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Issue no: 794/2www.georgiatoday.ge

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• NOVEMBER 17 - 19, 2015 • PUBLISHED TWICE WEEKLY YOUR FREE COPY

In this week’s issue...FDI in Georgia to Reach More than USD 1.5 billion

Less Bureaucracy Is Good, But Not Good Enough!

Comparing Living Standards

Navigating the EU Integration Process

EU-Funded Rural Development Pilot Project Presented in Lagodekhi

PAGE 2

Lika Khitarishvili, Head of the Personal Banking Service Center of FINCA Bank, talks to us about the bank’s mission, vision and newly launched personal banking business line

FOCUS ON SERVICE

Continued on page 2

BY MERI TALIASHVILI

Wissol Group has opened the largest Wendy’s restaurant in the world…in Tbilisi. The three-fl oor restaurant located at 26th May square covers

1,450 sq. meters and has a hosting capacity of 450 guests.

The restaurant was deliberately opened on November 15th, the date when, 46 years ago, Amer-ican businessman and philanthropist Dave Thomas opened the fi rst Wendy’s in Columbus, Ohio, US.

The opening ceremony was attended by Todd Penegor, the company’s Executive Vice-President and Chief Financial Offi cer, the company’s Chief Development Officer, newly appointed US Ambassador to Georgia, Ian C. Kelly, local gov-ernment and business representatives among them the Mayor of Tbilisi David Narmania, and many other public fi gures.

World’s Largest Wendy’s Opens in Tbilisi

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Opening the Biggest Wendy’s in the World: Soso Pkhakadze, the President of Wissol Group; Davit Narmania, Mayor of Tbilisi; Ian C. Kelly, US Ambassador to Georgia; and Todd Penegor, Wendy’s Executive Vice-President and Chief Financial Offi cer

Georgia Today offers its sincerest condolences to those affected by the tragedy that befell Paris on

November 13th.

FINCA Bank Georgia Launches Personal Banking Business Line

2 GEORGIA TODAY NOVEMBER 17 - 19, 2015

BY ANA AKHALAIA

By the end of the year, foreign direct investments will stand at more than USD1.5 billion. Economists predict that the increase in investments

should be particularly eye-catching in the energy sector and construction in the data of the 3rd and 4th quarters.

According to Q2 offi cial data of 2015, USD530 million worth of direct foreign investments came to Georgia. This was the largest volume in the last six years but the rate of investments failed to affect the rate of GEL and unemployment. Both these issues continue to be major chal-lenges for the Government.

According to the Economic Council of the Government, the Co-Investment Fund is implementing USD2 billion worth of investments in Georgia. The majority of projects will be completed by the end of 2017.

The projects are as follows: hydroelec-tric power plant Mtkvari, Tskhenistskali and Oni cascades; Dairy Farm and milk processing factory; Gallery Tbilisi; Hotel and fi tness center in Shekvetili; Pano-rama Tbilisi; Hotel Axis Towers; high-level computer data center. Some of the projects are already being carried out.

As mentioned above, Georgia’s foreign direct investment amounted to USD 530 million dollars in two quarters, while in 2014 – more than 1.7 billion. Last year, the biggest investors were the Nether-

BUSINESS

World’s Largest Wendy’s Opens in Tbilisi

Soso Pkhakadze, the President of Wis-sol Group thanked their partners, and attributed the huge success of Wendy’s in Georgia to the love of their faithful customers.

Georgia Today exclusively interviewed Wendy’s Executive Vice-President, Todd Penegor.

MR. TODD, WENDY’S HAS OPENED THE LARGEST RESTAURANT IN THE WORLD IN TBILISI. WHY DID YOU CHOOSE GEORGIA? Yes, it is genuinely the largest in the world. And it is because of the support of Wis-sol Group who partnered with us to make sure that we were comfortable with the idea of building the largest Wendy’s res-taurant. They felt that if they could make a statement here they would make a state-ment for the company around the globe and clearly what you see here today is the result of that statement. With the opening of the new restaurant, we’re try-

ing to create a truly unforgettable experi-ence: to make sure that when you come here, you engage with the people, enoy fabulous tasting food, and experience nice facilities. The new restaurant is unique; we have Dunkin Donuts down-stairs and a Frosty’s Corner, a fabulous café on the second fl oor and if you want to have a fun you have a brilliant space on the third fl oor with all the necessary equipment and also a space for kids. As for the new workforce, in this restaurant alone we have employed 50 folks, running three different shifts. In one particular shift they allow 16-18 people. I tell you one thing: they [Wissol and Wendy’s Georgia] are very, very good to their peo-ple. We recognized them earlier this year with a Jim Near Award which is Wendy’s special award that goes to the organiza-tion most focused on their people and giving back to the customers.

WHAT ABOUT WENDY’S SENSE OF SOCIAL RESPONSIBILITY? One of our core values is giving some-thing back. That really goes to the his-

Continued from page 1 tory of our founder David Thomas. In the US and Canada we have the David Thomas Foundation of Adoption and we spend a lot of time raising money in our restaurants to help the most una-doptable kids to be adopted. I am sure we will do the same here and we are so proud to be in Georgia. The Government is spending a lot to encourage job crea-tion and encourage Western brands to enter the country. And boosting the Georgian economic climate means cre-ating more jobs and it’s a pleasure for us to be a part of this.

At the opening of Wendy’s, US ambas-sador to Georgia Ian C. Kelly once again expressed the US support for Georgia in terms of politics and business. “Our main priority here in Georgia is to help the country integrate into Europe and the North Atlantic community, and a big part of this is about growing business and the trade relationship between these two countries. The Wendy’s event is just one example of the fantastic partnership between the US and Georgia,” Ambas-sador Kelly said.

BY ANA AKHALAIA

Adjara is to spend 3.7 million GEL on the region’s tour-ism marketing campaign in 2016- the amount of money provided in the

budget of the Department of Tourism and Resorts for a marketing campaign in both local and international markets.

According to the draft budget 2016 of Adjara, funding of the Department will increase by 21.5%.

Within the 2016 budget, funding for the Department is 5,823.300 GEL up from the 2015 fi gure of 4,582 million GEL.

The Department will spend 854,800 GEL on tourist products and service development and 1,266.500 GEL on man-agement and effective development of the tourism and resorts sector.

According to the Chairman of Depart-ment of Tourism and Resorts of Adjara,

Adjara to Spend 3.7 million GEL on Marketing Campaign

Mamuka Berdzenishvili, “Approximately 100 thousand GEL will be added to our newly created tourism product agency, which is responsible for the develop-ment of tourism products. According to the 2016 draft budget, funding the Depart-ment will be increased by 1.4 million.”

It is planned to increase online activi-ties and PR campaigns of the Department in 2016. The increased budget will make it possible to host more press tours in 2016 than in 2015. The advertising budget is also increasing in terms of domestic tourism. According to the 2016 draft budget, 369,00 GEL will be spent on regional tourism advertising within Georgia.

Berdzenishvili went on to say that the Department conducted advertising and marketing in 9 target markets in 2015. “Given the fact that the number of tour-ists is growing every year in Georgia and Adjara, the Department made a decision to add a 10th country, the Russian Fed-eration, into the 2016 program budget.”

BY ANA AKHALAIA

A new, modern industrial laboratory ‘Fab Lab’ has opened with the support of City Hall in the Techni-cal University. The indus-

trial project belongs to the Technology Development Fund.

