutaisi, “Gurmani”. The well-estab-lished connections are one of the crucial factors as to why the “Samegobro 2014” cooperative became a sustainable business model.

LINKAGES ABOUNDDecades ago, the economist Albert O. Hirschman highlighted the importance of linkage effects in encouraging economic growth. Modern agricultural value chains are increasingly characterized by well-developed horizontal and vertical linkages. Farm cooperatives are a good example of horizontal link-ages formed between actors at the same level of a chain. Vertical linkages, in comparison, are formed

between actors at different levels of a value chain (e.g., between farmer and processor). The literature distinguishes between two types of vertical linkages – the backward and forward linkages. A backward linkage is developed when there is a new demand for intermediate inputs for the production of fi nal outputs. For instance, when an agricultural coop-erative is producing strawberries in a greenhouse, members of the cooperative may procure greenhouse construction materials, drip irrigation, seedlings or fertilizers. This further catalyzes the development of these input markets, hopefully leading input sup-pliers to achieve greater economies of scale in pro-duction or distribution, thereby lowering costs (lowering production cost which in turn might reduce input expenditure for farmers). A forward linkage is developed when the product itself serves as an intermediate input downstream. An example of a forward linkage would be the business linkage between a grape-producing farmer or a cooperative and a winemaker who purchases these grapes and produces wine for the local or export markets. The graph below illustrates horizontal and vertical (back-ward and forward) linkages.

ON THE CHALLENGES OF LINKAGE DEVELOPMENTHowever, forming linkages is not an easy task.

Horizontal linkages (e.g. cooperatives) are faced with many challenges, including trust among farm-ers, the cost of cooperation (coordinating meetings, making decisions, etc.), and a free riding problem, among others. As for challenges in developing ver-tical linkages, there are search costs of fi nding potential input suppliers or product buyers. In some cases, credit constraints may prevent the formation of a backward linkage, especially for start-up agricultural cooperatives as are common in Georgia (due to a lack of collateral, ill-prepared bookkeeping, etc.). There are also other transac-tion costs related to the formation of contracts as well as complying with some new regulatory envi-ronments. Examples of the latter are various food safety and traceability requirements found in mod-ern agricultural supply chains around the world. In developing countries, such regulations are often too costly for value chain actors to comply with. On the other hand, such requirements are the main drivers of linkage developments, because they imply higher interdependence among value chain actors. Lastly, regardless of the regulatory regime, many customers require a certain quantity of prod-ucts supplied on a regular basis for the products they purchase and sell to fi nal consumers. In devel-oping countries, most small-scale farmers are not up to these challenges. However, while one farmer

in isolation can hardly develop business networks and meet the increasingly high quantity and qual-ity standards for agricultural products, some of the challenges may be overcome through collective action such as forming agricultural cooperatives.

LINKAGES IN GEORGIAN AGRICULUREFor more than three years, the government of Geor-gia and donors led by the European Union have been supporting the development of agricultural cooperatives across the country, an initiative we have previously discussed in detail in several blog articles. While many agricultural cooperatives were formed in the country and some of them already overcame the main challenges of forming good horizontal linkages, the main challenge of making these cooperatives sustainable still remains. One of the key success factors for this is having good vertical integration in the chain.

Several successful cooperatives in Georgia have already managed to form stable backward and for-ward linkages. In some cases, such vertical linkages are even formed inside of cooperatives when a cooperative is involved in several stages of a value chain. The formation of second level cooperatives will further contribute to developing sustainable linkages in Georgian agricultural value chains.

The successful business model of the “Samegobro 2014” cooperative could be summarized as follows:

• The strong value chain linkages (both horizon-tal and vertical) that are based on win-win eco-nomic relationships. This is defi nitely the case for our trout cooperative, wherein each and every member is benefi ting from being a member of the cooperative, be it in purchasing inputs or selling trout together.

• Seek to access higher-value markets and more profi table functions within the value chains. Although the trout sector has a short value chain in Georgia (and mostly ends at the “plate size” trout consump-tion, being either fried or boiled), besides the increased production volume, the cooperative also diversifi ed its income source. Namely, they started making their own roe and fries and selling the fries to other farmers. In addition, the cooperative mem-bers are building cottages around the trout ponds and plan to offer visitors touristic services, includ-ing delicious trout dishes for lunch.

In conclusion, horizontal linkages such as farm cooperatives are a good start, but not enough. Hav-ing good vertical linkages and adding higher value in the chain are essential for the development of sustainable business models in Georgian agriculture. The modern value chains are not about competing on their own, but about being more integrated in the chain and working together for “a bigger pie”.

Graph: horizontal and vertical linkages in the value chain.

Source: http://www.pir.sa.gov.au/valuechains/value_chain_toolkit

GEORGIA TODAY APRIL 25 - 27, 2017 5BUSINESS

BY MAKA LOMADZE

On April 23, the Tbilisi International Tea Festival took place in Mtatsminda Park, an event attracting numerous locals, tourists, offi cials, and repre-sentatives of the diplomatic corps.

Levan Davitashvili, Minister of Agriculture, opened the occasion, which saw the participation of a num-ber of private companies (LTDs and cooperatives), the British Embassy in Georgia, Embassy of the Peo-ple’s Republic of China, Center of Japanese Language and Culture, and Indian and Sri-Lankan companies.

