July Business Calendar

FROM THE REDACTION

Hot July turned out to be “chilly” for the business sector; against the background of June that was full of business news, July business calendar looks modest.

The current month started not very pleasantly for “Elektrokavshiri” subscribers:
“Georgian Elektrokavshiri” has developed a new tariff policy for its subscribers, according to which starting from July 1, 2005 “Elektrokavshiri’s” subscribers will be connected to the subscribers of other telephone operators by using 8 22 code, and will pay 2 tetri per minute of telephone conversation. The new tariff does not concern the subscribers of “Elektrokavshiri” for conversations between them.þ From July 1, VAT in Georgia will be cut, from 20 to 18%.
The new Tax Code that came into effect from January 1, 2005 envisaged 2% cut already from January 1, but according to the statement of the Minister of Finance of that time – Zurab Nogaideli, at that period Georgian government was to fulfill a number of obligations, and for this purpose additional borrowings were necessary, which under the conditions of VAT’s cutting to 18% would have been impossible.
Businessmen say that VAT’s 2% cutting will ease the tax burden for them, but it will not make their produce cheaper.
þ On July 1, a representative office of Russian “Gazexport” company was opened in Tbilisi (6 Brosse Street). “Gazexport” is a subsidiary of “Gazprom”. According to the statement of “Tbilgaz’s” former director – David Morchiladze, the opening of this representative office will contribute to constant natural gas supply of the capital, and will make interrelations with customers more efficient.
þ According to the EU Council’s decision (dated June 27), from July 1, 2005 a system of additional privileges, so called “GSP +” was launched which extended to 14 more countries (Armenia, Azerbaijan, Moldova, and the Russian Federation did not get in the list of these countries).
The new EU’s “GSP +” system gives an opportunity for up to 7200 description of Georgian goods to enter European market with zero customs rate, which, naturally, will contribute to the development of Georgian export.
It is noteworthy that the essence of GSP’s work is to render assistance to economically underdeveloped countries from the developed countries, which is expressed in export support.
Georgia has a beneficiary status in relations with the US, Canada, Switzerland, Japan, Turkey, and the EU. The beneficiary status was granted to Georgia from 1995.
þ On July 1, at the auction for the state privatization units, held in the Ministry of Economic Development, out of 9 put up units 3 were sold. These are: buildings and a ground area in Tblilisi, 59 Kostava street. The unit was bought by “Leasing 21” Ltd. (for 1 million 300 thousand USD);
“Shulaveri” Ltd. – the factory producing non-ore materials (100% public share) was purchased by “Lola” Ltd. and road joint-stock company “Tbilisi” (280 500 USD);
“Mitili” Ltd. (100% public share) was purchased by a natural person N. Eradze (250 500 USD).
There were no applications for the remaining 6 units.
þ On July 5, in the Import and Customers Union, a press conference of oil products producers was held.
According to the statement of the Union’s representatives, the authorities make the entrepreneurs pay unacceptable taxes. In accordance to their explanation, in Georgia the corresponding norms concerning natural losses of oil products (evaporations) do not exist. As it was said at the press conference, that during transportation, storage and distribution of 500 tons of petrol 0,8% is evaporated, that is about 4 tons of petrol is lost every month, which the tax inspection considers as sold, in other words it levies a tax on non-existing product – this is the opinion of producers of oil products. They demand that the state should take necessary measures.
þ On July 6, in “Sheraton Metekhi Palace Hotel” a memorandum on cooperation was signed in connection with the settlement of employment problems. The organizers of the memorandum – the Ministry of Public Health, Labor, and Social Welfare, State Agency for Social Assistance and Employment, the Association of Employers – set up a coordinating council that will help to solve the unemployment problem. According to the preliminary information, the coordinating council, along with international donor organizations, is going to solve the unemployment problem in Georgia.
According to the data of the State Statistic Department, a bigger part of Georgian export falls on scrap metal.
In January-May 2005, 483 million USD worth of scrap metal was exported, which in total makes up 15,9% of the total export. Ferroalloys’ export made up 10,7% (during the calculation period 326 million USD worth of ferroalloys was exported). Natural wine export made up 10,7% of the total export.