“It is very important to have a labora-tory equipped with modern technologies which, on the one hand, enables students to improve their qualifi cations in prac-tice and, on the other hand, is a profi t-oriented business project, by which we are helping small businesses,” said Davit

Business Incubator Fab Lab Opens in TbilisiNarmania, Tbilisi Mayor. “They can produce their desired products and items with the help of the laboratory and then put them up for sale on the market. This project is particularly interesting for us because this laboratory is the fi rst of its kind in the capital. What’s more, the same kind of laboratory will be opened in the Tbilisi State University in Decem-ber.”

The main goal of Fab Lab is to support inventors, innovators and beginner entre-preneurs. The Business Incubator is equipped with the latest technologies, and modern machinery will allow users to make their ideas reality. Business Incubator Fab Lab will serve clients free of charge.

FDI in Georgia to Reach More than USD 1.5 billion

lands (26%), Azerbaijan (24%) and China (15%). These three countries accounted for 65% of FDI. USD114 million came from the United Kingdom, USD85 mil-lion from Luxemburg, while investments increased from the United States, Turkey and Russia.

Most of the direct foreign capital was invested in transport and communica-tion - USD343 million, which is 27% of the total foreign direct investment. Con-struction took second place with USD295 million, while the third was the process-ing industry with USD174 million, fol-lowed by the energy sector - USD87

million and the fi nancial sector - USD78 million.

According to government members, a large-scale investment has been made in the energy sector. However, the vol-ume of investments in this sector has been declining for several quarters. A few months ago, the Energy Minister Kakha Kaladze spoke about the invest-ment of USD600 million to enter the energy sector.

The National Statistics Offi ce will release the data of Q3 on December 9th while the results of Q4 will be released in spring 2016.

Italian company Telecom Italia Sparkle is expanding its global IP network in a new joint project with Turkish telecommunications company Turkcell and Georgia’s

largest internet provider Silknet.The project will be presented on

November 17, at 11:00 am at the Radisson Blu Iveria Hotel where each of the three companies will make a statement and celebrate with the signing of a tripartite Memorandum of Understanding.

Italian Company Telecom Italia Sparkle to Expand Market Interest

GEORGIA TODAY NOVEMBER 17 - 19, 2015 3BUSINESS

BY MERI TALIASHVILI

FINCA Bank Georgia has recently opened its fi rst per-sonal banking service center in Tbilisi to offer personal banking services to its clients.

Customers of the personal banking ser-vice center will join more than 80,000 citizens of Georgia already enjoying FINCA Bank’s fi nancial services.

One of the leading fi nancial institutes, FINCA has been operating in Georgia for more than 17 years. During this time, FINCA Georgia has made signifi cant contribution to the formation of credit culture and to the development of small and medium businesses. Georgia Today met Lika Khitarishvili, head of the per-sonal banking service center of FINCA bank and talked to her about the bank’s mission, vision and newly launched per-sonal banking business line.

FINCA BANK GEORGIA IS A PART OF GLOBAL NETWORK OF FINCA MICROFINANCE HOLDINGS (FMH). COULD YOU TELL US MORE ABOUT FINCA BANK GEORGIA AND FINCA, GENERALLY, WHAT IT DOES WORLDWIDE?“FINCA” is an international fi nancial institution, founded in 1985 in the United States with representatives in 23 coun-tries. Being a part of global network of

FINCA Bank Georgia Launches Personal Banking Business Line

FINCA Microfi nance Holding (FMH), it has strong international fi nancial part-ners such as: FINCA International (USA), The International Financial Corporation (IFC, World Bank Group) (USA), KFW Bankengruppe - German Development Bank, FMO - United Bank of Netherlands, responsAbility Social Investments AG, Triple Jump and other fi nancial institu-tions.

FINCA’s vision is to build a global net-work of sustainable and scalable social enterprises that improve lives worldwide. Exactly based on this strategy it began to expand its network in Eurasia.

In 1998 the fi rst branch was opened in Georgia. Initially, the organization oper-ated with the status of microfi nance institution in the Georgian market, how-ever, after receiving a banking license in 2013, the organization now offers a full range of banking services to its custom-ers.

FINCA, on a global scale, provides full fi nancial services to around 2 million people worldwide. Small and Medium Entrepreneurs are FINCA’s core segment in the entire world. FINCA’s global mis-sion is to alleviate poverty through last-ing solutions that help people build assets, create jobs and raise their stand-ards of living.

In Georgia, in terms of loans, people owning small or medium size businesses are FINCA Bank’s major segment. Since receiving a banking license in 2013, FINCA Bank Georgia has expanded the scope of services and banking products and

serves more than 80,000 clients in all regions of the country through its 41 service centers. Today, our deposit inter-est rate is one of the highest and most competitive.

Alongside our international fi nancial partners, we are oriented on offering customers products and services tailored to their needs. We aim to be the bank which is the most reliable partner for the client, both when they need money and when they are looking to gain ben-efi t from that money.

We understand that customers need comfortable banking services that are constantly improving, and therefore we strive to expand the scope of our bank, its services and products. It is therefore important to note that, in October 2015, FINCA Bank Georgia launched personal banking business line.

WHAT DOES FINCA BANK PERSONAL BANKING SERVICE MEAN? FINCA Bank personal banking business line implies offering the best service that focuses on clients’ needs and interests, and offers comfortable service and highly qualifi ed consultation in both cases - when the client visits us, as well as dur-ing distance service.

FINCA Bank Georgia is built on the platform developed over 17 years of operations in the country contributing to the formation and development of the lending culture.

Today, through the FINCA Bank per-

sonal banking service, we are aiming at changing people’s attitude towards time and money. Our challenge is to have people see the importance of saving. Having savings helps us properly and effectively plan our future. In such cases, we are not afraid of the future and are ready to meet unforeseen situations.

GEORGIAN BANKS HAVE ALREADY IMPLEMENTED THE PERSONAL BANKING SERVICE. WHAT IS FINCA BANK OFFERING THAT IS NEW IN THIS DIRECTION? Personal banking qualifi cations, customer orientation, effective and comfortable service - is a guarantee of customer’s peace-of-mind - This is the driving force of personal banking service.

I think you would also agree that we live in an era where time is the most valuable asset and when life seems to fl y by. In such cases, it is vitally impor-

tant to have quick and optimal decision-making skills. Therefore, with our per-sonal banking service, we want to help our clients to make right decisions at the right time…

We believe that stability and security are the core values of our time. We aim to be the best for our customers because nothing is more valuable than a reliable, stable, loyal fi nancial partner - the inter-national experience of FINCA Bank is a guarantee of fi nancial stability of our clients.

WHICH ARE THE TARGET SEGMENTS – AFFLUENT OR MASS AFFLUENT CLIENTS? Our service aims at both - Affl uent and Mass Affluent segments. Generally, FINCA Bank aims to offer fi nancial ser-vices which will satisfy the needs of any segment. Because we believe that all customers equally want to receive a high-quality and client-oriented service.

Lika Khitarishvili, Head of the Personal Banking Service Center of FINCA Bank

4 GEORGIA TODAY NOVEMBER 17 - 19, 2015BUSINESS

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

E-mail: info@peoplescafe.ge

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.

BY OLGA AZHGIBETSEVA, CHARLES JOHNSON, AND ERIC LIVNY

Why do we fall, Bruce? So we can learn to pick ourselves up – Thomas Wayne to his son (Batman).

