FROM THE REDACTION
October 1. The term for submitting applications to the Ministry of Economic Development concerning selling energy units expired on October1.
The following units were put on the privatization list: “Rionges” joint stock company – authorized capital 7 391 073 GEL, installed capacity – 48 MW; “Gumadges cascade” joint stock company – authorized capital 1966732 GEL, installed capacity 44 MW, “Lajanurges” joint stock company – authorized capital 2391791 GEL, installed capacity 112 MW, “Dzevrulges” joint stock company – authorized capital 919786 GEL, capacity 8 MW, “Shaorgesi” joint stock company – authorized capital 1 735390 GEL, installed capacity 38 MW, “Atsgesi” Ltd. – authorized capital 841284 GEL, installed capacity 16 MW. Besides, “Ajarian Energy Company”– authorized capital 27 809 464 GEL, and “Georgian United Distribution Energy Company” – authorized capital 59 032 782 GEL were put up for privatization.
The Ministry of Economic Development of Georgia has put up the following units for privatization: “Metalurgproekti Institute” (Rustavi, initial price 60 000 GEL, authorized capital 93 130 GEL, accounts receivable 2 427 GEL, account payable 1000 GEL). In accordance with the competition’s terms, the buyer is obliged to retain the Institute’s specialization and the number of employees. The competition will be held on November 3 at the Ministry of Economic Development.
October 3. The President of Georgia – Mikhail Saakashvili and the President of Kazakhstan – Nursultan Nazarbaev held a joint press conference. According to Nursultan Nazarbaev’s statement, Kazakhstan is interested in implementation of investments in Georgian construction, tourism, and energy sectors. Kazakhstan is also interested in Georgian sea ports, including Batumi port. According to Nazarbaev’s statement, in the nearest future Kazakhstan will become one of the largest oil exporters. He hopes that Russia will play a positive role in the current negotiations between Georgia and Kazakhstan in connection with gas import. As to construction business, as it is known Kazakh “Turan Alem” bank, whose representative office was opened in Georgia a month ago (a few months ago the bank bought 49% of “Silk Road Bank’s” shares), implements hotel “Iveria’s” rehabilitation project (the construction of an ultra modern hotel and business centre is envisaged in the territory of “Iveria”). Besides, in the nearest future a modern hotel will be built in Kobuleti by Kazakh businessmen. It can’t be ruled out that Kazakh investments will be put in the construction of the motorway. Nazarbaev declares that Kazakhstan is interested in participation in the new project, according to which Georgia and Azerbaijan will be connected with Turkey by a motorway. “This will contribute to increasing of economic potential of the four countries” – the president of Kazakhstan said.
October 4. Georgian Prime Minister Zurab Nogaideli and a director of “RAO ES” company – Andrei Rapaport signed the memorandum on cooperation in energy sphere. According to Nogaideli’ statement, an agreement that envisages round-the-clock electric power supply in Tbilisi during the winter period had been practically reached. Under the agreement, the Georgian government will continue to subsidize the energy sector till the end of 2006 – “Telasi” will monthly get 5,5 million GEL in the form of subsidies, which will be used for purchasing 100% of electric energy generated by the 9th power unit. According to Rapaport’s statement. “RAO ES” is interested in rehabilitation of the 10th power unit and construction of “Khudonges”. In a month a meeting of representatives of CIS countries’ energy system will be held, at which the parties will once again consider the issues concerning cooperation, and specify the remaining details. The Prime Minister of Georgia – Zurab Nogaideli says that after signing of the memorandum a transparent cooperation between the Georgian government and investors will take place in future.
