issue no: 910/60 •• january 10 - 12, 2017 •...

Issue no: 910/60

MarketsAs of 06 Jan 2017

STOCKS Price w/w m/m BONDS Price w/w m/mBank of Georgia (BGEO LN) GBP 28.72 3,8% 7,7% GEOROG 04/21 106.13 (YTM 5.14%) +1,4% +2,4%GHG (GHG LN) GBP 3.40 4,8% 8,2% GEORG 04/21 110.78 (YTM 4.09%) +0,9% +2,0%TBC Bank Group (TBCG LN) GBP 14.55 +0,2% +3,9% GRAIL 07/22 109.00 (YTM 5.82%) +1,9% +2,4%

BGEOLN 07/23 101.69 (YTM 5.69%) +1,2% +2,0%COMMODITIES Price w/w m/mCrude Oil, Brent (US$/bbl) 57,10 +0,5% +5,9% CURRENCIES Price w/w m/mGold Spot (US$/OZ) 1 172,63 +2,2% +0,2% GEL / USD 2,7500 +3,5% +7,4%

GEL / EUR 2,8869 +3,1% +5,1%INDICES Price w/w m/m GEL / GBP 3,3713 +2,6% +3,2%FTSE 100 7 210,05 +0,9% +6,3% GEL / CHF 2,7013 +3,5% +6,4%FTSE 250 18 341,19 +1,5% +5,1% GEL / RUB 0,0461 +6,5% +14,1%DAX 11 599,01 +1,0% +7,6% GEL / TRY 0,7545 0,1% +1,5%DOW JONES 19 963,80 +1,0% +3,7% GEL / AZN 1,5242 +3,6% +4,4%NASDAQ 5 521,06 +2,6% +3,5% GEL / AMD 0,0057 +3,6% +7,5%MSCI EM EE 149,53 +1,9% +8,8% GEL / UAH 0,1020 +3,8% +4,1%MSCI EM 881,11 +2,2% +2,3% EUR / USD 0,9493 0,1% +1,7%SP 500 2 276,98 +1,7% +2,9% GBP / USD 0,8140 +0,5% +3,2%MICEX 2 213,93 0,8% +2,9% CHF / USD 1,0180 0,1% +0,8%MSCI FM 2 508,11 +3,7% +5,0% RUB / USD 59,6241 3,1% 6,6%GT Index (GEL) 1 176,94 +29,5% TRY / USD 3,6437 +3,4% +5,7%GT Index (USD) 838,85 3,7% +16,8% AZN / USD 1,8052 +0,1% +1,5%

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GALT & TAGGART PAGE 6

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• • JANUARY 10 - 12, 2017 • PUBLISHED TWICE WEEKLY PRICE: GEL 2.50

In this week’s issue...

Taxi Fares to Increase from January

Bloomberg: Trump Pulls Out of $250 Mln Tower Plan in Black Sea Resort

Nabeghlavi: How a Swiss-Georgian Friendship Brought a Mineral Water to Success

Electricity Market Watch

Prepared for Georgia Today Business by

FOCUS ON WINTER RESORTS

PAGE 2, 3

New Heli-Ski opportunities and Betania for sale

Ex-Mayor of Tbilisi Released from Prison

IDP Families Receive New Flats for the New Year

BY THEA MORRISON

The President of Israel, Reuven Riv-lin, is paying a two-day visit to Georgia. He was welcomed by Georgia’s President, Giorgi Marg-velashvili at the Presidential Palace

on Monday morning.After the welcoming ceremony, the presidents

held a face to face meeting and underlined that Georgia and Israel have enjoyed a multi-century friendly relationship.

The sides discussed the future prospects of deepening economic, defense and security cooperation.

President Margvelashvili condemned terror-ism and underlined Georgia’s role in fi ghting this global challenge.

He said that despite the fact that 20 percent of Georgia’s territories are occupied by Russia,

President of Israel Visits Georgia

presidential administration Giorgi Abashishvili, the Secretary of the National Security Council Secretary, David Rakviashvili, advisors of the President, the legislative and executive branches of the government, and Israeli offi cials.

Within the frames of his visit, President Riv-lin is to meet Georgia’s Prime Minister, Giorgi Kvirikashvili and the Parliament speaker, Irakli Kobakhidze.

Georgia is still one of the largest contributors to world peace and security.

Georgia’s president thanked his Israeli coun-terpart for supporting Georgia’s sovereignty and territorial integrity, as well as for the fi rm part-nership.

Both sides noted that Georgia and Israel are celebrating 25 years of diplomatic relations this year, however, the friendship of the peoples have lasted for over 2,600 years.

Moreover, it was noted that there was a need to enhance the trade relationship between the two countries.

Margvelashvili underlined that the corruption-free business environment and strategic geo-graphical location of Georgia makes it an attrac-tive country for investment.

He then invited Israeli companies to invest in Georgia in various growing sectors, such as renewable energy, agriculture, tourism and industry.

The meeting was attended by the head of

GEORGIA TODAY JANUARY 10 - 12, 20172 NEWS

BY THEA MORRISON

Gigi Ugulava, former Tbilisi Mayor and one of the lead-ers of Georgia’s key oppo-sition party United National Movement

(UNM), who was charged for misspend-ing in 2014, was released from prison on January 6 on the basis of a verdict of the Tbilisi Appellate Court.

The Court, taking into account the amnesty law, sentenced the former Mayor to one year, nine months and 22 days jail time for abuse of power in the “Tbilser-vice Group Case”. As Ugulava had already served the term, he was immediately freed from prison.

In 2010 - 2011, Ugulava allegedly embez-zled more than four million GEL of pub-lic funds. The money he embezzled was used to create 800 fi ctitious job positions within municipal service Tbilservice Group, through which funds were alleg-edly used to pay the salaries of then-ruling party UNM activists.

Ugulava was initially arrested in July 2014 for the misappropriation of funds and embezzlement. He was sentenced to seven month pre-trial detention. After this, in September 2015, he was found guilty and sentenced to nine years in prison. This prison term was commuted to four years and six months.

On January 4, the Appellate Court re-qualifi ed the article and Ugulava’s sen-tence was shortened by three years and three months.

“I was the leader and thus everything was my responsibility, good or bad. Of course, I had no intention to turn it in a political direction, but that’s how it turned out. It would be wrong to blame me for embezzlement and appropriation of funds,” Ugulava stated of Tbilservice Group in his concluding speech at the Court.

Following release, the ex-Mayor held a meeting with UNM members and stated he was going to meet founder and for-

Former Mayor of Tbilisi, Gigi Ugulava. Source: newposts.ge

Ex-Mayor of Tbilisi Released from Prison

mer leader of the UNM, Georgia’s ex-president, Mikheil Saakashvili, who is wanted in Georgia on numerous charges. As Saakashvili is now a Ukrainian citi-zen, Ugulava said he was ready to meet the ex-president in Ukraine and discuss with him confrontation within the party present due to diverse opinions about the change of the leadership of the UNM.

Saakashvili, who now is in the opposi-tion in Ukraine, welcomed Ugulava’s release on his Facebook page.