The Georgian Government’s pride and joy of the previous years has been its high standing in the World Bank’s Ease of Doing Business index. Investors, pol-icymakers, and economy-watchers around the world have opened editions of magazines like The Economist to see full-page advertisements about why Georgia is ‘different’ among Post-Soviet countries when it comes to doing busi-ness. A line such as “Georgia is different because we are the World Bank’s number 1 reformer for 5 years” said it all.

Georgia’s Doing Business ranking peaked at #9 and 8 in the world in 2013 and 2014, respectively, after vigorous actions by the new Georgian administra-tion to strengthen judicial independence and better secure property rights. In the following two years, however, Georgia went down in the Index: to #15 last year, and to 24 in the most recent ranking released on October 26, 2015.

What could possibly go wrong?

CINDERELLA LOSING HER GLASS SLIPPER?Georgia’s performance (see chart) in the Ease of Doing Business index is a Cin-derella story. In 2006, the country ranked in 100th place, but, thanks to a rapid and effective reform process, by 2010 it

Less Bureaucracy Is Good, But Not Good Enough!climbed all the way to 10th position, ahead of some of the most eminent eco-nomic powers in the world, such as Ger-many and Switzerland. Despite recent setbacks, Georgia maintains its offi cial title as the fastest reformer in the Ease of Doing Business over the past 12 years, closely followed by Rwanda (incidentally, Rwanda’s largest bank, Bank of Kigali, is chaired by a prominent Georgian banker, former PM and ISET’s chair, Lado Gurgenidze).

But what did this achievement mean in reality? How could Georgia be pos-sibly ranked ahead of Germany on any conceivable indicator of economic per-formance?

For lack of a convincing answer, Doing Business methodology has always been subject to harsh criticism from within and outside the World Bank Group. First and foremost, the Index grossly under-delivers relative to its well-selling name. De facto, until 2014, Doing Business had been meas-uring freedom from, and (to some extent) effi ciency of government regulations (a classical example is # of days to register a business). Yet, to measure how easy it is to do business (as opposed to registering a business), one would have to look at many other factors which Doing Business had ignored ‘for simplicity’. Such are things like, for example:

• quality of infrastructure• availability of input suppliers and

service providers• size of internal and external market• labor force quality (skills and ethics)• access to fi nance• property rightsWhile slashing suffocating regulations

and redundant bureaucracy, Georgia could

not achieve nearly as much progress on any “doing business” factors that require patient construction and nurturing rather than swift revolutionary actions. Remov-ing regulations – and even corrupt offi cials – is an easy task, provided the political will is there. Re-educating the entire labor force takes generations.

THE EASE OF GOING UP AND DOWN IN INTERNATIONAL INDEXESTo do justice to Georgia’s reformers, they did implement a number of highly suc-cessful constructive reforms such as mov-ing almost all government services to online platforms and opening amazingly effi cient public service halls. Yet, despite a lot of improvement, Georgia’s infra-structure is still light years away from Germany; its peanut-sized market is still hardly an attraction for multinational companies seeking to maximize the bang for their buck; whoever decides to invest in Georgia – for emotional or any other reasons – would still have to invest in own supply chain and services, given that very little would be available from local providers; and so on and so forth.

The many shortcomings in its business environment did not stop Georgia from progressing to almost the very top of the Ease of Doing Business Index. They did not stop Georgia from progressing for one simple reason: until 2014, the Index had largely ignored or discounted many of those things that businesses really care about. And by the same token, while Georgia’s seemingly worse performance in the Ease of Doing Business in 2015 and 2016 certainly works great inserted into an opposition party’s stump speech, the only thing it refl ects is a change the World Bank’s methodology. Yes, a change that, fi nally, after almost a decade of criticism, brings the methodology of Doing Business a bit closer to what its name actually implies.

An independent panel, appointed by the President of the World Bank, reviewed the methodology and practice of Doing Business in October 2012. The resulting report issued in June 2013 expressed concerns about both coverage and rel-evance of Doing Business indicators, as well as its potential to be misinterpreted as a one-size-fi ts-all template for devel-opment. Nevertheless, a recommenda-tion was made to retain the Doing Busi-ness report with some modifi cations to its methodology, institutional structure, name, and communication strategy. The methodology had been retooled over two years, in 2014 and 2015, with some

additional changes expected in the com-ing years.

The revised methodology, while main-taining the same basic structure, adds new indicators (e.g. quality of land administration systems, quality of con-struction regulations and controls, reli-ability of electricity supply, and quality of the judicial process). These new indi-cators focus on quality of regulation or infrastructure issues that are more chal-lenging for developing countries, such as Georgia. To take another example, Georgia’s has been downgraded to 78th on “trading across borders” after this indicator has been revamped in 2016 to better refl ect the actual structure of Georgian trade.

SHOULD “DOING BUSINESS” BE SIMPLE OR COMPLICATED?For all its simplicity – and maybe thanks to it – the good old Doing Business Index did perform a useful function. It motivated governments to implement deregulation reforms and improve the quality of exist-ing regulations. It was able to perform this function because, until 2014, it cov-ered areas that are mostly under direct government control. A government that wanted to look good on the Index could do so in a very short time. And many governments, starting with Georgia, jumped on the opportunity to do so.

For example, Azerbaijan made huge strides in Doing Business after its govern-ment became envious of Georgia’s suc-cess. Did it make Azerbaijan a truly good country for doing business? No, it is still as corrupt and as clan-dominated as ever before. However, having fewer and more effi cient regulations was a good thing for Azeri businesses and citizens.

No government can instantly improve its ranking on far more comprehensive indices such as the Global Competitive-ness Indicators (GCI) compiled by the

World Economic Forum. Progress in GCI is painstakingly slow because it requires a lot of investment in things like infrastruc-ture, innovation systems, free trade agree-ments, etc. Hence, GCI is not as effective in motivating myopic governments that are only interested in achieving quick results (before the next elections). It is particularly weak in incentivizing govern-ments of developing countries, such as Georgia, which by defi nition would never be able to top the world on the quality of infrastructure or labor qualifi cation.

A more complex and realistic Doing Business is likely to lose in the amount of attention it is getting in Georgia and elsewhere in the developing world where it provided governments with a unique opportunity to shine. Still, by keeping its focus on certain actionable aspects of the business environment it will con-tinue to perform an important role in promoting good governance reforms.

ONE STEP BACK, TWO STEPS FORWARD!The fact that Georgia went back in the new Doing Business may deny Georgian offi cials a platform to sing the praises of a top-10 ease-of-doing-business economy. At the same time, the new methodology helps highlight and monitor progress in areas that are key for strengthening Geor-gia’s competitiveness. Improvement in some of these areas (contract enforcement, quality of judicial processes, and reliabil-ity of electricity supply) is already refl ected in the 2016 Doing Business report. Addi-tional progress may be achieved thanks to closer economic ties and easier ‘trade across borders’ between Georgia and the EU.

Put simply, rather than constituting a setback, the 2016 Doing Business Report should be seen as an opportunity for Georgia to “learn how to pick itself up” once more.