On October 4, the 2nd Georgian – Italian business forum was held at “Tbilisi Marriott” hotel. The business forum was opened by the Prime Minister of Georgia – Zurab Nogaideli who stressed that the main task of the Georgian side was creation of favorable situation for attraction of foreign investments. According to the statement of Italy’s Deputy Foreign Minister – Adolpho Urso, the Italian side is interested in implementation of investments in Georgia in such sectors as energy, agriculture, tourism, food industry, as well as in woodworking industry. According to the statement of the Minister of Economic Development of Georgia – Irakli Chogovadze, Italian investors will probably purchase Rustavi metallurgical industrial complex as well. For information: the first Georgian-Italian business forum was held on June 28 at “Sheraton Metekhi Palace” hotel, at which a presentation of the program on cooperation between Georgian and Italian entrepreneurs “within the framework of Georgian – Italian partnership” took place. After filling in a special questionnaire Georgian entrepreneurs have an opportunity to participate in this program and find Italian partners according to their interests. Georgian Businessmen Federation and American Chamber of Commerce are the partners of the project financed by Italian Ministry for Industrial Affairs. The project is being implemented with the support of the Entrepreneurs Union of Kazerta province and with direct participation of Italian Embassy in Georgia.
October 5. The Georgian Parliament started hearings of the state draft budget of 2006. The draft budget for the next year was presented to the Parliament’s Committee on European Integration by the Finance Minister Alexi Alexishvili. According to the Minister’s statement, education, social protection, defense, and energy sectors will be a priority in 2006 budget. A considerable increasing in financing of the Ministry of Foreign Affairs is also envisaged. According to the appraisal of the Chairman of the European Integration Committee – Davit Bakradze, the tendencies of macroeconomic growth are retained in the draft budget for the next year. According to him, the structure of the budget fully meets the criteria that are made of the countries wishing to become the EU members. “It is the first year when financing of the Ministry of Foreign Affairs is increasing so considerably. It will give Georgia an opportunity to open Embassies in Japan, India, Portugal, Czechia and in Scandinavian countries, as well as consulates in New York and Saloniki. All this will play a positive role both in politics and economics” – explained Davit Bakradze.
October 5. A meeting of representatives of Georgian business and media was held in “Sheraton Metekhi Palace” hotel. Georgian companies participating in the pilot project of the International Financial Corporation (IFC) took part in the meeting (“Bank Republic”, insurance company “Aldagi”, “Tbiligvino”, “Tbilaviamsheni”). IFC assists these companies in perfection of corporate management. The pilot project that has been implemented for a year and a half is aimed at introduction of modern western models and facilitation of capitals availability. Another six Georgian companies have been chosen where the pilot program of IFC will be introduced. The managers of the companies – participants of the meeting were speaking to journalists about their latest achievements.
October 5. As the president of “Tbilaviamsheni” – Pantiko Tordia said at the meeting with journalists, the company is planning to launch production of a new seven-seat plane “Tam Air”. The project in which the Georgian side invested 5 million USD will be implemented together with American company “IPIC”. The price of the seven-seat plane will be 2 million USD. Certification of the plane will take place in October of the next year as a result of which a serial production of the plane will be launched in Georgia.
October 5. Georgian Businessmen Federation arranged a presentation of “Tbiligas’s” new project. The project that was presented by the director general of “Tbiligas” – Giorgi Gvichiani, is aimed at better administration of payments, or division of the capital into 16 districts (lots). According to the project, each district will have 10 000 subscribers, and permission for administration will be transferred to private companies which have won a special competition. The main condition of the competition is prepayment or presentation of a guarantee letter from a bank. For obtaining a license for gas distribution the companies participating in the competition should take into consideration the optimum purchasing price of natural gas. According to Giorgi Gvichiani’s explanation, gas will be delivered to the companies at a comparatively low price – 19 tetri, and the price of natural gas for the population will remain 26,5 tetri. According to Gvichiani, a similar project is already being implemented in Mukhiani district, where the best indicator of payments collection has been fixed.
October 5. In the central office of “Bank of Georgia” a presentation was held in connection with opening of Georgian representative office of international insurance company AIG. The deputy chairman of board of directors of European AIG – Bengt Westergren attended the ceremony. AIG is a famous international insurance organization rendering financial services and operates in more than 130 countries. One of the largest networks in the sphere of insurance of property, liability, and life belongs to the companies – members of AIG. “AIG Georgia” was registered in April 2005, and in May it received necessary licenses for implementation of non-life insurance activities. The decision concerning AIG’s entry into Georgia was taken last year during Davoss international conference (last year Georgian insurance companies expressed their displeasure concerning the entry of new companies into the local market since special changes were made in the insurance system for AIG).