þ On July 7, the National Bank’s Supervision Department examined 15 commercial banks according to CAEL analysis and supervision system.
The financial situation of the examined banks is as follows:
3 banks – “inappropriate”
5 banks – “appropriate”
7 banks – “less appropriate”
The National Bank does not make the names of the “inappropriate” banks public known, but declares that, if they do not improve their financial situation, they will have to leave the banking market.
According to the information of the National Bank’s Public Relations Service, bank notes of 500 GEL denomination will be printed anew since the notes printed ten years ago have become morally outdated. New notes will have a better design and higher protection standards. In future the National Bank is planning to issue notes of 200 GEL denomination, and soon a contest for the best design will be announced. But, for the time being, the Public Relations Service carries out sociological studies on the subject of who should be depicted on a 200 GEL note: Niko Nikoladze, Akvtime Takaishvili, Vazha Pshavela, Galaktion, Dmitri Kipiani, King Erekle II, or Ilia Vekua.
þ On July 7, the Minister of Environmental Protection and Natural Resources – Giorgi Papuashvili commented on the new law on “Licensing and Certification” passed by the Georgian Parliament. He, along with Georgian businessmen, considered new terms of licensing and certification.
If formerly licenses and permissions were issued for 377 kinds of activities, from now the Ministry will issue only 23 kinds of documents. Including 6 licenses for use, 7 licenses for activities, and 9 kinds of permissions.
It was stressed at the meeting that the law on “Licensing and Certification” needs perfection.
To all appearances, the amendments to it will be introduced in November.
For the information: the law on “Licensing and Certification”, which was passed in June, has not been signed by the President of Georgia.
þ On July 8, in Georgian Businessmen Federation the first “garden party” was held.
The following enterprises were rewarded with special “quality mark”: Tbilisi jewelry factory, “Rektifikat” (“Gomi”) company, and “Georgian Petroleum”. On the same day a trade exhibition of exclusive models of the jewelry factory was held. According to the organizers of the “garden party”, this kind of parties will be held weekly and will acquire a thematic character.
Tbilisi jewelry factory secured an order for its produce from Kazakhstan. Out of 700 thousand USD order, 107 thousand worth of produce has already been shipped. According to the director of the factory – Akaki Ramishvili, the enterprise has already sold, excluding the above-mentioned, 74 thousand USD worth of produce.
þ On July 8, at the office of the American Chamber of Commerce, a round table meeting was held on the subject of regulation of mobile phone market. The representatives of the American Chamber of Commerce, Georgian Telecommunications Regulatory Commission, as well as Nokia, Motorolla, and Ericsson companies. It was stressed at the meeting there are no competent representative offices of phone companies in Georgia.
The long-term technical aid program of the American Chamber of Commerce started in March 2005. The implementation of the project will give Georgian customers an opportunity to use the advantages of modern licensed mobile phones with one-year guarantee, latest technologies, and Georgian type.
Will a famous company, for example like Nokia, appear on the Georgian market? – the representatives of the American Chamber of Commerce answered this question asked by the journalists saying that everything depends on the regulation of the local market and legalization, the population’s demand, and the implementation of “technical aid program”.
Besides that, the leading mobile phone companies of the world have already carried out a prospective research of the condition of Georgian communications market, which was based on subscribers’ purchasing dynamics of mono and lai-lai cards of the two GSM operators – “MAGTI” and “Geocell”, which gives foreign experts an opportunity to draw the following conclusion: “The mobile phone market in Georgia is on the rise”.
The introduction of petrol’s new standards in Georgia is postponed till January 1 of the next year. This decision was taken at the request of Azerbaijani oil refinery. As it is known, Azerbaijani oil refinery does not meet the EU’s standards and it asked for a period of one year for the improvement of the situation. It is noteworthy that 60% of petrol imported to the Georgian market is from Azerbaijan. It is 10-12 tetri cheaper than European fuel. And besides, the petrol imported to Georgia from Azerbaijan has a 12% discount.
According to the new standards, in petrol solution the share of benzol should not exceed one unit, aromatic carbonhydrates should nor exceed 42%, and lead content – 0,005 units.