Besides teas, the event also showcased a variety of Georgian desserts, including honey, Tatara, Churchkhela, etc., with visitors given a chance to fi rst sample the products before deciding whether to buy. Contests and award-giving ceremonies were also held. The event was accompanied with danc-ing performed by children from the various tea-producing countries.

GEORGIA TODAY spoke to Tengiz Svanidze, President of the Tea Producers Association, organ-izer of the event: “Since 2006, the festival has been happening annually. Generally speaking, it aims at popularizing tea culture. There are not many pro-ducers at present, nor is the number of tea produc-ing countries high, so all companies were welcome [at the festival]. We always aim to invite foreign enterprises, as where competition is present, qual-

Tea Fest in Mtatsminda Park

ity is also present”. There is an apparent defi ciency of tea leaves and

to deal with this, the Georgian Ministry of Agri-culture has launched a rehabilitation program for tea plantations.

“We hope that as a result of this program, planta-tions will be restored and we will have more tea inside the country,” Svanidze said. “If the factories are restored, too, this will mean more employment and more delicious Georgian tea”.

Svanidze says the largest importer of Georgian tea is Azerbaijan, which does not produce but only packs tea, like Great Britain. “I believe that Geor-gian tea will fi nd its niche at least locally, if not as an export product,” he said.

Minister Davitashvili noted: “The Georgian cooperatives represented here are ones that very actively take part in the state program of reha-bilitating tea plantations. We believe that this branch will develop as the relevant potential is already there. Today, we can see that the quality of local tea products is quite high and the assort-ment suffi ciently great”.

Tea was once more popular in Georgia than cof-fee- this in the days when Georgia enjoyed its own plantations. Tea culture has existed since 1847, making 2017 the 70th anniversary year. Let’s hope that this is the beginning of the restoration of the Georgian tea-drinking tradition, not only to restore the once famed association with art and literary salons, but for the strengthening of biological national production.

Georgian tea originated from seeds smuggled out of China by 19th century Georgian prince, Miha Eristavi who fi rst encountered tea during his travels across China in the 1830s.

At the time, exporting tea seeds from China was forbidden so the prince hid some in a length of bamboo. Back in Georgia, he used the seeds to create the fi rst tea plantations.

In 1864, the Prince entered samples of his Georgian tea at the Russian International Exhibition in St. Petersburg and by the turn of the century Georgian tea was winning prizes and was awarded a gold medal at the World’s Fair in Paris.

Georgian tea increased in economic importance when the Tea and Subtropical Cultures Research Institute was founded in Anaseuli, western Georgia, where new varieties of tea were grown, focus-ing on tender shoots and special aromas. By the 1930s, Georgia had become the main supplier of tea for the whole of the Soviet Union.

Unfortunately, the drive to meet the huge demand signifi cantly affected the quality and the reputa-tion of the tea and by the 1990s many of Georgia’s plantations had been cut down or abandoned.

Recently, the Georgian government allocated resources for the restoration of tea plantations and existing plantations are being revitalized in western Georgia’s sub-tropical regions, especially Guria.

Approximately 90% of production is exported, mainly to Ukraine, Germany, the United Kingdom, Mongolia and Middle Eastern countries. Exports to the USA are growing.

Western Georgia’s mild climate is ideal for growing unique tasting ecologically pure, pesticide-free tea, acknowledged as one of the best worldwide.

Various health benefi ts are attributed to Georgian tea. Black teas have been found to have a ben-efi cial effect in preventing cardiovascular complications while the green teas are rich in antioxidants. Georgian tea is also said to have a signifi cant effect on bone health as it increases bone density and helps to prevent osteoporosis.

SOURCE: georgiaabout.com

A Tea Plantation in Georgia in the early 1900s. Photo by Sergeii Mikhailovich Prokudin-Gorskii

GEORGIA TODAY APRIL 25 - 27, 20176 BUSINESS

10 Galaktion StreetTel: (995 32) 2 45 08 08

E-mail: info@peoplescafe.ge

BY DIMITRI DOLABERIDZE

Russia's largest private oil company, LUKoil, has been carefully distancing itself from exporting LNG since 2014, but all for nothing. The

main argument of the offi cials: this will lead to competition with the products of Gazprom and, accordingly, a decrease in the export earnings of the treasury.

Yet, Azerbaijani and Russian business-man, president of the leading Russian oil company LUKoil, Vagit Alekperov, will still have the opportunity to become a small exporter of gas, though that gas is liquefi ed and not from Russia.

In the spring of 2015, when the "African campaign" of Lukoil started on such a scale, the oil company was already enter-ing the promising Etinde project in Cam-eroon. According to local media, the purchase was not cheap: the Russians

LUKoil & LNGhad to pay about $200 million for their 30% of the project. The rest was divided between British NewAge (30%) and Bowleven (30%), and the local state cor-poration SNH (10%).

According to bankers from Barclay's, the acquisition was well worth the money: a 461 square km. gas fi eld with reserves of approximately 290 million barrels of oil equivalent. LUKoil was not completely clear what to do with these stocks. While SNH insisted on the sale of produced gas to Equatorial Guinea, the partners diligently sought more lucrative options.