October 6. “Kazbegi” company produced new brand of beer – “Tbilisi”. “Tbilisi” is beer of “Pilsener” type, it is poured out into 0,5 liter bottles, its compactness is 12%, alcohol content – 4,8%. According to the statement of the company’s president – Gogi Topadze, the new product is made for beer-lovers of all generations. And the company itself, according to his words, increases the volume of production. New European fabrication systems have been bought, and production of new types of beer and soft drinks has been launched.
October 6. According to the chairman of “Tbilgvino’s” supervisory board – Giorgi Margvelashvili, the company is planning to produce and sell 1,5 million bottles of wine. 80% of the produce will be exported, and 20% will be sold on the local market. According to Margvelashvili’s words, the price of one bottle of wine is between 1,5 and 1,8 USD, and the company’s produce is exported to 15 countries. Among them is Russia, Ukraine, Kazakhstan, Belorus, Latvia, Lithonia, Germany, Switzerland, Netherlands, France, Poland, the US, Canada. According to Giorgi Margvelashvili’s information, the production volume of “Tbilgvino” has increased sevenfold since 1999.The company is planning to grow vineyards in Kakheti and western Georgia.
October 7. Georgian Parliament’s Committee for Agrarian Affairs considered the project of agriculture development according to which, with financing of international donor organizations, commercial banks will implement crediting of agriculture. For this purpose the World Bank will allocate 10 million USD of credits, and International Agriculture Fund – 9,2 million USD, 800 thousand USD was allocated as grants by Agriculture Development Fund, the government of Japan allocated 4,5 million USD. The government of Georgia takes part in the project and allocates 2,5 million USD for development of agriculture. Commercial banks will also allocate money for this project (2,9 million). The project will last for 5 years, and its implementation will be finished in 2010.
The work on the draft law “On microfinance organizations” has been completed at the Georgian National Bank and it was submitted to the Georgian Parliament for consideration. According to the draft law, the terms of work of microfinance organizations are determined, as well as the principles of their work, rights, and structure. Presently, up to 12 microfinance organizations operate in Georgia. Their loan portfolio makes up 23 million USD. They have 35 thousand of active borrowers, and besides in Georgia there are organizations of pawn-shop type, which also grant loans. The draft law “On microfinance organizations” will be published for public consideration on the National Bank’s web site.
October 7. The Georgian Parliament’s Committee for social issues and healthcare has considered development financing agreement between Georgia and “International Development Organization” (The World Bank). In case of ratification of the agreement till end of the year Georgian state budget will get 20 million USD from the World Bank for financing the deficit. This agreement was signed this September, the term of the credit is 40 years, privileged period – 10 years. Credit rate makes up 0,75%. The Committee supported ratification of the agreement.
According to the information of Georgian State Statistics Department, price formation (increasing) was stipulated by rising in price of fuel and tobacco. In September, in comparison with August, the prices for fuel has increased by 8%, for tobacco – by 4,1%. The price of gasoline has increased by 19,1%, of diesel fuel – by 8,9%, kerosene – by 6,2%. The cigarettes of local produce have risen in price by 11%, imported cigarettes – by 3,6%. In September prices for food products increased by 1,8%, including: for eggs – by 29,7%, for haricot – by 18,4%, for onion – 13,7%, for garlic – 10,8%, for aubergine – by 14,9%. Sugar rose in price by 5,6%, cheese – by 1,8%, detergents – by 5,3%, suburban bus service – by 5,1%, inter-city bus service – by 8,4%, air tickets – by 6,2%.
According to the information of Georgian State Statistics Department, the volume of direct investments in the Georgian economy has decreased sharply, which, according to experts opinion, is stipulated by two reasons: 1. Completion of Baku-Jeikhan oil pipeline’s construction (last year the volume of investments in the construction of Baku-Jeikhan oil pipeline and Shakhdeniz gas pipeline made up 500 million USD); 2. Problems in the privatization process.
According to statistical data, during the first half of 2005 the volume of direct investments made up 194,9 million USD, which is 43,7 million USD or 18,3% less than the last year’s indicator.