“Gigi has not committed a crime, nor has he done anything wrong…This impris-onment was nothing but the oligarch’s personal revenge and part of an intimi-dation campaign,” Saakashvili wrote in his Facebook post, referring to the ex-Prime Minister and founder of the ruling party-Georgian Dream, Bidzina Ivanish-vili, who is considered by the opposition as the informal ruler of the country.

Vice Prime Minister of Georgia, Kakha Kaladze, says that former Tbilisi mayor Gigi Ugulava will still have to answer questions pertaining to his use of gov-ernment funds despite his recent release from prison.

“The Court is absolutely independent and it makes independent decisions. However, regarding Ugulava, I have information that there are some ques-tions over specifi c cases which he will have to account for,” Kaladze said.

The Prosecutor’s Offi ce disapproved of the court verdict and stated that it would appeal the decision.

The United States Embassy to Georgia has released a statement over the Ugu-lava case, which says that the right to appeal against a decision was an impor-tant part of any democratic judicial sys-tem.

“The Court of Appeal assessed the evidence and enabled the parties to pre-sent their legal arguments. These steps are a clear example of the fact that the judicial system has the opportunity to be independent, which is an integral part of any healthy democratic system,” the US embassy said, adding that the judici-ary must be free from political pressure.

BY NINO GUGUNISHVILI

The Georgian Civil Aviation Agency has granted permis-sion to Wucher Helikopter Gmbh and HTM Helicopter Travel Munich GMBH to

fl y the winter resorts in Georgia.

German & Austrian Companies to Operate Heli-Skiing in Georgian Winter Resorts

From January 10, Wucher Helikopter Gmbh will operate fl ights in the Stepants-minda - Gudauri area with AS 350 B3 Ecureuil and AS 350 B Lama helicopters serving groups of tourists, snowborders or skiers interested in heli-skiing tours.

Another company, HTM Helicopter Travel Munich GmbH, will be launching fl ights in Gudauri resort for heli-skiing fans with AS 350 BS helicopters from

January 16 to March 31. The Georgian Civil Aviation Agency

announced the fl ights will only operate in clear weather conditions and accord-ing to visual fl ight rules (VFR).

The Heli-Ski fl ights are expected to promote the touristic potential of the winter ski resorts in Georgia, making them more attractive and comfortable for potential tourists.

BY NATIA LIPARTELIANI

From January 1, 2017, changes implemented to the Georgian Tax Code have meant that Georgia has seen an increase in the excise tax on fuel and

motor oils for vehicles, as well as an increase in prices for taxi services.

Company Taxify informed its custom-ers via e-mail that from January 6, the taxi tariff would increase by 10 Tetri. Where before the journey tariff was 50 Tetri per kilometer, it is now 60 Tetri per kilometer. The price for waiting mode has also increased from 10 to 12 Tetri per minute.

“The changes also affect taxi fares,” the head of City Taxi, Nikoloz Tkeshe-lashvili, told Businesspressnews. “The cost of travel has increased by 8 Tetri per kilometer and it is possible there will be a further increase by 2-4 Tetri.

Taxi Fares to Increase from January

As for the fi xed tariffs, since January 1, there has been an increase in fares from 50 Tetri to 1 GEL. Where a journey cost 3 GEL, today it costs 3.50; where the price for a long-distance journey was 7 GEL, now it is 8 GEL.

According to Tkeshelashvili, the growth in rates will have a negative effect on every taxi company and will negatively impact customer satisfaction. In addi-tion, he says it is hard to forecast further changes in the taxi fares.

GEORGIA TODAY JANUARY 10 - 12, 2017 3NEWS


Betania winter ski resort is up for sale. As the head of the resort’s managing com-pany Randevu Betania, Tamaz Basilia, told news

outlet Commersant, the reason is a lack of dedication and interest from the local authorities. He says operation of the ski resort was suspended the sec-ond consecutive year this season.

“There are problems with Telasi incorrectly charging taxes. There is no access road to the resort. Basically, there are problems in every direction,” Basilaia said. “I have worked solely on

Want to Buy Betania Resort?

enthusiasm for 1-2 years but it can’t go on. Nobody cares about this ski resort.”

Who the next owner will be is still unclear. Basilaia says the Betania ski resort is dependent on snow as artifi cial snow is too expensive. He also notes that there is a hotel located at the resort, however, contsruction is unfi nished and there is a lack of ski infrastructure.

The ski resort has a price tag of $2.5 million. “This is the amount that was invested in the development of the resort,” Basilaia said.

Randevu Betania is located 18 kilom-eters from Tbilisi and is spread over 30 thousand square meters. The resort was launched in 2012 and was initially planned as a year-round holiday des-tination.


A hotel with 41 rooms, restau-rants, cottages, outdoor and indoor swim-

ming pools, a spa center, a wine museum, sports areas and children’s playgrounds is to be built in the town of Mtskheta as a part of a new touristic complex. It is set for completion in 2018-2019.

The project, to be imple-mented by Sevsamora Villa Ltd with an investment of GEL 5 million, will have an eco tourism concept intro-ducing locally produced ecological Georgian prod-ucts. The company has already bought vineyards and also owns land in the villages of Saguramo and Jighaura issued by the National Agency of State Property for GEL 104,261.

Cover Photo Sevsamora Villa

New Eco Tourism Complex to Be Built in Mtskheta

GEORGIA TODAY JANUARY 10 - 12, 20174 BUSINESS

ProCredit Holding AG & Co. KGaA (Pro-Credit Holding), the holding company of the international ProCredit group of banks, is now listed on the regulated market (Prime Standard) of the Frank-

furt Stock Exchange (Frankfurter Wertpapierbörse) in Germany.

This marks another milestone in the successful development of ProCredit since its establishment as a banking group in 2003.

With this listing on the Frankfurt Stock Exchange, ProCredit Holding is opening up to investors that can identify with the group’s unique approach to banking and with the ethical corporate mission implemented and lived by the well-trained client advisers in each ProCredit bank.

As a young, modern and highly integrated bank-ing group that is very well established in the bank-ing sectors of the emerging economies in which it operates, the ProCredit group believes in economic

ProCredit Holding Listed on Regulated Market of Frankfurt Stock Exchange

development that is in line with its ecological and social criteria.

Its focus is on South Eastern and Eastern Europe where it serves as a “Hausbank” for the region’s small and medium-sized enterprises (SMEs).

The group places great value on fostering entre-preneurship by collaborating with formalized, forward-looking SMEs that have sustainable busi-ness models.

The listing of ProCredit Holding on the Prime Standard sub-segment of the Frankfurt Stock Exchange further emphasizes ProCredit’s commit-ment to transparency, a critical pillar which has supported the group along its consistently profi t-able development path.

The acceptance of ProCredit Holding as a member of the Frankfurt Stock Exchange should above all be good news for the group’s SME clients, whose excel-lent growth potential shall be better served by Pro-Credit Holding’s greater access to the capital market.

BY THEA MORRISON

The head of Georgia’s National Tour-ism Administration (GNTA), Giorgi Chogovadze, announced Wednesday that the number of tourists visiting the country in 2016 had increased by

7.6 percent from 2015.According to Chogovadze, 6,350,825 international

visitors arrived in Georgia last year, which is 449,731 more than the previous year.