LUKoil, together with the British, man-aged to convince their hardened partner to stop on the most promising and fash-ionable option - liquefi ed gas, or LNG. At last February shareholders' meeting of the project, the British Bowleven "dis-cussed several potential options, includ-ing FLNG (fl oating LNG, or a fl oating LNG plant), the company said.

“We also received consent from the local government for the export of LNG,"

Thomas Becker, representative of the British company, added.

When a fl oating LNG plant was put into operation, neither the British nor LUKoil informed the media. According to the latest data, the shareholders plan to start production from Etinde in the second half of this year. And, of course, without Gazprom.

For LUKoil, this will actually be the fi rst such project in the entire history of the oil company. The company has asked the government for at least a few years to export LNG. The last time LUKoil tried to break through the monopoly of Gazprom was in autumn 2014, when it sent its pro-posals to the Russian Gas Society, which were quickly labelled "untimely".

Building LNG plants abroad is much easier than building the relationship with the authorities, Lukoil joked.

The technologies for building a gas liquefaction plant are available and do not represent any technological or tech-nical uniqueness. “There are already so many factories built that they are simply replicated,” Alekperov said in autumn 2015.

Yet the solid status of the LNG exporter hardly brings a comparable weight for the company from an economic point of view. According to Bowleven, a daily fl oating LNG plant will be able to receive up to 4.6 million cubic meters of gas

from Etinde. This is equivalent to approx-imately 1.2 million tons of LNG per year.

By all standards, the project is very modest. “Yamal LNG company Novatek, for example, will ship 16.5 million tons- which, for the now fashionable fl oating LNG plants, is quite a standard capacity,” notes Barclays analyst, Michael Cohen. Thus, the private bunkering project LNG-Gorskaya (Leningrad region) to be launched by the end of 2017, will also operate on the basis of a fl oating LNG plant with a capacity of 1.26 million tons per year.

“The world record holder (the Austral-ian ship-plant Prelude FLNG, with a capacity of 3.6 million tons of LNG, also considered to be the largest ship in the world) for them is as far away as can be,” says Cohen.

But even for such modest volumes, one way or another you still need a buyer. According to the representative of Bowleven, the shareholders of the pro-ject have not yet started negotiations with potential buyers. Meanwhile, the fi rst in this queue may turn out to be Russian Gazprom, or rather its trading LNG division Gazprom Marketing and Trading, which has already concluded a contract for the purchase of just 1.2 mil-lion tons of LNG over eight years from neighboring Coastal LNG project Kribi LNG, to start this year.

“In terms of reserves and geographical location, Cameroon, where LUKoil oper-ates, is a very promising country for LNG production,” says Stanislav Mitrokhovich, an expert of the National Energy Secu-rity Fund.

"But it must be understood that the most favorable times for LNG are com-ing: there’s a lot of it and the cost of gas is now extremely low," expert Laifu adds. “About 60 percent of the announced projects do not fi t into the market, in fact it is competition either within the country or within the region”.

"If the project is launched, its surviv-ing or not will depend fi rst of all on the success of competition with the Ameri-can LNG," Mitrokhovich believes.

And they will have to compete for the markets of the countries of South and Latin America: last year the largest vol-ume of American LNG went there, while only 10 percent of the total production fell into Europe. It should be noted that all the gas shipped by the States last year was contracted in 2011-2012, when the cost of LNG was signifi cantly higher.

“Competing with Americans in the price will be diffi cult,” Cohen says. "But since the LUKoil project and its partners are fl oating, it gives them some insur-ance: if it is unprofi table to supply LNG, then such a plant can always be sold to someone else," he said.

BY THEA MORRISON

Georgian-Iranian bilateral and multilateral relations and deeper trade and eco-nomic cooperation were the main topics discussed

during Georgian Prime Minister Giorgi Kvirikashvili’s visit to Iran on April 22-23.

The fi rst Iranian offi cial to welcome the PM was First Vice President Eshaq Jahangiri.

During the face-to-face meeting, Jahan-giri highlighted the two countries' eco-nomic cooperation and spoke about the vast untapped potential in this direction. Special emphasis was placed on the positive trade and economic dynamics between the two countries.

The sides also discussed prospects of deeper transport and energy, agricul-tural, infrastructural, and manufactur-ing cooperation, and the countries' interaction in the fi elds of innovation

Georgia’s Kvirikashvili & Iranian Offi cials Discuss Deeper Ties

agencies to encourage more Georgian tourists to visit Iran,” Kvirikashvili said.

Jahangiri expressed hope that follow-ing the Georgian PM’s visit to Iran, a new era of deeper cooperation would begin between the two states.

The Speaker of the Iranian Majlis Consultative Assembly, Ali Larijani, also welcomed Kvirikashvili, noting that very important reforms are underway in Georgia, and very good conditions

are in place for investments.Positive dynamics in the mutual rela-

tionship between Iran and Georgia and cooperation in the economic sector were the main topics of a meeting between Kvirikashvili and the President of Iran, Hassan Rouhani.