“Georgian Tobacco Production” after a 7 months’ interruption will resume its work in August. The head of the enterprise – Avtandil Tsereteli, in his interview to the “Prime News” agency, stated that the factory’s work was suspended because of adoption of the new Tax Code, since the increased excise tax, envisaged by the Tax Code, made tobacco production unprofitable.
According to his words, during 2005, 32 thousand of cigarette boxes were sold, and 8 thousand remained unsold. One month of the enterprise’s work will bring 2 million GEL to the state budget.
þ July 11. The American Agency for Development and Trade showed interest in construction of a new gas-holder in Georgia. Presently the issue of constructing of 1 200 million m3 capacity gas- holder at Ninotsminda deposit is being considered. From here, in emergency cases like breakdown, 500 million m3 will be used, the daily capacity of the gas-holder will be 5-7 million m3.
According to the experts’ opinion, the above-mentioned project is profitable and it will not take long to find investors. The construction of the gas-holder will presumably require 50 million USD, and the study of the project – 1 million USD.
þ On July 14, the presentation of the international project – “Batumi International Cinema Forum”
was held in the Federation of Georgian Businessmen. According to the statement of one of the project’s organizers – the management of “Amirani” movie theatre, the cinema forum in Batumi will take place from 4 to 10 October in a renewed “International” movie theatre. The culture attaché of the American Embassy in Georgia – Rovena Cross Nadzhap stated at the presentation that, along with the Georgian Ministry of Culture, 11 Embassies accredited in Georgia take part in the project and its aim is a renewal of art museum in Batumi. The profits obtained during the cinema forum will be used for the reconstruction of the museum. The presented films are selected according to 2 principles: 1. they have to represent the country; 2 . they must be acceptable for family view.
þ July 14. According to the information of Georgian Statistics Department, the prices, compared to the previous week, have increased by 0,13%. For food products – by 0,01%, for non- food products – by 0,44%, in services sector the tariffs remained unchanged. The price for liquefied gas has increased by 3,6%, for diesel fuel – by 3,3%, for “normal” petrol – by 2,6%.
Georgian construction companies ask 8.9 million USD from BP
Georgian construction companies that are implementing works within the framework of the projects on construction of Baku-Tbilisi-Jeikhan oil pipe line and South Caucasian gas pipe line have arranged precautionary actions at “BP” and “PetroCap” offices because of arrears of wages.
According to the statements of these firms’ representatives, for the April 2005, the arrears of wages (taking into account the compensation sums) made up 8,9 million USD. The Georgian companies address “BP” and “PetroCap” so that they show objectivity and not to allow bankruptcy of sub-leaser companies.
þ On July 20, the manager of American Department of Commerce’s administration program – Paul Coursen held a meeting with businessmen in “Tbilisi Mariott Hotel”. The main subject of the meeting was the “program of business ethics”, and American Chamber of Commerce and the Federation of Businessmen took part in it.
þ On July 20, the Association of Micro Organizations was founded. Its members are: “Konstanta” fund, “Pinka Sakartvelo”, “Kredo”, the Fund for the Development of Small Business, etc.
The aim of the newly established organization is improvement of the current situation in the system of micro finances, creating of conditions for their institutional development, and information of the public about micro finances.
According to the statement of the Association’s representatives, a new concept “on micro financial organizations” will be worked out according to the legislation. The work at the final version of the bill is likely to be over by October 2005.
þ On July 21, the Minister of Agriculture of Georgia – Makhail Svimonishvili stated at the press conference that this year the government is not allocating subsidies for grapes purchases, and is not participating selling of grapes. The issues concerning purchasing and selling of grapes should be settled between the peasants and private companies According to the information of the Minister of Agriculture, eradication of wine falsification is within the government’s competence, as a result of which the demand for natural wine will increase, and, correspondingly, the sales of grapes will improve. According to the preliminary data, the grapes yield will make up 200 thousand tons, which is 100 tons more than in 2004. Wine export, correspondingly, has increased from 26 million bottles to 50 million bottles.
þ On July 29, an action concert will be held in support of the struggle against falsification and piracy.
The organizers of the project are: Georgian Federation of Businessmen, and “Georgian Quality” fund.