The greatest number of tourists hailed from Azer-baijan (1,523,075, an increase of 9.3%), followed by Armenia (1,496,246, an increase of 1.9%) and Tur-key (1,254,089 – a decrease of 9.9% from last year). 1,037,564 Russian tourists visited Georgia in 2016, which is a full 12% more than in 2015, while visits from Ukraine increased by 21.8%, amounting to 172,631 people.

The year-on-year statistics for visitors from Europe also show positive signs. The total number of trave-lers from Lithuania, Latvia, Czech Republic, Bul-garia and Germany has signifi cantly increased.

“An exceptional increase in tourism was observed from the following countries: Iran (+485%), India (+ 199%), Saudi Arabia (+ 116%), the Philippines (+

The greatest number of tourists hailed from Azerbaijan ( an increase of 9.3%), followed by Armenia (an increase of 1.9%) and Turkey (a decrease of 9.9% from last year)

Tetnuldi Alpine Ski Resort

Number of Tourists in 2016 up 7.6 Percent

89%), Oman (+ 75%), and China (+46%),” Chogo-vadze said.

He added that the income from international tourism has also increased, amounting to $1.7 bil-lion in three quarters of 2016. That represents $177 million more than fi gures from the previous year.

GEORGIA TODAY JANUARY 10 - 12, 2017 5BUSINESS

BY THEA MORRISON

United States President-Elect Donald Trump’s company has pulled out of a proposed $250-mil-lion tower project in

Batumi, Bloomberg reports.“The Trump Organization and its local

partner in Georgia, the Silk Road Group, said in a joint e-mailed statement that they have decided to formally end the development of Trump Tower, Batumi,” the article reads.

Bloomberg: Trump Pulls Out of $250 Mln Tower Plan in Black Sea Resort

The project, a 47-story residential con-dominium, was announced in Batumi in 2012 by Trump and then-Georgian Pres-ident Mikheil Saakashvili.

Silk Road said it will go ahead on its own with a luxury tower in the city, once dubbed the Monte Carlo of the Caucasus by Trump.

Bloomberg reports that Trump’s organ-ization announced last month it was ending real estate projects in Brazil and Azerbaijan, in what Executive Vice President Alan Garten described as “housecleaning” ahead of Trump’s Janu-ary 20 inauguration.

“Political opponents have said his busi-ness interests could prejudice US foreign

policy - especially in the former Soviet Union, given Trump’s professed admira-tion for Russian President Vladimir Putin,” Bloomberg says.

The Trump Tower in Batumi was widely assumed to have been shelved when Saakashvili lost power in 2013 and was later stripped of his Georgian citizen-ship. But Giorgi Ramishvili, Silk Road’s founder, said a month ago that it was still on track.

“Ramishvili, contacted by phone, didn’t elaborate on why it’s been abandoned now, and also declined to comment on whether he’ll be attending Trump’s inau-guration,” the article reads.

Georgia's President Mikheil Saakashvili, left, and Donald Trump shake hands during a press conference, on March 10, 2011.Source: Bloomberg.com


Georgian wine exports showed a 38% growth in 2016, with USD 114 million in sales – almost 50 million bottles – to 53 countries

worldwide. Apart from traditional mar-kets, the demand for Georgian wine grew in the European Union, the United States, and China.

Georgian Wine Exports Increase in 2016

Russia remains the single biggest buyer, importing 49% more than it did in 2015. It is followed by Ukraine, with 6 million bottles (a 70 % increase), and China, which has reported a full doubling of Georgian wine imports, totaling 5 mil-lion bottles. Kazakhstan, with 3 million bottles, and Poland, with 2 million bot-tles, follow.

The most popular Georgian wine vari-eties on international markets are Kindz-marauli, Mukuzani, Tsinandali, Akhasheni, and Khvanchkara.

GEORGIA TODAY JANUARY 10 - 12, 20176

FOR GEORGIA TODAY BY MARIAM CHAKHVASHVILI

Sector research is one of the key directions of Galt & Tag-gart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agricul-

ture, Wine, and Real Estate sectors in Georgia. As part of our energy sector coverage, we produce a monthly Elec-tricity Market Watch, adapted here for Georgia Today’s readers. Previous reports on the sector can be found on Galt & Taggart’s website - gtresearch.ge.

NEW YEAR - NEW TARIFFSGNERC has announced new tariffs for certain HPPs and TPPs, as well as for commercial users of Telasi and Energo-Pro; residential tariffs remain unchanged in 2017. The new tariffs become effective on January 1, 2017.

Tariffs were revised for ten HPPs (all owned by Energo-Pro), which together accounted for 18.1% of total generation in 11M16. Only one of them got a tariff increase, while tariffs were lowered by 12.5%, on average, for the remainder. Enguri and Vardnili, the largest state owned HPPs, also saw their tariffs increase to 1.496 tetri/kWh (from 1.187 tetri) for Enguri and to 2.88 tetri/kWh (from 1.17 tetri) for Vardnili.

Tariffs were revised upward for all TPPs for the year 2017. Revisions varied from a 13.5% increase for the Gardabani CCGT to a 66.9% increase for GPower. The guaranteed capacity fee, received by TPPs for the number of days they are on standby, was decreased for Block 3 (-23.8%), Block 4 (-30.6%), and the Garda-bani CCGT (-6.1%), while it was increased for Block 9 (+10.5%) and GPower (+1.4%).

Changes were applied to GSE and Energo-Trans tariffs as well. GSE is a transmission and dispatch licensee, while Energo-Trans (subsidiary of GSE) is only a transmission licensee. GSE was granted a 15.6% increase for transmission services, while its tariff for dispatch services was lowered by 16.3%. Energo-Trans saw its tariff lowered by 7.9% for the 500kv lines and increased by 71.0% for its 400kv lines. The latter is paid mainly by exporters, while the former three tariffs are payable by both consumers and exporters.

Despite all the changes on the regulated wholesale electricity market, household tariffs remain unchanged. The Telasi and Energo-Pro tariffs were increased insig-nifi cantly and only for commercial users connecting to high voltage lines (6kv and above).

10 YEAR NETWORK DEVELOPMENT PLAN 2017-2027 APPROVED BY MINISTRY OF ENERGY, DECEMBER 15, 2016The Ten Year Network Development Plan (TYNDP) is to be updated on an annual basis. This (third) edition of TYNDP features revised forecasts of electricity consumption growth and updated pipelines of power plant and transmission network projects. The annual consumption growth rate in the

BUSINESS

The Galt & Taggart Research team comprises Georgian and Azerbaijani fi nance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fi xed income corporate research.

For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at [email protected].

Electricity Market Watch

for the whole month, while Blocks 3 and 4 and GPower were mainly providing reserve for the system.

WHOLESALE ELECTRICITY PRICES DOWN IN NOVEMBER 2016Wholesale market prices in Georgia decreased 21.2% y/y to USc 4.3/kWh, 9.0% below the Turkish market clearing price in November 2016. Turkish elec-tricity prices decreased 0.2% y/y to USc 4.7/kWh from a signifi cantly low base in November). 16.2% of total electricity supplied to the grid in November 2016 was traded through the market operator, with the rest traded through bilateral contracts.

optimistic scenario is revised downward from 5.0% to 3.5%, which would result in 16.4tWh of electricity consumption in 2027. Expected commissioning dates for several large HPPs (Khudoni, Nen-skra, Oni) have been pushed back, result-ing in certain infrastructural projects also being postponed. Total investment over 2017-2027 is estimated at EUR 735.4mn, with 40% of that amount to be spent over the fi rst three years.