“On the 25th anniversary of diplomatic cooperation between our countries, it is time to advance our mutual relation-ship to a new level,” Kvirikashvili said.

and high technology.Following the meeting, negotiations

between the two countries continued in a broader format.

The key topics discussed were the development of transport and transit corridors, including the Persian Gulf-Black Sea corridor, and cooperation in the fi elds of energy, agriculture, and banking.

The Iranian side expressed readiness to cooperate with Georgia in the energy sector, including electric power exchange and providing Georgia with Iranian natural gas.

Special attention was paid to the importance of developing economic ties. The sides agreed to hold the next meeting of the Georgia-Iran Intergov-ernmental Economic Commission in Georgia this summer.

Moreover, memoranda of understand-ing were signed between the ministries of Sport and Youth Affairs, Agriculture, and Environment Protection of Georgia and Iran, as were agreements between the Ministry of Information and Com-

munications Technology of Iran and Georgia's Ministry of Economy and Sustainable Development. On behalf of Georgia, the documents were signed by Foreign Minister Mikheil Janelidze, Minister of Economy and Sustainable Development Giorgi Gakharia, and Minister of Environment and Natural Resources Protection Gigla Agulashvili. In addition, several agreements were signed between private sector repre-sentatives of Georgia and Iran.

“Iran has always supported Georgia’s sovereignty and territorial integrity and we are very grateful for this to the gov-ernment and people of Iran,” Georgia’s Kvirikashvili stated at a joint press con-ference.

The PM went on to note that Georgia is able to offer Iranian investors a dis-tinguished business environment and, in addition, the possibility of free trade with Europe and the European Union.

“We are very glad that the number of Iranian tourists in Georgia is increasing and we have also made a decision to boost cooperation between tourism

Georgian PM and the President of Iran, Hassan Rouhani

GEORGIA TODAY APRIL 25 - 27, 2017 7BUSINESS

BY THEA MORRISON

On April 27-29, Expo Geor-gia Tbilisi will host the 19th International Cauca-sus Tourism Fair.

Travel companies, hotels, resorts and airline companies will intro-duce their products and services during over three days, with local and interna-tional tourism agencies to provide visi-tors with detailed information to help them choose the right place to go.

The 19th International Caucasus Tour-ism Fair will also see the fi rst HoReCa-Expo 2017 exhibition taking place.

HoReCa-Expo will be a consultative forum allowing business decision-mak-ers to evaluate new products, to establish contacts, to enhance relationships with

Expo Georgia to Host 19th International Caucasus Tourism Fair

suppliers and to make purchases.While following the changing trends

of the tourism industry during the last 19 years, developing local tourism and making travelling abroad a streamline became the main goal of the exhibition.

It is a place where exhibitors have a unique chance to fi nd new business part-ners, develop their businesses and obtain working partnership benefi ts.

The visitors will be able to get special travel offers and packages at exclusive prices. Furthermore, a lottery and a vari-ety of entertainment and surprises will be offered to guests.

On April 28, at 16:00 in Expo Georgia, the General Director of the National Parliamentary Library of Georgia, poet and essayist Giorgi Kekelidze will hold a reading of the ‘Guruli Diaries’.

On April 29, at 16:00, lecturer of the

Caucasus University, blogger and musi-cian Andro Dgebuadze will read a lecture entitled ‘Tourism and Philosophy’ and photographer Nodar Sumbadze will present the photos of the best views and architecture of Tbilisi in his ‘Catalog of Tbilisi’.

The event is supported by the Georgian National Tourism Administration, Min-istry of Culture and Monument Protec-tion of Georgia, Agency of Protected Areas of Georgia and Welcome to Geor-gia National Tourism Awards.

Register here to get all the latest news about the exhibition, information regard-ing the participants and attend the fair for free.

https://docs.google.com/forms/d/e/1FAIpQLScjF3cGr CqoS2T-KYBNo_LumeMKsYWeN9-EJoLy7hWaW-f5OG-g/viewform

BY NINO GUGUNISHVILI

Company PKF Georgia, which provides high quality pro-fessional services in audit, accounting, tax, legal and valuation services and busi-

ness consulting to both local and inter-national organizations, has recently marked 10 years of operating on the Georgian market. It opened its new offi ce on Agmashenebeli Avenue at the Mozaika business center last week.

PFK Georgia is one of over 400 offi ces representing PKF International in more than 150 countries across 5 regions. The company is considered a leader in the audit and business consulting sphere.

John Sim, CEO of PKF International, who came to Tbilisi for the 10-year anniversary of PKF Georgia and its new offi ce opening, said the company is considering strengthening and devel-oping its partnership opportunities in Georgia in future.

“Apart from the audit services we offer, there are many products vital to our market, hospitality management being one of the key directions where PKF holds a distinctive place. In several months, a yearly round table in hospi-tality management will be organized,” said David Gvetadze, Managing Partner at PFK Georgia, adding that the dates for that are yet to be fi nalized and will be announced soon.

He added, in his televised interview on Business Morning at TV Pirveli, that intellectual services are just one of the business products PKF offers, while audit is a product which gives the com-

PKF Georgia Opens New Offi ce Celebrating 10 Years on Georgian Market

pany a chance to know what’s happen-ing on the market.