GEORGIA TODAY NOVEMBER 17 - 19, 2015

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924 in 2003, helped by healthy GDP growth rates, as well as a decrease in population. However, the recent regional economic problems and related lari depreciation have weighed on per capita GDP, bringing it to almost the 2011 level. According to IMF’s estimates for 2015, Georgia ranks 119th out of 189 economies in terms of GDP at US$ 13.8bn and 117th in terms of per capita GDP at US$ 3,720. To reverse the trend, the value of goods and ser-vices that we produce must increase signifi cantly. If Georgia wants to join the ranks of countries with US$ 10,000 GDP per capita by the mid-2020s, it will need average annual real growth of at least 6%, which would allow Georgian citizens to feel the benefi ts of economic growth through improved living standards. To achieve this level of per capita income, FDI is one of the most important factors, taking into consideration Georgia’s low savings rate and skills needed to produce more sophisti-cated goods and services. In this regard, govern-ment policies aimed at improving the business environment, coupled with increasing the com-petitiveness of Georgian products and services, are essential.

2. GDP PER CAPITA BASED ON PPP An even better indicator for comparing living

standards across countries is GDP per capita based on purchasing power parity (PPP), which takes into account variations in living costs across nations. Instead of market exchange rates, this metric uses the PPP exchange rates, which show how much currency will be needed to buy the same quantity of goods and services in different countries and is a more accurate refl ection of actual living stand-ards. This type of cross-country comparison is the basis for the well-known “Big Mac” index, which is published by the Economist magazine. The major advantage of PPP exchange rate is its relative sta-bility over time compared to market rates. Another drawback of market exchange rates is that they are relevant only for internationally traded goods. Non-traded goods and services tend to be cheaper in low-income versus high-income countries. A hair-cut in Georgia is signifi cantly cheaper than one in New York, as is the price of a taxi ride or a theatre ticket. Any analysis that fails to take into account these differences in the prices of non-traded goods

Comparing Living StandardsBY EVA BOCHORISHVILI

Gross domestic product (GDP), the sum of all economic activity within a nation’s borders, provides a good snapshot of a country’s economic performance. However, citizens of a country with a

large GDP do not necessarily live better than those in smaller economies, as GDP per capita is the bet-ter indicator of a nation’s standard of living. For Example, China is the second largest economy by size of GDP after USA, but there is still a sizeable gap in the quality of life of an average American and an average Chinese citizen, captured by per capita GDP, as China has the world’s largest population. In our case, Uzbekistan’s GDP at US$ 62.6bn in 2014 was almost 4 times larger than that of Georgia, but the average quality of life of a Georgian citizen was higher than that of an Uzbek citizen, as measured

by per capita GDP. On average, a citizen of Uzbek-istan (with per capita GDP at US$ 2,046) had less money than a citizen of Georgia (per capita GDP at US$ 4,434), with the Uzbek population 8 times larger than the Georgian population. As seen above, national output statistics are commonly converted into US$ for comparison reasons across countries. However, there are two main methods of making cross-coun-try comparisons of GDP and the related per-capita income and they can provide markedly different answers.

TWO DIFFERENT YARDSTICKS:1. PER CAPITA GDP

When determining individual economic wellbe-ing, GDP per capita is a more appropriate tool than GDP. To arrive at this fi gure, the market exchange rate is used to convert GDP in national currency into US$. Using this metric, Georgia’s per capita GDP has shown remarkable improvement, increas-ing almost 5 times to US$ 4,434 in 2014 from US$

across countries will underestimate the purchas-ing power of consumers in developing countries and, consequently, their welfare. For this reason, PPP-based per capita income is generally regarded as a better measure of overall individual well-being.

Using PPP-based per-capita GDP, Georgia was in 107th place with US$ 9,209 GDP per capita (PPP) in 2014, ahead of many developing countries, includ-ing many from the former soviet bloc: Armenia, Ukraine, Uzbekistan, twice as rich as Moldavians, more than three times wealthier than Tajiks, and signifi cantly ahead of many developing Asian and African countries. Georgia is close to Bosnia and Herzegovina, Egypt, and Albania, but lags signifi -cantly behind rich countries, including major remit-ting countries for Georgia like Russia with per capita GDP (PPP) at US$ 24,449, Italy at US$ 35,131, and Greece at US$ 25,954.

While this outcome is disappointing, it is still an improvement compared to 2003, as Georgia moved up 15 spots in the global ranking over the last 11 years, becoming almost 3 times wealthier based on per capita GDP (PPP). This progress came on the back of higher growth in Georgia, compared to other economies, and structural improvements, which reduced living costs. While this number takes into account the decline in the Georgian population by 588,000 persons over that horizon, leaving the population number unchanged in 2014 still yields a more than 2x increase in PPP-based per capita GDP since 2003. Notably, while lari depreciation weighs on the per capita GDP esti-mate for 2015, in PPP terms Georgia still posts an improvement over the 2014 fi gure, according to IMF. Based on IMF’s projections, Georgia will maintain the same position in the global ranking with projected annual average real growth of 4.6% over 2016-2020. Faster growth will be necessary to move up in the global per capita GDP ranking and improve the country’s living standards.

Looking at the prospects of Georgians’ living standards, a stronger lari will translate into higher GDP in US$ terms, bringing Georgia closer to the club of wealthier nations. Maintaining a competi-tive environment and an open economy is imper-ative to keep living costs manageable, so that the higher GDP per capita in US$ terms will translate into higher GDP per capita based on PPP.

8 GEORGIA TODAY NOVEMBER 17 - 19, 2015BUSINESS

Navigating the EU Integration Process

At the ‘Making the Most of the DCFTA’ conference. (From left to right) Silvia Radu, GAS NATURAL FENOSA and President, EBA Moldova; H.E. Ambassador Pirkka TAPIOLA – Head of the European Union Delegation to Moldova; Cecilia Malmstrom – EU Commissioner Trade; and Octavian Calmic – Deputy Minister of Economy, Republic of Moldova.

BY KATIE RUTH DAVIES

In a conference entitled ‘Making the Most of the DCFTA,’ within the framework of the Visegrad Fund project ‘Sharing Experience of Public-Private Dialogue in EU,’

the Policy and Management Consulting Group (PMCG) hosted high ranking representatives of the Moldovan and Georgian governments, the EU delega-tion, Hungarian, Polish, Czech and Slo-vakian diplomatic missions and repre-sentatives of EBRD, EIB, USAID, WB, and IFC in Chisinau, Moldova on Octo-ber 22-23. The aim was to discuss the most effi cient ways for governments and private sectors to navigate through the EU Integration Process, more specifi -cally, to assist Moldovan and Georgian businesses and government bodies to strengthen dialogue and awareness about the opportunities and challenges pre-sented by the signing of the Association Agreement.

Cecilia Malmstrom, EU Commis-sioner for trade; Luc Devigne, Head of the EU Commission unit Russia, CIS, Ukraine, Western Balkans, EFTA, EEA and Turkey; Archil Karaulashvili, Deputy Minister on European and Euro-Atlantic Integration of Georgia; Aleksi Aleksishvili, Former Minister of Finance of Georgia, CEO- Policy

and Management Consulting Group - PMCG (Georgia) and other high-ranking offi cials shared their experi-ence and opinions regarding the pro-cess of EU approximation.

The focus of the event was on sharing the experience of the Visegrad countries (Czech Republic, Hungary, Poland, Slo-vakia) in developing constructive public-private dialogue in a transition period, while harmonizing legislation and stand-ards with those of the EU. Key topics discussed were ‘One year of the DCFTA,’ ‘external assistance for SMEs to meet the requirements of the DCFTA,’ ‘access-ing EU markets,’ ‘building public-private partnerships,’ and ‘providing support services.’