EBRD APPROVES US$ 5.5MN LOAN FOR 17.2MW LUKHUNI 2 HPPRustavi Group LLC is a special purpose vehicle (SPV) established for the sole purpose of constructing the HPP. Rustavi Group LLC is owned by Rusmetali Ltd (51%), a company registered in Georgia, and JSC Partnership Fund (49%). EBRD is providing a senior loan of up to US$ 5.5mn, partnering with TBC Bank on the project. Total investment cost of the project is estimated at US$ 26.4mn.

TBILISI & ENERGO-PRO CUSTOMERS DRIVING ELECTRICITY CONSUMPTION

GROWTH IN NOVEMBER 2016Domestic consumption increased 11.5% y/y in November 2016, with DNO con-sumption (+14.0% y/y) driving the growth. The greater Tbilisi area (Telasi subscrib-ers) posted an outsized 21.5% y/y growth rate. Usage of Energo-Pro subscribers was up 10.3% y/y, while Kakheti Energy Distribution usage was up 5.9% y/y. Con-sumption of the Abkhazian region was up 10.4% y/y, following a 20.8% y/y increase in October 2016. Eligible con-sumer usage was down 4.3% y/y from an already very low base in November 2015 (-32.7% y/y). Consumption by Geor-gian Manganese, the largest direct con-sumer, was up 1.7% y/y from the Novem-ber 2015 low base, while consumption by GWP, the second-largest direct con-sumer, declined 6.3% y/y.

Electricity exports were negligible in November 2016. A signifi cant amount of electricity transit (131.5gWh) took place from Azerbaijan to Turkey.

DOMESTIC CONSUMPTION NEEDS MET ALMOST ENTIRELY BY DOMESTIC GENERATIONImports accounted for a mere 1.3% of

total electricity supplied to the grid in November 2016. The newly commissioned wind power plant generated 1.8gWh, accounting for 0.2% of total electricity supplied to the grid. Total generation increased 17.9% y/y, with HPP generation up 17.0% y/y and TPP generation up 18.9% y/y. The main drivers of the increase in hydro generation were Enguri and Var-dnili (+43.3% y/y). Electricity imports in November 2016 were down 84.8% y/y to 12.7gWh, with 76.4% coming from Azer-baijan and the rest from Russia. Guaran-teed capacity was provided by each of the fi ve guaranteed capacity sources for most of the month. Mtkvari Energy and Gardabani CCGT operated at full power


The Ministry of Economy and Sustainable Develop-ment of Georgia and The German Corporation for International Cooperation

(GIZ) are to launch a DCFTA web por-tal in Georgia, an informative resource on the Deep and Comprehensive Free Trade Area (DCFTA) which is a prefer-ential trade regime introduced within the Association Agreement (AA) between the European Union and Georgia.

The aim of the online platform is to inform the small and medium businesses in the country about the possibilities and benefi ts of free trade with the EU. The web portal aims to be a communi-cation platform in which state institu-

DCFTA Web Portal to Launch in Georgia

tions involved in the DCFTA implemen-tation process will participate and will also provide information on new legisla-tive initiatives to be implemented in accordance with the AA.

Applications to participate in the ten-der for creation of the website will be accepted until January 20, after which the winner will have 18 months to com-plete the project for launch.

GIZ has been supporting Georgia’s transition to a social market economy, democracy and the rule of law since 1992.


ROUTING FLIGHT NUMBER WEEK DAYS DEPARTURE ARRIVAL

TBILISI -ISTANBUL ATATURK AIRPORT

TK 387

EVERYDAY

05.50 07.25TK 385 11.45 13.25TK 383 18.10 20.00

ISTANBUL ATATURK AIRPORT - TBILISI

TK 386 01.40 04.55TK 384 07.30 10.50TK 382 13.55 17.15

TBILISI -ISTANBUL SABIHA GOKCEN AIRPORT

TK 381EVERYDAY

07.40 09.00

ISTANBUL SABIHA GOKCEN AIRPORT -TBILISI

TK 380 20.45 00.10+1

BATUMI - ISTANBUL TK 393EVERYDAY

17.50 19.10ISTANBUL - BATUMI TK 392 13.55 16.55

TIFLIS KIS TARIFESI 7.5x6cm ING.indd 1 02/11/16 15:23

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

E-mail: [email protected]

We are patriots of small countries, and we believe that fi nancial profi t is only justifi ed if the employees and the country profi t, too

BY LUKAS MÄDER

Thomas Diem is not an inves-tor. The 74-year-old Swiss from Zurich is a psychiatrist. His vocation was people, not investing money for

profi t. Yet today, Diem is an associate of one of the largest Georgian mineral water companies, the Margebeli Holding, which has the well-known Nabeghlavi in its portfolio.

This extraordinary story began back in the early 1990s when Thomas Diem visited Georgia for the fi rst time and fell in love with the country and its self-conscious people. During a later visit in 1997, on the search for old and forgotten musical works, he met Avtandil Svimon-ishvili and they visited the abandoned mineral water bottling factory in Nabe-ghlavi in Western Georgia.

“I found a soulmate,” Diem tells GEOR-GIA TODAY of his meeting Svimonish-vili. “We are both patriots of small coun-tries, and we both believe that fi nancial profi t is only justifi ed if the employees and the country profi ts, too.”

With this philosophy, together they founded a company for bottling Nabe-ghlavi water. In the beginning, it was a struggle to keep going and the fi rst fi ve or six years were spent trying to fi nd investing partners, dealing with the has-sle of bureaucracy and fi ghting against dubious competitors, “and doing so in a fair and respectable way,” Diem recalls.

Nabeghlavi: How a Swiss-Georgian Friendship Brought a Mineral Water to Success

He started with a venture capital con-tribution of 40,000 Swiss Francs but had to increase his investment step by step – until after six years, a bigger investor showed up. “It was never an option for me to let my partners down. The natural loyalty among us was an essential part of our success.”

At the initial stages of set-up, Diem traveled to Georgia several times a year to bring potential investors to see the project. This changed as the next generation took over. Mikheil Svimonishvili, the son of co-founder Avtandil and former Minister of Agriculture in the Saakashvili period, is now the operational chief, while Thomas Diem's own son has also taken on an active role in the Margebeli Holding.

And water is not their only business any-more. The Margebeli Holding is active in agro production, food processing and food distribution, too. They grow fruits and farm cattle, they produce tomato sauce, pickled cucumbers and apple jam, and distribute products – the whole chain from the fi eld to the supermarket. And soon they will begin a trial bottling fruit juices.

“I'm a huge fan of Switzerland,” says Mikheil Svimonishvili, who spent a number of years studying there. He wants to bring as much Swit-zerland to Georgia as possible – not the best idea when taken from a strictly economical point of view: “We have higher costs, but at the same time also higher quality,” he says.