“Economic development and profes-sional-intellectual services are inter-linked,” said Alexander Margishvili, PKF Georgia’s Managing Director. “As the economy grows, the need to improve and develop such services becomes obvious, as the development of profes-sional-intellectual services is the nec-essary pre-condition for economic growth. With its services, both PKF International and PKF Georgia seek to contribute to economic development in general while at the same time intro-ducing its capacities better- hotel experts’ consultation is one of its best examples. Even before the recent hospitality man-agement boom in Georgia, PKF hospi-tality experts were already coming to Georgia, preparing grounds for profes-sional services to be available.”

He went on to note that PKF Hotel Experts both in Georgia and interna-tionally provide professional services, consultancy and assistance, at any stage, to investors in the hospitality sphere who are just now planning to invest or have been in the business for many years and are wanting to sell on.

“PKF Georgia always aims to establish long-term partnerships with their cli-ents, offering prices tailored to each case specifi cally,” Margishvili said. “The fi nancial side is secondary to us; what is important is to contribute to the eco-nomic development, to play an impor-tant role in it and to have a possibility to see the impact in three or four years”.

“The service we provide contributes to the sustainability, growth and devel-opment of the businesses of our clients, answering the needs of modern require-ments,” Gvetadze concluded.

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Wizz Air Celebrates 6 Months at Kutaisi Base & 200% Passenger Growth

Wizz Air, the largest low-cost airline in Central and Eastern Europe and Georgia’s leading LCC carrier,

last week celebrated the remarkable results of the fi rst six months of success-ful operations at its Kutaisi base.

In only six months of the base opening in Kutaisi, Wizz Air carried more than 100,000 passengers on its low-fare routes from Kutaisi, furthermore, the results of the fi rst quarter of 2017 (January-March) show a passenger growth of more than 200% y-o-y. Overall, in 2016, more than 168,000 passengers enjoyed WIZZ’s low-fares and excellent on board service, further stimulating the local job market in aviation and tourism and supporting 126 additional indirect jobs* in associ-ated industries.

Wizz Air, the pioneer of high quality and low-fare air travel in the Georgian market, has been dedicated to its Geor-gian customers since 2012, when the fi rst WIZZ fl ight took off from Kutaisi to Kyiv.

As the fi rst airline to operate commer-cial fl ights from Kutaisi International Airport, Wizz Air continues expanding

access, will offer maximum fl exibility for customer-tailored fares.

Speaking at a press conference in Tbilisi, József Váradi, Chief Executive Offi cer at Wizz Air, said: “Only six months since the start of our Kutaisi base operations, Wizz Air is celebrating remarkable results and a new passenger record. As the leading low cost carrier in Georgia, our investment in the country created affordable travel oppor-tunities for our passengers and during the fi rst quarter of 2017, our traffi c numbers tripled. In 2017, with the upcoming route to London, we expand our Kutaisi offering to a total of 11 services across 8 countries. We look forward to continuing our fruitful partnership with Kutaisi International Air-port and remain committed to bringing even more exciting opportunities that can best meet our Georgian customers’ needs, while further stimulating economic and business relations through the country”.

ABOUT WIZZ AIRWizz Air is the largest low-cost airline

in Central and Eastern Europe, operates a fl eet of 80 Airbus A320 and Airbus A321 aircraft, and offers more than 500 routes from 28 bases, connecting 140 destinations across 42 countries. At Wizz Air, a team of approximately 3,000 avia-tion professionals delivers superior ser-vice and very low ticket prices making Wizz Air the preferred choice of 23 mil-lion passengers in 2016. Wizz Air is listed on the London Stock Exchange under the ticker WIZZ and is included in the FTSE 250 and FTSE All-Share Indices. Wizz Air is registered under the Inter-national Air Transport Association (IATA), Operational Safety Audit (IOSA), the global benchmark in airline safety recognition. The company was recently named 2016 Value Airline of the Year by the editors of Air Transport World, one of the leading airline trade magazines, as well as 2016 Low Cost Airline of the Year by the Center for Aviation (CAPA), a leading provider of independent avia-tion market intelligence.

Gazprom Share in Europe to Reach 40%

BY DIMITRI DOLABERIDZE

Old Europe is not as power-ful as it once was. Where just ten years ago she could freely choose with whom from the energy supplier

countries to conclude an agreement, and with whom not, with the beginning of the collapse of her own production, she lost such privileges. Under construction pipelines from Transcaucasia and Cen-tral Asia hardly satisfy her gas supply, but Russia will make the Old World "depend" on its gas "needle".

The share of Gazprom in the markets of Europe and Turkey in 2013 rose to 30.07%, while in 2012 it was 26%. This was a great achievement for Russia. The joy of the top manager of Russia's main gas company Alexander Miller was unlimited: before that, Europe had sys-tematically pushed Russia out of its market, and now it seemed like the demand had begun again. Since then, Miller has had the opportunity to brighten his report with growing export fi gures. In 2015, the share had grown to 31%, and, last year, Miller said it was 34%. And in the next ten to fi fteen years this fi gure looks likely to stay.

“The drop in production in European countries, together with the decrease in supplies from Africa, will continue to ensure the growth of the share of Rus-sian gas in the EU market,” said Michael Stoppard, Managing Director of the con-sulting agency IHS Markit, during the National Oil and Gas Forum.