Valerian Gvalia, Senior Adviser of EU-Georgia Business Council: “The EU-Georgia Business Council (EUGBC), the only European Business Association in Georgia, pays paramount attention to experience sharing with its business col-leagues. Indeed, joint efforts from East-ern Partnership member states are nec-essary in order to move forward towards the benefi ts of the Association Agree-ment and DCFTA. The International Conference in Chisinau ‘Making the Most of the DCFTA’ proved once again that there is interest from the Georgian side to enhance the trade relationship with the EU.”

Georgia Today spoke with Nino Sam-velidze, EU Programs Manager of PMCG,

about some of the topics covered in the conference.

WHAT KEY ACHIEVEMENTS AND CHALLENGES WERE HIGHLIGHTED ON COMPLETION OF THE FIRST YEAR OF THE DCFTA IN MOLDOVA AND GEORGIA?Both Moldova and Georgia started imple-mentation of the norms and recommen-dations set out by the AA and DCFTA which also includes legal approximation of different sectors. The approximation process creates opportunities for eco-nomic advancement of the countries but there are several areas which still remain a challenge, one being the capacity and readiness of SMEs to catch up with the process and regulations.

The DCFTA has large political mean-ing for these countries and its proper implementation is important. At the same time it is essential not to sacrifi ce business interests to accelerated imple-mentation of the DCFTA, namely approx-imating legal and institutional framework while disregarding business needs and interests.

The Moldova conference stressed that another challenge is possible increased imports from the EU and additional pressure on domestic producers, espe-cially in the short run. This, together with increased costs due to strict com-pliance requirements with EU standards,

might be a trial for the economy. This is why assessing the countries competitive advantage is important; targeting the most promising fi elds in the short-run which might have spill-over effect and useful gains in the future. Special atten-tion should be paid in correctly utilizing the technical and fi nancial assistance provided by the EU, EBRD, EIB and oth-ers so they bring tangible results.

One of the challenges for SMEs in these countries is the lack of available and cost effective advisory services, lack of inter-regional and international mechanisms to exchange best practice, as well as a lack of internal funding due to underde-veloped capital markets and a fi nancial sector still in transition. For this, Geor-gia, Moldova and Ukraine need to develop local expertise capacity to provide cost effective advisory services to SMEs, facilitate exchange of best practice, and improve access to funding for SMEs to foster economic development

WHAT KIND OF ASSISTANCE / SUPPORT HAS BEEN OFFERED TO SMES IN GEORGIA AND MOLDOVA IN PARTICULAR?The European Commission - jointly with the European Investment Bank (EIB) and the European Bank for Reconstruc-tion and Development (EBRD)– has put in place the DCFTA Facility for SMEs. The DCFTA Facility for SMEs is an inte-gral part of the SME Flagship Initiative,

a wide-ranging regional initiative of the EU which aims to provide support to SMEs in the Eastern Partnership to tackle the challenges impeding them from reaching their full potential. The Facility will complement the EU programs in each country that help small businesses grow and prepare for the new market opportunities of the DCFTA and help national authorities to implement their Association Agreements.

The DCFTA Facility for SMEs will receive approximately €200 million of grants from the EU budget. This contri-bution is expected to unlock at least €2 billion of new investments by SMEs in the three countries, to be fi nanced largely by new loans supported by the Facility.

The funding will:• Help SMEs to seize new trade oppor-

tunities with the EU and within the region which have been opened up thanks to the DCFTA;

• Improve access to fi nance for SMEs, enabling them to make the necessary investments to increase their competi-tiveness;

• Allow SMEs to integrate into global value chains by becoming business part-ners of foreign direct investors;

• Enable SMEs to comply with new sanitary, phytosanitary, technical and quality standards, as well as with envi-ronmental protection measures, thereby benefi ting local customers and boosting exports to the EU and beyond.

WHAT IS TRACTION CAMP TRACTION Camp is a three-day training project for advanced early stage startups based in Georgia, Armenia, and Azerbaijan. This project is produced by USAID-REG, and is aimed at helping found-ers of existing startups improve their skills and enhance their competitiveness position globally. An average of seven (7) founders will be selected from each country to participate in the Camp, with the goal of augmenting their business operations with top industry insights and best practices.

This will be the third TRACTION Camp, after two successful editions in June in Macedonia, and October (forecasted) in Odessa, Ukraine. In each edition, 20-25 regional founders participated, learn-ing from six renowned international experts.

The TRACTION Camp agenda is based on experiential, demand-driven skill transfer from expe-rienced operators (founders, growth experts, and investors) to local startup founders. These are the topics of learning for the three-day program of TRACTION Camp:

• Pitching to international investors • Presentation and (oral/written) communication skills• Understanding marketing systems and metrics-based growth • Sales and distribution channels • Hiring strategy and execution • Investment structuring • Cashfl ow management and optimization TRACTION Camp will be organized by USAID-REG, with support from local sponsors and part-

ners. Partners will provide assistance and sponsorship in covering a part of the logistical expenses, and in offering (in-kind) prizes for winning entrepreneurs.

WHEN AND WHERE TRACTION Camp will take place in Tbilisi, Georgia, on November 27-29, 2015, at Tbilisi’s state-of-the-art High Tech Park. Previous editions have been held at off-season resorts (Mavrovo skiing resort in Macedonia in June, and Odessa seaside resort in Ukraine in November).

EXPERTS Three US/Silicon Valley and two leading European experts will be invited to provide the trainings at TRACTION Camp free of charge (no fees, only expenses). Based on previous TRACTION Camp experience, the project will attract proven investors, exited entrepreneurs and top domain experts in business development.

APPLICATIONS AND ADMISSION Applications for TRACTION Camp will open on October 1, 2015. USAD-REG will contact a num-ber of partner organizations in each country to submit applications, which will be handled with priority. If startup slots remain unfi lled, a public call will be announced through the TRACTION Camp website (http://tractioncamp.me).

Partner organizations in Armenia, Azerbaijan, and Georgia are:• Armenia

• Microsoft Innovation Center, Yerevan• Granatus Ventures, Yerevan • Enterprise Incubator Foundation, Yerevan • Saryan Tumanyan, Yerevan • Gyumri IT Center, Gyumri

• Azerbaijan • Khazar Ventures, Baku • High Tech Park Azerbaijan, Baku

• Georgia • Georgia’s Innovation and Technology Agency, Tbilisi • Smartex Capital, Tbilisi • Bank of Georgia Incubator, Tbilisi • IBSU Idea Lab, Tbilisi

GEORGIA TODAY NOVEMBER 17 - 19, 2015 9BUSINESS

WHAT’S ON IN TBILISI

80 works by the artist executed in different periods of his life.

GEORGIAN PARLIAMENTARY LIBRARY

Address: 7 Gudiashvili Str.Telephone: 2 97 16 61

November 19-24MIKHEIL KHORAVA’S PERSONAL EXHIBITIONPAINTING, CERAMICS

ZURAB TSERETELI MUSEUM OF MODERN ART

Address: 27 Rustaveli Ave.Telephone: 2 14 84 11, 2 98 60 04www.momatbilisi.ge

October 9 - November 15THE SOLO EXHIBITION OF FAMOUS GEORGIAN ARTIST OLEG TIMCHENKO. The artist with an inexhaustible imagination and a distinctive individual style offers the innova-tions to his visitors. The exhibition combines the series of three different projects under the title “Self-Portrait, Culmination, No Comment”.