Such high standards have also been applied to the latest project of the Margebeli Hold-ing, a cooperation with the Austrian juice pro-ducer Rauch. “Our bot-tling plant is state-of-the-

art, which is why it costs as much as it would in Swit-zerland,” says Mikheil Svimonish-vili. He doesn't

believe in the phi-losophy that for East-

ern Europe second-hand technology is suffi cient.

Thomas Diem will turn 75 this year, 20 years after the beginning of his engage-ment in Georgia. Financially, his invest-ment has paid off, although this was never his priority. “I have gained experience I wouldn't want to have missed thanks to

my investment,” Diem tells us. “The expe-rience of handling fi nancial problems and strategic mistakes, but also the experience that even aged 55, one can start a totally new project in life.”

He fi nishes by saying he is happy to see the company’s spirit being carried forward with the next generation.



Hundreds of internally displaced families in Georgia will be receiving new apartments for the New Year.

At the end of December 400 IDP families were granted fl ats in newly

constructed buildings across Tbilisi. In addition, it was announced that applications for new fl ats in the central Georgian city of Gori were to open for a further 480 families from January 3rd.

At a ceremony on Dadiani Street on December 26, Mayor Davit Narmania and Sozar Subari, Min-ister of Internally Displaced Persons (IDPs) from the Occupied Territories, Accommodation, and Refugees, 200 of the 400 families in Tbilisi were offi cially handed ownership of their new homes.

“Of the 400 apartments granted, 200 are located by Tbilisi Sea and 200 are in the center of Tbilisi, on Dadiani Street,” Subari said in a statement con-cerning the newer, 480-family grant. “The apart-ments will be allocated according to the wishes of the IDPs, by means of a ballot system, although ground fl oors will be granted to people with dis-

Mayor David Narmania and Sozar Subari, Minister of Internally Displaced Persons (IDPs) from the Occupied Territories, Accommodation, and Refugees, offi cially hand over ownership of new homes to 200 families in Tbilisi

IDP Families Receive New Flats for the New Year

abilities. The building will have an entrance adapted for PWDs. 200 families will be able to meet the New Year in their new homes. As for the remain-ing 200 families, those receiving apartments by Tbilisi Sea will be able to greet the Old New Year there (January 14th).”

Of the 200 apartments on Dadiani Street, 148 are single-room, 27 are double-room and 25 are three-room apartments.

Since 2012, 1,800 families have been provided with living spaces by the government to compen-sate for homes lost behind occupation lines. There are 263,598 IDPs in all, according to the latest avail-able statistics (2015).

The Prime Minister, in his End of Year speech on December 29th, claimed that around 13,700 IDP and 300 so-called “eco-migrant” families have received apartments in total since 2012, and that some 1,700 more families will be able to move into new apartments in 2017.

As for the 1,360 families which have announced their preference to stay in rural areas across Geor-gia and pursue an agriculture-centered life, the government intends to purchase houses worth 17,000-31,000 GEL and offer them in lieu of urban apartments.

in mind, but at least partly also for reasons of emo-tional attachment to the small Caucasian country.

And Georgia is indeed a small market. That's why the country as such is no priority market either for Swiss companies nor for the Swiss organization promoting exports.

Additionally, Ambassador Beglinger sees prob-lems in terms of legal security. “The justice system doesn't always work professionally here,” he says. But in his opinion the main challenge is education and skills. Svimonishvili agrees, “Too many young people are graduating university in Georgia,” he says. “This lowers the academic standard, while, on the other hand, there is a severe lack of skilled workers.” That the government has announced reforms in this sector is welcome news.

Yet, the regulatory framework in Georgia is quite investor friendly, and bureaucracy and corruption are relatively low. Added to this that the tax frame-work has become even more attractive from this month, with the so called “Estonian Model” mak-ing re-invested earnings tax-free.

Tourism and manufacturing could be interesting sectors for Swiss companies to invest in.

“These are the sectors the government wants to boost,” says the Georgian-Swiss Business Associa-tion’s Mikeladze. “For example, the State offers loans for industrial production on good conditions.”

Ambassador Beglinger sees logistics and infrastruc-ture as potential fi elds for Swiss investment, helped by the Georgian government’s desire to establish the country as an economic hub in the region thanks to free trade agreements with European countries as well as with most CIS countries and China.

“But an attractive framework and economic poten-tial is not enough,” says Mikheil Svimonishvili. “Swiss companies don't come to Georgia just because: they need to be attracted and convinced. Foreign investors should be helped to understand the mentality in Georgia,” he says. “That's the only way to get a big company from abroad to invest in this small country.”

Swiss Business in Georgia

BY LUKAS MÄDER

The possibility of free trade with Europe has raised high hopes in Georgia. Since the signing of the free trade agreement with the EFTA in June 2016 in Berne, these hopes have focused on Switzer-

land in particular, one of the four EFTA member countries. “The agreement opens a lot of oppor-tunities, especially in the fi eld of agribusiness,” says Mikheil Mikeladze, President of the Georgian-Swiss Business Association, an organization which aims to promote economic relations between the two countries.

In fact, there's a lot to promote when it comes to business between the two countries. In 2015, the volume traded was only 39 million Swiss Francs ($39 mln), even less than 2014, according to Swiss statistics. Most of this was made up of Swiss prod-ucts being exported to Georgia, the majority phar-

maceutical and watch-making parts. Only 15% of the total bilateral volume consisted of Georgian exports, mostly textiles and agricultural products.

But the EFTA agreement alone won't help Geor-gia to change this trade imbalance when it enters into force, probably in late 2017. “To export prod-ucts to European countries, Georgia needs far-reaching reforms to meet the high Western stand-ards,” says the Swiss Ambassador to Georgia, Lukas Beglinger. “Moreover the trade of agricultural products is not fully liberalized in the agreement.”

“Normally, a free trade agreement works for the profi t of the country with higher developed prod-ucts, in this case Switzerland,” says Mikheil Svi-monishvili, Margebeli Holding and former Minis-ter of Agriculture. “Today, Swiss chocolate is 12% more expensive than the same product from Ger-many because of taxation. This will change with the agreement.” And it could increase imports from Switzerland to Georgia.

With $175 million in 2015, Swiss investments made up only 1.3% of all foreign investments in Georgia.

However, this is set to change and there are already a number of large-scale investments in the fi eld of agricultural production and food processing.

The Margebeli Holding, with the prestigious Nabeghlavi mineral water, is a Swiss-Georgian cooperation existing since 1997 [see page 7]; the meat producer and processor Blauenstein was founded by Swiss businessman Max Blauenstein from Geneva; and the hazelnut trade fi rm Anka Fair Trade is run by a Turkish-Swiss citizen. These investments are not only made with huge returns

Mikheil Svimonishvili, Margebeli Holding and former Minister of Agriculture


The strategy focuses on promoting entrepreneurship and civil engagement, and on improving the quality of people’s life while paying special attention to the values of natural and cultural heritage. Source: ENPARD

BY THEA MORRISON

The Georgia-China Free Trade Agree-ment has been placed on the list of China’s major economic milestones for 2016.

The Agreement with Georgia holds 8th position on the list, which was determined by the Ministry of Commerce of the People's Repub-lic of China in December.