October 7. According to the decision of Tbilisi administration, the square in front of “Ajara” hotel will be sold. The price of 1 m2 of the square is 150 USD. It has not been determined yet what part of the territory will be alienated, but the personality of the probable owner of the square is already known: according to the preliminary information, this place will be bought by “Ajara” investors and they will build a skyscraper in it.
October 10. Georgian business companies opened a special account in “TBC Bank” for rendering assistance to victims of natural disasters. The executive director of Georgian Businessmen Federation – Giorgi Isakadze said at a press conference arranged for journalists that 14 companies took part in this action. By October 10 the collected sum exceeded 113 thousand GEL; among the companies are: “Kazbegi” (25 thousand GEL), “Silk Road Group” (10 thousand USD), “SM Tbilisi” (18 thousand GEL), “Goodwill” (10 thousand GEL), “Selprodsakartvelo” (5 thousand GEL), “Dio” (1 500 GEL), “Elitelectronics” (3 thousand GEL), “Kantora 2000” (3 thousand GEL), “Unitex” (1 000 GEL), etc. By October 17 the following sums had been transferred to the account: “TBC Bank” – 20 thousand GEL, “Bank Republic” – 20 thousand GEL, “Sakenergoremonti” – 9 thousand GEL, “Energomontazhremonti” – 6 thousand GEL, “Tusheti” airline – 3 thousand GEL, “Tbilludi”, “Mzekabani” and “Tbiligvino” – 2 thousand GEL each. “Tsekavshiri” wholesale market – 300 GEL. In all the sum collected by business companies makes up 171 500 thousand GEL.
October 12. “Energy and Industry Complex” company became the owner of Rustavi metallurgical industry complex (the authorized capital of the company is 34 thousand GEL). The above-mentioned company had no competitors at the auction, and correspondingly it bought the industrial complex at the initial price of 20 500 000 USD. “Energy and Industry Complex” is registered in Hong-Kong. Its founder is “Georgia Sil Holding Ltd.” registered in Great Britain, and 100% of its shares belong to “Asian Fund for Development of Global Resources”. According to the fund’s representative – Boran Kristol, the metallurgical industrial complex will start working after official registration of the deal. (according to the agreement, “Energy and Industry Complex” will fully pay the sum in December of this year).
Georgian Ministry of Economic Development announced a competition with the purpose of privatization of “Batumi Shipyard”. The initial price of the shipyard is 7 700 thousand USD. According to the terms of the competition, specialization of the shipyard should be retained during 5 years’ period, wages fund must be increased by 100% within 3 years, and the number of employees must not be changed.
The main fields of activities of “Batumi Shipyard” are as follows: building and repairing of vessels, production and repairing of machinery and hardware. The shipyard’s authorized capital is 13 774 250 GEL, accounts receivable – 309 837 GEL, account payable – 1 633 152 GEL.
The competition will be held on November 10 of this year at the Georgian Ministry of Economic Development.
The Ministry of Economic Development of Georgia put up for auction Kutaisi “Electromechanic” joint stock company. The initial selling value of the enterprise is 1 100 thousand USD. The main field of activities of “Electromechanic” is manufacturing of electric motors. The authorized capital of the enterprise is 5 721 672 GEL. Accounts receivable – 472 788 GEL, accounts payable 621 716 GEL. The competition will be held on November 10 at the Ministry of Economic Development of Georgia.
October 13. Tbilisi administration canceled street trade dues. As it became known, collection of dues will not be implemented until the city administration works out a definite approach to this issue. According to the statement of Tbilisi administration, a law will be passed, in accordance with which dues collecting services will implement their activities.
On October 15, a presentation of Spanish construction company “Porcelanosa’s” building materials centre took place. “Komodinia” Ltd. is Georgian partner of the company and has been working in Georgia for 10 years already. It is importing Spanish goods to Georgia. “Porcelanosa’s” produce is exported to more than 80 countries of the world. It has more than 350 shops. The annual turnover of the company exceeds 680 million Euro. It has representative offices in post-soviet countries – Ukraine, Russia, Kazakhstan, and Azerbaijan.