GALLERY

EAST POINTAddress: 2 Tvalchrelidze Str.

IN THE FRAMEWORKS OF ‘ARTISTERIUM’, PROJECT ARTBEAT WILL BE PRESENTING ‘ECHOES 2’ AT IT’S MOVING GALLERY, AN EXHIBITION BY NINO CHUBINISHVILI, AKA CHUBIKA, SPONSORED BY EAST POINT.The artist continues working on her series of Echoes and offers the viewer a journey in the fl ow of thought through her abstract works and visual signs. The fi rst works from the series are being exhibited in New York at Art in General.

THEATRE

TBILISI NODAR DUMBADZE STATE CENTRAL CHILDREN’S

THEATREAddress: 99/1 Agmashenebeli Ave. Telephone: 295 39 27

November 19ROYAL COWTaleDirected by Guram BregadzeRussian LanguageStart time: 15:00Ticket price: From 6 Lari

CINEMA

AMIRANI CINEMAAddress: 36 Kostava St.Telephone: 299 99 55www.kinoafi sha.ge

November 17-19SPECTREDirected by Sam MendesCast: Daniel Craig, Christoph Waltz, Léa SeydouxGenre: Action, Adventure, ThrillerLanguage: EnglishStart time: 19:45Language: RussianStart time: 12:15, 16:00, 19:30, 22:40 19:45, 22:30Ticket price: 7.50 – 12.50 Lari

BLACK MASSDirected by Scott Cooper Cast: Johnny Depp, Benedict Cumberbatch, Dakota JohnsonGenre: Biography, Crime, DramaLanguage: RussianStart time: 17:15Ticket price: 9.50 – 10.50 Lari

BURNTDirected by John WellsCast: Bradley Cooper, Sienna Miller, Daniel BrühlGenre: Comedy, DramaLanguage: RussianStart time: 15:00, 22:40Ticket price: 8.50 – 12.50 Lari

RUSTAVELI CINEMAAddress: 5 Rustaveli Ave.Telephone: 255 50 00www.kinoafi sha.ge

November 17-19

THE LAST WITCH HUNTERDirected by Breck EisnerCast: Vin Diesel, Rose Leslie, Elijah WoodGenre: Action, Adventure, FantasyLanguage: RussianStart time: 13:50, 16:00, 17:15, 20:00Ticket price: 8.50 – 12.50 Lari

BURNT(Info Above)Language: RussianStart time: 13:50, 16:00, 17:15, 20:15, 22:15Ticket price: 8.50 – 12.50 Lari

SPECTRE(Info Above)Start time: 11:45, 14:05Ticket price: 7.50 – 9.50 Lari

BLACK MASS(Info Above)Start time: 22:30Ticket price: 11.50 – 12.50 Lari

MUSEUM

GEORGIAN NATIONAL MUSEUM

SIMON JANASHIA MUSEUMAddress: 4 Rustaveli Ave.Telephone: 2 99 80 22, 2 93 48 21www.museum.ge

ARCHAEOLOGICAL TREASUREPERMANENT EXHIBITIONExamples of work by early Georgian goldsmiths were discovered during archeological excavations, and are currently preserved in the archeological treasury. The exhibition presents three periods of development in the history of Georgian goldwork, from the 3rd century BCE to the 4th century CE:

Kurgan Culture (3-2 BCE),“Golden Fleece Colkheti” (8- 3 BCE),Kingdom of Kartli-Iberia (3rd century BCE-4th century CE).

November 17 - May 1GEORGIAN NATIONAL MUSEUM AND ALEXANDER KARTVELI ASSOCIATION PRESENT AN EXHIBITION DEDICATED TO THE GREATEST MILITARY AIRCRAFT DESIGNER IN HISTORY.The exhibition will demonstrate the life and merits of the Georgian emigrant, an innovator of American and World aviation - Alexander Kartveli (Kartvelishvili /1896-1974/).The exhibition will also showcase models of aircrafts designed by Kartveli, blueprints, archives, documentation, articles, photos and multimedia materials. The exhibits will highlight the extraordinary life that Kartveli lead and his enduring legacy in military aircraft design.

SHALVA AMIRANASHVILI MUSEUM OF ART

Address: 1 Lado Gudiashvili St. Telephone: 2 99 99 09 www.museum.ge

November 5-23MALKHAZ KUKHASHVILI’S PERSONAL EXHIBITIONMalkhaz Kukhashvili is a graphic artist who worked for the fi lm and television industries. Among his works are movies like “Artist”, “Nodar Dumbadze”, “Leonardo” and many more. He also worked on illustrations for the books of famous Georgian writers Vazha-Pshavela and Giorgi Leonidze and illustrated children’s book “Deda Ena” and a book dedicated to Tbilisi. The artist frequently collaborates with different advertisement agencies.The exhibition will showcase up to

THE NATIONAL GALLERY

Address: 11 Rustaveli Ave.

www.museum.ge

November 7 – December 6AN EXHIBITION OF SCENOGRAPHY BY THREE GEORGIAN ARTISTS – OLEG KOCHAKIDZE, ALEXANDER SLOVINSKY, YURI CHIKVAIDZE.The exposition, the fi rst of its kind since the 1980s, is dedicated to the 80th anniversary of the three members of the artistic group working on scenography. The exposition will showcase stage and fi lm decorations with up to 200 illustrations, sketches, costumes, models and posters on display. All the exhibits are from the collections of the Georgian National Museum, State Choreography Theatre, Shota Rustaveli Drama Theatre and private collections.

TIFLIS BRANCH

Address: 4 K. Abkhazi Str.

Telephone: 299 65 66

November 13-22IRAKLI AVALISHVILI AND NUGZAR NATENADZE EXHIBITION

MUSIC

MOVEMENT THEATRE

Address: 182, Aghmashenebeli Ave.,

Mushthaid park

Telephone: 599 555 260

November 19THURSDAY JAZZLeaders:RESO KIKNADZE (SAX)NIKA GABADZE (GUITAR) MISHA JAPARIDZE (BASS)GIO KAPANADZE (DRUMS)

Start time: 21:00

BY ROBERT ISAF

Last Thursday government representatives, local com-munity members, and inter-national delegates came together in the bright, day-lit

conference room of the Lagodekhi Pro-tected Area’s Administration Center to present a new pilot project aimed at spurring growth in Georgia’s rural areas.

The Lagodekhi Rural Development Pilot Project is one of a triplet of pilot projects, all formally opened at a recent launching ceremony in Stepantsminda (Mtskhet-Mtianeti region). The other two pilots are based in Borjomi and Kaz-begi. Initial meetings for these pilot projects have been taking place since August.

Taken as a whole, the Rural Develop-ment Pilot Projects represent only small component of the larger European Neigh-borhood Program for Agricultural and Rural Development (ENPARD), a fi ve-year program funded by the European Union which aims to “reinvigorate the agricultural sector in Georgia with a

EU-Funded Rural Development Pilot Project Presented in Lagodekhi

thorough cooperation of government, civil society, and farmers.” ENPARD was initiated in March 2013, and will continue until 2018. Of its EUR 52 million budget, EUR 3 million is set aside for the Rural Development Pilot Projects.