"Looking at the horizon of 2030, both Russian gas and LNG [liquefi ed natural gas] will signifi cantly increase their mar-ket share as a result of declining produc-tion in Europe and supplies from some African countries," the agency said.

According to estimates of IHS Markit, the growth will be smooth, at 1% per year until 2020. By this time, Gazprom's share in Europe will reach 38%, but fur-ther growth will slow to 2% over the next 10 years. That is, in the end it will be 40%.

“Now we see an explosive interest in cheap Russian gas production from many Central European countries, leading us

to believe that new resources, for exam-ple, from the shelf of Azerbaijan or Turk-menistan, are unlikely to reduce its mar-ket share," said Stoppard.

Thus, the share of "Caspian gas," from Azerbaijan and Turkmenistan, by 2020 will grow from the current 2% to about 8% of the market.

"On the other hand, there will be a growing competition between gas from Russia and LNG from the US and Aus-tralia, which will determine the world prices for gas," he added.

However, given the current prices on the EU gas market, the US LNG has very vague prospects in "future": too small a difference between the cost of liquefac-tion in the US and the sale price in Europe will not allow it to happen. Because of a lack of its own gas, its cost, in order to attract sellers, will grow, which will open up a European market for LNG, Stop-pard claimed. In his opinion, for LNG penetration into Europe it will be enough if the difference between the cost of liq-uefaction and local prices reaches $4 per million British thermal units (now there is no such difference).

“As a result, by 2020, the share of LNG in the EU market will reach 15% (now 10%), and by 2030 - 20%, taking second place in supply after Gazprom,” the top manager of IHS Markit said.

LNG is very sensitive to price jumps in the market and loses at a cost price in comparison with Russian gas. But compared to gas from Africa, in many ways it is competitive: African gas requires a lot of investment, the situation with transportation security is even more acute, "says Chris Lafakis, an analyst with the oil and gas sector of Moody's Analytics. “Obviously, Russian supplies are not under threat of reduction, espe-cially if we take into account the great interest in Germany and Austria, large sales markets”.

The real competitor to American gas is only gas from Turkmenistan, since with it Europe plans to enter into long-term contracts.

"In fact, these contracts are yet to be concluded, the pipe is incompleted, and the regasifi cation terminals for LNG are unloaded; there are big doubts that the share of Asian gas will exceed LNG," Lafakis said.

BY DIMITRI DOLABERIDZE

In the first quarter of this year, the cost of one liter of gasoline in the US and Russia almost equaled, claimed Bloomberg in its latest report.

In this period, one liter of gasoline in the US cost $0.68, as it did in Rus-sia. At the same time, the price of one US gallon (3.79 liters) in the US was $2.57, and in the Russian Federation $2.58. In the fourth quarter of last year, gasoline was cheaper in Russia at $2.36 per US gallon, in the US being $2.54.

In total, 61 countries entered the rating of countries with cheap gaso-line. Russia took 11th place on the list, the United States - 10th. The lowest prices were seen in Venezuela, Saudi Arabia, Iran, Egypt and Kuwait.

Prices for Gasoline in the US & Russia Almost Equal

Bloomberg noted that the two-year recession in Russia may end this year and, according to analysts of the agency, support for the country is

exerted by rising oil prices and the election of a new president in the US which may be more benevolent towards Moscow.

its operations in the country and bring-ing even more low-fare travel opportu-nities for its passengers. In September 2016, Kutaisi became WIZZ’s 25th base with one modern Airbus A320, creating 36 new direct jobs with the airline and expanding its low-fare network to 11 destinations to 8 countries, including the upcoming service to London-Luton commencing on 18 June. In 2017, with over 85% increased seat capacity, WIZZ is offering more than 365,000 seats on sale to and from Kutaisi.

Committed to the Georgian market for more than 5 years, Wizz Air is looking to further stimulate the inbound tourism along with the development of business and aviation industries, creating new travel opportunities across Europe, more than 100 destinations being available through several WIZZ bases like Buda-pest, Warsaw, Vilnius and Katowice. With fares as low as GEL 44.99, travelers can book their tickets for a holiday or a weekend getaway to any destination on wizzair.com or via the free Wizz Air mobile app. The easy booking system, designed for WIZZ customers who are always on the go and need the fastest

GEORGIA TODAY APRIL 25 - 27, 201710 POLITICS

BY NANA SAJAIA, VOICE OF AMERICA

Following Turkey’s vote, we spoke to Senior Fellow at the Atlantic Council, Matthew Bryza, who previously served as US Ambassador to Azer-

baijan and currently resides in Istanbul.

WESTERN MEDIA CALLED THE REFERENDUM RESULTS THE DEATH OF TURKISH DEMOCRACY. IS TURKEY’S DEMOCRACY DEAD?By no means is Turkish democracy dead. Look at what happened: the difference in Turkish democracy today compared to yesterday is really nothing. The real-ity was that President Erdogan amassed more infl uence, more power, than any Turkish leader other than Mustafa Kemal Ataturk. What matters now is how he uses his legalized powers in future.