The China-United States Commerce and Trade United Commission was ranked 1st on the list, which followed the results of a popular survey. That survey is carried out on an annual basis by China's Ministry of Commerce.

Georgia-China Free Trade Deal among Top 10 China Events

Georgia's Ministry of Foreign Affairs says that Georgia will be the fi rst country in the region to have a free trade agreement with China. Talks were launched in 2015. On October 5, 2016, Chi-na's Minister of Commerce, Gao Hucheng, and Georgia’s then-Minister of Economy, Dimitry Kumsishvili, signed a memorandum to fi nalize the deal.

Georgian wine, mineral waters and agricultural products are among the goods that will be exported to China and its market of 1.4 billion consumers, with zero tariffs, with no additional customs fees and with no transition period.

Before the deal goes into effect it must be ratifi ed. This is expected to happen in the middle of 2017. After that, the world’s largest market will be open for Georgian products.

The signing of the Georgia-China Free Trade Agreement (pictured above) holds 8th position on the list of China’s major economic milestones for 2016

UNDP: Georgia Adopts First National Strategy for Rural Development

BY THEA MORRISON

The United Nations Development Pro-gram (UNDP) reports that Georgia’s government has adopted its fi rst-ever national strategy for rural develop-ment.

The plan outlines the country’s vision for the three years 2017 to 2020, in key areas of rural devel-opment – growth and diversifi cation of local econ-omies, improvement of social and public services, sustainable use of natural resources, and local engagement in the development process.

The Rural Development Strategy 2017–2020 was initiated by the Government of Georgia and sup-ported by the European Union (EU) and two United Nations agencies – the UNDP, and the Food and Agriculture Organization. It falls under the scope of the EU-funded European Neighborhood Program for Agriculture and Rural Development (ENPARD).

UNDP reports that the strategy focuses on pro-moting entrepreneurship and civil engagement, and on improving the quality of people’s life while

paying special attention to the values of natural and cultural heritage.

“The preparation of the Strategy engaged a range of national and international stakeholders, includ-ing for civil society and community organizations, national and international experts, relevant min-istries and state agencies,” the agency said.

After its adoption by the government, an ‘Intera-gency Coordination Council on Rural Development’ will be established and led by the Ministry of Agri-culture. The council will coordinate the implemen-tation of the strategy and will look into specifi c initiatives for individual regions of Georgia.

According to UNDP: “the EU is supporting rural development in Georgia through its ENPARD Pro-gram. Implemented since 2013 with a total budget of EUR 102 million, the main goal of ENPARD is to reduce rural poverty in Georgia. The fi rst phase of ENPARD in Georgia focused on developing the potential of agriculture. The second phase focuses on creating economic opportunities for rural pop-ulation that go beyond agricultural activities.”

The national strategy for rural development 2017-2020 was adopted by the government during its year-end session December 30th.


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The popular travel festival of Qatar Airways is back and has been signifi cantly enhanced for 2017, inviting world travellers to take

advantage of a number of exceptional deals across the airline’s global network. Extraordinary deals can be found on the World’s Best Business Class* and Economy Class, along with special com-panion fares, discounts on group book-ings** and a kids special offer on sale between 9 and 16 January 2017.

The Qatar Airways Travel Festival online Treasure Hunt will also once again offer Qatar Airways’ millions of social media followers the opportunity of searching for a zero fare Golden Ticket to one of the airline’s exciting global destinations, with clues being released via the airline’s Facebook, Instagram and Twitter pages through-out the sale period.

Qatar Airways passengers can choose from even more exciting places to explore, starting in 2017 with the launch of new services to Auckland, New Zea-land; Canberra, Australia; Dublin, Ire-land; Las Vegas in the United States, Rio de Janeiro, Brazil; Santiago, Chile; to name a few. Offers available through-out the Travel Festival are applicable on Economy and Business Class return airfares, with a travel period between 11 January and 15 December 2017 to more than 150 destinations worldwide, including the Middle East, Europe, East Asia, East Asia, Asia Pacifi c, and Africa.

For the fi rst time since starting the travel festival, Qatar Airways’ has part-nered with leading company, Visa, providing Visa card holders with addi-tional discounts of up to 15 percent on fl ight bookings. Travelers can also take advantage of the airline’s partnership

QATAR AIRWAYS UNVEILS ITS BIGGEST TRAVEL FESTIVAL EVER FOR 2017

Companion fares, kids fl y free and other fantastic deals to be discovered across the airline’s global network between 9 and 16 January 2017

More than 500 amazing prizeAdditional great offers available from main partners Visa, Expedia and AccorHotels

with AccorHotels, receiving a 10 percent discount when booking accommodation via the airline’s website, as well addi-tional benefi ts on great fl ight and hotel packages when booking with partner Expedia.

Qatar Airways Chief Commercial Offi cer, Dr. Hugh Dunleavy, said: “The Qatar Airways Travel Festival has fast become an exciting global event that offers great value and encourages our travellers to keep exploring; and I’m thrilled to be able to bring it back for its third installment. The New Year is the perfect time to start thinking about

travel plans for the year ahead and the travel festival allows travellers to take advantage of a number of fantastic deals and promotions across our entire net-work at exceptional prices.

“Our guests also have the opportunity to enjoy free upgrades to our Business Class or can benefi t from further dis-counts on group bookings – our travel festival is designed to encourage our valued guests to go places together and create memories with those who they cherish the most.”

The airline’s Privilege Club members also have the opportunity to earn dou-

ble Qmiles on bookings made through-out the promotion period, while travel-lers can also win a number of exciting prizes including upgrades to the World’s Best Business Class, Silver and Gold Privilege Club memberships, up to 100,000 Qmiles, access to Al Maha Lounges, Qatar Duty Free vouchers as well as vouchers to The Airport Hotel’s wellness spa inside Hamad International Airport. Guests can also take advantage of fantastic deals on hotels and accom-modation packages in partnership with Qatar Airways Holidays.

The Qatar Airways Travel Festival

provides the perfect opportunity for travellers to treat their nearest and dearest to award-winning service when they go places together, with the airline receiving a number of accolades in 2016. Qatar Airways was named Skyt-rax’s Best Staff Service in the Middle East, World’s Best Business Class 2016 and Best Business Class Airline Lounge as well as Best Business Class from Business Traveller Awards. The airline recently announced a number of new enhancements to its cabin to elevate the passenger experience, including new BRICS and Castello Monte Vibi-ano Vecchio amenity kits for Business Class passengers, and refreshed Hasbro children’s entertainment kits for the airline’s youngest travellers.

Passengers taking advantage of the Qatar Airways Travel Festival are encouraged to turn two holidays into one by planning a stopover in Doha, with a new transit visa scheme offer-ing visitors a free transit visa for up to 96 hours on your way to or from your fi nal destination. Combine a quick visit to Doha, with its historic sites and fi ve-star shopping and resorts, with a dream holiday – only available to Qatar Air-ways passengers. Visit Qatar Airways at http://www.qatarairways.com/us/en/qatar-transit-visa.page for more information.