October 18. 41226 GEL worth of securities was sold at the Georgian Stock Exchange. Out of the shares put up for sale deals were made on the shares of “Bank of Georgia”, “Tbilisi” department store, and “Tbilelektroaparati”. The total volume of the deals made 28 122 securities.
October 20. Irakli Ezurbaia was appointed director general of “The Georgian Railway”. According to the statement of the Minister of Economic Development of Georgia – Irakli Chogovadze, the new leadership of the Railway Department has already worked out a strategic plan the main emphasis of which is financial and structural reorganization and retaining of professional personnel.
October 20. The President of Georgia – Mikhail Saakashvili met a representative of Kazakh “Turan Alem Bank” – Erkin Tatishev. After the meeting in the State Office Tatishev said that Kazakh businessmen will invest from 500 million to 1 billion USD in Georgia, the guarantor of which will be the Georgian President himself. As it is known, Kazakh investors are interested in several sectors, including energy, infrastructure, construction business.
The next two years will be the years of Kazakh investments in Georgia, and correspondingly by the year 2007 Georgia will be visited by thousands of Kazakh tourists – this is President Saakashvili’s preliminary forecast.
Kazakh businessmen start large-scale investment from Ajara – they show particular interest to Batumi oil refinery. Construction of an ultra-modern hotel and golf ground is planned in the centre of Batumi.
October 20. At the final session of the Parliament’s Committee on Finances and Budget the draft state budget for 2006 was considered. According to Irakli Kovzanadze’s statement, the Committee has remarks concerning the mechanism of internal debt’s repayment, as well as remarks related to the exchange rate and inflation. According to Kovzanadze, it is noteworthy that the deficit will be reduced by 83 million GEL, the volume of expenditures will increase by 338 million GEL, and the income parameters – by 422 million GEL. The Committee supported the draft state budget for the next year taking into account the expressed remarks.
October 20. 89743 GEL worth of securities was sold at the Georgian Stock Exchange. Out of the companies’ shares put up for sale deals were made on the shares of “Georgian Bank”, “Sakkalakmshenproekti”, “Business Centre” (Vazha Pshavela avenue), “Saktransproekti – Green Office”, aand “Tbilelektroaparati”. The total value of deals made up 21500 securities, while the total value – 89 743 GEL.
October 21. Saba Kiknadze – Chairman of Tourism Department, said at the briefing that in 9 months of 2005 the number of visitors in Georgia has reached a record number – 393 212, which is 30% more than in 2000 (387228 visitors). According to Kiknadze’s information, a 40% growth of visitors’ number (450-500 thousand people) is expected till the end of the year. In accordance with the official information, during the summer season the number of holidaymakers from Armenia only exceeded 10 thousand. In Saba Kiknadze’s opinion, several factors contributed to tourism’s growth: Georgia’s image as a stable country, foreign policy, international communications, media’s activity, security, rehabilitation of roads, simplification of visa regime, etc.
October 21. The right of control over Tbilisi international airport was officially handed over to Turkish companies “Tav” and “Urbani”. The united company “ TAV URBAN Georgia” will start construction of the new airport in December. The construction of the new terminal and modernization of the corresponding infrastructure will be completed by November of the next year. The Georgian government signed an agreement with the Turkish companies in September 2005. According to the agreement, the Turkish side will invest 62 million USD for the construction of the airport, and in return it will get the right to control the airport during 15,5 years.
October 21. It was noted at the session of the Parliament’s Committee on “sector economy” that the Committee expresses its remarks concerning the ongoing privatization in the country. The commission studying the legality of tenders presented the information that shows that tenders that do not correspond to legislation are often held; for this reason investors often express their discontent, and correspondingly there is a great number of failed deals. Presently the commission is studying the issues of legality of privatization of Rustavi metallurgical industrial complex, “Chiatur Manganese”, “Vartsikhges”, and “Madneuli” industrial complex. The commission will present its conclusion in a month.
October 22. The Prime Minister of Georgia – Zurab Nogaideli met the Executive Director of the World Bank. In the opinion of Dona Dovset Corelio, the current Georgian government has done more than Shevardnadze’s government during 10 years in conducting economic reforms, tax collection, increasing of the budget, and eradication of contraband. It was noted at the meeting that the World Bank is satisfied with Georgia’s macroeconomic indicators.