ACCORDING TO THE TURKISH CONSTITUTION, THE PRESIDENT WAS A FIGUREHEAD, THOUGH THAT DID NOT LIMIT ERDOGAN FROM PROSECUTING AND SACKING THOUSANDS AFTER THE ALLEGED COUP. WHY DID THIS REFERENDUM MATTER FOR ERDOGAN,

Bryza: Turkish Democracy is Not Dead

ASIDE FROM EXTENDING HIS TERM IN OFFICE?I thought long ago, even before the coup, that these changes were going to hap-pen. If you examine Turkish politics at the time, it was clear that he was going to get power. What changes beyond that he’s able to stay in power longer? I’d say ‘not much’.

IT WAS A NARROW WIN AT 51% TO 49%. IS TURKEY COMING OUT OF THIS AS A MORE DIVIDED SOCIETY? I think that’s the key point: Turkish society been divided for some time. In the last Parliamentary election, Erdogan’s party won 49.5% of the votes. The country is as evenly spilt as it can possibly be between supporters and opponents. Now that division is even fi rmer and emotions are stronger due to many questioning the legitimacy of the referendum. Questioning the result, legitimacy is going to lead to further polarization, which was already quite strong.

For the fi rst time ever, President Erdogan lost three large cities in Turkey. The ‘No Vote’ concentration is all along the coastline- northwest Turkey and southeast Turkey; the Kurdish majority area voted no, and the other no was northeast Turkey, those regions closest to Georgia. I interpret that as sign of how much closer Georgia is to Europe

than the Anatolian heartland in Turkey. The closer the people are to Europe and Georgia, the stronger the no vote was.

DO YOU EXPECT ANY CHANGES IN TURKEY’S FOREIGN POLICY? Not at all. I don’t feel that the referen-dum does much except that Erdogan can run again for two more 5-year terms. In foreign policy, there’s no change at all: Turkey remains where it is, has the same problems to sort out, such as its anger about US partnership with PKK affi li-ated Kurdish militia and how to deal with Russia.

One exception is that President Erdogan is likely to move forward with reinstat-ing the death penalty. If that happens, then Turkey’s de facto EU accession process will be ended.

ERDOGAN ARGUED THAT THE NEW SYSTEM WOULD RESEMBLE THAT OF FRANCE AND THE US. WHAT ARE THE PARALLELS HERE? I think he’s talking about political power being more centralized in the presidency in both the US and France. The US has no Prime Minister, with the President in charge of the entire executive branch, though it is constrained by judiciary and congress.

On paper, it’s the same in Turkey, the difference being that alternative institu-

tions in the US are much stronger and more independent than in Turkey.

REFERENDUM SUPPORTERS SUGGEST THAT REPLACING THE PARLIAMENTARY SYSTEM WITH AN EXECUTIVE PRESIDENCY WILL MODERNIZE THE COUNTRY. WHAT KIND OF MODERNIZATION ARE WE TALKING ABOUT?I don’t really see how this is step towards modernization. Modern advanced polit-ical systems around world often have a parliamentary system of government like the UK.

We know that the quest has been to use this concentration of power to reshape the Turkish state in a way that many would say is the opposite of moderniz-ing.

TURKEY IS COMING OUT OF THIS REFERENDUM AS A LESS DEMOCRATIC STATE. DO YOU ALSO EXPECT A RISING OF RELIGION IN GOVERNANCE? I don’t. If we look at Turkish history, going back to the sultans, before the Republic, Islam played a greater and smaller role every few decades. Some-times Islam defi ned social and political norms more than at other times.

Erdogan is seen by conservative, more pious, Turks as somebody who has ena-bled them to gain respect, not be looked

down on; to be respected business peo-ple. Strong believers, of course, see Islam playing a greater role in society. In Istan-bul and many big cities, there’s pressure on restaurants and bars that serve alco-hol- that there be high excise taxes on alcohol to discourage drinking. Many argue to make it more diffi cult for women to prosper in the workplace. There are norms that are mixed with Islam and this traditional Anatolian culture that are diffi cult to separate. There is a degree of political Islam, but so distant from what you see elsewhere in the Middle East.

WHAT KIND OF EXAMPLE IS TURKEY, A NATO MEMBER, SETTING FOR COUNTRIES IN THE REGION, LIKE GEORGIA, WHICH HAS EURO-ATLANTIC ASPIRATIONS? Georgia has its own values and strong ambitions. I support them wholeheart-edly. I don’t think Georgians need inspi-ration from anybody to have a thirst to join the transatlantic community. Even if there are growing challenge to Turk-ish democracy, don’t worry too much about what example Turkey sets for NATO, especially when it comes to Geor-gia.

The interview was originally published on http://www.amerikiskhma.com/a/turkey-after-referendum/3816809.html

BY THEA MORRISON

The European Union (EU) has welcomed the Council of Europe (CoE) Secretary General Thorbjorn Jagland’s 15th consolidated report on

the confl ict in Georgia, considering it important to keep this issue high on the political agenda of the CoE and encour-aging the Secretary General to continue the submission of such reports covering, inter alia, the question of human rights protection in the areas affected by the confl ict in Georgia.

The statement was published on the offi cial webpage of the Delegation of the European Union to the Council of Europe.