Rural Development Programs (RDPs) are a long-established and essential piece of European policy. A core aspect of these programs is the LEADER method, and its hallmark local-governance mech-anism, known as the Local Action Group (LAG). The LEADER method – an acro-nym of “Liason Entre Actions de Dével-opement de l’Économique Rurale”, or “Links between Development Actions and the Rural Economy”, was developed in the early nineties by offi cials at the European Commission as a tool for spur-ring rural development across the newly unifi ed Europe. It recognized the neces-sity of allowing rural communities to dictate the direction of their own growth, while having that growth funded by sources at the national and international level. By doing so it created early, suc-cessful examples of the public-private partnership principle, a principle now fi rmly enshrined in European Rural Development policy.

It is in the Local Action Groups them-selves that these principles are most concretely realized. Under LEADER method, LAGs are created by the gov-ernment fi rst, with geographic bounda-ries drawn within which all residents are entitled to LAG membership, nor-mally for a small fee. There is no exact requirement for the legal structure of each LAG, although they are normally organized as NGOs, but the LAG’s deci-sion-making body must be at least 50% composed of private citizens, associa-tions, and business interests. Therefore, it is hoped that it is the private interests of the local community itself which come to determine the direction of the LAG, which itself is responsible for distribut-ing the Rural Development funds allot-ted to it by the public, government budget.

RDPs and the LEADER method have been implemented across the European Union for nearly two decades, and are being expanded into new Member States. For instance, in February of this year the European Commission approved a sec-ond RDP for Slovenia. A EUR 1.1 billion public budget is available for the 7-year

period, of which EUR 838 million is com-ing from the overall EU budget. The RDP as adopted anticipates nearly 600 jobs created in rural areas.

The Rural Development Pilot Projects in Georgia are funded as a part of the EU’s European Neighborhood Policy, which is concerned with the EU’s nearby “Neigh-bor” states – hence the name of the larger ENPARD programme of which these three pilot projects are a part. Each pilot project community is to be paired with NGOs and organizations from communities where the RDPs are already in place.

In Lagodekhi, the pilot project is to be implemented with the assistance of the international NGO CARE, in partnership with the ETEA foundation, a university center based out of Cordoba, in southern Spain.

Accordingly, present at the opening presentation last Thursday were repre-sentatives and delegates from across Europe. Filling the room before the head panel were dozens of government offi -cials and local community members. There was a clear sense of eagerness, of reigned-in and cautious enthusiasm.

“Potential” was the keyword of the after-noon, gushed both as regards the LEADER method as a tool and Lagodekhi as a testing grounds for it in Georgia.

The Govenor of Lagodekhi Municipal-ity, Kakha Jamburia , started with a call to action for his neighbors. “We are here to strive and walk together. We have to be proactive and develop a correct strat-egy. We will be a model and example for others.”

One offi cial from the Ministry of Agri-culture spoke up towards the end of the proceedings. “One week ago I visited Slovenian villages with the same project,” she said. “I would like to assure you that it can be very successful. Yes, fi nancial support is important, but your support is even more important. I had the impres-sion the villages had been painted by an artist. They don’t need an outsider to tell them what to do. I invite you to forget your ego – and to think about your vil-lage. This is a unique opportunity from EU and CARE, but don’t forget that they will leave, and we will stay. Please, all of you, be involved, be proactive, and we will see amazing, amazing results, too.”

10 GEORGIA TODAY NOVEMBER 17 - 19, 2015BUSINESS

Fireworks importers Maxsem provide wedding and festive fi reworks, fl aming fountains and a wide variety of kites at wholesale and retail prices.

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Maxsem Batumi

BY ANA AKHALAIA

According to Poti Port owner APM Poti, USD 250 million will be spent to increase the capacity of Poti Port.

Following a positive Environmental Impact Assessment report from the Ministry of Environ-ment, an application will be submitted to the Ministry of Economy on the fi rst stage of construction and, after receiv-ing the permit, further construction

USD 250 million To Be Invested in Poti Mega Portstages of the Poti Mega Port project will be presented.

The fi rst stage includes building two docks, the length of which will be 300 meters, while the depth - 14 meters, ena-bling Poti Port to be able to process more than 1 million TEU containers. The pro-ject should be completed within 30 months.

APM Terminals says there are currently four ports in Georgia, which process about 20 million tonnes per year. However, the total capacity is more than twice that.

APM Terminals owns 63 terminals and ports in 39 countries.

According to the Company, decreasing

oil prices, reduced remittances from abroad, sanctions on Russia, and military actions in Ukraine have led to the reduc-tion of cargo volume at Georgian ports and the APM Terminals recognizes that building a new port alone won’t neces-sarily solve the problem.

Yet during the recent troubled period, Poti Port, which owns 85% of the con-tainer traffi c moving through Georgian ports, was able to upgrade infrastructure and equipment of the Port in order to make it the most productive and safest port in the country and to maintain its current position as a gateway to Central Asia and the Caucasus.

The presentation of mega project “Metro City” was held on November 14. Metro Atlas Georgia is under the ownership of

the brand Metro Holding, which has a share on the Istanbul Stock Exchange and employs over 35,000 employees in more than 70 companies worldwide. Metro City can be found just 2 km from Batumi International Airport and 500m from the city center. The complex, the construction of which was begun in February 2015 and will be successfully completed in April 2017, harmoniously mixes mountain and sea views. The two residential complexes of Metro

Metro Holding Presents Metro City Batumi

City include 464 apartments with park-ing, an expansive green area, outdoor swimming pool and a playground for children. The biggest conference room in Transcaucasia for 1500 persons, a yacht club, a channel for gondolas, and a golden sandy beach (with sand directly imported from Bulgaria). The project is unique in its special maintenance services.

Mehmed Ayag (Chairman of the Board at Metro Avrasya Georgia) claims that 99% of employees will be selected from the local population. Metro City Forum gives an opportunity for visitors to not only shop but also to spend the week-ends with their friends and family. It will

be the fi rst multifunctional trade center to spread over such a wide area- 16 000 square meters. Metro Holding has made deals with such well-known brands such as Zara, LC Waikiki, Koton, Alexander Gardi, Polaris and more.

The project budget amounts to 125,000.000 USD. The company will spend 1 million USD on rehabilitating the water channel near the investment territory. Carrying out the project will begin this year. As per the agreement, Metro Atlas Georgia will have 5 years to complete the construction, although, according to the company’s statement, the project is expected to be complete by 2017.

GEORGIA TODAY NOVEMBER 17 - 19, 2015 11BUSINESS

GEORGIA TODAY

PUBLISHER & GM George Sharashidze

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Dechert is partnering with Georgia Today on a regular section of the paper which will provide updated infor-mation regarding signifi cant

legal changes and developments in Geor-gia. In particular, we will highlight sig-nifi cant issues which may impact busi-nesses operating in Georgia. Contributing this week is London-based Dechert Part-ner Paul Kavanagh. Mr. Kavanagh is an expert in intellectual property who spe-cializes in technology licensing and trans-actions, trademark and copyright issues, and intellectual property litigation. He regularly speaks at conferences and sem-inars and has contributed to a number of intellectual property-related journals and books. Mr. Kavanagh is recognized by Chambers UK and The Legal 500 as a leading voice in the fi eld of intellectual property law, with the former calling him “an impressive authority on trademarks.”

NEW EU TRADE MARK REGIME TO ADDRESS ECJ’S DECISION IN IP TRANSLATORThe European Court of Justice’s June 2012 decision in IP TRANSLATOR changed the way trade mark specifi ca-tions are interpreted. OHIM’s applica-tion of this decision led to inconsistent interpretations of trade mark specifi ca-tions depending on whether they pre- or post-dated that decision. The new EU Regulation governing EU-wide trade-marks looks set to remove this inconsist-ency, but at the expense of CTM owners. This week’s edition of OnPoint provides an in-depth analysis of the new regime.