*World’s Best Business Class as voted by Skytrax Airline Awards 2016. **Discounts increase with each additional passenger on group bookings from 3-7 people.Terms and conditions apply. Seats and subject to availability and blackout dates apply. Please review at time of booking at qatarairways.com/travelfestival

GEORGIA TODAY JANUARY 10 - 12, 2017 11

GEORGIA TODAY

PUBLISHER & GM George Sharashidze

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POLITICS

Vasil Maghlaperidze, new Director General of Georgia’s Public Broadcaster (GPB)

BY DIMITRI DOLABERIDZE

During 2016 Gazprom supplied Euro-pean countries with an extra 179 bil-lion cubic meters of gas, 12.5% more than in 2015- a record in the history of the Russian gas industry.

“Gazprom set a new record of gas export to for-eign countries,” said head of the company Alexey Miller on January 9.

Compared with the previous year (158.56 billion cubic meters), the export volume of Gazprom in non-CIS countries grew by approximately 12.5% or by 19.9 billion cubic meters. "The record result demonstrates the signifi cant increase in demand for Russian gas in Europe and our ability to ensure that it is exported in the desired volume,” Miller said.

"This is an amount not seen in the Soviet Union, or even in the days of modern Russia," said Miller, noting the growth of supply to Germany and other major gas consumers in Europe.

The total volume of gas in 2016 increased to about 570 million cubic meters and the company, accord-ing to Miller, is able to increase production by another 150 billion cubic meters, if necessary.

"We are always working on the market and extract-ing as much gas as is necessary for consumers," Miller said.

The previous record in gas production was last achieved by Gazprom in 2006, with 556 billion cubic meters. In 2009, production fell to 461.5 bil-lion cubic meters; in 2011, it rose to 513.2 billion

Gazprom Sets Record for Russian Gas Export

cubic meters; went down again, and by 2015 had fallen to 418.5 billion cubic meters.

At the New Year's conference, Miller said there was an increase in gas production by 11 billion cubic meters compared to the plan for 2016 thanks in part to the company's development of new produc-tion centers, in particular, on the Yamal Peninsula.

The Yamal Peninsula is located in the Yamal-Nenets autonomous district of northwest Siberia, Russia. It extends roughly 700 km and is bordered principally by the Kara Sea, Baydaratskaya Bay on the west, and by the Gulf of Ob on the east.

"The resource base of Gazprom is gradually shift-ing to the north,” Miller said. “Russian gas on the map appears as a powerful new gas transportation corridor, a gas supply chain for consumers in the Russian Federation and overseas markets. Of note is the development of the Northern Corridor, con-sistent creation of new capacity in the northwest of the Unifi ed Gas Supply System - the creation of facilities for the gas supply of the Sea gas pipeline Nord Stream - 2,” Miller said.

BY THEA MORRISON

Media watchers and opposition members are expressing disap-proval at the selection of Vasil Maghlaperidze as the new Direc-tor General of Georgia’s Public

Broadcaster (GPB).Maghlaperidze was elected on Friday in the sec-

ond round of secret balloting by GPB’s eight-mem-ber board of directors, receiving six votes.

Before the fi nal voting, some members of the media and the opposition repeated concerns that Maghlaperidze was favored by the current govern-ment. Maghlaperidze is himself a former employee of GDS TV, which is owned by Bidzina Ivanishvili, founder of ruling the Georgian Dream party (GD) and ex-Prime Minister of Georgia. Maghlaperidze produced a program for GDS TV called “2030.”

Lasha Tugushi, a media commentator, called the decision shameful.

“Their decision has ended development of the GPB. We, society, are paying 40 million GEL to the broadcaster for such incompetent decisions. This is unfair,” Tugushi said.

Another commentator, Zviad Koridze, said the board of directors had elected a politically biased person.

"It is a sad reality. The board made a political biased decision. It actually made a decision to pre-vent development of the GPB as an independent and democratic institution. They elected a person who openly demonstrated his political bias during

Opposition Claims Political Bias in Selection of New Public Broadcasting Director

the interview,” said Koridze.Members of Georgia’s main opposition party, the

United National Movement (UNM), have expressed their own disappointment, fearing that the new director will take orders from the government.

“Everything is absolutely clear. A politically biased person won the elections and now the broadcaster has become dependent on the government,” said Sergi Kapanadze, a member of UNM.

Fifteen people fi led initial applications for the position. Members of GPB’s board of directors chose the candidates from 14 after candidate Bachuki Bakhtadze was excluded following review by the board.

The Board of Trustees of GPB announced an open competition for the vacant position on November 28, after the former Director General, Giorgi Baratashvili, left his post right ahead of the October 8 parliamentary elections.

Five candidates were considered during the next round of voting: Zaal Anjaparidze, Vasil Maghla-peridze, Nino Zautashvili, Tinatin Berdzenishvili and Natia Kuprashvili. That ballot resulted in a run-off between Maghlaperidze and Berdzenishvili.

The new director general denies all allegations and says that his political past is not a crime.

“Everyone has a past. The main thing is that this past should not be shameful. I do not think that I have done anything that I should be ashamed of,” said Maghlaperidze, adding that some changes would take place at the broadcaster.

The new director said he would do his best to transform GPB into the nation’s leading broadcaster. He will serve his term for the next six years.

GEORGIA TODAY JANUARY 10 - 12, 201712 POLITICS

OP-ED BY LINCOLN MITCHELL

Like most years, 2017 promises to be an exciting and intrigu-ing one for Georgia. Given how spectacularly wrong much of my political forecast-

ing was in 2016, I am not making any predictions for Georgia, or any other countries for the new year. However, there are some key questions that will confront Georgia this year and are worth exploring. How Georgia responds to these questions will be of central rele-vance to Georgia’s future.

CAN GEORGIA NAVIGATE THE NEW GLOBAL ENVIRONMENT? The New Year began in Georgia with a visit by three infl uential US senators, John McCain (R-AZ), Lindsay Graham (R-SC) and Amy Klobuchar (D-MN). One of the reasons for this visit was for these senators to demonstrate that the US-Georgia bond remains strong. That the need to do so arose at all is evidence of the rapidly changing political relation-ship between the leadership of Russia and the US and its potential impact on Georgia. Unfortunately, a visit by three earnest and well-meaning senators will do little to ameliorate this concern. Inter-estingly, the strong words of praise that the trio, notably Senator Graham, had for Georgia and its current government suggest that the coming Trump presi-dency has left little political space for Georgia’s American friends to continue to repeat inaccurate United National Movement (UNM) talking points about the Georgian Dream (GD) somehow being pro-Russia.

Donald Trump’s election will at the very least mean tremendous uncertainty for Georgia. Trump campaigned on a vision of the US becoming less engaged with the rest of the world. He has little experience in foreign policy, and has a tendency to over-personalize everything from not winning television awards to terrorist attacks. Additionally, and of particular relevance for Georgia, the new American President appears to be enthralled with Russia’s President Vladimir Putin and very likely owes his narrow electoral college victory, at least in part, to Russia’s hacking of the Dem-ocratic Party.