October 23. The Ministry of Economic Development of Georgia put up for sale “Agrosystems” Ltd. for the second time. The enterprise is evaluated at 250 thousand USD, the state possesses 100% of its shares. Specialization of the enterprise is buying, export-import, and selling of bread products. The authorized capital of the enterprise is 562720 GEL, accounts payable -22664 GEL, accounts receivable – 1708384 GEL. The auction will be held on November 22.
By October 23 the indicator of bank deposit dollarizion makes 73,6%, which is 0,1% less than August indicator. In the third quarter of the current year the volume of deposits in foreign currency increased by 26,2% and made up 460,4 million USD by the end of September. As it became known, Georgian citizens still prefer to keep theirs savings in foreign currency.
October 24. Two companies – Georgian “Energy and Industry” Ltd and English “Stanton Equities Corporation” expressed their wish to buy “Madneuli”. The Ministry of Economic Development of Georgia put up for sale 97,255 worth of share holding, or 12 830 193 one dollar shares owned by “Madneuli”, and 50% share of state-owned “Trans Georgian Resource”. The initial selling price of the whole share holding is 32 500 thousand USD. “Madneuli’s” accounts receivable is 43 614 831 GEL, and account payable – 28 702 266 GEL. According to the terms of the competition, the buyer must retain specialization of the enterprise for 3 years, the number of employees, and the wages fund. As it became known, the British company is going to pay 51 million USD for “Madneuli” joint stock company, while the Georgian company – only 36 million USD.
October 25. The Prime Minister of Georgia Zurab Nogaideli was in the United States with an official visit, where he met the Executive Director of the IMF – Takatoshi Kato. According to Mr. Nogaideli, from the viewpoint of implementation of economic reforms, the Georgian government has no unfulfilled obligations. The IMF’s Executive Director expressed his satisfaction concerning the indicators of Georgian economy. “It is enough to say that inflation in Georgia since the beginning of 2005 does not exceed 2%” – he said. According to Georgian Prime Minister’s information, the indicator of Georgian banks liquidity is improving, and correspondingly, starting from the next year the shares of one of the banks will be distributed at London Exchange.
October 25. According to the information of “The Union of Oil Products Producers, Importers, and Consumers”, the price of gasoline in Georgia has become stable (Georgia annually consumes 40 thousand tons of gasoline and 30-32 thousand tons of diesel fuel). Presently, in the retail trading network 1 liter of A-92 “Regular” type gasoline, which not long ago cost from 1,60 to 1,65 GEL, now costs 1,30-1,35 GEL. Besides, import of gasoline from Azerbaijan was completely restored, which is connected with rehabilitation of Baku oil refinery. As to international prices, 1 ton of gasoline costs 509 USD, and 1 ton of diesel fuel – 568 USD.
October 27. The 28th session of CIS’s Electrical Energy Council was held in Tbilisi, over which the Chairman of “RAO ES’s” Board of Directors – Anatoli Chubais presided. At the session the ministers of energy of CIS countries supported the project of formation of a single energy market, though they stressed that implementation of the project will take several years.
October 27. The Georgian parliament passed in the first hearing the draft of amendments to the “law on license and permission dues”. According to the amendments, the dues for arranging entertainment drawings lotto and bingo will make up 3000 GEL, for arranging of a game machine salon – 4000 GEL, arranging of a totalizator – 6000 GEL. According to the statement of the Deputy Finance Minister – Giorgi Godabrelidze, increasing of permission dues is stipulated by the necessity to replenish the state budget.
A representative of the US Chamber of Commerce – Fadi Asli stated at the session of the Parliament’s Finance and Budget Committee that business in Georgia is scared and the international community shuts its eyes to it. “Business is obliged to pay taxes, but the Minister of Finance should pay attention to tax officers who demand that entrepreneurs should pay taxes for replenishing the budget when a businessman has to pay a comparatively lower tax” – Fadi Asli stressed. He also said that businessmen does not trust either the Ministry of Finance or the court that is under the authorities pressure.