The two key pieces of legislation that govern trade marks in the EU are the Community Trade Mark Regulation (the “CTM Regulation”) and the Trade Mark Directive. The CTM Regulation governs Community Trade Marks (“CTMs”), which are registered trademarks that confer rights on the owner throughout the EU. The Trade Mark Directive, by contrast, harmonizes the regulation of national marks by individual EU Mem-ber States.

On 8 June 2015 the Council of the EU published fi nalized texts of a recast Trade Mark Directive and a new Regulation amending the CTM Regulation (the “New Regulation”). These texts followed a political agreement on a new trade mark regime reached by the Council, European Parliament and European Commission on 21 April 2015. Whilst the New Regulation is yet to be formally adopted, it is unlikely that there will be substantial changes to its provisions.

Broadly, the owner of a valid registered Community trade mark (“CTM”) has an exclusive right to use that mark for the goods and/or services specifi ed in the CTM registration. Goods and services are categorized into various classes, pursuant to the Nice regime. The con-tents of each Nice class is summarized by class headings, however the class headings are far from comprehensive and often belie the true breadth of goods/services covered by that class. The breadth of each class can vary substan-

Dechert OnPoint: New EU Trademark Regime to Address ECJ’s Decision in IP Translator

tially, for example Class 33 only covers alcoholic beverages other than beer whereas Class 45 includes services as diverse as pet sitting and horoscope casting.

SUMMARYThe New Regulation will bring welcome consistency to the interpretation of class headings used in CTM specifi cations, as the meaning held by class headings will no longer depend on the date on which the application was fi led. However, the New Regulation threatens to diminish the protection attached to CTMs pre-dating 22 June 2012 that used class head-ings, unless CTM owners are pro-active in making a declaration to add goods/services to the specifi cations. As much of the protection offered by such addi-tions is not retrospective the earlier the additions are made the better, so it is recommended that CTM owners start preparing to make the necessary decla-ration before the New Regulation comes into force.

Trademark owners should:1. carry out an audit of any CTMs

applied for prior to 22 June 2012 to iden-tify any CTMs that specify goods/ser-vices using class headings;

2. assess in each case whether use of the class heading was intended to confer protection for goods/services beyond those covered by the literal meaning of the headings; and

3. consider whether to make a declara-tion to the EU Intellectual Property Offi ce ( “EU IPO”, which will be replac-ing OHIM under the new regime), once the New Regulation comes into force, to extend the goods/services covered by the CTM and, if appropriate, which goods/services should be specifi ed in that declaration.

IP TRANSLATORIn the case of IP TRANSLATOR (which has been the subject of much debate among trade mark practitioners) the Chartered Institute of Patent Attorneys applied to register the mark “IP TRANS-LATOR” in the UK. The goods/services specifi cation simply listed the class head-ings for Class 41. The UK Intellectual Property Offi ce (the “UK IPO”) consid-ered that listing the headings for a class amounted to claiming protection for all the services in that class even though not all of those services were listed explicitly and even if not all of those services fell within the literal meaning of the headings. This reflected the approach taken at that time by OHIM and a number of national IP offi ces. It had become common practice to use class headings in this way to register CTMs for the entirety of a class.

The applicant challenged the UK IPO’s decision before the English High Court, which made a reference to the European Court of Justice. The issue for the ECJ to consider was whether specifying the headings of a particular class meant that all possible goods/services within that class were covered by the trade mark.

In its decision dated 22 June 2012, the ECJ held that:

1. the goods/services for which trade mark protection is sought must be iden-tifi ed with suffi cient clarity to enable the competent authorities and economic operators, on that basis alone, to deter-mine the extent of the protection con-ferred by the trade mark;

2. some class headings can properly be used to identify goods/services, as they are in themselves suffi ciently clear and precise; and

3. when using the class headings an applicant can indicate that it wants its registration to cover all the goods/ser-vices included in the full alphabetical Nice list for that class, but, if the appli-cant does not intend its application to cover all the goods/services on the full list, it must specify the particular goods/services that it intends to be covered.

SUBSEQUENT OHIM PRACTICEA key area of diffi culty following the IP TRANSLATOR decision was how to treat CTMs fi led before the IP TRANS-LATOR decision, given that OHIM’s guidance prior to IP TRANSLATOR suggested that using the class headings was an effective way of obtaining pro-tection for the full alphabetical Nice list.

OHIM attempted to reconcile the IP TRANSLATOR decision with its previ-ous guidance by treating all of the appli-cations made before the IP TRANSLA-TOR decision that used the class headings as covering (i) the literal meaning of the class headings, and (ii) all the goods/ser-vices listed in the full Nice alphabetical list in force at the time of fi ling. By con-trast OHIM has interpreted class head-ings used in applications made after IP TRANSLATOR literally and not as auto-matically importing the full Nice list.

More generally OHIM now applies the requirement of “clarity and precision”, as established in IP TRANSLATOR, when considering CTM specifi cations.

THE NEW EUROPEAN TRADE MARK REGIMEThe New Regulation provides for a change in approach towards pre-IP TRANSLATOR CTMs. Pre-IP TRANS-LATOR CTMs that use class headings will be treated as registered just for goods/services within the literal mean-ing of the relevant class heading and not for the full alphabetical list. This brings the interpretation of pre-IP TRANSLA-TOR CTMs in line with OHIM’s current practice in relation to new applications, but will restrict the extent of the rights attached to a large number of CTMs.

However, the New Regulation offers owners of pre-IP TRANSLATOR CTMs an opportunity to avoid this restriction. CTM owners that used class headings to specify goods/services can make a declaration within 6 months of the New Regulation coming into force that when using the class headings in their CTM application their intention was to seek protection in respect of goods/services beyond those covered by the literal mean-ing of class headings. This declaration must specify which additional goods/services (from the alphabetical list in force at the date of fi ling) the applicant intended to be covered. The EU IPO will then take “appropriate measures” to amend the register accordingly.

The rights attached to goods/services added under the declaration procedure are limited as the amendment to the specifi cation will, in signifi cant respects, not be retrospective. When seeking to

prevent a third party’s use of a mark, where such use started before amend-ments were made to a specifi cation, the owner of an EU trade mark (as a CTM will be known once the New Regulation comes into force) will not be able to rely on additions made under the declaration procedure, just on the literal meaning of goods/services on the register at the time third party started the potentially infringing use. Similarly, an owner of an EU trade mark will not be able to rely on the additional goods/services when opposing or applying for a declaration of invalidity of a later trade mark if the later mark was applied for or used before the register was amended.

The New Regulation also codifi es the ECJ’s dicta in IP TRANSLATOR provid-ing that the EU IPO shall reject applica-tions where the goods/services are unclear or imprecise, unless the applicant suggests acceptable wording within a period set by the EU IPO.

CONCLUSIONThe New Regulation threatens to strip rights away from certain CTMs. CTM owners should take the steps outlined above to evaluate the risk that these changes pose to their CTM portfolio and to minimize the impact on any CTMs adversely affected.

* * *Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specifi c circumstances for your business.For more information, please visit www.dechert.com or contact Nicola Mariani at nicola.mariani@dechert.com.