It is possible, but unlikely, that this will have little effect on Georgia. There are still many supporters of Georgia, and many who are wary of Russia, in con-gress, the US government and the broader American foreign policy community. However, it is more likely that Moscow will try to exploit its new relationship with the American president to weaken the link between Washington and Tbilisi. The Georgian government must be nim-ble in its efforts to maintain this relation-

Four Questions for Georgia in 2017

ship and to prevent Georgia from being a casualty in the new good feeling between Presidents Trump and Putin. Whether or not it can do this in 2017 will have tremendous bearing on the future secu-rity, and indeed sovereignty of Georgia.

WILL GEORGIA MOVE TOWARDS A MULTI-PARTY POLITICAL SYSTEM? The 2016 election was a triumph for the governing GD, and an equally resound-ing defeat for the opposition UNM, who had governed the country from 2004-12. Moreover, that election was less an exer-cise in parties offering different ideas and visions, than one in which the UNM’s calls for regime change fell on deaf Geor-gian ears. As a result, the GD currently comfortably dominates Georgian politics; and the UNM appears to be in disarray. Thus, while Georgia is making progress in areas regarding freedom and democ-racy, it remains, in many respects, a one-party system. If Georgia continues to be dominated by one party, as has been the case essentially since independence, its democratic development will be stunted.

There are some possible paths to a multi-party system including the rational breakup of the GD block, an opposition

coalition of liberal pro-western parties and individuals emerging from the last election or a currently unseen political force emerging. There is, however, no guarantee that this will happen.

CAN GEORGIA’S ECONOMY BEGIN TO DELIVER FOR ORDINARY GEORGIANS? There have been some recent signs that Georgia’s economy is beginning to recover. Additionally, during the last several years, Georgia has begun to be a larger presence in the food, culture, travel, design and fi lm world. It is increas-ingly common to see Georgian wine, mountains, fashion or fi lm in the global media in a positive way that demonstrates what Georgia can offer the rest of the world. For example, Vogue described Georgia as the hottest travel destination for 2017. This, in addition to ongoing efforts to reduce regulations, improve the business climate and nurture the tech sector over the last several years are good harbingers for Georgia’s eco-nomic development.

These positive developments have not yet begun to impact the everyday lives of Georgia’s people, who still confront widespread unemployment and poverty.

As long as that remains the case, nice mentions on foreign websites or maga-zines are of little concrete value for Georgia. The major economic challenge for the Government of Georgia in 2017 is to translate these abstract accomplish-ments into concrete economic goods for the Georgian people.

This will require government policies that focus explicitly not just on bringing investment to Georgia, or raising Geor-gia’s profi le as a destination for tourists, hikers, wine experts or foodies. Instead, policies must seek to link foreign invest-ment to more and better paying jobs, facilitate the development of small busi-nesses that can support these growing sectors and make sure that infl ation does not become too high. If Georgia can turn a good story about economic develop-ment and reform, albeit one that primar-ily resonates outside of Georgia, into a reality for the Georgian people, it will be a signifi cant turning point for Geor-gia, one that suggests they are moving in new and better direction

WHAT ABOUT ABKHAZIA AND SOUTH OSSETIA? Since the war in 2008, there have been few major fl are-ups between Russia and

Georgia, but numerous minor and medium sized clashes between the two. Abkhazia and South Ossetia have been at the center, both symbolically and actu-ally, of many of these. While Georgia has succeeded in stymieing Russia’s efforts to win almost any international recogni-tion for their position that these are two independent states, Tbilisi has been unable to stop Russia from tightening its control over the regions or pushing the de facto borders, usually by erecting fences, further into the rest of Georgia.

Despite these issues and the obvious relevance of Abkhazia and South Osse-tia to broader Russian efforts to increase their infl uence in what they call their near abroad, Abkhazia and South Osse-tia are not exactly front and center issues in Georgian political life. This is in part because the Georgian government lacks a clear policy approach that could solve the problem. Military solutions are not possible. Strategic patience is little more than a euphemism for doing nothing and hoping for the best. Other more innova-tive approaches, such as engaging in more dialog and the like would cause political problems for the ruling GD. Additionally, because both the GD and the UNM were unable to move Abkha-zia and South Ossetia closer to Georgian sovereignty, neither party has much of an incentive to focus a lot of political attention on these questions.

It is, however, signifi cant that the New Year’s delegation from the US Senate visited the boundary line at Khurvaleti near South Ossetia. This was a reminder, not least to Russian President Vladimir Putin, that despite Donald Trump, some in the US leadership have not forgotten about Russia’s occupation of much of Georgia. Given the increased tension, but also increasingly strange relation-ship, between Russia and the West, 2017 could see Abkhazia and South Ossetia taking on a political relevance that is much greater than in previous years.

The year ahead will force Georgia to confront a changing world where long held notions, like the stability of Amer-ican democracy or core concepts under-pinning NATO, can no longer be assumed. While Georgia must craft a strategy for a changing Washington, and changing relationships between Washington and Moscow, there are domestic issues, such as the longstanding needs to deepen multi-party democracy and create an economy that benefi ts ordinary Geor-gians that will require attention and determine what happens to Georgia this year as well.

The Georgia Analysis is a twice monthly analysis of political and other major develop-ments in Georgia. Find it on lincolnmitchell.com. Lincoln Mitchell is a political develop-ment, research and strategic consultant who has worked extensively in the post-Soviet space.

BY THEA MORRISON

Nika Gvaramia, Director General of Georgia’s opposition-leaning TV channel Rustavi 2, was physically assaulted at a

restaurant on Saturday, following the funeral of his father.

As Gvaramia reports, the incident took place in a restaurant in central Tbilisi, just before he was going to leave.

“The lights went out as we were get-ting ready to go, and we were unexpect-edly attacked in the dark…I had no time to react or understand what was hap-pening,” Gvaramia’s post reads.

After the incident, the police arrested

Rustavi 2 TV Director Attacked one person, son of the former opposition fi gure Levan Gachechiladze. The arrest came after Rati Gachechiladze admitted the assault on his Facebook post.

“The incident in the restaurant was my reaction to the physical and moral abuse that my family and I have suffered in the last years from Gvaramia and not only from him,” Gachechiladze’s post reads.

He also underlines that only he attacked Gvaramia and there were no other attackers but him.

However, the Rustavi 2 TV Director insists that Gachechiladze was not alone and it was a group assault.

Gvaramia is also dissatisfi ed that the investigation was launched under arti-cle 126 of Georgia’s Criminal Code that refers to violence. He believes the case was not adequately qualifi ed and it is

either group assault or a hate crime.Rati Gachechiladze’s father, Levan

Gachechiladze, was a presidential can-didate in the 2008 presidential elections in which he came second after ex-pres-ident Mikheil Saakashvili.

As for Gvaramia, he was one of the most outspoken members of then-ruling party and now opposition United National Movement (UNM). He served as a Member of Parliament in 2004-2007 and was then appointed First Deputy Prosecutor General of Georgia. In Jan-uary 2008 Gvaramia was appointed Minister of Justice. He served as the Minister of Justice until October 2008. He was then appointed as the Minister of Science and Education, a position he quit in December 2009.

Gvaramia has been the Director Gen-eral of Rustavi 2 since November 2012. Nika Gvaramia, Director General of Rustavi 2 TV

issue no: 910/60 •• january 10 - 12, 2017 •...

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