“The EU reaffi rms its fi rm support for the independence, sovereignty and ter-ritorial integrity of Georgia within its internationally recognized borders,” the statement reads.

The statement underlines that the EU does not recognize the elections of March 12, 2017 in Georgian region of Abkhazia, also, the decision by the de facto authorities in the Georgian region of Tskhinvali region/South Ossetia to con-duct presidential elections and an illegal referendum on changing the name of the Georgian region of Tskhinvali region held on 9th April 2017.

EU Welcomes CoE Secretary General’s Report on Confl ict in Georgia

Furthermore, the EU is deeply con-cerned by the advancing implementation of the treaties and deriving sub-agree-ments, including actions that combine

Russian armed units and armed units of authorities of the Georgian regions of Abkhazia and South Ossetia, saying they are “detrimental to the efforts to

strengthen security and stability in the region and violate Georgia’s sovereignty and territorial integrity, contradict prin-ciples of international law and the inter-national commitments of the Russian Federation, including those undertaken within the CoE.”

The statement also underlines that human rights situation in the occupied territories remains worrying, adding the closure of two crossing points along the Administrative Boundary Line of Geor-gia's breakaway Abkhazia, which were used daily by hundreds of commuters, is detrimental to the freedom of move-ment of the population, including school children, on both sides of the ABL.

“Such a unilateral decision goes against commitments to work towards enhanced security and improved living conditions for the confl ict-affected population. It increased the risk of incidents, especially detentions. The EU is concerned by actions that combine Russian armed units and armed units of authorities of the Georgian regions of Abkhazia and Tskhinvali region,” the statement reads.

The EU calls on authorities exercising effective control to remove any imped-iment, restriction or limitation to the right of freedom of movement across the ABL, to prevent arbitrary detention of persons, including in the context of so called “illegal border crossing”, to prevent ethnic–based discrimination, to

re-open crossing points and to investi-gate all allegations of crimes and human rights violations on the ground.

Moreover, the EU underlines the impor-tance of a dialogue between the parties to the confl ict. The EU remains highly committed to support peace-building and confl ict resolution in Georgia, includ-ing through its co-chairmanship of the Geneva International Discussions and the EU Monitoring Mission on the ground.

“We welcome that the Georgian Gov-ernment continued to progress in ensur-ing durable solutions in terms of IDP reintegration, that support for socio-economic integration of IDPs has been increased under the new IDP Livelihood Action Plan, and that remaining diffi cul-ties with respect to access to drinking and irrigation water, heating and liveli-hoods, as well as access to social and medical infrastructure, were being addressed,’ the statement reads.

The EU reiterates its concern about the continuing Russian illegal military presence, increased military exercises and infrastructure reinforcements in the occupied regions of Georgia. The EU calls on the Russian Federation to fully implement the six-point ceasefi re agree-ment of 12 August 2008 and the Imple-menting Measures of 8 September 2008, and to provide the EU Monitoring Mis-sion (EUMM) with access to the Geor-gian regions.

GEORGIA TODAY APRIL 25 - 27, 2017 11POLITICS

GEORGIA TODAY

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BY THEA MORRISON

Within the frames of his offi cial visit to Georgia, Ukrainian Foreign Minister, Pavlo Klimkin vis-

ited Khurvaleti village located at the occupation line with Georgia’s break-away South Ossetia region on Saturday.

The Ukrainian FM spoke with the locals through the barbed wire fence and was informed about the grave humanitarian situation in the region.

Klimkin said that Georgia and Ukraine are facing the same challenges and have similar values.

“I have the same sad feeling when I come to the line of contact in Donbass occupied by Russia… It is a symbol that where Rus-sia is there are occupied territories with barbed wire fences,” he stressed.

Ukraine’s Foreign Minister Visits Occupation Line in Georgia

Klimkin added that unlike Georgia, there is shooting at the occupation line in Ukraine and people die there every day.

“I would like to express special grat-itude to everyone in Georgia who has fought against Russian aggression…we have the same values, we have the same roles: it’s about European integration, it’s about becoming a part of the Euro-pean and Trans-Atlantic family. We have the same challenges and threats and we have to fi ght together,” he said.

Klimkin arrived in Georgia on Friday. He had a meeting with his Georgian counterpart Mikheil Janelidze.

The ministers discussed a broad spec-trum of political, trade-economic and cultural-humanitarian relations between the two countries underlining the importance of conducting regular consultations between the foreign min-istries.

The necessity of deepening co-oper-

ation within the framework of inter-national organizations, including the Eastern Partnership format, was also highlighted.

The offi cials spoke about the impor-tance of exchanging high-level visits. Janelidze expressed hope Ukraine’s President Petro Poroshenko will also visit Georgia soon.

Janelidze and Klimkin exchanged views over the situation in Georgia’s occupied regions and in Ukraine’s east regions and reaffi rmed their strong support for the sovereignty and ter-ritorial integrity of each other’s coun-tries.

Following the meeting, the Ministers signed a joint statement on the occa-sion of the 25th anniversary of restora-tion of diplomatic relations between Georgia and Ukraine.

The Ukrainian FM also met Georgian Prime Minister Giorgi Kvirikashvili.